Armarda

Armarda: Heavily dilutive acquisition with option to become a RTO. Co is to acquire 45% of China Satellite Mobile (CSM) from several individuals for $76.3m (HK$469.1m). Consideration will be paid by issuing 920m shares at $0.075 per share (disc of 16.7% to last traded) and payment of HK$25m in cash. CSM will provide satellite telecom products and services…

Acq may add to co’s core business but the dilution of 920m shares is effectively 45.2% of enlarged share capital. Attributable net tangible assets of acquisition is approx $69.0m which is lower compared with payment of $76.3m…

In addition co will also have a call option to purchase the remaining 55% shareholding. Should the option be exercised, the purchase price for the remaining 55% will be S$104.9m (HK$645.1m) which will satisfied by issuing 1.3b shares, an additional HK$25m in cash and HK$30m in loan notes. The option will last till 30 days after CSM is able to sell 10k units of satellite phones…

If a further 1.3b shares are issued vendors will have majority over the co and effectively the acq becomes a RTO although co has not expressed desire to sell off existing business.