Advanced Systems Automation, which manufactures equipment for the semiconductor industry, plans to go into a new core business by acquiring a shrimp business for $20 million. 

 

In a series of announcements on Oct 28, ASA says it will acquire an entity called LSO Organization Holdings, which owns 50% of the total issued and paid-up share capital of British Virgin Islands-incorporated Lim Shrimp Organization. 

 

The sellers are Lim Chen Chong, Victoria Lim Yu and Structured Capital Solutions Inc.

 

As at June 30, the target' s book value was $0.8 million, and its net profits after tax was around $0.2 million for the six months to June.

 

According to ASA, LSO provides the technical know-how of shrimp farming to farms in Indonesia, China, Malaysia and Oman.

 

To fund this acquisition, ASA will first consolidate its shares in the ratio of 65 into 1. 

 

Next, it will pay $12 million of the $20 million by issuing 184.62 million post-consolidation shares at 6.5 cents each. It will then pay the remaining $8 million in cash within 6 months from the completion of the deal.

 

Upon completion of the deal, ASA will be paying an introducer' s fee of $1 million to Advance Capital Partners, whose sole director and shareholder is Tan Choon Wee.

 

The fee, equivalent to 5% of the $20 million transaction price, will be paid in the form of 15.38 million new shares.

 

To help fund the acquisition, ASA, in a separate announcement, says it will be issuing up to $20 million in the form of redeemable convertible notes to Advance Opportunities Fund I and Advance Opportunities Fund VCC, which are managed by Tan.

 

The notes will be issued at different tranches and carry an interest rate of 5% per year.

 

The deal is subject to the approval of ASA shareholders at an EGM to be called as well as the exchange.

 

According to ASA, there' s increased demand for food security during and arising from the pandemic.

 

Many countries are " urgently strengthening" their food supply chain resiliency and security via different means such as sustainable aquaculture.

 

" With the current and ongoing release of treated waste water from a nuclear plant by Japan, many countries have also sought alternate seafood sources from aquaculture instead of wild catch," says ASA.

 

According to ASA, the deal can help it turn around from its loss-making position.

 

" This, together with the positive business outlook for the target group, may allow the potential for growth in the market capitalisation of the company, an overall increase in

investor interest and, consequently, improvement in trading liquidity of the shares," says ASA.

ADVANCED Systems Automation (ASA), which recently agreed to buy a video-gaming company in a reverse takeover, is looking to consolidate every 375 of its existing ordinary shares into one ordinary share.

 

The Catalist-listed company also proposed a bonus issue of up to about 19.8 million free warrants, subject to the completion of the share consolidation.

 

The books closure date will be determined at a later date, the company said in an exchange filing on Thursday evening.

 

Shareholders who each hold fewer than 375 existing shares as at the books closure date will not be entitled to any consolidated shares, and will no longer be ASA shareholders when the consolidation is completed.

 

There were 1,901 such shareholders as at April 30, 2021. The company advised them to buy additional existing shares to increase their holdings to multiples of 375, if they wish to remain as shareholders.

 

ASA' s directors believe that consolidating the shares will " generally be beneficial" to the company and shareholders, by reducing the share price volatility and increasing market interest.

 

The stock price has been " closing at a low level" , hovering between 0.1 Singapore cent and 0.2 cent in the past six months, the directors said in the filing.

 

Lowly-priced shares are generally more susceptible to speculation and market manipulation, which may lead to excessive volatility and fluctuations in the company' s market capitalisation, they added.

 

Besides, trading in lowly-priced shares may translate to higher transaction costs relative to the trading price, given that it may involve minimum fixed expenses such as brokerage fees, the directors said.

 

The board also expects the share consolidation to allow the ASA shares to trade at a wider trading band that will enable investors to better price them " in a manner that more accurately reflects the actual financial condition of the company" , instead of being at or close to the lowest possible price of 0.1 cent.

 

" This may increase market interest and activity in the shares, and generally make the shares more attractive to investors, thus providing a more diverse shareholder base," the board said.

 

Under the proposed bonus warrants issue, each warrant will carry the right to subscribe for one new consolidated share at S$0.25 apiece during the exercise period.

 

The free warrants will be allotted to ASA shareholders on the basis of one warrant for every three existing consolidated shares held at the books closure date.

 

Proceeds from the exercise of the warrants may potentially increase the company' s capital base, strengthen its balance sheet and provide additional financial flexibility and liquidity, ASA said. Net proceeds are estimated at S$4.9 million, if all the warrants are duly exercised.

 

Both the proposed share consolidation and warrants issue are subject to shareholders' approval at an extraordinary general meeting, and the Singapore Exchange' s listing approval for the consolidated shares and warrants, among other things.

 

Last week, ASA said it would fully acquire video-gaming firm Excelgames Interactive Asia for S$120 million in new shares and cash. The proposed deal will constitute a reverse takeover of ASA.