(July 31): What does OLS Enterprise do? If you said it operates a chain of cinemas, or runs a risqué cabaret show, or produces cosmetics and pharmaceuticals, you would be right — well, sort of.

OLS has done all of those things in its 23 years as a public-listed company. In recent times, it has also tried and failed to get into construction and phosphate production.

Now, OLS is getting into corporate finance, which is to say that it plans to acquire the firm that backed its efforts to find a new business over the last three years.

On July 24, OLS said it would pay $1.5 million in cash to acquire 51% of Advance Capital Partners Asset Management.

The face of ACPAM is its founder and managing partner Tan Choon Wee. Another prominent individual at the firm is Philip Wong, who used to be chairman and CEO of a firm called Shanghai Tongjia Asset Management. The board of ACPAM consists of just Tan and Wong.

Among ACPAM’s vehicles is the Advance Opportunities Fund, which owned nearly 14% of OLS as at July 3.

OLS currently has a market capitalisation of $9.8 million. The 51% stake in ACPAM that OLS is acquiring is to come from an entity called Pine Partners, which currently owns 60% of the firm. Tan holds the remaining 40% of ACPAM.

Tan has been linked to OLS as its financier since at least late 2013. That was when a deal was struck by OLS with Advance Opportunities Fund to obtain up to $50 million by issuing redeemable convertible notes in small tranches. These instruments have been used by other public-listed shells to sustain themselves while hunting for suitable acquisition targets.

Some market watchers have called these notes “death spiral bonds” because of the massive dilution that can be triggered when they are converted into shares.

OLS was a cinema operator called Eng Wah Organization when it listed in 1994. In late 2005, it created a stir by bringing the Crazy Horse Paris Cabaret show to Singapore. But the show closed after a two-year run amid poor attendance.

When the funding deal with Tan was announced, OLS was known as Transcu Group and was at the tail end of a failed effort to develop a cosmetics and pharmaceutical business.

Then came a string of deals that failed to get off the ground.

In April 2014, OLS said it would acquire Straits Construction Group for at least $325 million in a reverse takeover. But that deal fell through in January 2015.

In August 2015, OLS said it would acquire a company called Malaysia Phosphates Additives for $300 million in new shares. That would have resulted in the vendors of MPA owning 72% of the enlarged OLS.

At the time, MPA was only running a small phosphate plant with a capacity of 30,000 tonnes a year in Perak, but it had plans to build a plant in Sarawak with a capacity to produce 1.5 million tonnes of phosphates a year.

There was a flurry of announcements after the deal was announced, including one that stated that MPA had inked 20-year-long power supply deals.

In May 2016, four Chinese construction firms were given a RM2.2 billion ($699.3 million) contract to build the new plant at a big signing ceremony held at the Sheraton Imperial Kuala Lumpur.

The deal did not just involve MPA, though. The new plant to be built in Sarawak was actually only 40% owned by MPA.

A further 40% was owned by Bursa Malaysia-listed Cahya Mata Sarawak, a conglomerate linked to the family of the state’s former long-serving chief minister Abdul Taib Mahmud. The remaining 20% of the plant was held by a unit of Tradewinds Corp, which is controlled by Malaysian tycoon Syed Mokhtar Shah Syed Nor Al-Bukhary.

In January this year, OLS said the long-stop date for the agreement with MPA had lapsed on Nov 30 and no further revision or extension was made. Did the deal fall through because of a disagreement over pricing? Which of the parties chose to walk away? Or, did the deal fail because of scrutiny from regulators? The reasons were not specified by OLS.

Two months later, OLS announced a new deal. It said it would spend $715,969 to acquire a 20% stake in a Thai company called Venture Incorporation Public Co, which specialised in buying over bad debts from banks.

The Thai company also offered debt collection services to other lenders, and had plans to expand into asset management. Yet, after another two months, OLS said it was not satisfied with what it had found at the Thai company following due diligence.

Will plans by OLS to acquire ACPAM fare any better? Interestingly, OLS has noted that ACPAM was $24,000 in the red for the year to May 31, 2017. Still, given Tan’s close links to both OLS and ACPAM, he is in a much stronger position to ensure this deal actually gets done.

That would be a relief to the long-suffering shareholders of OLS, who still include the Goh family that founded Eng Wah, with 1.18%.

OLS Enterprise to buy its own financier

OLS Enterprise to buy its own financier

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