By Boardroom Comms
Singapore – After four consecutive years of losses from itsÂ existing business operations, Ban Joo is taking concrete steps to claw its way backÂ into the black by exiting the textile industry and venturing into the fibre-optic cableÂ business. The Company today signed a conditional sale and purchase agreementÂ with Telemedia Pacific Group Limited (“TPG”) to acquire its fibre-optic cable businessÂ for S$376.15 million.
Under the terms of the agreement, Ban Joo will acquire the entire issued shareÂ capital of Telemedia Pacific Inc. (“TPI”) and Telemedia Pacific Incorporation LimitedÂ (“TPIHK”). Via these entities, Ban Joo will own and operate the first direct submarineÂ fibre optic cable linking Hong Kong and the Indonesian cities of Jakarta andÂ Surabaya upon its completion.
The acquisition will not only allow the Company to work towards a turnaround, butÂ will also enable it to address the growing bandwidth demand for broadbandÂ transmission between Indonesia and Hong Kong, as well as internationalÂ transmissions passing through both territories. According to Spectrum ValueÂ Partners, which conducted an independent valuation of the business to be acquired,Â bandwidth demand for broadband transmission between Indonesia and Hong Kong isÂ set to grow from about 22 Gbps in 2008 to 909 Gbps in 2020, representing aÂ compounded annual growth rate of about 36% from 2008 to 2020. In addition, theÂ number of broadband subscribers in Indonesia is estimated to rise from 0.3 million inÂ 2007 to 7 million in 2020, with the average bandwidth consumption growing from 451Â Kbps to nearly 5,000 Kbps in the same period.
Ban Joo will acquire the business from TPG at a 25% discount to the lower end ofÂ Spectrum's valuation range of between S$501.54 million and S$563.51 million, andÂ will pay for the acquisition via the issue of 3,582,380,952 new Ban Joo shares at anÂ issue price of S$0.105.
Mr. Hady Hartanto, Executive Deputy Chairman of Ban Joo, said, “This change ofÂ focus from the textile business to fibre optics will provide Ban Joo with a viable pathÂ towards sustainable long-term growth. By creating this direct link between HongÂ Kong and Indonesia, we will be able to offer our clients an alternative that is bothÂ efficient and attractive in terms of speed and cost.”
The submarine fibre-optic cable project involves leading industry players. FabricationÂ of the submarine cables is currently in progress, and the laying of the submarineÂ cable network is expected to commence in 2010 and be completed by end of 2011.Â The cable network will span 4,200 km and have a capacity of up to 3.84 Tbps, andÂ will be leased to telecommunications operators, media-related companies and allÂ other businesses that are dependent on bandwidth for their communications. TheseÂ entities will then use the leased capacity to provide voice, data and other services toÂ their own customers.
Ban Joo will convene an EGM to seek shareholders' approval for the transaction. AsÂ a controlling shareholder with 49.23% ownership of Ban Joo, TPG and its associatesÂ will abstain from voting at the EGM. Upon completion of the acquisition, TPG will ownÂ about 71.16% of the enlarged share capital of Ban Joo.
DBS Bank is the Financial Adviser for the transaction.
About Ban Joo & Company Limited
Established in 1953 as a textile partnership, Ban Joo is engaged in the business ofÂ supplying or trading in a wide range of textiles and the raw materials used in theÂ production of the textiles. The Company is on the SGX watchlist and is currentlyÂ finalizing steps to acquire the fibre-optic cable business, as part of its new strategicÂ business direction.