LBC Development Corp., the parent firm of cargo and courier services provider LBC Express Inc. is buying P59.1 million worth of shares in dormant firm Federal Resources Investment Group Inc. for its backdoor listing.
In a disclosure to the Philippine Stock Exchange, Federal Resources said its board approved on Thursday the issuance of 59.1 million common shares from its unissued authorized capital stock to LBC Development Corp. at P1 per share.
The issue of shares to LBC Development will enable the mail courier to absorb Federal Resources and gain a backdoor listing.
In connection with the transaction, the PSE imposed a one-hour trading halt on Federal Resources shares from 9 a.m. to 10 a.m. “to give the investing public sufficient time to digest the material information disclosed,” as provided by its rules on backdoor listing.
Federal Resources said the transaction is still subject to terms and conditions of both parties, including a mandatory tender offer, in accordance with corporate laws.
“The company needed to raise additional capital through the issuance of new shares out of the unissued portion of the company’s authorized capital stock for general corporate purposes,” Federal Resources said.
“Further, such infusion is preparatory to a potential additional investment of LBC Development Corp. and LBC Express Inc. into the company as a result of the ongoing due diligence on the company,” it said.
Federal Resources has said the request to sell shares to LBC was initiated by a “substantial stockholder” in behalf of willing stockholders “to cede some or all of their interests in Federal Resources in favor of LBC.”
According to its latest annual report, Federal Resources went through several changes in corporate purpose before settling in the business of PVC resins, sealants, coatings and adhesives. It stopped its PVC operations in 2009, resulting in a worsened net loss of P15.53 million.
LBC planned to debut on the stock market through an initial public offering (IPO) last year but it dropped the idea and has since been scouting for a company to be used for a backdoor listing.
The backdoor method of going public is cheaper compared with launching an IPO. This entails acquiring or entering a listed firm—usually dormant ones with no operations—and proceeding with the change of name and corporate purposes.
LBC has said it preferred to raise funds in the equities market for its expansion plans in the next few years.
This year, the PSE expects nine to 10 companies to list on the exchange.
The anticipated listings for 2015 include: the IPOs of Crown Asia Chemicals Corp. (P222 million), Company of Friends Inc. (P7.7 billion), Gweilo Corp. (P75 million) and Green Power Panay Philippines Inc. (P290 million); the follow-on offering of Global Ferronickel Holdings Inc. (P32 billion); as well as the backdoor listing of National Book Store Inc. via Vulcan Industrial Mining Corp., among others.