Kimly's S$16M buy of a one-employee drinks firm died under SGX questions and a CAD probe

Kimly, the SGX Catalist coffee-shop operator, signed a sale and purchase agreement on July 2, 2018 to buy Asian Story Corporation, announced as a manufacturer and distributor of Asian beverages, for S$16 million. What the announcement did not mention: Pokka's involvement. According to Pokka's filing reported by The Straits Times, ASC never had any manufacturing and distribution capabilities and appeared to have only one employee; Kimly answered that ASC owned the brands and ran an 'asset light business strategy', with two employees at the time of acquisition, contracting production to Pokka.

The overlap ran through Kimly's own boardroom. Alain Ong, Pokka's former CEO, had joined Kimly as a non-executive, non-independent director on February 15, 2017 before its IPO and sat on its audit and remuneration committees until January 2018. Pokka is suing him for allegedly diverting business to ASC and inflating ASC's value in anticipation of Kimly's acquisition, claiming at least S$10 million in losses. Responding to Singapore Exchange queries, Kimly rescinded the deal on November 29, 2018.

Kimly's sponsor, PrimePartners Corporate Finance, told the bourse that executive director Vincent Chia — not Ong — was the key person driving the company's IPO and dealt with the issue manager during due diligence, and said the Commercial Affairs Department investigation into the deal was still ongoing. Kimly said it was not aware of any formal charges against its directors.

Kimly announced the acquisition without disclosing that ASC was only a brand owner whose drinks were produced and distributed by Pokka — the omission regulators queried.

ASC's founder transferred 100 per cent of it out in 2015 and bought it all back in 2016 — shuffled ownership that due diligence should have weighed before signing.

An ex-Pokka CEO on Kimly's board and audit committee while it bought a Pokka-manufactured brand gave the deal a conflict the July 2018 announcement never acknowledged.

A target with no operations, a seller with shuffled shareholdings and an insider's ex-employer as the contract manufacturer are due-diligence red flags, not details.

The S$16 million deal was rescinded on November 29, 2018, and Kimly shares slipped 2.2 per cent as it disclosed the sponsor's answers on September 3, 2019. The CAD probe remained open; Kimly said the board saw no reason for directors to step aside, with chairman Lim Hee Liat continuing to oversee the group and Vincent Chia keeping his role.