November 4, 2003

 

 

Singapore Company Diversifies into China's Dairy Industry

 

Poor prospects in Singapore's construction industry have prompted marble and granite specialist TSM Resources to diversify into a totally different business - China's dairy industry.

 

The dairy industry in China is growing by 20 - 30% a year. And the growth is likely to sustain for a long time. Average per capita consumption of milk products per year in China is only 7.2kg, while in advanced countries it is around 100kg.

 

TSM Resources is therefore issuing 224 million new ordinary shares at 25 cents apiece, amounting to $56 million, to acquire a Chinese milk products manufacturer, Silver Bridge.

 

Silver Bridge is based in the Shaanxi province. The reverse takeover of TSM Resources would present it an opportunity to raise future funds from the capital market for expansion.

 

'Singapore and Southeast Asia will be our springboard for overseas expansion,' said Liu Hua Guo, founder and managing director of Silver Bridge.

 

Asked why his company opted for the takeover route instead of the conventional initial public offer, Mr Liu attributed it to fate and timing which brought him in touch with Mr Tan.

 

'We also saw how other Chinese food companies, People's Food and United Food, have done well in their listings here,' said Mr Liu at a press briefing in Singapore last week.

 

Silver Bridge is the second Chinese food and beverage group to do a reverse takeover of a Singapore-listed company. Hangzhou Kingsea, a Chinese company which produces sparkling mineral water, did a reverse takeover of eWorld of Sports.com, a sports goods retailer.

 

With the reverse takeover, the bulk of TSM Resources' earnings, almost 90%, will come from dairy products. Mr Tan said TSM Resources would continue to look for business in the construction industry.

 

After the reverse takeover is completed, Silver Bridge, with a 57.84% stake, will emerge as the biggest shareholder of TSM Resources. Mr Tan and his wife, Eyleen, will have their stake reduced to 27.42%, from the current 65%.

 

Silver Bridge, which produces milk powder, fresh milk and yoghurt, had a net profit of $8.4 million last year. One of the top 10 dairy producers in China, its products are sold throughout the country, except in Tibet and Xinjiang.

 

TSM will hold an extraordinary meeting on November 17 to ask shareholders to approve the reverse takeover by Silver Bridge. TSM will also be releasing its January to July results before the November 17 EGM.