Memstar in RTO deal with China firm

Memstar Technology - a cash company after selling its membrane manufacturing business to United Envirotech - has entered into a US$420 million reverse takeover deal with the owners of Longmen Group, a China-based developer of unconventional natural gas.

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Guanyu said…
Memstar in RTO deal with China firm

Kelly Tay
23 December 2014

Memstar Technology - a cash company after selling its membrane manufacturing business to United Envirotech - has entered into a US$420 million reverse takeover deal with the owners of Longmen Group, a China-based developer of unconventional natural gas.

Memstar is proposing to acquire Longmen through the issue of new shares to the vendors. On completion, the vendors of Longmen will own 73.1 per cent of Memstar, marking a backdoor listing for Longmen.

The new shares in Memstar will be issued at 1.615 Singapore cents apiece, representing a premium of about 7.24 per cent to the volume weighted average price of the shares on Nov 28 - the last market day preceding the date of the share sale and purchase agreement.

United Envirotech had acquired Memstar in April this year for S$293 million in cash and shares, in a move to become a fully vertically integrated water-treatment outfit. Following that deal, Memstar ceased to have any operating business, and is deemed to be a cash company under the Singapore Exchange (SGX) rules. It has to meet the requirements for a new listing within 12 months from its becoming a cash company.

Founded in 2005, Longmen is principally engaged in the exploration, development, production and sale of coal bed methane resources in the Ordos Basin in Shaanxi, China. It is 50.43 per cent-owned by LESS Longmen - a strategic fund of funds focused on investing in recycling, renewables, forestry and organic food production - with the balance owned by various private equity funds and the current and prior management of Longmen. The latter’s net loss has widened for three consecutive financial years ended Dec 31 - from US$5.84 million in FY2011, to US$19.51 million in FY2012, to US$35.04 million in FY2013. Revenue in FY2013 stood at US$525,000, compared to US$4.71 million the year before and US$2.61 million in FY2011.

Given certain assumptions to arrive at the proforma effects, the net tangible assets per share would be 0.26 cent after the placement and proposed RTO, compared to 0.1 cent before. Losses per share would widen from 0.03 cent to 0.19 cent.

The deal is conditional upon the SGX’s approval and that of Memstar’s shareholders. Conditions of the agreement are to be fulfilled on or prior to Dec 31, 2015, or four months from the date of in-principle SGX approval.

Stirling Coleman Capital Ltd is the financial adviser to the company for the proposed deal. Mermaid shares, which resumed trading on Monday, closed trading at 2.5 Singapore cents, up one cent or 66.7 per cent.
Anonymous said…
Useful perspective on the RTO:
http://stockresearchasia.com/1/post/2015/01/memstar-technology-ltd-share-price-surge-unjustified.html

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