Tuesday, November 17, 2015

Fragrance/ Aspial/ LCD Global

Fragrance/ Aspial/ LCD Global: AF Global, a 50/50 Fragrance-Aspial JV has proposed to buy over Aspial owner Koh Wee Seng's aggregate 28.9% stake in LCD Global for $74.2m in an interested party transaction.

The stake comprises 304.9m LCD shares, which includes shares held by Koh Wee Seng's 80.5%-owned Aspial (100.5m), his direct stake (152.1m) and his mother Tan Su Lan (52.3m). His brother Koh Wee Meng is the controlling shareholder of Fragrance, with a 74.3% stake.

Notably, the sale prices of the LCD shares differ for all three parties - $0.2946 for Aspial, $0.2164 for Koh Wee Seng and $0.2222 for Tan Su Lan. This translates to an average $0.243/share, or 3.4% above than LCD's closing price of $0.235.

Funding for the purchase will be through an interest-free loan of $37.1m each from Fragrance and Aspial. This compares to Fragrance's net debt of $794.4m (0.78x gearing) and Aspial's net debt of $1.13b (3.19x gearing) as at 30 Sep.

The group believes that the acquisition of LCD would enhance its existing property business with a ready portfolio of high end hotels, serviced residences and property development. Post-acquisition, AF Global will directly hold 83.5% of LCD, up from the current 54.6%.

While Aspial would have to fork out $7.5m after netting off the sale proceeds compared to Fragrance's full $37.1m, the proposed deal essentially means a drawdown of shareholder funds from both listed entities to pay their respective owners.

To recap, the Koh family and their concert parties accumulated their LCD shares back in Jun '14 when the company was the subject of a low-ball management buyout at $0.17/share.

That turned into a bidding war between the previous owner- Lum brothers, and the Koh brothers, who were substantial shareholders back then. Subsequently, the Lum brothers bowed out after share price of LCD doubled to $0.31 over a span of six weeks.

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