Encorium Group Inc. (ENCO) said Wednesday that it has entered into a non-binding letter of intent to combine with Fine Success Investments Ltd., a British Virgin Islands company doing business as Linkcon. The company also signed a non-binding letter of intent to buy clinical research organization Prologue Research International Inc. for $13.0 million.
Under the non-binding letter of intent, Linkcon will merge with Encorium. The company will issue about 12.5 million shares of its common stock to Linkcon shareholders in connection with the merger.
Chardan Capital LLC, a merchant bank and founder of Linkcon, is expected to oversee the raising of $25 million on behalf of Linkcon in exchange for about 10 million shares of the combined entity. The funds raised on behalf of Linkcon will be used for acquisitions, repay a portion of the debt related to the proposed acquisition of Prologue and for working capital.
Following the business combination and the investment Linkcon and its investors will own a total of about 22.5 million shares in the combined entity and Encorium shareholders about 23.6 million shares.
Upon closing, Linkcon is expected to add about $11 million in net revenue to Encorium on a pro forma basis.
The company has also plans to acquire clinical research organizations in India, Latin America and China.
In a separate release, Encorium said it has signed a non-binding letter of intent to buy clinical research organization Prologue Research International Inc. for $13.0 million, comprising of $4.5 million in cash and $8.5 million in debt financing.
The closing the Prologue transaction is expected to occur in the third quarter of 2008, subject to completion of Encorium's due diligence, approval of the transaction by both parties' board and the signing of a definitive agreement.
ENCO closed Wednesday's regular trading session at $1.65, up 6 cents or 3.77%. In the after-hours, the shares further gained 3 cents or 1.83%.
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