King Wan sells its 30% Cables International stake

Move brought in $9mln on investment made seven years ago from divestment of associate company.

Mainboard-listed King Wan Corporation Limited announced that the Company has entered into a share sale agreement with Cables International Pte. Ltd. and Halcyon Energy Corporation Pte. Ltd. to sell to HECPL its entire 30% shareholding interest in Cables for a consideration of S$9 million, according to a King Wan report.

The Company had invested approximately S$0.6 million for its 30% ownership stake in Cables. The principal activity of Cables is the wholesale of electrical and wiring accessories.

Rationale for proposed disposal of interest
King Wan’s decision to sell its stake in Cables is consistent with its commitment to actively manage and optimise its portfolio of businesses. In financial year ended 31 March 2010, its net profit after tax of S$9.5 million included Cables’ contribution of S$0.95 million. The Proposed Disposal is expected to have a positive effect of S$4.3 million on the Company’s earnings for financial year ending 31 March 2011.

Ms Chua Eng Eng, Managing Director of King Wan, said: “This is the result of a strategic evaluation of our business portfolio and represents an opportunity for us to realise significant value on an investment made seven years ago. We have received an attractive offer and the sales proceeds will enable us to pursue other strategic and growth opportunities.”

“The cable business has been a successful and gratifying investment for the Company and we are very pleased to have participated in its growth over the past seven years,” added Ms Chua.

Basis for consideration of proposed disposal
The Consideration for the Proposed Disposal was arrived at between the parties after arm’s length negotiations on a willing buyer and willing seller basis, taking into account among other things, the net worth and future earnings of Cables.

The Proposed Disposal will be satisfied entirely in cash on completion and is expected to close on or before the 15th business day immediately following the date on which the last conditions precedent in the Agreement is fulfilled or waived.

Subject to the relevant approvals, the proceeds from the sale may be applied towards dividend payout to shareholders, to fund the expansion of its business, to pursue other strategic investment opportunities as well as for the Group’s working capital purpose.

King Wan is an integrated building services company with principal activities in the provision of Mechanical & Electrical engineering services for the building and construction industry. It also operates in three other business segments, namely Property, Manufacturing and Services.

The Company reported its full year 2010 results as at 31 March 2010 with record performance in profit and revenue, achieving a net profit after tax of S$9.5 million, up 81%, on record revenues of S$70.5 million.