Catalist-listed CPH signs reverse takeover deal with B2B fintech oCap

Singapore two-dollar bills

Catalist-listed CPH entered a reverse take-over agreement with business-to-business fintech player oCap, in a S$61.82 million deal, the companies said on Thursday.

Under the deal, CPH will acquire oCap Management from Delphinium Capital for S$61.82 million, with the consideration to be settled via the issuance of 5.15 billion new shares at S$0.012 each, it said in a statement on Thursday. That will make Delphinium Capital the largest shareholder in CPH, with an 80.34 percent stake upon completion, it said.

A reverse takeover is typically less expensive than if a company sought an initial public offering.

Lee Teong Sang, the independent non-executive chairman of CPH, said at a press conference that his company, which primarily makes printed circuit boards in Malaysia, had been looking for ways to diversify from the money-losing business, which struggled to develop the scale to compete with larger Taiwan-based players.

He said that CPH would look to sell the circuit board business “as soon as practically possible,” taking into account the needs of various stakeholders, including employees and customers.

The reverse takeover with oCap is expected to be completed by the second quarter of 2019.

OCap is a profitable fin-tech which offers financing options for small-to-medium-sized enterprises (SMEs), it said.

Carlos Haeuser, CEO of oCap, said his company has financed a bit more than $100 million in loans in 2017, and the reverse takeover is expected to help the fintech scale up its operations. He said around 80 percent of its business was Singapore, with the remainder in Europe, but that he hoped to expand to more countries within Asia.

The business model has several products, with the main thrust involving stepping in to offer SMEs what are essentially bridging loans at competitive rates when they might otherwise need to wait as much as 30 days for credit-card receivables to be paid.

The loans, which often have tenors of a week to 30 days, can have payment cycles as quick as daily, the company said.

Jan Semrau, chief risk and compliance officer at oCap, said at the press conference that the company offers risk-adjusted and market-specific pricing for its loans, which range from payment receivables financing, merchant cash advances, trade finance and SME working capital.

By having access to its borrowers’ daily transactions, oCap can use artificial intelligence and its algorithms to create a profile of how risky each loan is on a very short-term basis, the company said, noting that it hasn’t created its own blockchain platform and instead uses ethereum.

Semrau was quick to add that loan pricing was not predatory, as oCap was seeking long-term relationships and predatory lending can push merchants to default.

This article was originally published on Thursday 22 November 2018 at 12:05 P.M. SGT; it has since been updated.