Memstar Technology

[CityFarmer]

Both Memstar & Envirotech halted. More shares placement or merger / takeover?

Yes, you are right, a takeover deal...

United Envirotech to acquire Memstar’s business and assets for $293.4 mil

Mainboard-listed United Envirotech announced today that it has agreed to acquire a 100% stake in Memstar Pte Ltd, a wholly owned subsidiary of Memstar, and certain assets from Memstar, for $293.4 million.

United Envirotech is a leading membrane-based water treatment solution provider. United Envirotech’s principle activities involve the provision of water treatment solutions using its proprietary advanced membrane technologies, such as the Membrane Bioreactor (MBR) technology and the Continuous Membrane Filtration (CMF) technology.

Memstar is one of the leading manufacturers and suppliers of polyvinylidene fluoride (PVDF) hollow fibre membrane and membrane products, with a global presence. Listed on SGX Mainboard in 2007, Memstar is equipped with strong R&D capabilities and has manufacturing facilities in Singapore and China. It’s membrane products have been used extensively by UEL in its water and wastewater treatment projects.

United Envirotech’s acquisition of Memstar Pte Ltd will make the combined entity a vertically integrated water solutions provider with enhanced competitiveness to capture the opportunities in the fast growing membrane-based water and wastewater treatment industry, leveraging on both Memstar’s proprietary membrane technologies and United Envirotech’s strong engineering and marketing capabilities in China and the global market. United Envirotech had previously acquired a 13.2% stake in Memstar, in January 2013.

http://www.theedgesingapore.com/the-dail...4-mil.html

[DP28]

"25% of the consideration will be satisfied by way of approximately S$73.4 million in cash and the balance
75%, or S$220.1 million, through the issuance of approximately 200.1 million UEL shares, at S$1.10 per
share."

This effectively turns MemstarT into a cash cow. However, in layman i put it as memstarT bought into UEtech at $1.10. (bad deal afterall)

The board of UET has maintain its promise to keep MemstarT listed. So, in long term memstarT maybe become a shell company with heaps of cash. Possibly an RTO target in long term.

Once ago... vested. But no longer, may plan to buy in things are more clear with story behind.

[morten]

Yes. RTO in the pipeline it seems. Wasteful to let a nice and clean shell disappear from the exchange.

[sgd]

sweet

There was once upon a time where many "value" investors in wallstraits forum boo'ed and looked down upon this prc counter. I wonder what they think of it now when it has become a takeover target.

Another prc counter that many here most recently also didn't think highly of is Unionmet it is also in the news that they have become a potential takeover target.

sometimes even the experts play it too safe and get it wrong

[DP28]

I think it do no justice to blanketly say all S-chips are not good. However, Whenever it comes to PRC counter. I will be extremely careful on due diligence and their corporate governance.

better be safe than sorry, because when you lose. You lose everything in those counters. Thats probably a tail risk that most funds will choose to avoid.

[CityFarmer]

Report update on the acquisition... I will post the similar one on United Envirotech thread for completeness...

BTW, memstarT is not S-chip IMO...

(not vested)

United Envirotech, Memstar tumble on acquisition plan

Shares in United Envirotech tumbled as much as 13% to a four-week low after the company announced its plans to acquire assets from Memstar Technology, whose shares were headed for their biggest daily decline in nearly five months.

United Envirotech, a membrane-based water treatment solution provider, agreed to acquire certain assets from Memstar and a 100% stake in Memstar, a wholly owned subsidiary of Memstar, for a total of $293.4 million.

The acquisition will help United Envirotech become an integrated solution provider in Singapore’s competitive water treatment market, analysts said. But its share price dropped to as low as $0.89, before paring some losses to $0.96 by 10:24 a.m..

“The acquisition is mainly funded by shares, so even though in the long term it will be positive, in the near term you’ll have to bear with a huge EPS (earnings per share) dilution,” said Tan Ai Teng, an analyst at DBS Vickers.

http://www.theedgesingapore.com/the-dail...-plan.html

[KopiKat]

Looks kind of complicated to me with their cross holdings if and when completed... From the earlier SGX Annc,

1. UEL is holding 13.18% of Memstar (Group)
2. Now, Memstar (Group) will hold 22.6% of UEL after the 1st Tranche Payment (in shares)
3. Memstar is proposing to either delist or stay listed, in which case, they'll pay out a distribution in Cash + UEL Shares (1-for-10). UEL will have their entitlement set off during the 2nd Tranche payment..


Some extracts,

1.8
(a) Maintain listing status as a cash company
.
Shareholders of the Company who hold shares in the share capital of the Company (“Shares”) as at the date on which the Register of Members will be closed (“Books Closure Date”) will be entitled to the Proposal Distribution (“Entitled Shareholders) and will receive their respective entitlements by way of a distribution in cash and a distribution in specie of the Consideration Shares in proportion to their shareholdings in the Company on the basis of one (1) Consideration Share for every ten (10) Shares held by Entitled Shareholders on the Books Closure Date.
.

3.2 Payment Terms. The Purchase Consideration shall be payable in two tranches as follows:

(a) First Tranche Payment: On Completion, UEL shall pay to the Company the sum of S$63,728,702 in cash, and allot and issue to the Company 173,805,550 Consideration Shares at S$1.10 a share with a value of S$191,186,105. This represents approximately 22.6% of the enlarged share capital of UEL, and approximately 15.2% of the enlarged share capital of UEL (after assuming UEL’s existing convertible bonds have been fully converted and UEL’s outstanding employee share options of 73.7 million shares have been fully exercised); and

(b) Second Tranche Payment: On a date no later than 2 months after Completion, UEL shall pay to the Company S$9,625,000 in cash, and allot and issue 26,250,000 Consideration Shares at S$1.10 a share with a value of S$28,875,000. By virtue of UEL’s current shareholdings of 350 million Shares in the Company, representing 13.18% of the Company’s existing share capital, it is proposed that this Second Tranche Payment be set off against its proportionate entitlement in the event of a distribution of shares and/or cash by the Company. Such proposed set-off arrangement will be subject to the approval of the SGX-ST.

[DP28]

In that case, may I ask whats the definition of an S-chip? Dont my clarifying.. I thought mainly its associated with China companies listing in SG.

I was a shareholder of MemstarT many years back and remember the board are mainly from mainland china. Back then, less than ten cent stock was trading at half a cent tick. I was sculping in and out at $0.08 to $0.085/$0.09 there was also Moya asia that was in water treatment. One fine day, it reverse to $0.04 and it stood there for 2 years then on I know was in the wrong stock but held on back to $0.075 and cut all ties with them. Quite a bad experience losing half the capital..

[CityFarmer]

Looks kind of complicated to me with their cross holdings if and when completed... From the earlier SGX Annc,

1. UEL is holding 13.18% of Memstar (Group)
2. Now, Memstar (Group) will hold 22.6% of UEL after the 1st Tranche Payment (in shares)
3. Memstar is proposing to either delist or stay listed, in which case, they'll pay out a distribution in Cash + UEL Shares (1-for-10). UEL will have their entitlement set off during the 2nd Tranche payment..

Yes, a complicated deal indeed.

It seems a fair deal IMO. The most important question to me is any room for "tikam" within the deal? Hmm...

(not vested)

[KopiKat]

Looks kind of complicated to me with their cross holdings if and when completed... From the earlier SGX Annc,

1. UEL is holding 13.18% of Memstar (Group)
2. Now, Memstar (Group) will hold 22.6% of UEL after the 1st Tranche Payment (in shares)
3. Memstar is proposing to either delist or stay listed, in which case, they'll pay out a distribution in Cash + UEL Shares (1-for-10). UEL will have their entitlement set off during the 2nd Tranche payment..

Yes, a complicated deal indeed.

It seems a fair deal IMO. The most important question to me is any room for "tikam" within the deal? Hmm...

(not vested)

At first look, Memstar NTA will be increased from RMB19.08 to RMB53.25 if and when this whole deal goes through. At an exchange rate of 1RMB = S$0.2072 (Yahoo Finance), this translates to S$0.11. Using current Memstar mkt price of $0.09, this translates to a potential 22.5% gain.

BUT (there's always a BUT), the new NTA is based on an UEL inflated share price ($1.10 vs current $0.955 ie. 15% premium). Let's look at the breakdown of this deal ie. what Memstar will get over 2 tranches,

1. Cash = $73.35Mil
2. UEL Shares = 200,055,550

Total Memstar shares in issue = 2,667,407,337

At UEL = $1.10, we get on a per share basis,
(Cash + UEL Shares) / Memstar Shares
= ($73.35M + 200,055,550 * $1.10) / 2,667,407,337
= $0.11 (similar to reappraised NTA)

But at current mkt UEL = $0.955, we get $0.0991 or ~10% premium over current Memstar mkt price of $0.09

So, looking at liquidation value, the key would be to watch both UEL & Memstar share prices.... perhaps clearer when key events like EGMs draws closer..