Many would rec0gnise Global Yellow Pages Limited (SGX: Y07) as the brainchild behind the Singapore-based directories and classified directory advertising publication Yellow Pages.
The company’s subsidiaries also include Singapore River Explorer Pte Ltd, an operator of river taxi and river tour services along the iconic Singapore River, which flows along our city-state’s Central Business District.
Looking for growth
However, not many know might know that Global Yellow Pages is diversifying its business into the food & beverage (F&B) industry and the property sector. As part of the diversification, the firm had acquired a portion of China-based edible fungi supplier Yamada Green Resources Ltd (SGX: MC7) in June 2013.
In December last year, the firm revealed that it would be gobbling up coffee-chain purveyor Gloria Jean’s Coffees and its related intellectual property. However, the deal fell through on 3 July 2014 and the acquisition was not completed. In preparation for the deal, Global Yellow Pages had undertaken a rights issue earlier in June. With the extra cash in hand from the issuance of rights that was not used for the failed deal, the firm is ready to deploy that cash on other acquisitions in the F&B sector.
A new deal’s signed
A few days ago, Global Yellow Pages announced that it had entered into a conditional agreement on August 2014 with Wendy’s Supa Sundaes Pty Ltd (WSS) and Innovation Ice Cream Pty Ltd (IIC) to acquire 100% of their intellectual property rights. The deal includes all the recipes and formulas held anywhere in the world by both WSS and IIC.
WSS has a heritage of more than 30 years and sells desserts and other sweets across Australia and New Zealand through a total network of around 240 stores. IIC meanwhile holds recipes “used to manufacture high quality cold dessert products such as ice-cream, slushy, powder products, frozen yoghurt and sugar infused fruit products.” Global Yellow Pages believes there is significant potential for further expansion of the ice-cream retail business in Asia, especially in China.
As part of the deal, Global Yellow Pages also entered into a “conditional master intellectual property licence agreement” with Asia Food Retail Group Pte Ltd, in respect of the conditional licence of the intellectual property rights that will be acquired by Global Yellow Pages from WSS and IIC.
This latest deal will cost Global Yellow Pages A$10 million (around S$11.7 million) and it will be funded from the proceeds it has received from its rights issue, as mentioned earlier.
Will the new venture bode well for the company?
In its latest first quarter earnings that was released yesterday, Global Yellow Pages had posted a net loss of S$0.6 million as compared to a net loss of S$0.7 million a year ago. Revenue for the quarter had decreased by 8.5% year-on-year to S$4 million.
The proposed acquisition may turn the fortunes of the company around if the F&B concept proves to be popular in Asia and continues its growth in Australia and New Zealand. However, there are also executional risk as this would be Global Yellow Pages’ first foray into the F&B retail arena.
If the venture really does take flight, the company may see renewed interest from the market. Shares of Global Yellow Pages have plunged some 73% over the past five years. In comparison, the Straits Times Index (SGX: ^STI) has added around 25% in value during the same period.
Shares of Global Yellow Pages closed at S$0.047 on Wednesday, trading at just six times trailing earnings.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.