International Cement’s proposed acquisition of SCHWENK Namibia failed to receive approval from SGX as a very substantial acquisition because the target wasn’t profitable —- a requirement for a VSA, International Cement said in a SGX filing Monday.
SGX said International Cement doesn’t have sufficient cash resources to fund the acquisition and instead planned to fund the deal with “significant external loans,” the filing said.
“Such loans when considered with the potential losses of the target business will result in a material adverse financial impact on the enlarged group. There is no certainty that the target business will be able to generate sufficient profits to service the loans,” the filing said. “Thus, SGX-ST is of the view that the proposed acquisition will put the company out of healthy financial position.”
SGX subsequently classified the proposed deal as a VSA, making it subject to approval of both International Cement’s shareholders and SGX.
In March, International Cement said it planned to acquire all of SCHWENK Namibia from SCHWENK Zement International for US$19.34 million. The proposed deal had included International Cement acquiring a shareholders’ loan from SCHWENK Zement for US$85.07 million.
SGX also said that for any future acquisition, it would require International Cement to commission pre-deal anti-money laundering due diligence.
International Cement also needs to put in place “adequate and effective” internal controls and risk management systems as long as it is operating in Kazakhstan, Tajikistan, Namibia and/or any other developing jurisdictions, the filing said.
SCHWENK Namibia has a 69.83 percent stake in Ohorongo Cement, which operates a cement plant in Namibia with an annual capacity of around 1 million metric tonnes, and a 100 percent stake in Energy For Future (EFF), which seeks out alternative energy sources, both of which are incorporated in Namibia.
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