MEDA INC. BERHAD ( MEDA OR THE COMPANY OR THE PURCHASER )

Transcription

1 MEDA INC. BERHAD ( MEDA OR THE COMPANY OR THE PURCHASER ) PROPOSED ACQUISITION OF THE ENTIRE EQUITY INTEREST IN PESONA ALFA SDN BHD COMPRISING 1,100,000 ORDINARY SHARES OF RM1.00 EACH FROM THE VENDORS OF PESONA ALFA SDN BHD, FOR A CASH PURCHASE CONSIDERATION OF RM35,000,000 ( PROPOSED ACQUISITION ) 1. INTRODUCTION On behalf of the Board of Directors of Meda ( Board ), M&A Securities Sdn Bhd ( M&A Securities ) wishes to announce that Meda had on 9 November 2011, entered into a conditional share sale agreement ( SSA ) with Lim Chin Aik, Tan Kim Seng, Rusnah Binti Kassim, So Kee Mun, Chan Kaim Sam, Looi Kwai Fong, Leow Lai Ching, Ng Lai Chiek, Abd Rahman Bin Harun, Ong Soon Kiow, Yuen Kok Meng and Wong Ging Gii (collectively, the Vendors ) for the proposed acquisition of the entire equity interest in Pesona Alfa Sdn Bhd ( PASB ) comprising 1,100,000 ordinary shares of RM1.00 each ( Sale Shares ), for a cash purchase consideration of RM35,000, THE PROPOSED ACQUISITION 2.1 Details of the Proposed Acquisition Meda proposes to acquire the entire equity interest in PASB from the Vendors for a cash purchase consideration of RM35,000,000 on terms as set out in the SSA. The entire issued and paid-up share capital of PASB shall be acquired from the Vendors by Meda free from all claims, charges, liens, encumbrances and equity whatsoever together with all rights attaching thereto including all dividends, rights and distributions declared, paid or made in respect thereof upon completion of the SSA Information on PASB PASB was incorporated in Malaysia as a private limited company under the Companies Act, 1965 on 20 May As at the date of this announcement, the authorised share capital of PASB is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each, of which 1,100,000 ordinary shares of RM1.00 each have been issued and fully paid-up. The shareholders of PASB are Lim Chin Aik, Tan Kim Seng, Rusnah Binti Kassim, So Kee Mun, Chan Kaim Sam, Looi Kwai Fong, Leow Lai Ching, Ng Lai Chiek, Abd Rahman Bin Harun, Ong Soon Kiow, Yuen Kok Meng and Wong Ging Gii, whilst the directors of PASB are Lim Chin Aik and Tan Kim Seng. PASB is an investment holding company whilst the principal activity of its whollyowned subsidiary, Maju Puncakbumi Sdn Bhd ( MPSB ) is property development. PASB and MPSB are collectively known as the PASB Group. PASB s wholly-owned subsidiary, MPSB is the proprietor of a parcel of vacant commercial land measuring approximately 58,991 square metres, held under H.S.(D) 28787, Lot PT No 41469, Mukim of Dengkil, District of Sepang, State of Selangor Darul Ehsan ( Land ) and the developer of an integrated commercial development project ( Development Project ).

2 2.1.2 Description on the Land and Development Project The Land The freehold land measuring approximately 58,991 square metres is held under H.S.(D) 28787, Lot PT No 41469, Mukim of Dengkil, District of Sepang, State of Selangor Darul Ehsan. The Land is located along Persiaran Bestari within the township development of Cyberjaya, which lies at about miles (55 kilometres) south-west of Kuala Lumpur city centre. The present approach to the Land from the Kuala Lumpur city centre is via the Kuala Lumpur-Putrajaya Highway, exit to Lingkaran Putrajaya before turning into Persiaran Apec, Persiaran Multimedia and finally onto Persiaran Bestari. The Land is also easily accessible from most parts of Klang Valley via major highways; i.e. Lebuhraya Damansara Puchong (LDP), the North-South Central Link Expressway (ELITE), the North- South Highway and the Kuala Lumpur-Putrajaya Highway. Properties within the township of Cyberjaya comprises of residential components of low to high rise apartments, service apartments and condominium buildings, double storey terrace houses, semi-detached and detached houses whilst the commercial components include stratified shop offices, a retail/street mall, purpose-built offices and commercial buildings. In addition, there are many pockets of vacant parcels of development lands designated for commercial and residential use. Prominent landmarks located within the immediate locality are the Multimedia University and Sekolah Menengah Kebangsaan Cyberjaya which are located to the eastern and south-eastern side of the Land respectively. Some of the notable multinational companies situated within Cyberjaya include the premises of Shell, EDS, Ericsson, BMW, IBM, HSBC and DHL to name a few. Cyberjaya also houses higher education universities which include Lim Kok Wing University College of Creative Technology, Cyberjaya University College of Medical Sciences and Multimedia University. Neighbouring residential schemes found within Cyberjaya are Perdana Lakeview West, Perdana Lakeview East, The Serenity Garden Homes and D'Melor Condominiums, offering a wide array of homes. Shopping, retailing, educational and public facilities are also available in the locality. Details of the Land are set out below: Location : H.S. (D) 28787, Lot No PT 41469, Mukim of Dengkil, District of Sepang, State of Selangor (1) Tenure : Freehold (1) Total land area : 58,991 square metres (2) Category of Land Use : Building (1) Express Conditions : Commercial building (1) Restriction-in-Interest : The Land can be transferred, charged or mortgaged upon approval of the State Authority (1)

3 Encumbrances : Charged twice to United Overseas Bank (Malaysia) Berhad (1) Registered proprietor : MPSB (1) Existing and proposed use Net book value* : RM37,195,642 (3) Market value : RM79,000,000 (4) Notes: : The site had progressed through initial stages of construction i.e. site clearance and earthworks have been completed and piling works, pile cap works are ongoing. * The net book value being the cost of the Land and property development costs. (1) Based on the title search at the Selangor s Registry of Land Titles in Shah Alam on 6 September (2) Provisional land area. (3) As at 31 July (4) As appraised by the independent valuer, PPC International Sdn Bhd, based on its Valuation Report dated 25 August 2011 using the comparison and discounted cash flow approaches. (Source: Valuation Report and audited financial statement of MPSB as at 31 July 2011) The Development Project The Development Project comprises the following: Phase 1 (a) four (4) blocks of 23-storey hostel apartments of 1,000 units built upon a 5-storey car park podium, known as The Arc@Cyberjaya; and (b) a badminton complex; Phase 2: (c) three (3) blocks of 8-storey institutional building built upon with a 4-storey retail / car park podium; and (d) one (1) block of 8-storey institutional building built upon a 5-storey retail / car park podium. The layout approval for the Development Project was approved on 18 January 2011 by the Town and Country Planning Department, Majlis Perbandaran Sepang. Pursuant to a letter dated 16 May 2011 from the Majlis Perbandaran Sepang, the building plan was approved for the four (4) blocks of 23-storey 1,000 hostel apartments together with a two (2)-storey recreational centre and a swimming pool, two (2) guard houses and two (2) refuse chambers. The apartments will encompass a range of sizes (i.e. from 913 square feet to 1,915 square feet), of three and four bedroom apartments located through the building. The common property will include building services and security control. Extensive recreational facilities including a swimming pool, gymnasium, squash courts and communal games room-cum-multi-purpose hall are located in the two (2)-storey recreational centre annexed to the apartment blocks. As at the date of the valuation, all the 1,000 hostel apartments have been launched. Of these, 895 units of the apartments have been sold. The sales value for the 895 units of hostel apartments is RM319.5 million.

4 (Source: Valuation Report) The estimated gross development cost of the Development Project is RM360.4 million with an approximate gross profit margin of 35.6%. Construction for Phase 1, The has commenced in April 2011, and is expected to be completed in 4th quarter The development cost for The is financed through a combination of internally-generated funds and external bank borrowings. (Source: Management of PASB) 2.2 Basis of arriving at the Purchase Consideration The Purchase Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the following: (a) the PASB Group s audited net assets as at 31 July 2011 of RM294,502; (b) the increase in the issue and paid-up share capital to RM1,100,000 from RM12 after 31 July 2011; and (c) fair value adjustments taking into account the revaluation surplus (from the revaluation of the Land and net of deferred tax) amounting to RM31.4 million. The Purchase Consideration represents a premium of approximately 6.4% to the adjusted net assets of the PASB Group of RM32.8 million after the increase in the paid-up share capital and fair value adjustments taking into account the revaluation surplus (net of deferred tax). 2.3 Sources of funding and mode of consideration The Purchase Consideration will be satisfied entirely in cash, which will be financed through internally-generated funds and shall be paid in the manner set out below: Timing Purchase Consideration RM (a) Deposit Payable upon execution of the SSA 3,500,000 (b) Balance Purchase Consideration Payable on the Completion Date (as defined in Section 3(a) below) 31,500,000 Total Purchase Consideration 35,000, Liabilities to be Assumed Save for the warranty^ by Meda to Tan Kim Seng and Lim Chin Aik, the Meda group of companies ( Meda Group ) will not be assuming any additional liabilities arising from the Proposed Acquisition. The liabilities of the PASB Group will be settled by the PASB Group in the normal course of business. Note: ^ Pursuant to credit facilities granted by a financial institution granted to MPSB which is secured against the Land and personal guarantees by Tan Kim Seng and Lim Chin Aik, Meda shall within twenty-four (24) months from the Completion Date (as defined in Section 3(a) below) obtain or procure the discharge of the personal guarantees by Tan Kim Seng and Lim Chin Aik ( Guarantors ) made in favour of the said financial institution.

5 2.5 Additional financial commitment Save for the commitment for the Development Project as set out in Section above, there is no other additional financial commitment incurred/to be incurred by Meda in relation to the Proposed Acquisition. 3. Salient terms and conditions of the SSA The salient terms of the SSA are as follows: (a) (b) The Vendors jointly and severally agree to sell and the Purchaser agrees to purchase from the Vendors the Sale Shares free from all claims, charges, liens encumbrances or adverse interests and with all rights attaching thereto together with all dividends and distributions declared ninety (90) days after all the conditions in the SSA are fulfilled within the Approval Period (as defined in Section 3(b) below)( the Completion Date ). The sale and purchase of the Sale Shares is conditional upon the following conditions precedent being fulfilled within three (3) months from the date of the SSA or such other period as the parties may agree in writing ("Approval Period"): (i) (ii) (iii) (iv) receipt by the Purchaser of the approval of the Economic Planning Unit, Prime Minister s Department for the acquisition of the Sale Shares by the Purchaser (if applicable); and the Purchaser being satisfied with the legal and financial due diligence on the PASB and MPSB; the approval of the Purchaser s shareholders, if required: and any other approvals, if required. (c) (d) (e) (f) If any or all of the conditions precedent referred to in Section 3(b) above is not fulfilled within the Approval Period, the sale and purchase of the Sale Shares in the SSA shall be deemed terminated and be null and void and of no effect and no party shall have any claims of whatsoever nature against the others save and except in respect of any antecedent breach; In the event completion does not take place due to the events set out in Section 3(c) above, the Vendors shall return the Deposit to the Purchaser within seven (7) days from date of notification, failing which interest at the rate of 8% per annum shall be chargeable on the amount of Deposit yet to be refunded commencing from the date of notification till the date of full payment to the Purchaser and upon full refund of the Deposit, the parties shall have no rights or remedies against each other, save and except of any antecedent breach. If any of the approvals in Section 3(b) above ( Approvals ) is obtained but the terms and/or conditions (including but not limited to any revaluation resulting in any change to the Purchase Consideration) are unacceptable to any party, the affected party shall have the option to appeal against such unacceptable terms and/or reject such unacceptable terms and/or conditions by notice. If as a condition of any of the said Approvals, the approval of some other authority shall be required to be obtained, the Approval Period shall be deemed to be extended for a further period of twenty (20) days or such other period agreed by the parties in writing.

6 (g) (h) (i) (j) (k) It is agreed that the party for whose benefit a condition precedent as set out above, shall have the unfettered right to waive the said condition precedent. The completion of the sale and purchase of the Sale Shares is subject to and conditional upon all the Vendors completing the sale and purchase in accordance with clause 5.3 of the SSA in relation to the delivery of certain documents. In the event that any of the Vendors do not complete the sale and purchase in accordance with the said clause, the Purchaser shall have the absolute discretion to decide to terminate and rescind the SSA. In such event, the Vendors shall refund to the Purchaser, the Deposit within seven (7) days from date of termination, failing which interest at the rate of 8% per annum shall be chargeable on the amount of the Deposit not refunded commencing from the date of termination till the date of full payment; The Purchaser undertakes that upon the Completion Date, the Purchaser shall take steps to procure that PASB and/or MPSB makes a full repayment of the advances or loans granted to PASB and/or MPSB by any of the Vendors (if any) within twenty four (24) calendar months from the Completion Date. The Purchaser agrees to indemnify and keep indemnified the Vendor/Guarantor against all loss and damages (including legal fees) suffered by them in connection with their respective guarantee not being discharged. If any of the Vendors: (i) (ii) (iii) defaults in completing the sale of the Sale Shares; fails to perform any of its obligations under the terms of the SSA; or breaches any of its warranties, representations and undertakings in the SSA, and the Purchaser lawfully elects to terminate and rescind the SSA, the Vendors shall return all moneys paid by the Purchaser to Vendors together with a sum equivalent to the Deposit as liquidated and ascertained damages within seven (7) days from date of termination, failing which interest at the rate of 8% per annum shall be chargeable on the amount of the moneys payable and/or to be refunded commencing from the date of termination till the date of full payment to the Purchaser. Nothing therein shall prejudice any other rights or remedies available to the Purchaser in law. (l) In the event the Purchaser fails to complete the purchase of the Sale Shares or fails to perform any of its obligations under the terms of the SSA, and any of the Vendors elect to terminate this Agreement, the Deposit shall forthwith be absolutely forfeited in favour of those Vendors electing to terminate the SSA and without prejudice to any other rights or remedies available to the Vendors in law. 4. RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition is intended to enable the Group to replenish its land bank for its property development projects to drive earnings sustainability. The Board is of the view that the Proposed Acquisition provides the Meda Group with a valuable opportunity to venture into the growing Cyberjaya property market, which has become host to more than 500 companies including global multinationals such as HP, Dell, Fujitsu, Motorola, AMD, DHL, KPMG, HSBC, Nokia, Shell, BMW and Ericsson all of which have set up regional and global centres in the Cybercity and making the township a rapidly growing area.

7 5. EFFECTS OF THE PROPOSED ACQUISITION 5.1 Share Capital and Substantial Shareholders shareholdings The Proposed Acquisition will not have any effect on the share capital and substantial shareholders shareholdings of Meda as the Proposed Acquisition does not involve any issuance of shares in Meda. 5.2 Net Assets and net assets per share and Gearing Based on the unaudited 3-month quarterly results of the Meda Group as at 31 March 2011, which has been reviewed by Meda s external auditors, the effects of the Proposed Acquisition on the net assets, net assets per share and gearing ratio of Meda Group are as follows: - As at RM 000 After the Proposed Acquisition RM 000 Share Capital 213, ,470 Share Premium 20,013 20,013 Revaluation Reserve 41,027 41,027 Accumulated losses (123,618) (123,618) Shareholders Funds / Net Assets 150, ,892 Borrowings 49,463 67,648* Gearing Ratio (times) Note: * After including bank borrowings of the PASB Group. Based on the proforma consolidated statement of financial position of the Meda Group as at 31 March 2011, the borrowings of the Meda Group would increase from approximately RM49.46 million to approximately RM67.65 million while the gearing ratio would increase from 0.33 times to 0.45 times. The Proposed Acquisition is not expected to have any material effect on the net assets and net assets per share of the Meda Group for the financial year ending 31 December However, the Proposed Acquisition is expected to contribute positively to the net assets and net assets per share of the Meda Group in the future financial years. 5.3 Earnings and earnings per share The Proposed Acquisition is not expected to have any immediate material effect on the earnings and earnings per share of the Meda Group for the financial year ending 31 December 2011 as the Proposed Acquisition shall only be completed at the end of the fourth quarter of However, the Proposed Acquisition is expected to contribute positively to the earnings and earnings per share of the Meda Group in the future financial years.

8 6. PROSPECTS AND RISK FACTORS Selangor s property market had experienced a positive movement in the first half of year 2010 and continued the same throughout the year. This was significant due to the upbeat market activity and reducing numbers of residential and shop overhang. It saw 90,414 property units transactions at a total value of RM36.61 billion which recorded an increase of 10.4% and 30.6% respectively compared to the year before. The residential property market in Selangor witnessed 69,445 units transactions at a total value of RM2.02 billion which is an increase of 7.3% and 19.9% respectively compared to the year before. Prices of residential properties, both landed and stratified, also continued to strengthen. However, the rental market was seen stable with some increases in preferred locations. In the first quarter of 2011, the residential property prices in Selangor were seen to rise of 9.6% and anticipated to keep with the trend. In 2010, Selangor witnessed the entrance of Philomath Resource Centre Building in Gombak and Empire Tower in Subang Jaya which contributed about 27,273 square feet of office space to the existing 25,079,910 square feet. The occupancy rate of purpose built-offices in Selangor was registered at 76.9% which is a decrease from 78.0% in year Selangor also registered ten (10) office building transactions; i.e. CSF Building, Block 3605 and Bangunan EMERIO in Cyberjaya, Unit A (fronting Jalan Sulaiman 1), Unit A (fronting Jalan Ampang Putra), Unit C and Unit G in Excella Business Park in Ampang Hilir, MTD Building in Batu Caves and Block B of Kelana Centre Point totaling to RM million. The Land is located within the township development of Cyberjaya, Malaysia s first selfcontained intelligent city and low-density urban enterprise and is highly accessible and well connected by a network of highways including the Lebuhraya Damansara Puchong (LDP), the North-South Central Link Expressway (ELITE), the North-South Highway and the Kuala Lumpur-Putrajaya Highway, which has considerably shortened the travel time between Kuala Lumpur and Cyberjaya to approximately 20 minutes. The Land is also within easy reach of higher education universities such as the Multimedia University, Lim Kok Wing University College of Creative Technology, Cyberjaya University College of Medical Sciences, Hospital Putrajaya, Hospital Serdang, Century Square office blocks, the Multimedia Development Corporation Headquarters, Putrajaya Marriot Hotel, Cyberview Lodge Resort and Spa, Cyberpark and the Street Mall. (Source: Valuation Report) In light of the above, coupled by the strength of market demand for hostel apartments in Cyberjaya as well as its strategic location, the Board is of the view that the prospects for the Proposed Acquisition is positive and favourable. (Source: The management of Meda) As Meda is in the property development business, the Proposed Acquisition will not materially change the general business risks of the Company s business as the Meda Group would still be exposed to the same business, operational, financial and investment risks inherent in the property sector. These risks are inherently due to timely commencement or completion of projects, satisfactory performance of contractors and adverse economic events or recession. In addition, any material escalation of cost of cement and other building materials as well as increase in petrol prices may contribute to a higher overall development cost, thereby impacting the profit margins of the Development Project.

9 6.1 Non-completion of the Proposed Acquisition The Proposed Acquisition is conditional upon the conditions precedent being met. In the event the conditions precedents are not met, the Proposed Acquisition will not be completed and the Meda Group will not be able to meet its objective as stated in Section 4 of this announcement. Nevertheless, the Board will take reasonable steps to ensure that every effort is made to obtain all the necessary approvals for the Proposed Acquisition and satisfaction of the conditions precedent. 6.2 Development Risks The development of the Development Project is subject to risks inherent to property development, such as fluctuations in prices of building materials, labour and building material shortages, increases in the costs of labour and building materials, inflation, changes in credit and interest rate conditions. Although the Board believes that the Meda Group may derive significant benefits from the development of the Development Project, there is no assurance that the anticipated benefits will be realised, or that sufficient revenue or profits will be generated to offset the development costs of the Development Project. Nevertheless, the Meda Group continues to keep abreast with the latest developments in the property development market and has an experienced, capable and dedicated management team to ensure the success and future profitability of the Meda Group s development plans. Although steps have been taken to mitigate these development risks, no assurance can be given that any changes in these factors will not have any material adverse effect on the Meda Group. 7. APPROVALS REQUIRED To the best knowledge of the Board, the Proposed Acquisition does not trigger any requirements that would subject the Proposed Acquisition to any approvals by the relevant authorities or the shareholders of Meda. 8. INTERESTS OF DIRECTORS', MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders of Meda and/or persons connected to them, as defined in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ), has any interest, direct or indirect, in the Proposed Acquisition. 9. DIRECTORS RECOMMENDATION The Board, after having considered all aspects of the Proposed Acquisition is of the opinion that the Proposed Acquisition is in the best interest of the Company, fair, reasonable and on normal commercial terms and is not detrimental to the interests of the shareholders of Meda. 10. HIGHEST PERCENTAGE RATIO PURSUANT TO PARAGRAPH 10.02(G) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA SECURITIES The highest percentage ratio as set out in Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is 23.20%.

10 11. ESTIMATED TIMEFRAME FOR COMPLETION Barring unforeseen circumstances and subject to the fulfilment of the conditions as set out in the SPA, the Directors expect the Proposed Acquisition to be completed by the end of the fourth quarter of DOCUMENTS FOR INSPECTION A copy of the SPA and the valuation report will be made available for inspection at the registered office of Meda at No. 11, USJ Sentral, Jalan USJ Sentral 3, Persiaran Subang, Subang Jaya, Selangor Darul Ehsan, during normal office hours on Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 9 November 2011.