Shares of Reitar Logtech Holdings Limited (NASDAQ:RITR) declined 9% on Tuesday after the Hong Kong-based smart logistics and automated warehousing firm revealed a non-binding memorandum of understanding (MOU) for a potential equity infusion totaling $60 million.
Under the terms outlined in the MOU, Equator Capital Management SPC - acting on behalf of Equator Private Equity Fund SP - would subscribe for newly issued ordinary shares of Reitar at a price of $4.00 per share. Reitar said the proceeds from the proposed subscription are intended primarily to support its participation in a consortium formed to acquire a controlling stake in an international logistics company with operations in Southeast Asia, Europe and China.
The filing specifies that at least 92% of the investment proceeds would be earmarked for the consortium acquisition, while up to 8% could be used for transaction fees and working capital requirements. Reitar additionally noted it will partner with an industrial private equity firm that focuses on logistics technology and manages several billion dollars in assets.
The MOU includes a number of conditions precedent to any definitive transaction. These include satisfactory completion of due diligence, the execution of a binding consortium agreement, any required regulatory approvals and the target company demonstrating audited EBITDA of at least $8 million for its most recent financial year.
As part of the arrangement, Reitar granted Equator Capital a 90-day exclusivity period during which the company will not pursue competing equity financing transactions. The agreement is described as non-binding, except for provisions covering exclusivity, confidentiality, costs and governing law.
The MOU will terminate automatically upon the execution of definitive transaction documents, the expiry of the 90-day exclusivity window, or by mutual agreement of the parties. Reitar cautioned that there is no assurance the proposed transaction will be completed on the terms described, or at all.
Contextual summary
The proposed $60 million investment would be used mainly to enable Reitar to join a consortium seeking to purchase an international logistics operator that spans three regional markets. The proposal ties the investment to defined uses for proceeds, specific financial performance of the target and a short exclusivity window, while remaining non-binding except for a handful of contractual provisions.
Market and sector implications
- The immediate market reaction was a single-day share price decline of 9%.
- The deal, if completed, would affect the logistics and automated warehousing sectors by linking capital flows between a technology-focused operator and private equity backing.
- Capital markets and private equity activity in logistics technology are the primary financial sectors implicated by the proposed transaction.