The Proposed Shares Acquisition and Proposed Property Acquisition will be hereinafter referred to as the Proposals.

Transcription

1 MAGNA PRIMA BERHAD ( MPB OR THE COMPANY ) PROPOSED ACQUISITION BY WINICON (M) SDN BHD, A WHOLLY OWNED SUBSIDIARY OF MPB FROM DATO AHMAD SHAFEE BIN SABARUDDIN AND MOHD SABKI BIN RAZALI OF 250,002 ORDINARY SHARES OF RM1.00 EACH IN IBSUL DEVELOPMENT (SEL) SDN BHD ( IDSB ) REPRESENTING THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF IDSB FOR A TOTAL CASH CONSIDERATION OF RM3,500,000 ( PROPOSED SHARES ACQUISITION ) 1. INTRODUCTION On behalf of the Board of Directors ( Board ) of MPB, TA Securities Holdings Berhad ( TA Securities ) is pleased to announce that Winicon (M) Sdn Bhd ( Winicon or Purchaser ), a wholly-owned subsidiary of MPB had on 27 August 2009 entered into a sale of shares agreement ( SA ) with Dato Ahmad Shafee bin Sabaruddin and Mohd Sabki bin Razali (collectively, the Vendors ) for the proposed acquisition of 250,002 ordinary shares of RM1.00 each in IDSB ( Sale Shares ) representing the entire issued and paid-up share capital of IDSB for a total cash consideration of RM3,500,000 ( Shares Consideration ). 2. THE PROPOSED SHARES ACQUISITION 2.1 Details of the Proposed Shares Acquisition Pursuant to the SA, the Vendors have agreed to sell and the Purchaser has agreed to purchase the Sale Shares free from all liens, pledges, charges and encumbrances and with all rights attached thereto upon the terms and conditions contained in the SA. IDSB had on 5 August 2009 entered into a sale and purchase agreement with Perbadanan Kemajuan Negeri Selangor ( PKNS ) ( PKNS Agreement ) for the purchase of a piece of land located in Section 16, Bandar Shah Alam, Selangor Darul Ehsan ( Shah Alam Property ) for a total cash purchase price of RM18,500,000 ( Proposed Property Acquisition ), further details of which are set out in Clause 2.5 below. The Proposed Shares Acquisition and Proposed Property Acquisition will be hereinafter referred to as the Proposals. 2.2 Information on IDSB IDSB was incorporated in Malaysia on 17 June 2005 under the Companies Act, 1965 as a private limited company. IDSB is principally a general trading company. The shareholders of IDSB are Dato Ahmad Shafee bin Sabaruddin holding 131,251 ordinary shares of RM1.00 each (or 52.5% equity interest) and Mohd Sabki bin Razali holding 118,751 ordinary shares of RM1.00 each (or 47.5% equity interest). The Directors of IDSB are Mohd Asri bin Abdullah and Mohd Ehsan bin Mohd Sabki. As at 12 August 2009, the authorised share capital of IDSB is RM500,000 comprising 500,000 ordinary shares of RM1.00 each, of which 250,002 ordinary shares of RM1.00 each have been fully paid-up. Based on the latest audited financial statements of IDSB for the financial year ended 31 December 2008, IDSB recorded after tax losses and net assets of RM1,200 and RM240,552 respectively. 1

2 2.3. Information on the Vendors Dato Ahmad Shafee bin Sabaruddin and Mohd Sabki bin Razali, both Malaysian, aged 51 years and 54 years respectively are substantial shareholders of IDSB. 2.4 Basis of arriving at the Shares Consideration The Shares Consideration of RM3,500,000 for the Proposed Shares Acquisition was arrived at on a willing buyer-willing seller basis after taking into consideration IDSB s audited net assets as at 31 December 2008 of RM240,552 and after incorporating the revaluation surplus of the Shah Alam Property based on the valuation certificate dated 19 August 2009 by Azmi & Co Sdn Bhd ( AzmiCo ), an independent firm of registered valuers of RM26,000,000 ( Market Value ) against the PKNS Agreement for the Proposed Property Acquisition by IDSB of RM18,500,000. AzmiCo has determined the Market Value of the Shah Alam Property based on an as is basis using the comparison approach. Further, AzmiCo has reduced the Market Value by RM1,365,000 being the market value for the remaining thirteen (13) units of 2-storey low-cost terraced-type houses occupying part of the Shah Alam Property so as to arrive at a net Market Value of RM24,635,000 to represent the valuation of the said property with the benefit of vacant possession. 2.5 The Shah Alam Property The Shah Alam Property, with an area of approximately seventeen (17) acres in size, is located in Section 16, Bandar Shah Alam, Selangor Darul Ehsan and surrounded by Jalan Cengkih 16/10 on the western boundary, Jalan Pahat 16/8 on the northern boundary, Jalan Sempadan 16/1 on the eastern boundary and Persiaran Kemajuan on the southern boundary. The Shah Alam Property is located on the south side of Shah Alam City Centre and the Federal Highway. It is accessible from the Federal Highway via Persiaran Raja Muda, Persiaran Selangor and thence, onto Jalan Cengkih 16/10. The Shah Alam Property comprises two (2) parcels of proposed State alienated land with a combined land area of approximately seventeen (17) acres. Plot A land measures in area approximately 10 acres and Plot B land measures in area approximately 7 acres. The State Government of Selangor had approved the alienation of the Plot A land vide its letter dated 29 February 2008 with the Borang 5A under the National Land Code 1965 (for the purpose of calculating the alienation premium to be paid) to be issued in due course. The lease term of the Shah Alam Property shall be for 99 years commencing from the issuance of the qualified title. Plot A land is currently vacant and not in use. Plot B land is vacant save and except for thirteen (13) units of 2-storey low-cost terracedtype houses currently occupying the said land. Under the PKNS Agreement, IDSB shall at its own costs and expenses be solely responsible to relocate and/or compensate these remaining thirteen (13) residents currently residing on the land so as to obtain the original titles of the said thirteen (13) parcels of sub-divisional lots for the purpose of surrender and amalgamation at the relevant land office. The market value of the said thirteen (13) units of 2-storey low-cost terraced-type houses, as appraised by AzmiCo, is estimated at RM105,000 per unit giving an aggregate value of RM1,365,000 as mentioned in Clause

3 2.6 Salient terms of the SA The salient terms of the SA include inter-alia, the following: Mode of Payment (i) (ii) (iii) (iv) The Purchaser has prior to the execution of the SA, paid the sum of Ringgit Malaysia Five Hundred Thousand (RM500,000) ( Deposit ) to the Vendors solicitors as stakeholders (the receipt of which the Vendors hereby expressly acknowledge) as deposit and part payment towards the account of the total purchase price of Ringgit Malaysia Three Million and Five Hundred Thousand (RM3,500,000) and a further sum of Ringgit Malaysia One Million (RM1,000,000) only payable to PKNS at the express request of the Vendors ( PKNS Sum ) towards part payment of the PKNS Agreement. A further sum of Ringgit Malaysia Five Hundred Thousand (RM500,000) ( Second Sum ) shall be paid by the Purchaser to the Vendors solicitors as stakeholders upon stamping of the SA. Notwithstanding Clause (i) and (ii) above, in the event the Sale Shares cannot be transferred to the Purchaser as the legal and registered owner of all the Sale Shares for any reasons whatsoever, the Vendors shall forthwith refund all monies paid and released to the Purchaser. The balance purchase price of Ringgit Malaysia Two Million Five Hundred Thousand (RM2,500,000) shall be paid by the Purchaser to the Vendors solicitors as stakeholders on a deferred basis in accordance to the payment schedule in the third schedule of the SA with the last installment payment on or before 8 October Due Diligence (i) (ii) (iii) The Purchaser shall at any time after the execution of the SA, be entitled to conduct a financial due diligence exercise on IDSB s financial position and affairs including but not limited to the audited accounts and management accounts ( Financial Due Diligence ). The Purchaser shall at any time after the execution of the SA, be entitled to conduct a legal due diligence exercise on IDSB s legal affairs including but not limited to (a) all contracts and agreements entered into by IDSB, (b) all options, guarantees, indemnities and undertakings granted or issued by IDSB; and (c) all claims and legal proceedings whether pending or contingent in which IDSB is likely to be involved ( Legal Due Diligence ). In the event that any or all of the Financial Due Diligence report and Legal Due Diligence report is/are in the Purchaser s sole and absolute opinion, unacceptable, the Purchaser shall at its sole and absolute discretion be entitled to elect either: (a) to proceed with the sale and purchase transaction contemplated at the price and upon the terms and conditions to be renegotiated and agreed upon by the parties hereto mutually; or 3

4 (b) to rescind the SA and the Vendors shall forthwith and in any event within seven (7) days from the date of the said rescission, refund all monies paid and released to the Purchaser free of interest and whereupon the SA shall be of no further effect and shall become null and void, thereafter neither of the parties hereto shall have any further claims against each other Default of the Vendors In the event of the Vendors defaulting or failing to observe or perform or otherwise being in breach of any of the provisions of the SA and such default, non-observance or non-performance or otherwise, if capable of remedy is not remedied within fourteen (14) business days after the Purchaser shall have given written notice to the Vendors to remedy such breach, the Purchaser shall in its absolute discretion be entitled to elect either: (a) (b) to pursue the remedy of specific performance of the SA against the Vendors and to all reliefs following therefrom; or to terminate the SA and claim agreed liquidated damages of a sum equivalent to the Deposit and the Second Sum (hereinafter defined as Agreed Liquidated Damages ) whereupon the Vendors shall forthwith and in any event within seven (7) days from the date of the said termination, refund all monies paid and released together with the monies released to PKNS at the express request of the Vendors and all other monies paid towards the account of the purchase price (if any) free of interest and pay an additional sum equivalent to the Agreed Liquidated Damages to the Purchaser and thereafter, the SA shall become null and void and cease to have any effect and neither party shall have any further claim or claims against each other save and except in respect of antecedent breach Default of the Purchaser Upon the execution and stamping of the PKNS Agreement and the registration of the shares in the name of the Purchaser and in the event of the Purchaser failing to pay the balance purchase price or any outstanding sums thereto to the Vendors, according to the terms of the SA for reasons attributable to the Purchaser in particular to Clause above, the said breach by the Purchaser shall give the Vendors the right to caveat the Shah Alam Property provided that the Purchaser shall have been served with a notice to rectify the said breach within fourteen (14) days of receipt of the notice by the Purchaser and/or the Purchaser s solicitors of such notification by the Vendors and/or the Vendors solicitors, failing which the said outstanding sum shall be deemed as a debt due and owing to the Vendors from the Purchaser Termination of the PKNS Agreement (i) In the event that the PKNS Agreement is terminated by PKNS for any reason not attributable to the Purchaser s and/or the Vendor s control and/or not contributed by the Purchaser and/or the Vendors in any manner whatsoever, the Purchaser s obligation to pay the Vendors the balance outstanding purchase price shall cease and all monies paid and released to the Vendors shall immediately be refunded to the Purchaser forthwith save and except for the Deposit sum being forfeited sum due to the Vendors provided always that the Purchaser has been registered as 4

5 the shareholder of IDSB, failing which the Deposit sum shall be forthwith refunded within seven (7) days of notification and thereafter neither party shall have any claims whatsoever against the other. (ii) Notwithstanding Clause (i) above, in the event the PKNS Agreement is terminated by PKNS, attributable to the default of the Purchaser, the Purchaser s obligation to pay the Vendors any further sums or any balance outstanding purchase price shall cease and all monies paid and released to the Vendors shall immediately be refunded to the Purchaser forthwith within seven (7) days of notification save and except for the Deposit sum and Second Sum, being the forfeited sum due to the Vendors and thereafter neither party shall have any claims whatsoever against the other. 2.7 Sources of funding The Proposals shall be financed by internally generated funds of and/or bank borrowings by MPB. The exact manner in which the Proposals will be satisfied has not been finalised at this juncture. However, it is anticipated that MPB will be able to finance approximately 70% of the Proposed Property Acquisition by way of bank borrowings. The balance of 30% of the Proposed Property Acquisition and the Proposed Shares Acquisition is expected to be funded from internally generated funds. 2.8 Assumption of liabilities There are no liabilities, including contingent liabilities and other guarantees to be assumed by MPB arising from the Proposed Shares Acquisition. Save for the relocation and acquisition cost for the thirteen (13) residents on the Shah Alam Property and incidental expenses relating to the Proposed Property Acquisition as set out in Clause 2.5 above, MPB will not assume any additional liabilities (including contingent liabilities and guarantees (if any) under the Proposed Property Acquisition. 2.9 Highest Percentage Ratio The highest percentage ratio applicable for the Proposals pursuant to Paragraph 10.02(g) of the Bursa Malaysia Securities Berhad s Main Market Listing Requirements is 20.5%. 3. RATIONALE FOR THE PROPOSALS During 2009, MPB has announced several land or land related acquisitions. The Proposals are in line with the corporate strategy of MPB and its subsidiaries ( MPB Group ) to develop strategically-located land in high-density areas, with easy accessibility and significant gross development value, for the development of lifestyle-themed projects within a short turnaround time. 4. RISK FACTORS MPB Group s core business is in the property sector. As such, the Proposals will not materially change the risks of the Company s business as the MPB Group would still be exposed to the same business, operational, financial and investment risk inherent in the property sector. These risks are inherently due to timely commencement or completion of projects, obtaining required 5

6 approvals, 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 MPB Group s projects. The MPB Group seeks to limit these risks through, inter-alia, careful planning and identification of the type of developments, innovative pricing strategies to pass through cost escalations to customers, prudent financial policy, a close supervision on projects and effective management. Another risk associated with the Proposals would be the non-fulfillment of the terms and conditions in the SA and PKNS Agreement. However, the Company will take all reasonable steps to ensure completion of the Proposals. 5. OUTLOOK & PROSPECTS The Malaysian property market grew in the first three (3) quarters, in line with the sustained gross domestic product growths but declined in the last quarter of Nevertheless, on the whole, the country s property market remained on a favourable track supported by the confidence in the stability of the Malaysian economy. The property market recorded lower number in sales of newly launched housing units, and increased number and value of overhangs. Property supply responded swiftly, witnessed in dwindling construction activities; starts, completions and new building plan approvals. The Malaysian economy is expected to progressively feel the shock from the slowing global economy through trade and investment linkages. Even though the Malaysian economy is backed (by) strong fundamentals, most economists believe that the economy is not going to be insulated from the global downturn. The government continues to support the economy. The RM7 billionstimulus package, which was unveiled in November 2008, is to avoid a possible recession in The basic thrust is to stimulate domestic demand and retain the maximum workforce in gainful employment. The residential sector is expected to gain from several measures under the Budget The low-cost house buyers are given full stamp duty exemption whilst medium range property purchasers are to benefit from the 50.0% stamp duty exemption for houses priced up to RM250,000. To further lessen the burden of home ownership, the Government further proposed that the 50.0% exemption be extended to loan agreements. For the civil servants, tenure for housing loan facility has been extended to 30 years from 25 years. For those without fixed income, an additional RM100 million has been injected into the Housing Credit Guarantee Scheme (SJKP) to assist house purchase. The Malaysia My Second Home ( MM2H ) Programme has positive tangible impacts across most property sub-sectors and encourages the inflow of FDI. In January 2009, the programme will be repackaged to allow participants to work in critical sectors i.e. health, biotechnology, science, engineering and oil and gas industry for 20 hours per week. Apart from that, they are allowed to do business and invest. To make MM2H more appealing, foreign citizens may apply to participate in (the) MM2H programme directly. On the development side, the government plans to release prime government lands in strategic areas in Klang Valley for joint venture developments with the private sector and Government Linked Companies. To date, property market players are still waiting for further information to surface from the authorities. There is no doubt that these lands have the potential to be developed to international standards and design that could entice foreign funds to invest. 6

7 On the whole, the property market looks set on the path of moderation in 2009 with prices and rentals correcting, and construction activities easing slightly. However, it is unlikely that prices and rentals will plunge in the coming year. (Source: Press release National Property Information Centre, Valuation & Property Services Department, Ministry of Finance Malaysia, dated 21 April 2009) Prospect of the Shah Alam Property - The Board of MPB is of the view that the prospects of IDSB appears to be favourable as the Shah Alam Property is strategically located in the Shah Alam area. Along with all the surrounding housing estates and well populated catchment area in the Klang Valley, the Shah Alam neighbourhood will continue to be an affluent and prestigious suburb area. 6. EFFECTS OF THE PROPOSALS 6.1 Share Capital and Substantial Shareholders' Shareholdings The Proposals will not have any effect on the issued and paid-up share capital and substantial shareholders shareholdings of the Company as there is no issuance of new securities by MPB. 6.2 Net assets ( NA ) and Gearing Based on the audited consolidated financial statements of MPB as at 31 December 2008, the effects on the NA and gearing of MPB are as follows: As at 31 December After the Proposals 2008 RM 000 RM 000 Share Capital 53,459 53,459 Share Premium 10,521 10,521 Warrants Reserve 6,469 6,469 Capital Reserve Retained Profit 43,800 43,800 Shareholders Funds / NA 114, ,279 Borrowings (a) 73,990 86,940 (b) Gearing Ratio (times) Notes: (a) (b) Include both long term and short term borrowings Assuming the Proposed Property Acquisition is 70% financed by bank borrowings and the balance of the Proposed Property Acquisition and the Proposed Shares Acquisition are funded by internally generated funds. The Proposals will not have any material effect on the consolidated NA of the Group for the financial year ending 31 December However, the Proposals are expected to enhance the consolidated NA of the MPB Group and NA per share of MPB in future. The gearing of MPB is expected to increase from 0.65 times to 0.76 times after the Proposals as set out above. 7

8 6.3 Earnings The Proposals are not expected to have any immediate effects on the earnings of the MPB Group for the financial year ending 31 December However, the Proposals are expected to contribute positively to the future earnings and earnings per share of the MPB Group. 7. APPROVALS REQUIRED FOR THE PROPOSALS To the best knowledge of the Board, the Proposals do not trigger any requirements that would subject the Proposals to any approvals by the relevant authorities or the shareholders of MPB. 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors or major shareholders of MPB or persons connected with them have any interest, direct or indirect, in the Proposals. 9. DIRECTORS STATEMENT After taking into consideration all aspects of the Proposals, the Board of MPB is of the opinion that the Proposals are fair and reasonable and in the best interest of the MPB Group. 10. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposals are expected to be completed by the fourth (4 th ) quarter of DEPARTURE FROM THE SECURITIES COMMISSION S ( SC ) POLICIES AND GUIDELINES To the best knowledge of the Board of MPB, the Proposals do not depart from the SC s Guidelines. 12. ADVISER TA Securities has been appointed by MPB to act as the Adviser for the Proposals. 13. DOCUMENTS AVAILABLE FOR INSPECTION The SA dated 27 August 2009 and the valuation certificate from AzmiCo dated 19 August 2009 is available for inspection by the shareholders of MPB during normal office hours on Mondays to Fridays (except for public holidays) at the registered address of MPB at Lot No. C-G11 & C-G12, Block C, Jalan Persiaran Surian, Palm Damansara, Kota Damansara, Petaling Jaya, Selangor, for a period of three (3) months from the date of this announcement. This announcement is dated 27 August