Advance SCT scuttles acquisition over delay disputes

Legal battle also looming between the company and its former vendor.

The Board of Directors of Advance SCT Limited and its subsidiaries (the “Group”) had on 24 August 2011 announced an acquisition of some working capital in Qingyuan for a subsidiary's copper smelting operation in China (“the Acquisition”), said the Mainboard-listed recycling and wastes management company in a release.

Advance SCT said that since then, the relationship between the Group and the seller of the Acquisition (“the Vendor”) has deteriorated, with disputes over the inordinate delay in completing the Acquisition as well as the assignment of roles and responsibilities. The Vendor had previously on several occasions expressed its intention to terminate the Acquisition; and as various discussions to resolve the disputes were not fruitful, the Group has indicated to the Vendor its inclination towards accepting the termination.  

Advance SCT then said that its wholly-owned subsidiary, Advance SCT (Qingyuan) Co. Ltd (“ASCT Qingyuan”) has been served with a court summons in respect of an amount allegedly payable to the Vendor, amounting to an aggregate of RMB 599,664 (about S$115,500 based on the exchange rate of S$1 = RMB 5.19) (“Summons”) which is dated 29 August 2012 and was served on 7 September 2012.

The Summons relates to the dismissal of some employees in the smelting facilities. ASCT Qingyuan has subsequently sought legal advice in China and since taken the position that this Summons initiated by Vendor serves as a formal notice to ASCT Qingyuan of the termination of the Acquisition (the “Termination”).

As at the date of this announcement, ASCT Qingyuan has engaged with legal counsels in the China in connection with the Court Order and will defend its interests vigorously. 

The potential litigation is not itself, expected to have any material effect in the earnings per share and net tangible assets per share of the Company for the financial year ending 31 December 2012. The Termination and the resulting winding down of copper smelting business

in Qingyuan is likely to have a material effect in the earnings per share and net tangible assets per share of the Company. However, the financial impact is yet to be determined until the due legal process has been completed.