Beng Kuang Marine Limited Announces Major Acquisition: Full Ownership of Asian Sealand Offshore and Marine Pte. Ltd.

Overview of the Proposed Acquisition

Beng Kuang Marine Limited (“Beng Kuang” or “the Company”) has announced a significant strategic move to acquire the remaining 49% stake in Asian Sealand Offshore and Marine Pte. Ltd. (“Target”), elevating its ownership from 51% to 100%. This acquisition, valued at approximately S\$60 million, is a major event for shareholders, as it will fully consolidate the Target Group’s contributions to the Company’s financials and operational control.

Key Terms of the Acquisition

• Aggregate Consideration: S\$60 million, based on an internal assessment of S\$122 million for the Target Group, representing a price-to-earnings (P/E) ratio of 8x FY2025 profit after tax (PAT).
• Consideration Structure:
  • S\$20 million satisfied by issuance of 57,142,857 new ordinary shares at S\$0.35 each (12.8% premium to last traded VWAP).
  • S\$20 million payable in cash at completion.
  • Up to S\$20 million as deferred and contingent consideration, payable based on the Target’s financial performance in FY2026 and FY2027.
• Deferred and Contingent Consideration:
  • Earn-out based on PAT thresholds:
    • PAT ≥ S\$15m: S\$10m per year
    • PAT between S\$5m and S\$15m: Earn-out = PAT – S\$5m
    • PAT ≤ S\$5m: No earn-out
  • If aggregate PAT for FY2026 and FY2027 exceeds S\$30m, earn-out is paid on a cumulative basis, capped at S\$20m overall.
• Permitted Dividend: The Target may pay a pre-completion dividend of up to S\$8m for FY2025, which will not affect the agreed consideration.
• Moratorium and Tag-Along Rights: Vendors must observe a 24-month moratorium on their new shares, with tag-along rights if the Executive Chairman and CEO sell their entire holdings, and exceptions if they cease to be directors.
• Conditions Precedent:
  • Final valuation report by independent valuer.
  • Shareholder approval for the acquisition and share issuance.
  • Approval from SGX-ST for listing of new shares.
• Funding: Combination of share issuance, internal resources, and external financing (including bank loans).

Background and Rationale

The Target Group is a core operating subsidiary, contributing substantially to Beng Kuang’s revenue and profits. Its financial performance over the past three years has been robust, with FY2025 revenue at S\$75.2m, PAT at S\$14.9m, and net asset value at S\$32.6m. The acquisition will allow Beng Kuang to capture the full upside of the Target Group’s future growth, enhance earnings attributable to shareholders, and provide greater operational flexibility. The Vendors, who will become substantial shareholders, will continue in active management roles, ensuring continuity and stability.

Financial Effects and Shareholder Impact

Net Tangible Assets (NTA) Per Share

• Before Acquisition: NTA per share at 12.64 cents.
• After Acquisition: NTA per share reduces to (0.67) cents, reflecting goodwill of S\$48.2m. The reduction is due to acquisition accounting and does not reflect deterioration in underlying assets.
• Net Asset Value (NAV) per share rises from 12.64 cents to 17.44 cents post-acquisition, accounting for goodwill.

Earnings Per Share (EPS)

• Before Acquisition: EPS at 2.61 cents.
• After Acquisition: EPS increases to 4.80 cents, indicating the deal is earnings accretive.

Major Transaction Under SGX Rules

• The acquisition triggers several thresholds under SGX’s Chapter 10, meaning it is classified as a “major transaction” and requires shareholder approval.
• Relative figures: Net profits (57.6%), consideration vs market cap (89%), equity securities issued (27.3%) are all substantial.

Additional Shareholder Considerations

• Service Contracts: Warrantors must enter into 2-year service agreements, with non-compete and non-solicitation clauses extending for 2 years post-employment. Earn-out entitlements may be forfeited if service contracts are terminated for cause or via voluntary resignation.
• No Director or Controlling Shareholder Interests: None of the Company’s directors or controlling shareholders have any direct or indirect interest in the acquisition.
• Extraordinary General Meeting: Shareholder approval will be sought at an EGM for both the acquisition and share issuance.
• Inspection of Documents: Shareholders may inspect the Term Sheet at the Company’s registered address for three months post-announcement by prior arrangement.
• Trading Caution: The acquisition is subject to conditions and may not be completed. Investors are advised to exercise caution when trading shares.

Potential Price Sensitivity

• This acquisition is a major event for Beng Kuang Marine, with the potential to significantly impact share value due to full consolidation of a core profit contributor, earnings accretion, and the issuance of a large block of new shares at a premium.
• The deal may result in short-term dilution of NTA per share, but is expected to drive long-term earnings and operational synergies.
• Completion depends on shareholder approval, independent valuation, and SGX-ST approval, all of which are price-sensitive milestones to monitor.

Conclusion

The proposed acquisition of Asian Sealand Offshore and Marine Pte. Ltd. is a major, price-sensitive transaction for Beng Kuang Marine Limited, promising full consolidation of a key profit contributor and enhanced earnings. Shareholders should closely follow developments, including the EGM and regulatory approvals, as these may materially impact the Company’s share price and long-term outlook.

Disclaimer: The information above is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisers before making any investment decisions. The completion of the acquisition is subject to various conditions, including shareholder and regulatory approvals. There is no guarantee that the transaction will be completed as announced.

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