On Aug 15, at a meeting, RE&S’s shareholders were given a choice of voting for a scheme of arrangement to privatise the company or against the scheme. The major shareholders of RE&S who hold 84.1% of the shares in issue have given their irrevocable undertaking to vote for the scheme.
On May 19, shareholders of RE&S received an offer to privatise the company via a scheme of arrangement at a consideration of 36 cents per share. A scheme of arrangement requires 75% in value of shares of the shareholders present and voting at the scheme meeting to vote for the scheme and court approval. The reason why some offerors prefer a scheme of arrangement is that it provides certainty that the offeror receives 100% of the shares.
The sole shareholder of the offeror is Euphoria Investments, a special purpose vehicle incorporated in the Cayman Islands, which is an indirect wholly owned subsidiary of a fund that is advised and managed by Southern Capital Group (SCG), a Singapore-headquartered private equity firm that focuses on investments into high growth middle market businesses across Southeast Asia. The members of the board of directors of the offeror are Low Yon Jan, Boh Sang Wei and Kenneth Tan Jhu Hwa, who are executives of SCG.
The rationale for the offer includes a thread that runs through the two successful privatisations and delistings of Koufu and BreadTalk Group: low liquidity. The offer price represents a decent premium to the undisturbed last traded price and the volume-weighted average price over various periods.
For RE&S, the scheme consideration represents a premium of 65.1%, 50.0%, 45.2% and 38.5% over the volume-weighted average price for the one-month, three-month, six-month and 12-month periods, respectively.
Additionally, the acquisition provides an opportunity for the offeror to “invest in a premier multi-concept owner and operator in the Japanese cuisine F&B sector, with a strong foothold in Singapore and a direct presence in Malaysia”, the May 19 press release says.
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RE&S’s portfolio includes brands such as Ichiban Boshi, Kuriya Japanese Market and Gokoku, which have a track record of resilient performance and steady growth in the competitive F&B industry.
By leveraging SCG’s expertise, resources and network, the offeror aims to accelerate the company’s growth trajectory, capitalise on emerging opportunities, and strengthen its market position.
The privatisation of the company also provides flexibility for management to focus on long-term execution while saving on listing costs. RE&S was listed on Catalist in November 2017 at an IPO price of 22 cents per shareoufu, listed in July 2018, was considered one of the more successful food court operators.
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Rasapura Masters, the food court in The Shoppes at Marina Bay Sands, operated by Koufu, was packed most days. Additionally, the vegetarian restaurant Elemen was another popular brand.
In 2021, in the closing weeks of the pandemic, Dominus Capital, an entity belonging to Pang Lim, the chairman of Koufu, offered to privatise the company for 77 cents per share. Both Rasapura Masters and Elemen remain popular even after the delisting. According to the circular to shareholders, the rationale for the privatisation would be the opportunity for shareholders to realise their investment at a premium without incurring brokerage costs. The offer price represented a premium of 14.4%, 13.6%, 15.1% and 15.3% over the volume-weighted average price per share for the one-month, three-month, six-month and 12-month periods, respectively.
Another reason to privatise was because of “low trading liquidity”. Indeed, the pandemic triggered the offer. During the pandemic, the company said: “The group’s operations have had to navigate closures, differentiated levels of dining-in prohibitions and restrictions, caps in the number of persons at social gatherings, and a reduction in capacity at malls.”
“The offeror recognises that the group needs to stay vigilant and adaptable in the event of any new and additional regulations to address the spread of the virus and mutations of the virus,” it adds.
The circular added that a private company would allow management greater control and flexibility in deploying capital and implementing necessary changes. Another pertinent reason cited was the compliance cost related to the listing status. In the circular, the company said there was no need to access the capital markets. In FY2018 and FY2019, the company recorded a net profit of $24.5 million and $27.7 million, respectively, before tumbling to $9.9 million in FY2020.
The rationale for Koufu’s privatisation was the same reason BreadTalk cited for its privatisation a year earlier. In 2020, BreadTalk cited compliance and associated costs with maintaining a listing and that the company had no necessity to access equity markets. Koufu was delisted in March 2022, while BreadTalk was delisted in June 2020.
In 2021, BreadTalk sold the BreadTalk Building to a consortium comprising Lian Beng (70%) and Apricot Capital (20%) for $118 million.
On the other hand, Koufu spent $55 million developing Koufu HQ on Woodland Avenue 12, which opened in 2022. Koufu HQ is an integrated facility for Koufu’s business operations, which includes the production of dim sum, bakery, pastries and dough products for distribution to its outlets. It also houses a Koufu food court and Elemen.
