TRANSACTION (CHAPTER 10 OF LISTING REQUIREMENTS) NON RELATED PARTY TRANSACTIONS

Transcription

1 Type: Subject: Description: Announcement TRANSACTION (CHAPTER 10 OF LISTING REQUIREMENTS) NON RELATED PARTY TRANSACTIONS KEY ALLIANCE GROUP BERHAD ( KAG or the Company ) PROPOSED ACQUISITION OF ENTIRE EQUITY INTEREST IN RAPIDCLOUD (M) SDN BHD ( RAPIDCLOUD ) 1. INTRODUCTION The Board of Directors of KAG wishes to announce that its wholly owned subsidiary, DVM Innovate Sdn Bhd ( DISB ), had on 22 May 2017 entered into a Share Acquisition Agreement ( Agreement ) with RapidCloud Asia Sdn Bhd ( the Vendor ) to acquire 1,000,000 ordinary shares ( Sales Shares ) representing 100% equity interest in RAPIDCLOUD (M) SDN BHD ( U) ( RAPIDCLOUD ) ( Proposed Acquisition ) at a total purchase consideration of Ringgit Malaysia Three Million Five Hundred Thousand Only (RM3,500,000.00) ( Purchase Consideration ) subject to the terms and conditions stipulated therein. 2. BACKGROUND INFORMATION 2.1 Information on the Vendor The Vendor is a company incorporated in Malaysia on 13 October 2011 and having its registered office at Suite 10.03, Level 10, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur. The shareholder of the Vendor is RapidCloud International Plc. The directors of the Vendor are Mr Chee Han Wen, Mr Chew Man Fai and Ms Chong Lip Kian. 2.2 Information on RAPIDCLOUD RAPIDCLOUD is a company incorporated in Malaysia with its registered address at Suite 10.03, Level 10, The Garden South Tower, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur. RAPIDCLOUD is wholly owned by the Vendor. The director of RAPIDCLOUD is Mr Chew Man Fai. RAPIDCLOUD are a premier enterprise cloud solutions provider in South East Asia, currently hosting in excess of 10,000 SME and Corporate clients, and is one of the established reseller of Alibaba Cloud in Malaysia. 3. SALIENT TERMS OF THE AGREEMENT

2 The salient terms of the Agreement include, amongst others, the following: DISB will incorporate a new private limited company as a subsidiaary, to be called Progenet Innovations Sdn Bhd or such other name as may be determined by DISB ( Newco ) to receive the transfer of the Sale Shares and to perform the obligations of DISB in Agreement. The obligations of DISB in the Agreement shall be deemed fulfilled if performed by the Newco. The Newco shall be incorporated with an issued and paid-up capital of RM5,000,000 comprising of 1,000 ordinary shares. 3.1 Condition Precedent the Vendor having obtained all necessary approvals of its/their board of directors and shareholders by way of special resolution for the disposal of the Sale Shares; the Vendor having obtained the approval or consent of the financiers of RAPIDCLOUD (if required) in respect of the change in shareholdings contemplated hereunder in accordance with the terms of any banking or financing facilities granted to RAPIDCLOUD; the Vendor having obtained the approval or consent of any third party to the sale and purchase of the Sale Shares (if required) in accordance with the terms of any contract or agreement of a material nature entered into between RAPIDCLOUD and such third party, including but not limited to its principals, suppliers and/or customers; the Vendor having obtained the approval or waiver of any regulatory requirement by any other relevant authorities, if required, (collectively, Approvals ); DISB having conducted a legal, financial, tax and operational due diligence review on the affairs of RAPIDCLOUD and being reasonably satisfied with the due diligence findings thereof; resolution of any issues arising from the said due diligence findings in such manner as may be agreed between the Vendor and DISB and to the reasonable satisfaction of DISB; fulfilment of the basis of the transactions as below: RAPIDCLOUD shall be freed of all liabilities (including all contingent liabilities) as of the completion date. For the avoidance of doubt, the Vendor shall ensure and procure that all liabilities of RAPIDCLOUD up to the completion date are fully paid and/or settled at its/their own costs;

3 the book value of the assets of RAPIDCLOUD shall be reviewed and impaired/depreciated/amortized accordingly in such manner reflective of the true and fair state of RAPIDCLOUD and acceptable to both the Vendor and DISB; The Company shall continue to own and possess as at the completion date: (a) (b) (c) (d) Alibaba Cloud reseller rights/license for Malaysia and the Vendor has no reason to believe that the said agreement would be terminated by the principal for any reason whatsoever prior to its expiry date; Alibaba Global Gold Supplier reseller rights/license for Malaysia and the Vendor has no reason to believe that the said agreement would be terminated by the principal for any reason whatsoever prior to its expiry date; All relevant intellectual property rights in respect of the businesses of the Company; All relevant software and hardware in respect of the businesses of the Company; The Company shall remain as a going-concern; RAPIDCLOUD s audited accounts for the financial year ended 31 December 2016 shall have been completed and delivered to DISB within thirty (30) days from the date hereof; 4. PURCHASE CONSIDERATION AND ASSUMED LIABILITIES 4.1 Basis of the Purchase Consideration The Purchase Consideration was arrived at on a willing seller willing buyer basis after taking into consideration of the following: (I) the Net Tangible Assets ( NTA ) of RAPIDCLOUD of RM6.16 million as derived from the audited financial statements 2015, (II) the NTA of the management account for the financial year ended 31 December 2016 of RAPIDCLOUD of RM4.41 million, (III) future earnings potential of RALOUDCLOUD and prospect of the industry, 4.2 Mode of Settlement KAG and the Vendor hereby agree that the Purchase Consideration shall be paid by KAG in the following time and manner:

4 4.2.1 Deposit A cash consideration sum of Ringgit Malaysia Two Million Five Hundred Thousand (RM2,500,000.00) payable in the following manner: (i) (ii) (iii) a sum of Ringgit Malaysia One Hundred and Five Thousand (RM105,000.00`) ( Initial Deposit ) as deposit and part payment of the Purchase Consideration shall be paid to the Vendor upon the signing of Agreement; a further sum of Ringgit Malaysia Three Hundred Ninety Five Thousand (RM395,000.00) ( Further Deposit ) as further refundable deposit and part payment of the Purchase Consideration shall be paid to the Vendor upon the Vendor fulfilling the condition as stated in Clause 3.1.1; the balance of the cash consideration sum of the Purchase Consideration amounting to Ringgit Malaysia Two Million (RM2,000,000.00), shall be paid to DISB s solicitors on the completion date, whom are hereby instructed and authorised to apply the said sum towards satisfaction of all agreed liabilities in exchange for and subject to receipt by DISB s solicitors of the duly executed full and final settlement agreements from the relevant creditors, and thereafter any balance thereof shall be released to the Vendor within seven (7) days from the date of settlement of all agreed liabilities in the manner as aforesaid Balance Purchase Consideration The balance Purchase Consideration amounting to Ringgit Malaysia One Million (RM1,000,000.00) shall be settled by way of DISB transferring 200 ordinary shares representing 20% of the issued and paid-up share capital of the Newco to the Vendor ( Consideration Shares ) on the completion date. The Consideration Shares shall be free from all encumbrances and with all rights attaching thereto. 5. RATIONALE AND PROSPECT FOR THE PROPOSED ACQUISITION The Proposed Acquisition provides KAG Group a turnkey operation of 10,000 customer strong hosting business, which is expected to be earnings accretion immediately. Further the Propose Acquisition allows KAG Group to immediately leverage of an existing reseller relationship with AliBaba Cloud and Alibaba Global Gold Supplier. The Proposed Acquisition dovetails into KAG Group s acquisition of Progenet Sdn Bhd (please refer to announcement dated 19 May 2017) as part of its strategy to acquire synergistic businesses to tap into the growing e-commerce market in Malaysia, fostered by the launch of the government led Digital Free Trade Zone ( DFTZ ).

5 6. SOURCE OF FUNDING The Purchase Consideration will be financed through the combination of internally generated funds. 7. RISK FACTORS FOR THE PROPOSED ACQUISITION 7.1 Financial risks Save for the obligations and liabilities in and arising from, pursuant to or in connection with the Agreement, there are no other liabilities, including contingent liabilities and/or guarantees to be assumed by KAG arising from the Proposed Acquisition. 7.2 Political, economic and regulatory risks Apart from the normal market and economic risks, the Board of Directors of KAG is not aware of any risk factors arising from the Proposed Acquisition. 8. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 8.1 Share capital and substantial shareholders shareholdings The Proposed Acquisition is not expected to have any effect on the issued and paid-up share capital of KAG and the substantial shareholders shareholdings of KAG. 8.2 Earnings and earnings per share The Proposed Acquisition is not expected to have any material effect on the earnings of KAG Group and the Company s earnings per share for the financial year ending 31 March The Proposed Acquisition is however expected to contribute positively to the future earnings of KAG Group. 8.3 Net assets The Proposed Acquisition is not expected to have any material effect on the net assets per share of the KAG Group for the financial year ending 31 March Gearing The Proposed Acquisition is not expected to have any immediate material effect on the gearing of the KAG Group for the financial year ending 31 March HIGHEST PERCENTAGE RATIO APPLICABLE

6 As at 22 May 2017, the highest percentage ratio applicable to the Proposed Acquisition pursuant to Rule (g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad is 10.21%. 10. APPROVAL REQUIRED The Proposed Acquisition is not subject to the approval of the shareholders of KAG and any relevant government authorities. 11 INTEREST OF THE DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THEM None of the Directors, major shareholders of KAG and/or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 12. STATEMENT BY THE BOARD OF DIRECTORS The Board of KAG, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Company. 13. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed within two (2) months from the date of the Agreement. 14. DOCUMENTS FOR INSPECTION The Agreement is available for inspection during the office hours from 9.00 a.m. to 5.00 p.m. from Monday to Friday (except for public holidays) at the registered office of the Company at 3-2, 3 rd Mile Square, No.151, Jalan Kelang Lama, Batu 3½, Kuala Lumpur for a period of three (3) months from the date of this announcement. This announcement is dated 22 May 2017.