SINGAPORE (Dec 30): Lorenzo International, a struggling furniture group, is in talks to set up a joint venture initially worth $124 million as part of its proposed acquisition of a company specialising in genetics.

Lorenzo said in October it had entered into an agreement to acquire from Genetik Inc the Asia-wide rights to Gene ID, a certified molecular laboratory that specialises in DNA sequencing for molecular diagnostics and oncogenetic testing.

Gene ID's services include next-generation gene sequencing of DNA from tumour cells using microchip technology. It can also identify genetic predispositions to many forms of cancer and recommend required treatments.

As part of the proposed acquisition, Lorenzo inked an agreement in October with JE Capital, which offered to provide $100 million in funding to the furniture company for its move into the new business.

In an update on the proposed diversification, Lorenzo said in a regulatory filing today that it is in discussions with Gene ID to form a joint venture with an initial contribution of $124 million from both parties.

Lorenzo will invest up to $24 million in the new entity for a stake of not more than 20%, while Gene ID will contribute laboratory services and an imaging centre in Singapore valued at about $100 million.

Lorenzo will partly fund the move into the new business with proceeds from a rights issue and warrants sale announced today.

The company will raise about $9.1 million by issuing 129.9 million rights shares at seven cents each on the basis of one rights share for every two ordinary shares held.

It will also issue up to 389.9 million bonus warrants, each entitling the holder to subscribe for a new share at 12 cents apiece.

An additional 389.9 million free warrants will be given to shareholders when they exercise the bonus warrants. The so-called piggyback warrants can be converted into shares at an exercise price of 17 cents.

If all the warrants are fully exercised, Lorenzo will raise net proceeds of $112.3 million.

Lorenzo incurred a net loss of $1.5 million for the six months to June 30.