KUALA LUMPUR (April 18): SMTrack Bhd has scrapped plans to acquire US-based Wellspring Worldwide Ltd for RM310 million through a combination of cash and new shares, after considering the latter's performance for the financial year ended Dec 31, 2017 (FY17), which did not meet SMTrack’s expectation.

Wellspring Group is the master licensor of Tutti Frutti Frozen Yogurt and O’ My Buns!.

In a filing with Bursa Malaysia today, SMTrack said it and the vendors will enter into a deed of termination, release and discharge, to terminate the shares sale agreement (SSA) in due course.

The acquisition would have paved the way for Wellspring to undertake a reverse take-over (RTO) of loss-making SMTrack. The RTO exercise would have also triggered a mandatory general offer (MGO) by promoters and persons acting in concert for all remaining shares and convertible securities in SMTrack not already owned by them.

"Subsequent to the termination of the SSA, SMTrack will abort its proposed rights issue of shares with warrants, MGO and private placement," SMTrack said.

On June 15 last year, SMTrack had proposed to acquire 230 million shares in Wellspring from its shareholders for RM310 million, through the issuance of 2.07 billion new shares at 14 sen each and cash payment of RM20 million.

In conjunction with the proposed acquisition of Wellspring, SMTrack had proposed to undertake a rights issue on the basis of three rights shares for every two existing shares. The cash call was sweetened with free warrants, on the basis of two warrants for every three rights shares subscribed.

Upon completion of the rights issue and proposed RTO, Wellspring’s shareholders would have emerged as new controlling shareholders in SMTrack, having a combined shareholding of 75.69%.

At the time, the major shareholders of Wellspring were Jay Kim (40%), Savvy Valley Sdn Bhd (20%), Lembaga Tabung Haji (10%), Datuk Mohamed Ridzuan Nor Md (7.38%), Andy Farouk Muhamad (7.38%) and Littleton Foods Sdn Bhd (5%).

Tabung Haji had then informed Wellspring that the pilgrimage fund had intended to realise its investment by disposing of its 10% shareholding to Mohamed Ridzuan and Andy Farouk.

Wellspring shareholders had expressed their intention to maintain SMTrack’s listing status. In order to ensure SMTrack’s public shareholding spread remained above 25% of the enlarged issued share capital, the group had proposed to undertake another private placement after conducting the MGO. The proposed private placement would have raised about RM30.59 million.

SMTrack shares closed unchanged at 13.5 sen today, bringing a market capitalisation of RM19.37 million.