Friday 20 March 2009

Bid to sell Beauty China shares fails


Beauty China's chairman Wong Hon Wai had entered into an agreement to sell a 14 per cent stake to a buyer associated with the holding company of a firm listed in Hong Kong. The deal was terminated after the potential buyer's conditions were not met.

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Guanyu said...

Bid to sell Beauty China shares fails

Deal by firm’s chairman falls through as it could not fulfil buyer’s terms

By Yang Huiwen
20 March 2009

The fate of embattled cosmetics firm Beauty China Holdings still hangs in balance, after a deal by founder and chairman Wong Hon Wai to sell a large batch of shares fell through.

The potential buyer had been worried about Beauty China’s debt position and had asked to have its loan ‘favourably restructured’ before buying the shares.

However, this condition could not be met by Beauty China in time, the firm told the Singapore Exchange yesterday.

Last week, the firm said its lenders had issued a statutory demand seeking the repayment of a loan of about HK$134 million (S$26.4 million) by next Friday.

However, the syndicated lenders have agreed to extend the deadline of the first instalment of the loan of about HK$27 million by a month to April 27.

Mr. Wong had entered into an agreement to sell 50 million shares, or a 14 per cent stake in Beauty China, to a buyer associated with the holding company of a firm listed in Hong Kong.

Mr. Wong had, in previous announcements, mistakenly described it as a subsidiary of a Hong Kong listed firm, Beauty China said.

The share sale agreement also included a call option to buy another 41 million shares or an 11.5 per cent stake at about 12.83 cents apiece.

The agreement was terminated after Mr. Wong failed to meet certain specified conditions by a set deadline, Beauty China said.

One of the conditions was that Beauty China’s syndicated loan had to be ‘favourably restructured’. The group had earlier cautioned in a statement that it did not expect this condition to be met by the deadline of 5pm last Friday set by the potential purchaser.

Mr. Wong has issued a termination notice to the other party on Tuesday, said the company.

He has fully repaid an outstanding loan of $800,000 owed to a financier through the forced sale of Beauty China shares that he had pledged.

That means the termination of the agreement is not expected to result in further forced selling of the company’s shares.

The forced sale of Mr. Wong’s pledged shares has cut his stake from 38.6 per cent down to 30.51 per cent. He is still the majority shareholder.

But with Beauty China also having to pay off its loan soon, things have come to a standstill and investors are unclear as to when trading of the shares will resume.

Beauty China said last week that it is in talks with another potential investor who would bring in a strategic investor, also a cosmetics industry player.

The proposed capital infusion is expected to be adequate to meet the company’s immediate obligations to its lenders, the firm said.

Beauty China said last Thursday that ‘a failure to successfully reschedule the loan will raise a going concern issue’.

The firm is one of several China-based companies listed here which are facing financial woes.

Mr. Wong’s pledging of a significant chunk of shares to raise a personal loan has raised questions about whether shareholders were given adequate disclosure about a major shareholder.

The forced selling of the shares was to help repay the loan.