An Analysis of Reverse Takeover Transactions (RTO Transaction) in Singapore as an alternative to initial public offering (IPOs)

Posted by on Feb 20, 2015 in SGX-ST Listings, Singapore Business, Singapore Economy, Singapore Legal Services

                   Reverse Takeover Transactions (RTO Transaction) in Singapore Happy Chinese New Year of the Goat to all my readers!  This year looks bad on the economic climate for the second half of the year but this also means assets are getting cheaper valuations which means more RTO transactions may be in the pipeline.  I been getting several calls on this.  Further to my earlier post on Reverse takeover Transactions in Singapore, there have been several new RTO Transactions in Singapore and this write up will analyse some of the commercial considerations when structuring RTO deals. As we write previously, in a IPO transaction, a businessman restructures some assets under a holding company and lists that holding company on the Singapore Stock Exchange. In a RTO transaction, there is an existing listed company (the “Listco”) that has an existing asset (“Existing Business”) and the parties can carry out either one of the following: (a)                The Listco acquires the new business (which is usually unlisted) (“New Business”) and merges it with the existing business so as to achieve strategic synergies;   (b)               The Listco acquires the New Business and the original major shareholder buys his Existing Business using a private company vehicle that he owns;   (c)                Or if the Listco’s original business has been sold prior to the RTO, then the Listco will change name after the acquisition of the New Business to reflect the name of the asset acquired. From the asset perspective Some benefits of a RTO transaction from the perspective of the asset owner: An acquisition via an RTO allows the asset to be sold into a listed company and multiples that of profits as opposed to a mere discounted cash flow valuation that you may expect for a normal merger and acquisition;   An acquisition via an RTO allows the owner of the asset to have liquidity (i.e. he can sell down part of his stake in the asset);   A listed parent allows the company/group to borrow at a lower interest rate.  In some transactions that we have done, the post IPO/listed entity can sometimes borrow at a much lower interest rate;   From a China perspective, this overseas listing allow china business owners to move their money/assets overseas on a more fluid basis rather than having to do the usual 内保外贷 (pledge assets in china as security and then borrow offshore in Singapore);   An overseas listing allows the China entity a reason to invest overseas and expand overseas from a china compliance perspective.  The State Administration of Foreign Exchange (SAFE) (国家外汇管理局). This also grants the China entity a reason to move funds overseas to expand...

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Singapore launches first mobile messaging applications company under established Singapore listed company

Posted by on Aug 16, 2014 in SGX-ST Listings, Singapore Technology Companies

Singapore’s traditional business ventures are now expanding into the dot-com space. Reading the Edge Singapore today and Asiaone, I noticed that Singapore eDevelopment, formerly CCM is aiming to be the next Tencent and Alibaba. This is a Singapore listed company (run by an Ex Wall Street Banker) and who is expanding the company into the Mobile Messaging space (think QQ Messenger/Line/Whatsapp). This is a good development whereby technology companies are seen to be profitable companies by the financial sector and are officially listed so adding legitimacy to the sector. I think if not wrong this may be the first listed company (Other than Creative) to move into the technology space in a large way in Singapore. Hopefully more of the established companies can set up technology arms and spin them off into large listed companies to boost the prestige and inspire another generation of Dot-Com Entrepreneurs in Singapore. This is probably one of the first few Singapore Listco led Technology expansions in...

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Initial Public Offering Process Singapore

Posted by on Sep 1, 2013 in SGX-ST Listings, Singapore Legal Services

Are you looking for more information on the Initial Public Offering Process Singapore? This article will help highlight in simple terms the listing process in Singapore. As the Global Economy continues to grow in 2013 and the prices of Singapore shares continues to climb, many global macro funds would start to invest their monies into Singapore equity funds which in turn will invest in companies that are listed on the Singapore Stock Exchange (SGX-ST). It is during this period that many companies from Singapore and China will start considering listing their companies on the Singapore Exchange. What are the several reasons that a businessman may have for listing his company in Singapore? Whilst there is a higher valuation based on PE ratios in China and Hong Kong but in China the queue is 800 to 900 companies waiting for approval to list which makes listing in China a feat in itself. While in Hong Kong only large companies are able to receive approval quickly. The smaller ones join the queue.   A public listed company means that the businessman can discharge his personal guarantees for his company. This is quite an important thing for a serial entrepreneur so he can use his own good personal credit for other ventures.   A businessman can make money from his stock price. No we are not talking about insider trading. So a businessman can buy shares in the market when there is no inside news and then release good news (assuming its true) and then sell his shares at a profit. So what is the initial public offering process in Singapore? First a team is assembled to examine if a company can be listed in Singapore. The audit of the company’s last three years of financials are carried out and restructuring of a company (if necessary) is carried out. The due diligence process starts. The relevant documentation is drafted and submitted to the Singapore Exchange for comments and approval. The listing is given the green light and the prospectus is listed on the website of the Monetary Authority of Singapore for main board companies or on Catalodge for Catalist companies for a period of time. After the expiry of the Red Herring Period, the Company is listed on the Singapore Exchange. This process is typically supposed to take anything from 6 months to 9 months (assuming no complications arise) but may take longer.  In the interim, private equity investors will invest monies in these companies to fund the IPO expenses by way of a pre-IPO investment usually in the form of a convertible loan to the company. Do contact us if you are interested in a Singapore...

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What Is IPO? Listing on the Singapore Exchange

Posted by on Aug 27, 2013 in SGX-ST Listings

By Ricky Lim What does Google, Microsoft and Dell have in common? These three well established companies, along with other large business organizations have went public before through the IPO or initial public offering.  Today many companies like them have considered listing on the Singapore Exchange. So what is an IPO? In financial terms, IPO or initial public offering is the first issuance of a company’s shares to the general public usually to interested investors. These shares are allowed to be transacted in the stock market where they can be brought and sold. One thing to note is the shares allocated to the public do not constitute 100% of the company’s shares. Only a certain percentage is allocated to the public. Usually the company owner or the board of directors will still hold the majority of the shares. So why does a company offer an IPO? One of the most common reasons companies offer IPO is to raise capital for the company. The main reason is because companies plan to use the money gathered from IPO to further expand their business or to increase their business operations. While IPO may sound like a good way for companies to raise money, they are disadvantages as well. The chief disadvantage is there are heavy legal compliance and financial regulations that needs to be followed strictly. The IPO Process The first step for any company to offer an IPO is to get several investment banks as underwriters. The purpose of underwriters is to assess the business, operational and financial background of the company in order to determine the value of the company’s shares to be sold to the public. Once it is agreed, the company will sign an agreement with the lead underwriter to sell shares on the market and the underwriters can proceed to sell these shares to any interested investors. For large corporations dealing with billions of dollars of shares, several large investment banks may act as underwriters. These banks are paid commissions for shares that they sell. The underwriters will also help the company deal with the legal and financial regulations imposed by the country. Most multinational companies that plan to hold an IPO will also need to comply with the rules and regulations of different countries therefore sometimes law firms may also be involved in some cases. Once the IPO is successfully launched, companies will need to submit their annual business earnings reports to the financial securities board since the company’s shares will be listed in the stock market. Ricky Lim is the online editor of a initial public offering [] info site. Visit his site today for more info on initial public stock offering [] and google...

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How to raise capital with a listing on the Singapore Exchange Securities Trading Limited (“SGX-ST”)

Posted by on Aug 19, 2013 in SGX-ST Listings

It is quite well known that at the height of the financial crisis in the USA, even the famed soccer club Manchester United was contemplating a listing on the SGX-ST as its owner Malcolm Glazer wanted to raise equity to pay off the huge amount of debt that he had raised in his acquisition of Manchester United.  In the end, there were three markets that were shortlisted and London, Hong Kong and Singapore.  Singapore made a pitch for the listing to the Glazer’s family and was poised to snatch the listing from Hong Kong,  but it appears that finally the deal was aborted due to the two tranche shareholding issue where the Glazers wanted a separate special class of shares where they could control the company. The question is why is Singapore such a good place for public fund raising for a company?             Fund raising in Singapore may be easier in part due to the fact that Singapore is one of the largest private banking and fund management capitals of the world. This has resulted in money flowing into Singapore from all over the world (as compared to Hong Kong where most of the wealth managed there flows out from China).  Any company listing in Singapore can gain access to a more diversified pool of investors. Singapore has the strong rule of law and has fund managers that are familiar with Asian companies and investing in Asian economies. This means that a potential investor can have greater certainty that he can enjoy higher returns (due to the high growth of the Asian economies) whilst knowing that the fund will comply with Singapore law in the making of investments.   This translate into greater liquidity for funds flowing into the SGX-ST. Singapore listings carry with it the perception of quality and due diligence. A company listed on the Singapore exchange has a right to be proud that it has cleared the quality standards of the SGX-ST. This is in stark contrast to the many countries in the region which are rife with corruption, fraud and political risk. A listing on the Singapore bourse is thus something that a businessman can aspire to and a mark of recognition that his companies has attained the highest corporate governance standards. Thus raising funds on the Singapore Exchange is a good way to signal to your competitors, suppliers and customers that a company has made it and what better way than to list on the Singapore Exchange. Contact us today if you would like to know more about listing on the Singapore Exchange.  We can form a team to help you in your listing on the SGX as well...

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Reverse Takeovers on the Singapore Securities Trading Limited (SGX-ST)

Posted by on Jul 19, 2013 in SGX-ST Listings

Singapore being one of the top financial centres in the world has seen in recent times an increase in the number of reverse takeover deals, where an existing listed company acquires a target by way of issuing shares.  The moving spirit (founding director) of the Company would then raise funds to buy back his part of the business. Reverse Takeover Singapore activity saw an upswing in the earlier part of 2013. My view is that this is due to the economic cycle whereby companies that did not do much fund raising by way of issuing new shares or accessing the capital markets, decide that they want to bring their company private. Then they find out that their Singapore listed company shells are worth money so decide to go in search for companies (with assets) that may be interested.  Given that most companies are not doing well in terms of profits, Singapore has seen a slew of mining, oil and resource based companies looking to list in Singapore in the early part of this year. Some key issues to consider if you own assets that you want to list indirectly by way of a reverse take over in Singapore. Whether the asset fulfills the financial criteria for listing in Singapore. Singapore has two boards for listing companies, namely the Main board and the Catalist board.  You should get familiar with the difference between the two. The financial requirements for the Main Board are tougher but you gain access to investors (like funds) that invest in larger companies.   The regulatory environment where your assets/business is located. Singapore has many PRC companies listed on its bourse but in recent times rules and regulations on PRC assets have been tightened. The Singapore exchange has asked listed companies to put steps in place to increase control of parents over the legal representatives in their PRC subsidiaries.   Singapore has a regime to list mineral oil and gas companies.  The Catalist listing manual allows companies with an exploratory angle (rather than a production story) to list. If you have any queries about listings, reverse takeovers or IPOs in Singapore, please drop us a note and we will assist you.  We can help arrange and put together a deal if your assets are listable in...

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