Red Rock’s part owned business Resource Star (RSL) has conditionally agreed to acquire a controlling stake in Sugar Dragon, a vehicle which has an interest in a company that sells confectionery in China with an exclusive licence to use the Candy Crush branding.
"Some time ago it was decided that new investors and new business directions should be sought for Resource Star, and step by step the RSL board has followed this path,” said Andrew Bell, Red Rock’s chairman.
“We believe this transaction is a significant milestone for RSL.”
Okmno Asia, 72% owned by Sugar Dragon, has a four-year licence to produce and sell the confectionery carrying the branding of the mobile-phone gaming phenomenon.
The Resource Star statement highlights the popularity of the game in China, citing a statistic that the candy-matching game has 48mln subscribers in the republic.
Resource Star’s investment in Sugar Dragon will strategically position the new venture in the Asian confectionery market, the company added. It says the confectionery market in greater China amounted to an estimated US$13.9bn, according to 2013 figures.
Some 18 tonnes of product has already been sold by the targeted business to date, according to Resource Star, which expects sales from Candy Crush confectionery to bring a material revenue stream and significant profit to its business.
Resource Star will pay A$4.125mln to acquire its stake in Sugar Dragon.
Red Rock currently owns 12% of Resource Star though the Australian company plans to raise new equity to fund the new business direction. The total funding amount has yet to be determined, but, Resource Star told investors it needs at least A$4mln.
Resource Star must, in the meantime, also raise at least A$200,000 for working capital to tide it over whilst the proposed transactions are completed.
AIM quoted Red Rock does not currently attribute any book value to its stake in Resource Star.