Disposal of 51% shares in a joint venture company
ecoWise Holdings Limited (the “Company”) had on 23 April 2021 via its subsidiary, Sunrich Integrated Sdn. Bhd. (the “Vendor”), had, entered into a sale and purchase agreement (“Agreement”) with Kasan Corporation (Malaysia) Sdn. Bhd. (the “Purchaser”) for the sale by the Vendor, and the purchase by the Purchaser, of 357,000 ordinary shares in the capital (the “Sale Shares”) of Saiko Rubber (Malaysia) Sdn. Bhd. (“Saiko”), representing 51% of the issued and paid-up share capital of Saiko, on the terms and conditions as set out in the Agreement (the “Disposal”) for a cash consideration of RM18 million (approximately S$5.82 million) (“Consideration”).
The joint venture with our counterpart, the Purchaser has been for quite some time and the cashflow that it can bring to company is limited. Cash is critical to the survivability of an organisation, more so during COVID-19 period as shown by the impact it had brought to many businesses. Hence, the Disposal will bring a level of cashflow to the Company which will enable it to fight against any challenges during COVID-19 period. Mr Cao Shixuan, Deputy CEO and Executive Director, led the investment team and the director office in discussing and negotiating intensively with the Purchaser over a protracted period of one month to finally arrived at the Consideration, including the terms and conditions. The Disposal had enabled the Company to recognise a gain on disposal in respect of the Disposal of approximately S$1.6 million based on audited figures as at 31 Oct 2020 and a premium over the net book value, which is admirable under such economic situation and against the background of COVID-19, given that it is not an easy task to negotiate and arrive at a consideration, acceptable to both parties. In addition, the Disposal has also enabled the Company to collect the future profits upfront, which will enable the Company to better utilise the proceeds for other purposes.
The Agreement was simultaneously signed in Singapore, Seremban and Kuala Lumpur Malaysia via ZOOM at 1 p.m. with representatives from both sides, including lawyers to witness the completion. The Consideration was also paid immediately in full upon signing of the Agreement.