Jadason Enterprises Proposes Major Acquisition and Share Issuance: What Investors Must Know

Key Points from Jadason Enterprises’ Acquisition Announcement

• Proposed Acquisition: Jadason Enterprises Ltd plans to acquire 100% of Jadason Technology Limited (JTL) and Metason Limited (ML) for S\$4.29 million (approx. HK\$26.2 million).
• Consideration Structure: The acquisition will be paid entirely via the issuance of 330,000,000 new Jadason shares at S\$0.013 per share, representing an 18.18% premium to the previous trading day’s VWAP.
• Potential Earnout: An additional 33,000,000 new shares may be issued if the Targets achieve at least HK\$4.0 million net profit in FY2025.
• Major Transaction & Interested Person Transaction: The deal qualifies as both a major transaction and an interested person transaction, requiring independent shareholder approval.
• Whitewash Waiver Required: The deal triggers a mandatory general offer requirement, but a Whitewash Waiver from the Securities Industry Council (SIC) is being sought.
• Moratorium: All new shares issued to vendors will be under a 12-month lock-up period.
• Financial Impact: The deal will significantly dilute existing shareholdings, with new shares representing up to 50.25% of the current share base if both consideration and earnout shares are issued.
• EGM & Circular: An Extraordinary General Meeting will be convened for shareholder approval, and a circular with more details will be sent out.

In-Depth Details for Retail Investors

Background & Rationale

Jadason Enterprises is seeking to diversify and rejuvenate its revenue streams by acquiring JTL and ML, two companies with strong track records in IT, 3D modeling, motion capture, virtual reality, and digital transformation solutions. JTL, founded in 2000, primarily serves the IT and computer graphics market, while ML, established in 2014, complements JTL with a focus on Hong Kong government and education sector projects. These companies bring specialized technical expertise and established client bases.

Notably, JTL was formerly an indirect subsidiary of Jadason but was sold in 2005 for business realignment. The reacquisition marks a strategic pivot back to digital and media technologies.

Valuation & Financials

The acquisition price is based on an independent valuation (draft report by AVA Associates Ltd), which values the two targets at about HK\$43 million (S\$7.0 million), using an income-based discounted cashflow (DCF) approach. Sensitivity tests suggest a valuation range between HK\$38 million and HK\$49 million (S\$6.2-8.0 million). For FY2024, the targets recorded combined revenues of HK\$53.2 million (S\$8.7 million) but their combined net asset value (NAV) was negative HK\$1.6 million (negative S\$0.3 million) due to losses in ML. After a planned capitalization of intra-group liabilities, the NAV would become marginally positive.

JTL was profitable, while ML posted a net loss in FY2024. The acquisition is structured to incentivize post-acquisition performance: additional shares (the Earnout) are only issued if the targets collectively achieve at least HK\$4.0 million (S\$0.7 million) net profit in FY2025.

Share Dilution & Key Shareholder Changes

The 330 million consideration shares represent a substantial 45.68% increase over the current issued share capital. If the earnout is achieved, up to 363 million new shares could be issued, totaling approximately 50.25% of the pre-acquisition base. Post-deal, Kenneth (the vendor and son of the current Chairwoman, Queeny Ho) will become the largest shareholder with about 32.30% interest (if the earnout is met), overtaking Queeny, who will retain about 21.74% through deemed interest.

This change could be price-sensitive, as it shifts control within the founding family and brings in strategic management changes—Kenneth is expected to be appointed Executive Director upon completion.

Regulatory and Shareholder Approvals

Due to the scale of the deal (exceeding 5% of NTA and over 15% of group net profits), it is classified as a “major transaction” and an “interested person transaction” under SGX rules. This triggers requirements for independent shareholder approval and an independent financial adviser (IFA) report.

Additionally, given the family connections and resulting shareholding changes, the transaction triggers a mandatory general offer under Rule 14 of the Singapore Code on Take-overs and Mergers, unless a “Whitewash Waiver” is obtained from the Securities Industry Council (SIC). SIC has granted this waiver, subject to shareholder approval via a special “Whitewash Resolution.”

Moratorium and Shareholder Rights

All shares issued to the vendors (including Kenneth and Hysteric International Ltd) will be locked up for 12 months, restricting resale and reducing immediate share overhang risk.

Shareholders will be asked to vote at an upcoming EGM. Those associated with the interested parties (Queeny, Kenneth, Hysteric) will not be allowed to vote on the relevant resolutions.

Financial Impact & Price Sensitivity

The acquisition will dilute the net tangible asset (NTA) per share from S\$0.0053 to S\$0.0036 (if the earnout is achieved), but is projected to reduce loss per share from S\$0.0015 to S\$0.0005, as the acquired businesses are expected to be accretive to earnings, especially if the earnout condition is met.

This deal represents a strategic shift for Jadason, from a focus on printed circuit board activities to a renewed push into IT and digital media services. The accompanying changes in major shareholding, management, and business direction are all potentially share price-sensitive events.

What Should Shareholders Do?

• Monitor Announcements: Watch for the formal EGM circular, IFA report, and further regulatory approvals.
• Consider Dilution: Assess the impact of nearly 50% dilution if both consideration and earnout shares are issued.
• Note Family Control Shift: Understand the implications of Kenneth overtaking Queeny as the largest shareholder, especially given the family relationship.
• Evaluate Strategic Direction: Consider whether the acquisition and new business focus align with your investment outlook for Jadason Enterprises.

Caution:

Jadason’s announcement repeatedly cautions investors that there is no certainty the acquisition will be completed, as it is subject to multiple regulatory, shareholder, and due diligence conditions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should consult their own professional advisers and read all company disclosures and circulars carefully before making any investment decisions. The author and publisher accept no responsibility for any loss arising from reliance on this article.

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