S i2i (formerly: Mediaring)

By WINSTON CHAI


SPICE I2I'S acquisition spree may have encountered a road bump with investment adviser ISS Proxy Advisory Services coming out to recommend shareholders to vote against its latest buyout plans.

In January, Spicei2i unveiled plans to broaden its regional footprint by acquiring Indonesian handset distributor, Affinity Group, for US$175 million (S$225 million). Along with this acquisition, the firm issued yet another cash call, barely five months after a previous rights issue exercise.

This time around, it announced a one-for-one rights issue to raise gross proceeds of some $151 million to fund future buyouts.

At that time, some retail investors questioned if Spicei2i was overpaying for Affinity Group and ISS is now lending weight to those concerns.

'The total consideration under the proposed acquisition represents a significant premium to the net book value of Affinity Group,' ISS said in a March 17 report.

Illustrating the financial effects of the Affinity buyout, Spicei2i has said that its net tangible asset per share, as at Dec 31, 2009, will drop from 6.52 US cents to a negative 7.01 US cents.

The steep drop in tangible assets was again red-flagged by ISS.

In addition, ISS pointed out that Spicei2i appears to be locking in a maximum net profit of US$5 million from Affinity for FY2011 to 2013 by virtue of a deferred payment structure.

Any change in the control of Spicei2i would accelerate the rate of deferred payments under the deal, ISS highlighted.

In light of these concerns, 'shareholders are recommended to vote against this proposal', it concluded.

Even in the absence of ISS's investment advice, shareholders appear to have signalled their early dissent with regards to Spicei2i's acquisition and rights issue plans.

In the wake of these announcements in January, the firm's shares plunged to a nine-month low of eight cents and the decline continued as the counter closed at six cents yesterday.

Spicei2i is scheduled to hold an extraordinary general meeting on March 29 to vote on its proposed rights issue.


Source: Business times

Copied from CNA forum; The issue has reached Minister for Finance.


CFA wrote:
----- Original Message -----
From: --
To: tharman_s@mof.gov.sg
Cc: heng_swee_keat@mas.gov.sg ; smenon@agc.gov.sg
Sent: Monday, March 21, 2011 6:08 PM
Subject: Re: Spice i2i Limited 's right issue and overpaid acqusition in Indonesia


To: Minister of Finance
Attn: Mr. Tharman

Dear Mr. Minister,

Ever since the new management from India took control of Spice i2i Limited, they have been raising funds through right issues and buying over-valued companies in overseas. Please help the retail investors like me to stop them from these deals.
Below is an article published by Business times which is self-explanatory.

Please help us, many thanks.

Regards/Investor






Original Message -----

From: MOF QSM (MOF)
To: --
Cc: MAS Webmaster (MAS)
Sent: Tuesday, March 22, 2011 4:45 PM
Subject: FW: Spice i2i Limited 's right issue and overpaid acqusition in Indonesia




Dear Mr Chan


I refer to your email dated 21 Mar 2011 to Minister Tharman Shanmugaratnam.



As the feedback raised falls under the purview of the Monetary Authority of Singapore (MAS), we are forwarding it to them for their attention and follow-up. Thank you.





Regards

Leela Pokkan (Mdm)
for Quality Service Manager
Ministry of Finance

Is there really a need to bring the matter to Minister Tharman? What can or should MAS do, if the deals by Spice i2i are above board? We have to assume so, as both the proposed 1-for-1 rights issue priced at $0.055 per new share, and acquisition of the Indonesia-based cellular business and the "Nexian" brand of the Affinity Group, are managed/advised by DBS. I guess it pays to review the 2 circulars prepared by DBS for the proposed rights issue and acquisition......
http://info.sgx.com/listprosp.nsf/5ec09b...400292aed/$FILE/Spice%20i2i%20Cir-Samba-SGX.pdf [Rights Issue]
http://info.sgx.com/listprosp.nsf/5ec09b...400290532/$FILE/Spice%20i2i%20Cir-Spin-SGX.pdf [Acquistion of Affinity Group]

It is to be noted that if the minority/public shareholders choose not to support the proposed rights issue, the controlling shareholders - the India-based Spice Group of companies - will stand to raise their combined stake in Spice i2i, from the current 20.6216% to up to approx. 60.3108%.

I guess such is the problem of an overly aggressive ultimate controlling shareholder/Executive Chairman in Dr. B.K. Modi, who is using a listed company to raise funds to pursue rapid business growth - or more like pursuing his own empire-building dream! - through M&A's . But he has already warned investors beforehand - by re-naming MediaRing as Spice i2i, where the company’s commitment is to realise its “Circle of Champions” vision - to become one of the leading mobility players in the local markets of the "i2i" region, and "i2i" actually stands for "Ivory Coast to Indonesia". I suppose it is difficult to just agree to such grand business or growth strategies!

Many troubled 'S' chips' rights and acquisitions were also advised by DBS or world- class banks .

(23-03-2011, 09:48 PM)valueinvestor Wrote: Many troubled 'S' chips' rights and acquisitions were also advised by DBS or world- class banks .

Interesting case here, and thanks for highlighting. I was not aware of this radical change in business direction for Mediaring, as I only kept track of the company back in 2005-2006 when it managed to turn around, and was one of the few VOIP players to boast a profit.

Seeing how things are going and the frequent fund-raising, it must really stink to be a shareholder! Either you keep coughing up money, or you get massively diluted. Either way, you lose!

I guess this illustrates the dangers of purchasing shares in a company which is a serial acquirer, and which is not even using its own money; and is also possibly overpaying for its transactions.

As for DBS, they have fees and commissions to earn, so why not suggest or structure the deal? They have everything to gain and nothing to lose.....

If DBS is good, they should have advised themselves not to have bought into Dao Heng Bank at 3.2x book value, Thai Military bank at 3X,. Good or goon adviser ? DBS has fantastic track records of this.

Mar 28, 2011
Spice i2i expects to win over shareholders
Indian chairman vows to explain and answer every question at EGM
By Chua Hian Hou , Technology Correspondent

SPICE i2i is confident it will be able to soothe minority shareholders' unhappiness over its controversial rights issue at its extraordinary general meeting (EGM) tomorrow.

In an interview with The Straits Times last Friday, the mobile phone maker and Internet telephony company's chairman, Indian billionaire Bhupendra Kumar Modi, said shareholders' ire had taken him by surprise.

'I am working for shareholders,' he protested.

'They should be very happy, because the rights issue is giving first priority, first loyalty, to shareholders compared to a public share issue... In India, it's taken as a positive thing.'

Some shareholders protested over the frequency of the rights issues - this is the second rights issue in as many years - while others said Spice had failed to explain how it planned to use the funds raised.

Some are also unhappy about the rights price of 5.5 cents, a hefty discount compared to the 11.5 cents the share was trading at before the announcement, claiming this allows Dr Modi to increase his stake cheaply. The shares closed at six cents on Friday.

Spice's proposed issue of 2.74 billion rights shares will allow it to raise up to $146.35 million, funds that will 'provide the company with funds for potential acquisitions in the near future and to be in a position to take advantage of such opportunities,' the company said previously. Shareholders will be able to sell their rights if they do not wish to exercise them.

And these acquisitions, said Dr Modi, are necessary for his vision for Spice: to create a regional phone maker capable of going toe-to-toe against the likes of Apple, Samsung and Nokia.

The company was known as MediaRing before changing its name to Spice i2i in 2009, after Dr Modi's Spice Group became its biggest shareholder. Before this, it had been 'hardly profitable... a company with no future, sitting in a dying industry', he said.

Today, said the flamboyant mogul in the 45-minute interview at his 63rd floor penthouse at The Sail, Spice has been successfully transformed into a mobile phone manufacturer, with solid market shares in the markets from Malaysia to India. It does not sell its handsets here, although there are plans to launch its phones here over the next few months.

But although it was 'in the right industry... in the right (geographical) area with many young countries with many young people,' one problem remained: size.

Growing organically, said Dr Modi, is too slow in such a fast-moving business, thus the string of rights issues-funded acquisitions.

If it pans out, at the end of its next financial year next March, Spice should be able to grow its pre-tax profit ten-fold to $50 million, and quadruple its sales to $1 billion, he said.

When this happens, he believes there will be significant institutional investor interest in his firm.

'Right now, it's too small a company to attract the big investor, and if you cannot attract these investors, you will have no future as a listed company,' said Dr Modi, who is supremely confident shareholders will accept this vision tomorrow.

His promise: 'A very open meeting, and I will properly explain the whole scheme, and answer every single question'.

The company has, in fact, already won over the some parties like the Securities Investors Association (Singapore), which had received queries from aggrieved shareholders over Spice's plans.

Following a meeting with Spice's chief executive Maneesh Tripathi and chief financial officer KTS Anand, Sias chief executive officer David Gerald said that it was 'of the opinion that the company is in fact acting in the interest of the minority shareholders'.

Shareholders, said Mr Gerald last Friday, should 'seriously consider the acquisition plan... if the company is successful in their vision, it may succeed in becoming a billion dollar company'.

Besides the rights issue, Dr Modi also said that he remains keen on setting up a $200 million entertainment complex, an idea he first announced in 2008.

This 24-hour entertainment, dining, and shopping complex, he said, would be a first-class modern mall designed to meet the needs of tourists from the Indian sub-continent as well as the many thousands of 'high middle-class' Indians now living here - like his daughter.

Right now, there was no place for these people, he lamented. 'Going to Little India is like going to 1960s India. India has changed, but Singapore's Little India has not changed.'

The problem is land.

He had put a team to search for a suitable commercial site, including empty plots with which to build a new complex, as well as unused or underused buildings to convert.

So far though, he had not been able to find a suitably central plot of commercial land to build his dream 250,000 sq ft complex.

'If I get the opportunity to do this, I will do this... maybe I will place an ad in the newspaper to see if anybody has a suitable plot of land to sell,' he said.

chuahh@sph.com.sg

www.facebook.com/hianhou

May 7, 2011
Spice i2i's Affinity buyout delayed due to valuation
By Jonathan Kwok

Spice i2i, whose chairman is Dr Bhupendra Kumar Modi, has delayed its $215 million buyout of Affinity Group to May 16.

TECH firm Spice i2i said yesterday that its US$175 million (S$215 million) acquisition of Indonesia's Affinity Group had been delayed until May 16, due to differences in valuing the firm's assets.

The mobile handset company said the delay, which is allowed in the acquisition agreement, stemmed from the due diligence process.

Spice i2i said on Monday that the acquisition had been delayed by 10 business days to May 16, but did not provide a specific reason.

It disclosed yesterday that it found Affinity Group's stated US$32.6 million in net assets as at Dec 31 appears to have been overstated by about US$10 million.

'These are preliminary findings of the company's internal team and the company is seeking clarification from the Affinity Group,' said yesterday's statement.

'The company is also separately seeking guidance from a local adviser on this issue. All such findings, including the due diligence report, will be placed before the board for consideration.'

Spice i2i said it expects Affinity to finalise its audited accounts soon.

Singapore-listed Spice i2i, formerly known as MediaRing, was taken over by Indian telecoms and entertainment conglomerate Spice Group in 2009, when an aggressive regional expansion spree began.

Yesterday's announcement also raised the prospect of a merger between Spice i2i and Bombay-listed Spice Mobility, another member of the Spice Group.

Dr Bhupendra Kumar Modi, who owns the Spice Group and is chairman of Spice i2i, was quoted by Indian media recently as saying that he might look at merger options.

The suggestion came from the most recent meeting with stakeholders of Spice Mobility, who mooted the idea as both companies share a common supply chain and brand.

But the announcement said that 'no plan or proposal has been presented to the board or the company (Spice i2i) with respect to this matter'.

Spice i2i also said that it is 'always open to evaluating avenues to improve efficiencies and enhance shareholder value'.

Some Indian traders tend to like to push and negotiate for a final discount at the last point before concluding a business deal, in some cases using all kinds of excuses.

Spice i2i shareholders should pray that the Indonesia's Affinity Group being acquired is a good-enough business, as the price tag of USD175.0m is certainly a big sum!

(28-03-2011, 08:29 AM)Musicwhiz Wrote: Mar 28, 2011
Spice i2i expects to win over shareholders
Indian chairman vows to explain and answer every question at EGM
By Chua Hian Hou , Technology Correspondent

...

'Right now, it's too small a company to attract the big investor, and if you cannot attract these investors, you will have no future as a listed company,' said Dr Modi, who is supremely confident shareholders will accept this vision tomorrow.

This seems to contradict what i have heard. Shouldnt the success of the company depend on whether consumers spend $$ on your phones?