FARM S BEST BERHAD (Company No.: V) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad ( Bursa Securities ) takes no responsibility for the contents of this Circular (as defined herein), makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. FARM S BEST BERHAD (Company No.: V) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED DISPOSAL OF TEN (10) PARCELS OF FREEHOLD VACANT LAND IN MUKIM GRISEK, DAERAH LEDANG, JOHOR BY SINMAH POULTRY FARM SDN BHD, A WHOLLY- OWNED SUBSIDIARY OF THE COMPANY TO BUDI SAJA SDN BHD FOR A CASH CONSIDERATION OF RM27,000,000 AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser M&A SECURITIES SDN BHD (15017-H) (A Wholly-Owned Subsidiary of Insas Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Extraordinary General Meeting ( EGM ) of Farm s Best Berhad ( FBB or Company ) will be held at Bilik Bunga Teratai, 7th Floor, Ramada Plaza Melaka, Jalan Bendahara, Melaka on Tuesday, 29 September 2015 at a.m. or any adjournment thereof. The Notice of the EGM of FBB together with the Form of Proxy are enclosed in this Circular. The Form of Proxy must be completed and deposited at the office of the Company s Share Registrar at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor not less than forty-eight (48) hours before the time set for the EGM or any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. Last day and time for lodging the Form of Proxy Date and time of the EGM : Sunday, 27 September 2015 at a.m. : Tuesday, 29 September 2015 at a.m. This Circular is dated 10 September 2015

2 DEFINITIONS In this Circular, unless otherwise indicated, the following words and abbreviations shall have the following meanings:- Act : The Companies Act, 1965 as amended from time to time and any re-enactment thereof Board : Board of Directors of FBB BSSB or Purchaser : Budi Saja Sdn Bhd Bursa Securities : Bursa Malaysia Securities Berhad Circular : This circular to shareholders of FBB dated 10 September 2015 Disposal Consideration : The total cash consideration of RM27,000,000 for the Proposed Disposal EGM : Extraordinary general meeting EPS : Earnings per share FBB or the Company : Farm s Best Berhad FBB Group or Group : FBB and its subsidiaries IPC Island or Valuer : IPC Island Land Consultants Sdn Bhd, the independent registered valuer appointed by the Company Land : Ten (10) parcels of freehold vacant land in Batu 17, Jalan Sengkang, Bukit Gambir Muar, Mukim Grisek, Daerah Ledang, Johor with an aggregate area of acres (or hectares) LPD : 13 August 2015, being the latest practicable date prior to the printing and despatch of this Circular M&A Securities : M&A Securities Sdn Bhd NA : Net assets PAT/(LAT) : Profit/(loss) after taxation Proposed Disposal : The proposed disposal of the Land by Sinmah to BSSB at the Disposal Consideration RM and sen : Ringgit Malaysia and sen respectively Sinmah or Vendor : Sinmah Poultry Farm Sdn Bhd, a wholly-owned subsidiary of FBB SPA : Conditional sale and purchase agreement dated 12 June 2015 entered into between BSSB and Sinmah for the Proposed Disposal sq ft(s) : Square feet(s) Valuation Report : Valuation report on the Land dated 8 June 2015 prepared by IPC Island Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Reference to persons shall include corporations. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise stated. i

3 CONTENTS LETTER TO SHAREHOLDERS OF FBB: NO. DETAILS PAGE 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED DISPOSAL 2 3. RATIONALE FOR THE PROPOSED DISPOSAL 8 4. UTILISATION OF PROCEEDS EFFECTS OF THE PROPOSED DISPOSAL RISK FACTORS APPROVALS REQUIRED DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS DIRECTORS STATEMENT AND RECOMMENDATION CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION ESTIMATED TIMEFRAME TO COMPLETION EGM FURTHER INFORMATION 17 APPENDICES APPENDIX I - VALUATION CERTIFICATE BY IPC ISLAND 18 APPENDIX II - FURTHER INFORMATION 25 NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED ii

4 FARM S BEST BERHAD (Company No V) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Level 8, Symphony House Block D13 Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor 10 September 2015 Board of Directors: Datuk Hj. Zainal Bin Hj. Shamsudin (Chairman, Independent Non-Executive Director) Dato Fong Kok Yong (Managing Director) Datuk Fong Kiah Yeow (Executive Director) Fong Ngan Teng (Executive Director) Fong Choon Kai (Executive Director) Datuk Ng Peng Ng Peng Hay (Executive Director) Mohd Khasan Bin Ahmad (Senior Independent Non-Executive Director) To: The Shareholders of Farm s Best Berhad Dear Sir/Madam, PROPOSED DISPOSAL 1. INTRODUCTION On 12 June 2015, M&A Securities had, on behalf of the Company announced that Sinmah have entered into the SPA with BSSB for the Proposed Disposal. The purpose of this Circular is to provide you with the details of the Proposed Disposal and to seek your approval for the resolution pertaining to the Proposed Disposal to be tabled at the forthcoming EGM. The Notice of EGM together with Form of Proxy are enclosed in this Circular. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED DISPOSAL TO BE TABLED AT THE FORTHCOMING EGM. 1

5 2. DETAILS OF THE PROPOSED DISPOSAL 2.1 Proposed Disposal Under the Proposed Disposal, Sinmah shall dispose the Land to BSSB for a total cash consideration of RM27,000,000 subject to the terms and conditions contained in the SPA Description of the Land The Land is located at Batu 17, Jalan Sengkang, Bukit Gambir Muar, Johor. It is about 28 km to the northeast of Muar Town and about 3 km to the northeast of Pekan Bukit Gambir, Johor. The locality within where the Land is situated is mixed development in nature of which some are agriculturally orientated namely oil palm and rubber and also kampung type of development as well as small housing schemes. The major business area in the vicinity is Pekan Bukit Gambir which is about 3 km from the Land. The newly operational Bukit Gambir interchange (Plus Highway) is about 7 km to the southwest of the Land or about 4 km from Pekan Bukit Gambir. Pekan Bukit Gambir consists of old shop houses and newly built two (2) and three (3) storey shop houses. There are few newly built housing schemes in the area. FBB had previously operated a layer farm on the said Land, which was producing about 360,000 of various grades eggs per day. However, the layer farm has ceased operation on 30 April The Land currently has 32 units of layer sheds, one (1) unit of workers quarters, a pump house, a double-storey office, and egg packaging factory and a power sub-station erected on it. Under the terms of the Proposed Disposal, only the Land shall be disposed to BSSB. Therefore, the existing buildings and fixtures shall be dismantled and sold as scraps by FBB. The realisable value of the said buildings and fixtures has not been determined at this point. On 11 May 2015, Majlis Daerah Tangkak had issued a planning permission for the Land. As such, the market value of the Land (as set out in Section 2.1.2) has taken into consideration the planning permission obtained. Details of the Land are as follows: Title details ^ : Ten (10) parcels of freehold vacant land: (1) HS(D) 7988 (formerly HS(D) 5124), PTD 2163, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (2) HS(D) 7989 (formerly HS(D) 5125), PTD 2164, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (3) HS(D) 7990 (formerly HS(D) 5126), PTD 2165, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (4) HS(D) 7991 (formerly HS(D) 5127), PTD 2166, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (5) HS(D) 7992 (formerly HS(D) 5128), PTD 2167, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; 2

6 (6) HS(D) 7993 (formerly HS(D) 5129), PTD 2168, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (7) HS(D) 7994 (formerly HS(D) 5130), PTD 2169, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (8) HS(D) 7995 (formerly HS(D) 5131), PTD 2170, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; (9) HS(D) 7996 (formerly HS(D) 5132), PTD 2171, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares; and (10) Geran (formerly HS(D) 5261), Lot 13509, Mukim Grisek, Daerah Ledang, Negeri Johor in an area measuring approximately hectares Postal address/location : Sinmah Poultry Farm Sdn Bhd, No. 68 Batu 17, Jalan Sengkang, Bukit Gambir, Muar, Johor Description : Ten (10) parcels of agriculture land with the benefit of planning permission for housing purpose obtained on 11 May 2015 from Majils Daerah Tangkak Land area : hectares (55.24 acres) Built up area : Not applicable. The buildings and fixtures erected on the Land comprises 32 units of layer sheds, one (1) unit of workers quarters, a pump house, a double-storey office, and egg packaging factory and a power sub-station Tenure : Freehold Category of land use : The existing category of land use is for agriculture Registered owner : Sinmah Existing use : Not applicable. The Land was previously used as a layer farm and the layer farm has ceased operation on 30 April 2015 Age of building : Between 4 20 years. The age of the buildings and fixtures erected on the Land is 32 units of layer sheds (between 4 to 20 years), one (1) unit of workers quarters (4 years), a pump house (18 years), a double-storey office (19 years), and egg packaging factory (6 years) and a power sub-station (18 years) Net book value ( NBV ) : RM4,752,233 (based on the audited consolidated financial statements of FBB as at 31 December 2014) Total market value : RM27,000,000 (as appraised by IPC Island vide its Valuation Report) Encumbrances : Charged to Bank Pertanian Malaysia Berhad for banking facilities extended to FBB Group 3

7 Amount of lettable space Amount of lettable space available for letting and the occupancy Percentage of occupancy : Not applicable* : Not applicable* : Not applicable* Notes: ^ The above particular of the titles has been verified by Messrs Farid & Radhi, the solicitors appointed by FBB. * The subject property does not have any lettable space Basis of the Disposal Consideration The Disposal Consideration is arrived at after taking into consideration the market value of the Land of RM27,000,000 as appraised by IPC Island, the independent registered valuer appointed by FBB via its Valuation Report. The Disposal Consideration represents the market value of the Land. Based on the Valuation Report, the Land is valued by using the comparison method and residual method, of which the comparison method is considered as the primary method. The comparison method entails analysing recent transaction and asking price of similar property in and around the locality and making adjustments for factors which will affect the value of the Land. The residual method entails valuing the undeveloped land as if it has been fully developed based on the approved development plan. The comparison method gives a market value of RM27.0 million and the residual method gives a market value of RM26.5 million. IPC Island is of the opinion that the market value derived from the comparison method is a fair representation of the market value of the Land in view of the relevant sales comparable in the locality and the comparison method reflects better market condition for development land, whereas the residual method is based on variables and hypothetical assumptions adopted in arriving at the market value of the Land as the building plans are not approved. As such, IPC Island has adopted the comparison method of valuation to derive its opinion of the market value as the value derived from the primary method is more accurate Salient terms and conditions of the SPA (i) The salient terms of the SPA are as follows: The Vendor shall sell and the Purchaser shall purchase the said Land on as-is-where-is-basis, free from all charges, encumbrances, liens, caveats and other restraints whatsoever and with vacant possession but subject to the existing conditions and restrictions of title and category of land use expressed or implied in the document of title upon, relating to or affecting the said Land or to which the said Land is subject to at RM27,000,000 ( Purchase Price ) and upon the terms and subject to the conditions of the SPA. (a) Conditions Precedent The SPA and any obligation on the part of the both the parties herein shall be subjected to the following conditions precedent: 4

8 (i) (ii) That within a stipulated time that shall be agreed between parties, the Vendor had successfully obtained the relevant approval from its shareholders and/or its Board of Directors to the effect of consenting to and/or approving of the purchase of the Land by the Purchaser mentioned herein; and That within a stipulated time that shall be agreed between parties, the Vendor had applied and successfully obtained on behalf of the Purchaser, the relevant consent from the relevant authority for transfer of title (if any) of the Land to the Purchaser. (b) Payment of Consideration The Purchase Price shall be paid by the Purchaser at the time and in the following manner: (i) (ii) Upon the execution of the SPA, the Purchaser shall pay to the Vendor s solicitors, as stakeholders, the sum of RM2.70 million ( Deposit ) and part payment towards the Purchase Price. The Purchaser s solicitors are authorised and directed to release the sum of RM810, being the taxable sum payable to the Director General of Inland Revenue ( the Retained Sum ) to the Vendor s solicitors as stakeholders who are authorised to release the same to the Vendor. While the Purchaser s solicitors are authorised to utilise the Retained Sum. The balance of the Purchase Price of RM24.30 million ( Balance Purchase Price ) shall be paid to the Vendor s solicitors as stakeholders within three (3) months from the date the conditions precedent of the SPA have been satisfied ( Completion Date ), failing which, the Vendor shall automatically grant to the Purchaser an extension of time of one (1) month from the expiration of the completion date ( Extended Completion Date ), to enable the Purchaser to pay the Balance Purchase Price subject to Purchaser paying the Vendor, an interest on the Balance Purchase Price or any part thereof still outstanding at the rate of eight percent (8%) per annum ( Penalty Interest ) calculated on a daily basis from the first day of the Extended Completion Date until full payment of the same together with the said Penalty Interest to the Vendor s solicitors as stakeholders. All monies paid to the Vendor s solicitors shall be deemed to have been paid and received by the Vendor. (ii) Default by Purchaser If the Purchaser fail(s) to pay the Balance Purchase Price within the time stipulated in the SPA or if the Purchaser is in breach of the warranties and/or the terms of the SPA not due to or occasioned by any act, default, willful refusal, neglect, omission or blameworthy conduct on the part of the Vendor, the Vendor shall be entitled by giving fourteen (14) days notice in writing to the Purchaser to terminate the sale and purchase and unless in the meanwhile the Balance Purchase Price or any part thereof is paid, the SPA shall at the expiration of the said notice be deemed to be terminated. Upon such determination, the following provisions shall apply: (a) (b) the Vendor shall be entitled to forfeit absolutely the Deposit by way of liquidated damages and all other excess sum or monies paid by and on behalf of the Purchaser, if any, shall be refunded to the Purchaser by the Vendor within fourteen (14) days from the date the Vendor exercise the right of forfeiture free of interest failing which the Vendor shall pay to the purchaser penalty interest on the excess sum until the same is fully paid by the Vendor to the Purchaser; in exchange of such excess sum and interest, if any, the Purchaser shall cause the Purchaser s solicitors or the Purchaser s financier or the Purchaser s financier s solicitors as the case may be to forthwith return to the Vendor the original Title Deed, the 5

9 chargee s documents and the Vendor s documents (where the same are in their possession and if the transfer is not required by the Stamp Office for cancellation for the purpose of refund of the stamp duty paid thereon) intact and free from all encumbrances, and the Purchaser shall at his own cost and expense have first withdrawn or cause to be withdrawn any private caveat entered upon the said Land by the Purchaser s financier and by the Purchaser (if applicable) and the Purchaser shall also redeliver vacant possession of the said Land to the Vendor (if such possession has been delivered earlier) free from any rental or compensation payable by the Purchaser; (c) thereafter the SPA shall be terminated and rendered null and void and be of no further force or effect and neither party hereto shall have any further claims action or proceedings against the other in respect of or arising out of the SPA and the Vendor shall be at liberty to sell, dispose of the said Land to a third party and to deal with the said Land in whatsoever manner as the Vendor deems fit. (iii) Default by Vendor In the event of default by the Vendor to complete the sale and purchase herein or in the event of any breach of the warranties and/or the terms of the SPA by the Vendor not due to or occasioned by any act, default, willful refusal, neglect, omission or blameworthy conduct on the part of the Purchaser and when the Purchaser has performed its obligations herein, the Purchaser shall be entitled at his option either: (a) (b) to claim for specific performance of the SPA against the Vendor together with all other relief flowing therefrom and all costs and expenses incurred thereby shall be borne and paid solely by the Vendor; OR by giving fourteen (14) days notice in writing to the Vendor, to terminate the sale and purchase and unless in the meanwhile the breach or default shall have been remedied, the SPA shall at the expiration of the said notice be deemed terminated, whereupon the following shall apply accordingly: (i) (ii) (iii) (iv) the Vendor shall, within fourteen (14) days from the date of receipt of the written notification of such termination from the Purchaser, refund or cause to be refunded all whatsoever moneys paid to the Vendor under the SPA including the Deposit free from interest; the Vendor shall pay to the Purchaser the sum equivalent to the amount of RM2.70 million as agreed liquidated damages ( the Liquidated Damages ); in the event of non-payment by the Vendor of the refunded sum and the Liquidated Damages within the stipulated time, the Vendor shall pay to the Purchaser interest on the aforesaid sums at Penalty Interest from the same becoming due until the date of actual receipt thereof by the Purchaser; in exchange of such refunded sum and interest, if any, and the Liquidated Damages the Purchaser shall cause the Purchaser s solicitors or the Purchaser s financier or the Purchaser s financier s solicitors as the case may be to forthwith return to the Vendor the original Title Deed, the chargee s documents and the Vendor s documents (where the same are in their possession and if the transfer is not required by the Stamp Office for cancellation for the purpose of refund of the stamp duty paid thereon) intact and free from all encumbrances, and the Purchaser shall at his own cost and expense have first withdrawn or cause to be withdrawn any private caveat entered upon the said Land by the Purchaser s financier and by the Purchaser (if applicable) and the Purchaser shall also redeliver vacant possession of the said Land to the Vendor (if such possession has been delivered earlier) free from any rental or compensation payable by the Purchaser; and 6

10 (v) thereafter the SPA shall be terminated and rendered null and void and be of no further force or effect and neither party hereto shall have any further claims action or proceedings against the other in respect of or arising out of the SPA and the Vendor shall be at liberty to sell, dispose of the said Land to a third party and to deal with the said Land in whatsoever manner as the Vendor deems fit. (iv) Redemption of Land The Vendor shall within seven (7) days from the date of receipt by the Vendor s solicitors of the request made by the Purchaser s solicitors and/or the Purchaser s financier and/or the Purchaser s financier s solicitors, as the case may be, cause Bank Pertanian Malaysia Berhad ( Chargee ) to issue and deliver the following documents to the Purchaser s financier s solicitors failing which the Vendor shall allow the Purchaser an extension of time which corresponds with the period of such delay without interest to pay the outstanding Balance Purchase Price: (a) (b) a valid redemption statement (hereinafter referred to as the Redemption Statement ) of the sum due and payable to the Chargee to redeem the Land from the Chargee (hereinafter referred to as the Redemption Sum ); a written undertaking to the Purchaser s financier as the case maybe to: (i) deliver to the Purchaser s solicitors or the Purchaser s financier s solicitors the Chargee s documents; and (ii) refund any monies received by the Chargee towards payment of the Redemption Sum to the Purchaser or the Purchaser financier in the event of non-registration of discharge of charge for any reasons whatsoever. (v) Non Registration of Documents In the event that all or any of the relevant documents necessary for effecting registration of the transfer of the Land in favour of the Purchaser free from all encumbrances cannot be registered due to any reason whatsoever not occasioned by any act, omission or default on the part of either party hereto and the parties have done all acts and things executed and signed further documents if necessary to procure the registration of the transfer, the Vendor shall forthwith upon receipt of demand from the Purchaser refund to the Purchaser and/or the Purchaser s financier as the case may be all whatsoever moneys paid by the Purchaser and/or the Purchaser s financier within FOURTEEN (14) days failing which the Vendor shall pay interest at the rate of Eight per centum (8%) per annum on the outstanding sum(s) until the same is fully paid by the Vendor Provided That the Purchaser shall at his own cost and expense have first withdrawn or cause to be withdrawn any private caveat entered upon the said Land by the Purchaser s financier and by the Purchaser (if applicable) and in exchange of such sums and interest (if any) as aforesaid, the Purchaser shall cause the Purchaser s solicitors or the Purchaser s financier or the Purchaser s financier s solicitors to return to the Vendor the original title deed, the Chargee s documents and the Vendor s documents intact and free from encumbrances AND the Purchaser shall redeliver vacant possession of the Land to the Vendor free from any rental or compensation payable by the Purchaser thereof AND thereafter the SPA shall terminate and cease to be of any further effect but without prejudice to any legal right either party may be entitled to against the other in respect of any antecedent breach of the SPA and the Vendor shall at liberty to sell, dispose of the said Land to a third party and to deal with the said Land in whatsoever manner as the Vendor deems fit. 7

11 (vi) Others The Purchaser has irrevocably and unconditionally consented and agreed to allow the Vendor, to dismantle and/or remove, any/all structure whether fixture or chattel or otherwise, which are currently erected on the said Property, save and except for any concrete structure; and The Purchaser has irrevocably and unconditionally consented and agreed to allow the Vendor, at their own discretion, choice and cost, to exercise its rights to dismantle and/or remove, any/all structure whether fixture or chattel or otherwise, which are currently erected on the said Property, at any time before the completion of the SPA Liabilities to be assumed There are no liabilities (including contingent liabilities and corporate guarantees) to be assumed by BSSB pursuant to the Proposed Disposal Original cost of investment and date of investment Sinmah was formerly known as TTK Poultry Farm Sdn Bhd ( TTK Poultry ). On 15 October 1997, Sinmah Egg Products Sdn Bhd ( Sinmah Egg ), a wholly-owned subsidiary of FBB had acquired 51% equity interest in TTK Poultry for a total purchase consideration of RM5,000,000 ( TTK Acquisition ). The Land was acquired by TTK Poultry for a total cost of RM2,956,161 prior to the TTK Acquisition. However, the date of acquisition of the Land is not available. Save for the layer farm, TTK Poultry has no other asset. On 19 November 2005, Sinmah Egg had acquired the remaining 49% equity interest in TTK Poultry for a total purchase consideration of RM2,800,000. Thereafter, TTK Poultry became a wholly-owned subsidiary of the FBB Group. Thereafter, TTK Poultry s name was changed to Sinmah. As such, the effective cost of investment of the Land is RM7,800,000. The total cost for the construction of the buildings and fixtures erected on the Land amounted to RM38.99 million. 2.2 Information on BSSB BSSB ( T) is a private limited company incorporated in Malaysia on 23 April 2013 with its place of business at 40-2 (Bilik 1), Jalan PPM 4, Plaza Pandan Malim, Melaka. BSSB is currently dormant, its intended principal activity is investment holding. As at the LPD, BSSB has an authorised share capital of 100,000 ordinary shares of RM1.00 each ( BSSB Share(s) ) of which three (3) BSSB Shares have been issued and fully paid-up. The shareholders of BSSB are Datuk Beh Kim Ling and Datuk Lee Soo Gee, holding two (2) BSSB Shares and one (1) BSSB Share respectively. The Directors of BSSB are Datuk Beh Kim Ling and Datuk Lee Soo Gee. 3. RATIONALE FOR THE PROPOSED DISPOSAL The FBB Group s revenue from its poultry operations are derived from three (3) categories as follows: (i) (ii) sale of live broilers; sale of processed chicken and chicken products; and 8

12 (iii) sale of eggs. The eggs are produced in the layer farms owned by Sinmah. The layer farms have been in operation since However, the FBB Group had on 30 April 2015 ceased the operations of its layer farms entirely after taking into consideration the following factors: (i) the layer farms has been recording losses after tax ( LAT ) for the past three (3) financial years; and (ii) (iii) the revenue contribution from the layer farms is less than 10% of the FBB Group s total revenue. the sustainability of the layer farms operations business was in doubt as the business was still loss making during the times when average selling price of eggs is high, ie RM0.29 per egg in FYE 31 December Currently, the properties owned by FBB Group (save for the layer farms) are as follows: Description/Usage Number of properties Usage Broiler farm 29 Broiler farming Breeder farm 6 Breeder farming Processing plant 2 Processing of chicken and chicken products Feed mill factory (industrial property) 1 Production of feed mill Shophouse/factory 3 Sales depot Shophouse 1 Storage warehouse Apartments 7 Workers hostel and staff apartment Building offices 3 Administration department for FBB Group Vacant land 1 The land is intended to be used for future property development It is the decision of the Board to dispose off the Land instead of converting the Land into broiler farms considering the following factors: (i) (ii) (iii) the Board foresees difficulties in obtaining approvals from relevant authorities for the usage of the Land for farming purposes as the Land is located close proximity to newly developed residential area in Mukim Grisek; the high cost of construction of farm buildings and the equipment required for the Broiler farm due to the weakening RM; and the difficulty to obtain financing for the required capital expenditure to construct new broiler farms due to high cost of construction. Furthermore, the bank borrowings will further increase the gearing level of FBB which currently stood at 2.44 times. 9

13 The financial information of the layer farms and contribution of the layer farms to the financial statements of FBB Group for the past three (3) financial years ended ( FYE ) 31 December 2012, 2013 and 2014 are as follows: FYE 31 December 2012 FYE 31 December 2013 FYE 31 December 2014 (RM 000) (RM 000) (RM 000) Layer farm operations Revenue 30,546 39,760 30,416 (LAT) (11,274) (4,651) (911) FBB Group Revenue by activities Poultry 383, , ,105 Property development 16,720 26,459 23,321 Revenue 400, , ,426 PAT/(LAT) (8,716) 4,304 1,616 Contribution of the layer farm operation to the revenue of FBB Group (%) Contribution of the layer farm operation to the PAT/(LAT) of FBB Group (%) (129.35) -* -* Note: * The layer farm operation does not contribute to the PAT registered for FYE 31 December 2013 and The layer farm operations have been incurring losses for the past three (3) FYEs 31 December 2012 to The breakdown of the number of eggs produced, cost of production of the eggs, the selling price of the eggs for the past three (3) FYEs 31 December 2012, 2013 and 2014 are as follows: FYE 31 December 2012 FYE 31 December 2013 FYE 31 December 2014 Number of eggs produced (per year) Selling price of the eggs (RM) The revenue derived from sale of eggs Cost of productions of the eggs (RM 000) Loss from the production of eggs* (C) = (A)*(B) (A) 128,516, ,076,485 99,026,690 (B) ,687 38,094 28,718 (D) (41,820) (44,411) (31,327) (C) (D) (12,133) (6,317) (2,609) Note: * The loss from the layer farms is offset partially by the sale of birds droppings and spent layers. 10

14 The Proposed Disposal will enable the FBB Group to unlock the value of its assets, which are not currently used in the business of the FBB Group, thereby reducing its gearing and strengthening the cash flow position of the FBB Group. The FBB Group shall utilise RM14.0 million of the total gross proceeds from the Proposed Disposal for the repayment of bank borrowings which is expected to result in an annual interest savings of RM1.10 million based on the effective interest rate of 7.86% per annum. The cash and bank balances and total borrowings of the FBB Group stood at RM6.38 million and RM million as at 30 June 2015 respectively. In addition, the Company shall utilise RM12.04 million of the total gross proceeds from the Proposed Disposal for use as working capital for the purchase of raw materials in FBB s feed mill. Based on the unaudited financial statements of FBB for 6 months FPE 30 June 2015, the total borrowings of the FBB Group amounted to RM million. RM million or 69.32% of these borrowings are overdraft facilities, revolving credits/trust receipts bankers acceptance which are short term borrowings used to finance the working capital requirements of the FBB Group. As such, with the utilisation of RM12.04 million as the working capital, the FBB Group will be able to reduce its borrowings (of overdraft facilities and bankers acceptances) which is expected to result in an annual interest savings of RM0.95 million based on an effective interest rate of 7.86% per annum. The Board further notes that on 11 May 2015, Majlis Daerah Tangkak had issued a planning permission for the Land for 262 units of residential properties and 184 units of low cost residential properties and other facilities. Although the planning permission for the Land has been received, it is not the intention of the Board to develop the Land. As such, the Board did not carry out any feasibility studies for the development of Land. Notwithstanding the above, IPC Island has ascribed an estimated gross development value of RM million, gross development cost of RM million and gross profit of RM35.69 million for the development of the Land. While the FBB Group currently has a property development division, the Board has resolved to dispose the Land instead of developing it taking into consideration the following: (i) (ii) (iii) the cost of development if to be funded via bank borrowing, will increase the gearing level of the Company; the uncertainty on the sales of the properties and the difficulty in obtaining endfinancing for house buyers considering the current Malaysia economy; and it is the intention of the Board to prioritise the reduction in gearing level and raise funds for working capital requirement. 4. UTILISATION OF PROCEEDS The total gross proceeds of RM27,000,000 received from the Proposed Disposal are intended to be utilised in the following manner: Estimated timeframe for full utilisation (from completion of the Proposed Disposal) RM Real Property Gains Tax ( RPGT ) Within two (2) months 810,000 retention sum (i) Repayment of bank borrowings (ii) Within twelve (12) months 14,000,000 Working Capital (iii) Within twelve (12) months 12,040,000 11

15 Estimated timeframe for full utilisation (from completion of the Proposed Disposal) RM Estimated expenses in relation to the Proposed Disposal Immediate 150,000 Total gross proceeds 27,000,000 Notes: (i) (ii) (iii) The RPGT payable is estimated at RM1.35 million, calculated based on 5% of the Disposal Consideration. RM0.81 million has been allocated from the proceeds of the Proposed Disposal to for the payment of the RPGT while the remaining shall be funded from the existing cash reserve of the Company. The Company shall utilise the sum of RM14.0 million of the total gross proceeds for the repayment of bank borrowings which is expected to result in an annual interest savings of RM1.10 million based on the effective interest rate of 7.86% per annum. The total borrowings of the FBB Group stood at RM million as at 30 June The working capital will be mainly utilised for the purchase of raw materials in FBB s existing feed mill based in Malaysia. The main raw materials to be purchased include corn, soy bean meal and other raw materials to produce poultry feeds for the operation of the FBB Group. 5. EFFECTS OF THE PROPOSED DISPOSAL 5.1 Share capital and substantial shareholders shareholdings The Proposed Disposal shall be satisfied entirely in cash and therefore will not have any effects on the issued and paid-up share capital and substantial shareholders shareholdings of the Company. 5.2 NA, NA per Share and Gearing Based on the audited consolidated financial statements of FBB as at 31 December 2014, the pro forma effects of the Proposed Disposal on the NA and gearing of the Group and NA per share of the Company are as follows: Audited as at 31 December 2014 RM 000 After the Proposed Disposal RM 000 Share capital 61,083 61,083 Share premium 62,410 62,410 Other reserve 3,706 3,706 Accumulates losses (iii) (32,052) (27,687) (i) Shareholders equity 95,147 99,512 Non-controlling interests 5,505 5,505 Total Equity 100, ,017 No. of share ( 000) 61,083 61,083 NA per share (RM) Bank borrowings 245, ,661 (ii) 12

16 Audited as at 31 December 2014 RM 000 After the Proposed Disposal RM 000 Gearing (times) (iv) Notes: (i) After adjusting for: (a) (b) gain on disposal of RM4.515 million. Further details on the gain on disposal is set out in Section 5.3 below.; and expenses in relation to the Proposed Disposal amounting to RM150,000. (ii) (iii) After repayment of bank borrowings amounting to RM14.0 million. The accumulated losses position of the FFB Group was mainly due to the following: FYE/FPE Details Amount (RM million) FYE 31 January months FPE 31 December 2004 FYE 31 December 2008 FYE 31 December 2009 FYE 31 December 2012 Losses incurred due to weakening of RM currency which increased the raw material prices and interest rates Losses incurred due to the increased prices of imported raw feedstuff, such as corn and soy bean and the decreased demands of poultry products due to the outbreak of the Avian influenza A virus, or commonly known as bird flu Losses due to the increased prices of imported raw feedstuff, such as corn and soy bean and slowdown of property development division Losses incurred due to the decreased average selling prices of poultry products Losses incurred due to the decreased average selling prices of live Broilers and increased average purchase price of imported raw feedstuffs, such as corn and soy bean (iv) The Board is aware of the high gearing level FBB, hence RM14.0 million from the proceeds from Proposed Disposal will be utilised for the repayment of bank borrowings. 5.3 Earnings and earnings per share ( EPS ) The gain on Proposed Disposal calculated based on the audited consolidated financial statements of FBB as at 31 December 2014 is calculated as follows: Details RM Disposal Consideration 27,000,000 Less: (i) NBV of the Land (4,752,233) (ii) NBV of the buildings and fixtures* (16,382,485) (iii) RPGT expenses (1,350,000) Sub-total (22,484,718) Gain from disposal 4,515,282 13

17 Note: * The buildings and fixtures erected on the Land shall be fully impaired. The proforma effect of the Proposed Disposal on the EPS of FBB (assuming the Proposed Disposal is completed on 1 January 2014, being the start of the financial year of FBB) is shown below: Audited as at 31 December 2014 ( 000) After the Proposed Disposal ( 000) PAT of FBB 1,616 1,616 Gain from Proposed - 4,515* Disposal Total PAT 1,616 6,131 No. of share ( 000) 61,083 61,083 EPS (sen) Note: * The calculation of gain of Proposed Disposal is shown above. Utilisation of proceeds raised from the Proposed Disposal is expected to contribute positively to the earnings of the Group in the future. 6. RISK FACTORS Shareholders should consider the following risk factors arising from the Proposed Disposal (which may not be exhaustive): (i) Non-Completion of the Proposed Disposal The completion of the Proposed Disposal is subject to the fulfillment of the conditions precedent set out in Section 2.1.3(i)(a) of this Circular. In the event of non-fulfilment of any of the conditions precedent within the stipulated timeframe, the SPA shall lapse and be of no further effect (but without prejudice to any right which either party may be entitled to against the other party in respect of any antecedent breach of the SPA). The Company will take all reasonable steps to ensure that the said conditions precedent are met within the stipulated timeframe to facilitate the Proposed Disposal. Nonetheless, there can be no assurance that the SPA will not be terminated through the non-fulfillment of certain conditions precedent within the stipulated timeframe. (ii) Contractual Risks Sinmah may be subjected to certain contractual risks such as specific performance and payment of liquidated damages as a result of non-fulfillment of its obligations under the SPA. Nevertheless, the Company shall endeavour to ensure that Sinmah complies with its obligations under the SPA. 14

18 7. APPROVALS REQUIRED The Proposed Disposal is subject to and conditional upon the following: (i) (ii) (iii) approvals being obtained from the shareholders of the Company at an EGM to be convened; the relevant consent from the relevant authority for transfer of title (if any) of the Land to the Purchaser; and a valid redemption statement from Bank Pertanian Malaysia Berhad for the discharge of the Land. The Proposed Disposal is not conditional upon any other corporate proposals to be implemented by the Company, if any. 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors, major shareholders and persons connected with a Director or a major shareholder of FBB has any interest, direct or indirect, in the Proposed Disposal. 9. DIRECTORS STATEMENT AND RECOMMENDATION The Board is of the opinion that the Proposed Disposal is in the best of interest of the Group after careful deliberations on all aspects of the Proposed Disposal, which include inter-alia the following: (i) (ii) (iii) (iv) (v) (vi) (vii) The Disposal Consideration represents the market value of the Land; The Disposal Consideration represents a premium of RM19,200,000 or % from the cost of investment of RM7,800,000; Based on the calculation of the gain on disposal set out in Section 52.2 Note(i)(a)* and Section 5.3 of this Circular, the gain on disposal of RM4,515,282.; The Proposed Disposal will be able to unlock the value of an unutilised asset; The terms and conditions of the SPA; The rationale for the Proposed Disposal, which is in line with the Company s plan to reduce its gearing and strengthen the cash flow and financial position of the Group; and The utilisation of proceeds from the Proposed Disposal, which is expected to contribute positively to the future earnings of the Group. Accordingly, the Board recommends that you vote in favour of the resolution pertaining to the Proposed Disposal. 15

19 10. CORPORATE EXERCISES ANNOUNCED BUT PENDING COMPLETION Save for the Proposed Disposal and save as disclosed below, the Company confirms that there is no outstanding proposal that is announced which has yet to be completed as at the LPD: (i) FBB had on 27 November 2014 announced that Joint Farming Sdn Bhd ( JFSB ), a 58.91% owned indirect subsidiary of FBB had on 25 November 2014 filed a petition into High Court of Malaya ( High Court ) to reduce the issued and paid-up capital of JFSB from RM11,000, of 11,000,004 ordinary shares of RM1.00 each to RM5, comprising 11,000,004 ordinary shares of RM each in JFSB by way of cancellation of RM from the share capital of JFSB. The rationale for the capital reduction exercise is that the shareholders of JFSB had decided to cease the business of JFSB, and the capital reduction exercise would enable the surplus cash reserve of JFSB to be returned/credited to the shareholders of JFSB. On 6 July 2015, FBB had announced that the High Court has on 16 June 2015 granted an order confirming the capital reduction in JFSB ( Order ). The said Order had been lodged with the Companies Commission of Malaysia. As per the Order, JFSB has six (6) months from the date of the Order to complete the repayment in share capital to its shareholders. This said repayment is still pending. 11. ESTIMATED TIMEFRAME TO COMPLETION Barring any unforeseen circumstances and subject to the fulfillment of all conditions precedent as set out in the SPA, the Board expects the Proposed Disposal to be completed in the fourth quarter of The details of the tentative timeline are set out below: Month Events 29 September 2015 EGM for the Proposed Disposal End December 2015 Completion of the Proposed Disposal 12. EGM An EGM, the notice of which is enclosed in this Circular, will be held at Bilik Bunga Teratai, 7th Floor, Ramada Plaza Melaka, Jalan Bendahara, Melaka on Tuesday, 29 September 2015 at a.m. or any adjournment thereof, for the purpose of considering and if thought fit, passing with or without modifications the ordinary resolution to give effect to the Proposed Disposal. If you are unable to attend and vote in person at the forthcoming EGM and wish to appoint a proxy to attend and vote in your stead, you are requested to complete, sign and return the Form of Proxy, in accordance with the instructions printed thereon to the office of the Company s Share Registrar at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor not less than forty-eight (48) hours before the time set for the EGM or any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so. 16

20 13. FURTHER INFORMATION Shareholders are requested to refer to the attached appendices for further information. Yours faithfully, for and on behalf of the Board of Directors of FARM S BEST BERHAD DATUK HJ. ZAINAL BIN HJ. SHAMSUDIN CHAIRMAN, INDEPENDENT NON-EXECUTIVE DIRECTOR 17

21 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND 18

22 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 19

23 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 20

24 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 21

25 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 22

26 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 23

27 APPENDIX I VALUATION CERTIFICATE BY IPC ISLAND (CONT D) 24

28 APPENDIX II FURTHER INFORMATION 1. RESPONSIBILITY STATEMENT This Circular has been seen and approved by our Board who individually and collectively accept full responsibility for the accuracy of the information given and confirm that, after making all reasonable enquiries and to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. Information on BSSB has been obtained from publicly available information. The responsibility of our Directors with respect to such information and statements is therefore restricted to ensuring that such information and statements are accurately reproduced in this Circular. 2. MATERIAL COMMITMENTS Save as disclosed below, as at the LPD, our Board is not aware of any material commitment, incurred or known to be incurred by the FBB Group, which may have a material impact on the results or financial position of the FBB Group. RM 000 Finance lease commitment 5, CONTINGENT LIABILITIES Save as disclosed, as at the LPD, our Board is not aware of any contingent liabilities, incurred or known to be incurred by the FBB Group, which upon becoming enforceable, may have a substantial impact in the ability of FBB Group to meet its obligations as and when they fall due: RM 000 Corporate guarantees provided to financial institutions Credit facilities granted to subsidiaries of the Company 240, CONSENTS AND DECLARATIONS Consents M&A Securities has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and all references thereto in the form and context in which it appears in this Circular. IPC Island has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name, the valuation certificate and all references thereto in the form and context in which it appears in this Circular. Conflict of Interest M&A Securities and IPC Island have given their confirmations that no conflict of interest exist or is likely to exist in relation to their roles as the Adviser and Independent Valuer for the Proposed Disposal, respectively. 25

29 APPENDIX II FURTHER INFORMATION (CONT D) 5. MATERIAL LITIGATION Neither FBB nor its subsidiaries are engaged in any material litigation, claims or arbitration involving the Land, either as plaintiff or defendant, and the Directors of FBB do not have any knowledge of any proceedings involving the Land, pending or threatened against FBB and its subsidiaries or of any facts likely to give rise to any of such proceedings which might adversely and materially affect the position or business of FBB and its subsidiaries as at the LPD. 6. MATERIAL CONTRACTS Save as disclosed below and the SPA, FBB and its subsidiaries have not entered into any material contracts (not being contracts entered into in the ordinary course of business) within the two (2) years immediately prior to the printing of this Circular: (a) On 20 January 2014, FBB, Zhu Zongying, Zheng Wendi and SHH (Malaysia) Holding Sdn Bhd have entered into a heads of agreement (a) to set up a new company ( NewCo ) incorporated under the laws of Malaysia for the purpose of acquiring SHH (Malaysia) Holding Sdn Bhd; (b) for FBB to conduct and implement the proposed capital reduction, proposed acquisition of the entire equity interest in SHH (Malaysia) Holding Sdn Bhd by the NewCo, proposed share exchange, proposed offer for sale, proposed special issue, and proposed transfer of listing status; and (c) apply for the listing of and quotation for the entire issued and paid-up share capital of the NewCo on the Main Market of Bursa Securities. This agreement has lapsed and is of no further effect. (b) On 6 May 2014, Sinmah Livestocks Sdn Bhd has entered into two (2) sale and purchase agreements with Virtual Profit Sdn Bhd for the acquisition of all those pieces of land held under (i) GM 2551, Lot 360, Mukim Gemencheh, Daerah Tampin, Negeri Sembilan together with all the building erected thereon; and (ii) Geran 71977, Lot 1684, Mukim Gemas, Daerah Tampin, Negeri Sembilan together with all the building erected thereon respectively for a total purchase consideration of RM3,750, only. These agreements were completed on 20 January (c) On 12 June 2014 and 29 August 2014, FBB, Zhu Zongying, Zheng Wendi, Xu Maolei, HH Food Holding Limited and Lerfood International Berhad have entered into a sale and purchase agreement whereby Lerfood International Berhad has agreed to acquire SHH (Malaysia) Holding Sdn Bhd from Zhu Zongying, Zheng Wendi, Xu Maolei and HH Food Holding Limited for an aggregate purchase consideration of RM380,000, to be satisfied via the issuance of 760,000,000 new Lerfood International Berhad s shares ( SPA ). On 29 August 2014, a supplemental sale and purchase agreement was subsequently entered into to amend certain terms of the SPA. These agreements have lapsed and are of no further effect. (d) On 18 June 2014, FBB has entered into a sale and purchase of shares agreement with V.Sumathi A/P Veerasami and Malar Vili A/P Palanysamy in relation to the disposal of its entire equity interest in Lynbridge Sdn Bhd for a total purchase consideration of RM2.00 only. This agreement was completed on 18 July