Shanaya Limited Announces Strategic Acquisition: 60% Stake in Hup Lee Leong Enviro Pte Ltd

Key Highlights

• Binding Term Sheet Signed: Shanaya Limited, through its wholly-owned subsidiary Shanaya Environmental Services Pte Ltd (SES), has entered into a binding term sheet to acquire 60% of Hup Lee Leong Enviro Pte Ltd (HLL).
• Proposed Acquisition Structure: SES will purchase 300,000 ordinary shares of HLL from its current directors and owners (the Sellers), representing a 60% stake. The remaining 40% will remain with the Sellers.
• Consideration: The total purchase consideration is S\$1,800,000, split into S\$300,000 cash and 27,272,727 new shares in Shanaya Limited at S\$0.055 per share—at a 22.2% premium to the last traded price (S\$0.045).
• Profit Guarantee: The Sellers guarantee HLL will achieve an after-tax profit of S\$400,000 to S\$500,000 for each of the financial years ending 31 December 2026 and 2027. Any shortfall will be compensated by the Sellers in cash.
• Moratorium: The Consideration Shares issued to the Sellers will be subject to a two-year moratorium, restricting their sale.
• Valuation Condition: Completion is conditional upon independent valuation of HLL at no less than S\$3,500,000 for FY2025, and after-tax profit for FY2025 not less than S\$400,000.

Detailed Information for Investors

About Hup Lee Leong Enviro Pte Ltd (HLL)

HLL, incorporated in Singapore in 2016, is a National Environmental Agency (NEA) licensed General Waste Collector. It provides waste collection and general cleaning services, excluding household cleaning. As of the announcement, HLL has a paid-up capital of S\$500,000. For the nine months ended 30 Sep 2025, the book value and net tangible assets (NTA) of the sale shares (60%) are approximately S\$1,070,167, with net profits attributable to the sale shares at S\$184,634.

Sellers’ Profile

The Sellers are the current directors and equal shareholders (20% each) of HLL. They are not related to Shanaya Limited’s directors or major shareholders and do not hold shares in Shanaya Limited.

Principal Terms and Conditions

• Completion is subject to satisfactory due diligence and execution of a formal sale and purchase agreement (SPA).
• A shareholders’ agreement and a waste logistics and disposal services agreement will be entered post-acquisition, ensuring support and operational synergy between SES and HLL.
• HLL must present two-year financial projections and budgets for 2026-2027.
• All necessary corporate and regulatory approvals, including SGX-ST approval for listing of the new shares, must be obtained.
• No material adverse change in HLL’s business, finances, or operations should occur before completion.
• The transaction includes standard representations, warranties, covenants, and an exclusivity period for SES.

Profit Guarantee Mechanism

The Sellers jointly and severally guarantee minimum after-tax profits of S\$400,000-S\$500,000 for FY2026 and FY2027. Any shortfall will be made good in cash to Shanaya Limited. The Board considers this guarantee reasonable, based on HLL’s historical performance and future prospects.

Financial Impact and Shareholder Value

• Share Capital: Post-acquisition, issued shares will increase from 229,467,740 to 256,740,467, enhancing liquidity but also diluting existing holdings.
• NTA per Share: Pro forma NTA drops from 1.83 cents to 1.66 cents due to the share issuance, despite a slight increase in total NTA.
• Loss Per Share (LPS): Pro forma LPS improves from 0.92 to 0.65 cents, factoring in HLL’s profits, potentially reducing overall losses.
• Relative Figures: The acquisition consideration represents 17.4% of Shanaya’s market cap, and the new shares issued comprise 11.9% of existing share capital—a significant transaction by Catalist rules.
• Funding: The acquisition will be funded by internal resources, indicating no additional debt or equity fundraising pressure.

Shareholder and Price-Sensitive Considerations

• Material Transaction: The deal is classified as a discloseable transaction under SGX Catalist rules, not requiring shareholder approval but is significant enough to impact share price and investor perception.
• Strategic Synergy: The acquisition is expected to provide long-term synergistic benefits through resource sharing and operational collaboration, potentially enhancing future earnings and positioning Shanaya as a more integrated environmental services provider.
• Profit Guarantee: The Sellers’ profit guarantee acts as a safeguard for investor interests, with a monetary recourse mechanism if targets are not met.
• Moratorium on Shares: The two-year lock-up on new shares helps prevent immediate market dilution from Sellers’ sales and provides confidence in their commitment to the business.
• Potential Risks: The transaction is subject to due diligence, regulatory approvals, and valuation hurdles. There is no certainty the deal will be completed, and adverse due diligence findings or failure to meet financial conditions could terminate the transaction.
• Future Announcements: Shareholders should monitor further updates, especially regarding due diligence outcomes, formal SPA signing, and completion. Material developments could impact share price.

Other Notable Points

• No new directors will be appointed to Shanaya Limited as part of this acquisition.
• None of Shanaya Limited’s directors or major shareholders have interests in HLL or the Sellers.
• The Term Sheet is available for inspection at Shanaya’s registered office for three months.

Investor Takeaways

This acquisition represents a significant strategic move for Shanaya Limited, potentially enhancing its market position in the waste management sector. The profit guarantee and premium share issuance terms, combined with the moratorium, provide a degree of security and alignment of interests. However, the transaction’s completion is subject to multiple conditions, and investors should monitor further announcements closely for price-sensitive developments.

Disclaimer: This article summarizes public disclosures made by Shanaya Limited and is for informational purposes only. It does not constitute investment advice or a recommendation to buy or sell securities. Investors should consult their financial advisers and review all available information before making investment decisions. The proposed acquisition is subject to various conditions and may not be completed. Shanaya Limited and its sponsor, PrimePartners Corporate Finance Pte. Ltd., do not guarantee the accuracy or completeness of this information. Shareholders are advised to exercise caution and read all company announcements carefully.

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