CFA Society Singapore
SINGAPORE (Sept 12): Serial System, the distributor of electronic components and consumer products, is divesting its entire 27.34% stake in SPL Holdings (Australia) to Anchorage Bridge Street for US$31.2 million ($43 million).
SPL Holdings is an Australia-based commercial laundry business whose clients include hospitality brands such as Hilton, Hyatt and Sofitel. On the other hand, the buyer is a company owned by funds managed by Australian private equity (PE) firm Anchorage Capital Partners.
Serial System first invested in SPL in 2014 with an initial 20% stake, with a further injection in 2016 that brought its stake in the company to 27.34%.
The group expects to recognise a gain of US$20 million from the sale of SPL, representing a premium of 179% over the company’s books value in SPL as at end-June this year.
In a press release on Wednesday, Serial System says it intends to use 40% of the net proceeds to repay its bank loans.
It also plans to issue a special dividend to shareholders as a result of the sale.
The rest of the proceeds will be retained for working capital to support the group’s main distribution businesses, as well as for future investments.
Serial System estimates that had the sale of its stake in SPL been completed in 2017, its earnings per share (EPS) would have risen to 3.31 US cents from 1.07 US cents on a pro-forma basis, while net tangible assets (NTA) would have increased to US16.04 cents per share from 13.81 US cents.
Its net gearing would have declined to 82% from 115%.
Derek Goh, the group’s executive chairman and CEO, says the group’s sale of SPL is “timely and particularly rewarding” given the returns, which he considers to be extremely attractive.
“We have been invested in SPL for more than four years now… The sales proceeds will come in handy for our main distribution business and for strengthening our balance sheet,” he comments.
While the disposal would have been subject to a vote by shareholders according to SGX listing rules, Serial System has obtained a waiver for the need to obtain such approval.
As at 11.13am, shares in Serial System are trading 1 cent higher at 15 cents.