QT Vascular: Asia Dental acquisition and placement restructured in wake of EGM drama

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After recent drama over requisitioning shareholders calling for extraordinary general meetings (EGMs) to both remove and add directors, QT Vascular said Thursday it has changed the structure of its deal to acquire 60 percent of Asia Dental Group and of the proposed placement of new shares to raise funds.

Previously, the deals were structured as a “scheme of arrangement,” which would create a new holding company. QT Vascular’s shareholders would receive an equivalent number of shares in the NewCo, which would take over the listing status.

On Thursday, QT Vascular said the seller of the Asia Dental stake and the investors acquiring newly issued shares in the placement have sent the company a letter proposing the consideration shares for both deals be changed to the existing company, rather than a NewCo.

The letter said the transfer of the listing status to the NewCo could be deferred until the company decides it is appropriate, according to the filing.

With the new deal structure, both the placement and the acquisition of the stake in Asia Dental would be subject to shareholder approval at an EGM, but would avoid the need for the High Court of Singapore to approve the deal, which would have been required if the structure had remained a scheme of arrangement, the filing said.

“The corporate proposals EGM would also give shareholders a fair and more expeditious opportunity to vote on proceeding with the proposed subscription and proposed acquisition,” QT Vascular said. “Accordingly, the board is of the view that it is in the interest of
the shareholders to proceed with the proposed subscription and proposed acquisition and has accepted the aforementioned proposal variations and entered into a supplemental agreement with the investors and the vendor.”

The long-stop date for the deal was also extended to 28 February form 31 December, the filing said.

The requisitioning shareholders did not immediately respond to Shenton Wire’s request for comment.

What’s in the Asia Dental deal?

QT Vascular plans to acquire the 60 percent Asia Dental stake from Dr. Gian Siong Lin Jimmy, who will hold the remainder, for up to S$7.65 million in a deal that would diversify the company into dental and general medical services.

Asia Dental Group provides dental services, general medical services and consultancy services to some government entities; it operates three clinics in Singapore.

Currently, QT Vascular specialises in developing products for the minimally invasive treatment of vascular diseases.

The consideration for the deal will be paid by S$3 million in cash, S$500,000 in new shares at S$0.0018 each and an earn-out payment of up to S$4.15 million over three years, the May filing said.

A draft valuation of Asia Dental Group by Vallaris Deal Advisory valued the 60 percent stake at S$5.5 million to S$7.2 million as of end-2020, according to a May filing to SGX.

In the same May filing, QT Vascular had announced the issuance of 4.06 billion new shares at S$0.0018 each in a private placement to raise S$7.3 million.

Around 48.4 percent of the private placement net proceeds will be used to finance the acquisition, while the remainder is earmarked for general working capital, the company said.

The investors in the placement are Tan Gim Chua Thomas, Quek Chin Thean and Chong Leong Fah Derrick, who collectively would hold 61.7 percent of the enlarged share capital of the NewCo if the deal is completed, the May filing estimated. All three are private investors referred by QT Vascular’s legal advisors, Rajah & Tann Singapore, the filing said.

Whopping discount?

The issue price of the new shares was a whopping 64 percent discount to the volume-weighted average price (VWAP) of S$0.005 of trades on 25 May, just before the announcement of the deal. Shares of QT Vascular closed Thursday at S$0.006, up 20 percent.

At the time, QT Vascular said the discount was due to the company’s net tangible liabilities of US$710,000 at end-2020, and as the deal will provide the financial resources to expand into a new business and strengthen its working capital.

The consideration in the deal also represents an as much as 39 percent premium to Asia Dental Group’s draft valuation range, QT Vascular said at the time, noting it was taking into consideration the company’s future prospects.