SGX rejects Nutryfarm International's 45% stake acquisition in First Linkage

The agency cited concerns about contractual workarounds to address foreign ownership restrictions.

The Singapore Exchange (SGX) rejected Nutryfarm International’s acquisition of a 45% stake in tech firm First Linkage for $18.1m (RMB90m), an announcement revealed.

Following several rounds of submissions and representations to the SGX-ST, Nutryfarm received a letter stating the proposed acquisition was rejected due to the considerations related to the significance of the business conducted through workaround, as well as the legality of the ownership structure.

“To comply with foreign ownership restrictions in the relevant jurisdiction, issuers have proposed the use of various structures including the use of contractual arrangements which confer operational control as well as economic rights,” SGX highlighted. “A key concern would be the legality of the structures as any clampdown by the authorities could have a material adverse impact on issuers and their minority shareholders.”

SGX required adequate safeguards to be in place to protect the interests of the issuer and its minority shareholders, and expects issue managers and full sponsors to demonstrate that the issuer is suitable for listing, notwithstanding the use of the structure.

Nutryfarm International announced its plans to acquire a 45% stake in First Linkage through its subsidiary LottVision Internat Management in March 2018. First Linkage is the legal and beneficial owner of First Linkage Hong Kong, which in turn is the legal and beneficial owner of Beijing Zhonglian Shengton Internet Technology Co.

“The proposed acquisition is a proposed investment into the related industry of internet services, telecommunications, network and information technology services,” the firm said in an earlier announcement. Nutryfarm has previously focused its core efforts on developing and expanding its business in nutrition and health food products.