http://business.asiaone.com/news/teho-buying-local-property-firm-ecg-17m
Offshore and marine company Teho International is buying local property firm ECG Property Services in a $17 million deal, giving the latter a listed vehicle for expansion.
Teho executives told a briefing yesterday that it will fork out $5 million in cash for the acquisition, while the rest will be satisfied with 42.9 million shares at 28 cents apiece.
This will effectively translate into an 18 per cent stake in Teho for ECG chief executive Eric Cheng, making him the second-largest shareholder in the firm, after Teho chief executive Lim See Hoe.
Earlier this year, Teho made the “baby step” of acquiring another of Mr Cheng’s firms, Tiec Holdings, for $12.3 million in a bid to diversify its revenue streams into property development.
Mr Lim said: “When we decided to diversify into property, we did not want to take a huge step.”
Since taking over Tiec Holdings, the firm said last month that it will also be developing a mixed-use project in Cambodia.
“The overseas market was at the back of our minds at the time we acquired Tiec Holdings, but it was not cast in stone. Now that we have something more concrete, we decided to go a step further to acquire ECG,” Mr Lim said.
Under the new structure, Mr Cheng remains chief executive of ECG and will continue to run the business as before. This includes its agency services, valuations unit and property management services. But property development, such as the project in Cambodia, will be undertaken by Teho.
Mr Lim acknowledged that the property market here is in the doldrums and that marketing local properties would take a back seat for now.
But as it is, 60 per cent of ECG’s sales are from overseas – with Malaysia and Taiwan as its biggest markets – while local deals make up 40 per cent, said Mr Cheng.
“If the market is not doing well, for sure, instead of selling 100, we will sell 15 units. But you don’t make a loss because you don’t invest in the development,” said Mr Cheng. “For myself and my partner, See Hoe, we feel that there’s a lot of growth out of Singapore.”
Mr Cheng said not only will Teho’s resources help ECG to reach its target of expanding from nine to 35 cities, he hopes a listed platform will give future partners the confidence for collaborations or even more acquisitions.
ECG, with 660 property agents and 109 employees, is marketing projects by 16 developers from countries such as Thailand, Japan and Britian. Overseas, it has 37 projects in the pipeline, while 13 developments are being marketed now.
Teho’s shares closed at 21.5 cents on Tuesday, before trading was halted on Wednesday. Trading will resume today.
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