When a company lists in a stock exchange without undertaking an initial public offering (IPO), the process is called a backdoor listing or a reverse takeover.
This strategy is being adopted by unlisted companies merging with firms that are already listed on the equities market, or by listed companies that acquire the majority assets of an unlisted firm in exchange for shares of stock. In both cases, significant changes are involved in the scale or nature of the listed firm’s activities.
Equities markets such as the Australian Stock Exchange (ASX) and the Singapore Exchange (SGX) have become attractive to companies looking for an alternative to IPOs. With changes in the listing rules of both exchanges now in effect, backdoor listing is now a viable option especially for foreign companies, including two subsidiaries of Philippine Stock Exchange (PSE) listed DFNN Inc.
DFNN’s affiliate Hatch Asia Inc. (HAI) is set to list in the ASX through its wholly owned subsidiary, Hatch Australia Holdings Pty Ltd., which offered a non-binding term sheet to acquire gaming firm Silver Heritage Group Ltd. listed under the stock symbol SVH. On its part, HAI is engaged in building solutions for various industries through innovative technology and business process management.
Last month, the creditors of debt-ridden SVH met with Ryan Eagle and Amanda Coneyworth of receiver KPMG, who have been appointed as administrators of the deed of company arrangement (DOCA). The meeting was an offshoot of the recapitalization proposal put forward by HAI as the deed proponent via DOCA methodology.
Under the terms of the DOCA, existing securities of SVH will be consolidated and new shares of Hatch Australia will be issued prior to HAI’s acquisition of approximately 92% of SVH’s issued capital. The consideration for this transaction is AUD530,000 in cash and 3% of the issued shares in SVH, resulting in the listing of Hatch Australia on the ASX.
Calvin Lim, CEO of DFNN and incoming director of HAI, said the move will provide the company better access to a wider capital base and create new business streams that will pave the way for more Philippine businesses to globalize. “Tapping the Australian capital market allows DFNN to fully value its early investments in HAI,” he disclosed.
Another DFNN investee company, iWave Inc., is in the process of listing in SGX via a reverse takeover of China Sky Chemical Fiber Co. Ltd. Through a scheme of arrangement allowed under SGX rules, China Sky will transfer its listed status to iWave for SGD4.45 million in the form of shares in the listing vehicle. This will expand iWave’s footprint in Singapore and across the ASEAN region.
A Filipino-Japanese fintech venture, iWave is engaged in software consultancy, systems integration, and technology development. Ramon Garcia Jr., concurrently DFNN chairman and iWave CEO, explained that the SGX listing allows the firm greater access to global capital.
“iWave will become one of only three Filipino companies to be listed in the prestigious SGX,” he revealed in a media interview.
Previously, Filipino multinational food giant Del Monte Pacific Ltd. listed on the SGX board in 1999 followed by a dual listing at the PSE in 2013. Del Monte took the IPO-less route in listing by way of introduction on the PSE’s main board.
Cross-border listing in multiple stock exchanges has become a feasible alternative that adds liquidity to a company’s shares and gives investors a greater choice in deciding where they can trade their shares.
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