Alpha Returns Group plc : Investment in Oriental Ventures
Alpha Returns Group PLC
("Alpha Returns" or the "Company")
31 March 2014
Investment in Oriental Ventures Limited ("Oriental Ventures")
Alpha Returns, the AIM traded investing company focusing on investments in high-growth Asian economies, is pleased to announce that on 29 March 2014 its wholly owned subsidiary Shidu International Ltd. ("Shidu") entered into a Sale and Purchase Agreement ("SPA") for the acquisition from Wong Xin Yan (the "Vendor") of 30 per cent. of the issued share capital of Oriental Ventures, a BVI registered special purpose vehicle incorporated on 3 January 2014 which has been formed to acquire Shenzhen MaxLife Catering Management Ltd. ("MaxLife"), a start-up coffee chain business operating in the PRC. MaxLife was incorporated on 10 September 2013 and will be operated as a coffee chain business. It opened its first 1,600m2 store in Dongmen, a major shopping district in Shenzhen, PRC in December 2013. It is intended to open two more outlets, with financing from the Vendor, prior to moving onto a franchise model with a target of 300 stores across China.
Consideration for the acquisition of the 30 per cent. shareholding is expressed to be US$1,500,000, satisfied by the payment of HK$5,812,500 cash (c. £451,000) paid on execution of the SPA with the balance on Completion through the issue of 32,142,857 new ordinary shares in Alpha Returns at an agreed price of 1.4p per share (approximately 5.66 per cent. Alpha Returns' existing issued ordinary share capital). At the current market price of 1.875p per share, the deferred consideration is valued at some £604,000, giving a total consideration of approximately £1,055,000. Completion, which is subject to a number of conditions precedent, is expected to occur some 9 months from execution of the SPA. Should the conditions precedent not be satisfied (or waived) other than through the fault of Shidu, the cash consideration shall be repaid in full with interest at 5 per cent..
Under the terms of a shareholders' agreement ("SHA") to be entered into at completion with the Vendor as Oriental Ventures' sole shareholder and director, the business to be carried on by Oriental Ventures and its subsidiaries is confined to the operation of food and beverage businesses as a café in the PRC or in the Asia-Pacific region. It is intended that Oriental Ventures itself will act only as a holding company. Oriental Ventures has a paid up share capital of US$50,000 and, save for establishing Oriental Ventures Hong Kong Limited (a wholly-owned subsidiary in Hong Hong) on 21 January 2014, has not yet traded. It is a condition of the SPA that the Vendor subscribes an additional US$950,000 share capital in Oriental Ventures. Under the terms of the SHA, Oriental Ventures shall have two directors, one appointed by each of the Vendor and Shidu with the Vendor's appointee being Chairman, albeit with no casting vote.
The SPA is expressed to be subject to a number of conditions precedent relating to the acquisition by Oriental Ventures, through Oriental Ventures Hong Kong Limited, of MaxLife on terms satisfactory to Alpha Returns, including as to the results of due diligence and to three consecutive months of profitable operation prior to Completion. There are not intended to be any further contributions by Alpha Returns to Oriental Ventures or its subsidiaries beyond its initial investment. It is the intention that MaxLife continue under its existing operational management with the Vendor or his nominee as its sole initial director on Completion.
Under the SPA, Alpha Returns has an option to purchase from the Vendor an additional 15 per cent. of the issued shares in Oriental Ventures. The option may be exercised in tranches of 5 per cent. with an exercise price for each tranche of US$250,000, payable at the choice of the Vendor in cash or in Alpha Returns shares at a price of 1.4p per share. The option is exercisable at any time from Completion of the investment in Oriental Ventures (including satisfaction of the conditions precedent) and for a period of three years thereafter. Any decision to exercise the option is entirely at the discretion of Alpha Returns acting through its wholly-owned subsidiary Shidu and will be subject to the satisfactory development of the nascent MaxLife business.
There are various conditions precedent to the SPA, including:
Oriental Ventures having increased its authorized and issued share capital to US$1,000,000, with all such share capital allotted fully paid to the Vendor;
Oriental Ventures Hong Kong Limited having acquired the entire equity interest of MaxLife pursuant to terms satisfactory to the parties and having obtained all necessary licences and approvals;
the revenue of Oriental Ventures and its subsidiaries in a calendar month covering all its costs and expenses in such month for no less than 3 consecutive months immediately preceding Completion;
the Trademarks, Designs and the Assets (each as defined) being owned by Oriental Ventures and its subsidiaries; and
Shidu being satisfied with the results of legal and financial due diligence in respect of Oriental Ventures and its subsidiaries.
The Vendor shall use his best endeavours to procure that the conditions precedent are fulfilled by the first anniversary of execution of the SPA. If they are not fulfilled or waived (other than due to default or failure of Shidu) by that date (or such later date falling not more than 30 business days after the Completion date as Shidu may specify), the SPA may be terminated by Shidu and all monies paid to the Vendor shall be returned with interest at 5 per cent per annum.
Should Shidu fail to comply with the terms and conditions of the SPA other than due to default or failure of the Vendor, the Vendor may rescind the SPA and shall be entitled to forfeit all consideration monies received.
Commenting on the investment, Christopher Neo, executive director of Alpha Returns, said: "We are delighted to announce that we have conditionally secured MaxLife as our third cornerstone investment in the Asia Pacific region. We believe that the innovative business model of MaxLife will become highly successful in the PRC, and we are excited to be able to participate at this early stage of the business. The Directors have initiated three cornerstone investments in the Asia Pacific region to date, and we shall now focus on the next phase of development for the Company which is to complete and develop those investments to their fullest potential through active engagement with management. Through this active engagement, we look to facilitate continued growth in shareholder value over the coming years."
For further information:
Alpha Returns Group plc
Christopher Neo, Executive Director 020 3286 6388
ZAI Corporate Finance Limited (Nomad) 020 7060 2220
Peter Trevelyan Clark / Ivy Wang
Peterhouse Corporate Finance (Broker) 020 7469 0935
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Source: Alpha Returns Group plc via Globenewswire