TT buys Novena's furniture business

By CONRAD RAJ
Feb 22, 2007
The Business Times

MAINBOARD-LISTED TT International, the makers of the Akira brand of electric and electronic goods, is entering the furniture trade by buying over the furniture and furnishings business of Sesdaq-listed Novena Holdings for about $13.5 million worth of TT shares.

Under the deal announced yesterday, TT will issue 67.5 million new ordinary shares at 20 cents each to Novena for its furniture assets and businesses, including its seven brand names - Novena, Castilla Premium, Castilla, Castilla Modern, Natural Living, Modern Living and The White Collection - and six wholly owned subsidiaries. It also includes three industrial properties along Sungei Kadut Road.

The issue price of 20 cents a share is a 14.3 per cent premium over TT's last traded price of 17.5 cents at the close of Feb 16. Trading in both companies' shares was temporarily suspended prior to their respective announcements.

With Novena purchasing another 3 per cent of the enlarged capital of TT for 20 cents each, for a total consideration of $3.65 million, the company will end up owning 14.1 per cent of TT. Novena will then become TT's second largest shareholder after founders Sng Sze Hiang (chairman and chief executive) and his wife Julia Tong (executive director), who will see their stake reduced from just over 62 per cent now to 53.35 per cent.

TT, which has set its sights on becoming a key player in South-east Asia's retail sector, plans to incorporate the furniture business into its consumer electronics retail stores in Singapore and Indonesia, and rapidly replicate this pattern in its other key markets like Brunei, Cambodia and Vietnam.

'We want to be like Courts or Harvey Norman,' said Ms Tong at a briefing yesterday. Ms Tong is also TT's international executive director.

The company, which reported net earnings of $8.1 million on revenue of $510 million for the nine months to end-December 2006, has two stores here and 10 stores with nearly 500,000 sq ft of retail space in Indonesia.

Ms Tong said: 'The proposed transaction will fit very well into the immediate and medium-term growth plans for TT as we build up our third strategic pillar of growth - the large-scale retail stores offering a one-stop home and electronics solution to end-consumers - to complement our existing two core businesses.

'In particular, we find the product mix and brand positioning of Novena brands' furniture and furnishing products very suitable to our market portfolio: the emerging markets, and the lower, middle-lower, middle and middle-higher income segments.

'Adding the furniture and furnishing business to our electronics business will immediately boost our economies of scale and help increase both sales and profit.'

Novena Holdings CEO and founder Toh Soon Huat said: 'We see this transaction as a strategic and complementary partnership to take both companies to their next levels of growth. For Novena Holdings, we see it as a commitment and strategic investment as we are also buying an additional 3 per cent stake.'

The company felt that expanding its furniture business on its own would entail too much resources and risk. Furniture contributed 24 per cent of the group's $24 million turnover and 67 per cent of net profit of $1.63 million for the year ended June 2006.

After completion of the proposed transaction, the Novena Group will retain its Beauty division under its wholly owned subsidiaries Beaute Spring Pte Ltd, NiClas International Pte Ltd, Fasta International Pte Ltd and BSP Global Pte Ltd, as well as its interest in the distribution of FCMG products through its subsidiary, Chuan Seng Leong Pte Ltd.

In addition, the group will also retain its interest in its overseas manufacturing operations in China.