January 23, 2017
Sino Agro Food provides updates on restructuring of aquaculture business
The completion of this legal due diligence represents a significant milestone in the company's strategic plan, allowing it to move forward with the carve-out and spin-off of its aquaculture assets. The lead advisor for the planned IPO of the aquaculture business has accepted all legal opinions.
The operating company of Aqua Farm 1, Jiangmen City A Power Fishery Development Co. Ltd. (JFD) has been registered as a Wholly Foreign Owned Enterprise (WFOE) of Tri-way by the Authorities of PRC Business Registration. Thus, shareholders of Sino Agro Food, Inc. are legally eligible to own shares in Tri-way directly, both prior to and at the time of IPO, under Hong Kong foreign ownership laws.
JFD has secured the requisite legal agreements needed to acquire all farm assets of Aquafarm 2 (AF2), Aquafarm 3 (AF3) and Aquafarm 4 (AF4) as well as the authority to determine and hire contractors for Aquafarm 5 (AF5). This is a positive step toward creating an efficient and streamlined single entity, which holds all of Sino Agro's aquaculture operations, in preparation for the carve-out of JFD’s parent company, Tri-way. Today, JFD also owns and operates Aquafarm 1, a grow-out facility for fish, prawns and eels in the Guangdong Province in China.
Furthermore, Sino Agro Food's subsidiary, Capital Award Inc., has granted Tri-way a China Master License to develop and operate up to 20,000 units of its 'A' Power Recirculating Aquaculture System ("APRAS" technology) over a 50-year period, at a combined Developer and Operator's license fee of $100,000 per APRAS. This will allow Tri-way to develop and operate additional aquaculture facilities using the APRAS technology, opening up long-term expansion opportunities in China. For a frame of reference, AF4 uses 144 APRAS modules and plans for AF5 call for 864 APRAS modules. The proprietary APRAS technology produces seafood using less water, land and feed, and is more bio-secure than other methods of aquaculture. Moreover, it produces a higher seafood yield and, due to its climate-controlled environment, ensures more reliable production all year round, compared to other farming methods such as net-pen or pond culture.
Solomon Lee, chairman and CEO of Sino Agro Food Inc., stated: "The significant progress we have made restructuring our business and completing legal due diligence has helped with our preparation for the anticipated carve-out and subsequent spin-off of our aquaculture operations, which is designed to provide greater clarity to investors and to drive current and future value for the business and its stakeholders. Tri-way, as an independent entity, will be listed on the public markets where it is expected to trade at a market value commensurate with its peers, (thus) unleashing value for shareholders."
Lee added: "We continue to make solid progress toward our vision to build the world's largest, indoor APRAS aquaculture farm, which will produce live shrimp, prawns, fish and eels. As we move forward with this strategic plan, we are confident that our APRAS technology, high-margin seafood sales, and ability to scale means we are uniquely positioned to capitalise on increasing consumer demand from China's burgeoning middle class."
The aquaculture spin-off strategy
Spinning off Tri-way into an independent company is expected to provide the investor community with greater clarity into the financial and operational structure of the aquaculture business, and facilitate growth in the company. Sino Agro Food, Inc. believes that creating a stand-alone company - supported by a talented management team - as well as meeting the requirements set forth by the stock exchange will provide the necessary foundation for long-term value creation.
In addition to providing dividend shares to current shareholders of Sino Agro Food, Inc., the company will maintain a stake in Tri-way. Tri-way is underway with efforts toward listing on a senior exchange where it will trade as a pure aquaculture play, unlocking value for shareholders.
The company has recently changed the terminology it uses to refer to each farm because it is interchanging the species of seafood and prawns at its various farms. Referring to each as "aquaculture farms (AF)" is now more accurate. Fish Farm 1 becomes AF1 and Prawn Farms 1 through 4 become AF2 - 5.
- Sino Agro Food