Aoxin Q&M proposes 150 million yuan acquisition to expand into central China

[SINGAPORE] Aoxin Q&M Dental Group announced on Friday (Mar 27) that it has signed a non-binding memorandum of understanding to acquire a 100 per cent stake in a dental group in the central region of China.The proposed acquisition, valued at 150 million yuan (S$27.9 million), is a strategic move to deepen the company’s footprint and consolidate its position as the dedicated China platform for its parent company, Q&M Dental Group (Singapore) .The Chinese dental group operates a network of nearly 30 clinics with 80 dentists, Aoxin Q&M said in a bourse filing.Beyond clinical services, the group is engaged in medical device technology and the sale of Class I and II medical devices. Aoxin Q&M expects this integration to improve supply chain efficiency, facilitate the adoption of advanced dental technologies across its existing network and potentially generate additional revenue streams.“The proposed acquisition is part of the steps taken by the group in achieving its long-term strategic objectives of expanding its footprint in the People’s Republic of China (PRC) and deepening its business presence in the China region,” said Aoxin Q&M.Transaction detailsA total of 75 million yuan will be paid in cash. This includes an initial payment of about 56.3 million yuan upon completion and a deferred payment of around 11.3 million yuan one year later, provided the seller meets specific profit targets.The remaining 75 million yuan will be satisfied through the issuance of new ordinary shares. Of this, 30 million yuan worth of shares will be issued at S$0.30 per share, while the remaining 45 million yuan worth of shares will be priced based on the volume-weighted average price over a seven-day trading period prior to completion.These consideration shares will be subject to a 15-year moratorium period. Additionally, the seller and key personnel will enter into service agreements lasting at least 15 years to ensure operational continuity.Aoxin Q&M said that the proposed acquisition will comprise a profit guarantee of an aggregate of 71 million yuan over five years. The target group is expected to deliver a net profit after tax starting at 12 million yuan in the first year, rising incrementally to 17 million yuan by the fifth year.The proposed acquisition also requires a shift in Aoxin Q&M’s current operating boundaries, it noted. Under a non-compete undertaking established during its 2017 listing, Aoxin Q&M was restricted to providing dental services only within the Northern PRC Region.Since the proposed acquisition targets the central region, the company is in discussions with its parent company to lift this restriction. The board noted that there is no certainty the proposed acquisition will be completed, as it remains subject to definitive agreements and satisfactory due diligence.Shares of Aoxin Q&M ended at S$0.191 on Thursday, S$0.006 or 3.1 per cent lower.