The Straits Times | MARCH 28, 2013
RH Energy will take over real estate company, sell loss-making oil business
RH Energy has entered into two deals that will transform it from an oil and gas company into a property developer.
In the first agreement, RH will sell off its loss-making oil and gas business to Petchem Holdings for $36 million.
In the second, RH will undertake a reverse takeover of property developer Chiwayland Group (Singapore) from Sinway Investment for $399 million.
It will also perform a share and warrant consolidation, under which three of its existing shares will be consolidated into one share. Similarly, three existing warrants will be consolidated into one.
RH will then pay for the purchase of Chiwayland with $20 million in cash and by issuing up to 549.3 million new shares at 69 cents each for the remaining $379 million.
The Chiwayland Group is involved in development, project management and sale of residential and commercial properties, mainly in the Yangtze River Delta region of China.
In a statement yesterday, RH said the acquisition would give it "a new operating business with a track record and good financial fundamentals".
"Despite the various property market cooling measures adopted by the Chinese government in recent years, the Chiwayland Group continues to be profitable and has demonstrated its ability to maintain its profit margins for the past three financial years ended Dec 31, 2010, 2011 and 2012," it noted. RH added that it was undergoing this major restructuring exercise so as to increase its profile.
"If completed, the proposed acquisition will have the potential to significantly increase the market capitalisation of the company and widen the investor base for the shares of the company," it said.
"This will, in turn, enable the company to attract more extensive analyst coverage, leading to an overall increase in investor interest and trading liquidity of the shares."
Up until now, RH has been a provider of technical services to the oil, gas and petrochemical industry in China. In 2011, it entered into the exploration, development and production of oil and gas resources in Canada.
RH will incur a loss of about $4.7 million from the sale of these businesses.
The company has appointed Provenance Capital as its independent financial adviser for the proposed disposal.
It will also hold an extraordinary general meeting so that shareholders can vote on the sale.
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