ACQUISITION OF 2,431,623 ORDINARY SHARES OF RM1.00 EACH REPRESENTING 100% EQUITY INTEREST IN THE ISSUED AND PAID-UP SHARE CAPITAL OF MOTEL DESA SDN BHD 1.0 INTRODUCTION Further to our announcement on 30 October 2009, the Board of Inch Kenneth Kajang Rubber PLC ( IKKR ) wishes to announce that IKKR, through its wholly owned subsidiary, Common Focus (M) Sdn Bhd, had on 23 November 2009 fixed the purchase price of RM18,500,000 million for the purchase of 2,431,623 ordinary shares of RM1.00 each representing 100% equity interest in the issued and paid-up share capital of Motel Desa Sdn Bhd ( Motel Desa ) together with 50,000 ordinary shares of RM1.00 each of Motel Desa s wholly owned subsidiary, Actualpadu Tours Sdn Bhd ( Actual Padu ) ( Sale Shares ) from Montvale Sdn Bhd ( the Vendor ) via Share Sale Agreement dated 30 October 2009 ( Agreement ). 2.0 THE ACQUISITION 2.1 Details of the Acquisition The Acquisition entails the acquisition of the Sale Shares by IKKR for a cash consideration of RM18,500,000 subject to the terms and conditions stipulated in the Agreement. 2.2 Information of Motel Desa Motel Desa is a company incorporated in Malaysia on 29 January 1976. The authorised share capital of Motel Desa is RM5,000,000 comprising of 5,000,000 shares and its paid up capital is RM2,431,623. The principal business of Motel Desa is hotel and restaurant operations located at Bukit Pak Apil, Kuala Terengganu. 2.3 Information of Actual Padu Actual Padu is a company incorporated in Malaysia on 8 July 1993. The authorised share capital of Motel Desa is RM100,000 comprising of 100,000 shares and its paid up capital is RM50,000. The principal business of Actual Padu is inbound tour operator company located at Bukit Pak Apil, Kuala Terengganu. 2.4 Details of the Vendors Montvale is a company incorporated in Malaysia on 31 October 1985. The authorised share capital of Motel Desa is RM1,000,000 comprising of 1,000,000 shares and its paid up capital is RM1,000,000. 1
The principal business of Montvale is investment holding bearing registered address at Bukit Pak Apil, Kuala Terengganu. 2.5 Basis of Purchase Price and source of funding The Purchase Price was arrived at on a willing buyer-willing seller basis after taking into consideration the following : (i) Motel Desa s Shareholders Equity as per audited accounts as at 31 December 2008 of RM18,539,527 (ii) The market value of its land at RM18,000,000 million (iii) The advantage of its location (iv) The potential future earnings of the hotel and restaurants businesses The cash consideration of RM18,500,000 will be funded via internally generated funds. 2.6 Liabilities to be assumed pursuant to the Acquisition Motel Desa and Actual Padu (the Group ) currently has no bank borrowings. Therefore, IKKR will not assume any additional liabilities (including contingent liabilities and guarantees (if any)) under the Acquisition. The existing liabilities of the Group will be settled by the Group in the normal course of business. 3.0 RATIONALE OF THE PROPOSED ACQUISITION IKKR s venture into the tourism business represents part of its strategy to expand its hotel chain particularly in the East Coast, after its wholly owned, Perhentian Island Resort in Terengganu. Moving forward, IKKR plans to redevelop Motel Desa into a 3 to 4 stars hotel by taking advantage of its premier location. Motel Desa is a unique hilltop hotel at the heart of Kuala Terengganu where it offers a breath of fresh air as well as a fantastic view of Kuala Terengganu and its surrounding. It is located only 15km from the Sultan Mahmud Airport and 5 minutes away from city center by car. The Acquisition represents a strategic investment by IKKR and are expected to contribute positively to the earnings as well as the shareholders value of the IKKR Group in the medium to long term. 4.0 SALIENT TERMS OF THE AGREEMENT The salient terms of the agreement are as follows : 4.1 The Vendor has agreed to sell 100% ownership of Motel Desa and the Purchaser has agreed to purchase the Sale Shares on a willing buyer-willing seller basis at the 2
aggregate purchase price to be determined upon the completion of the valuation and due diligence exercise of the company as at 31/12/2008 free from all claims, charges, liens, encumbrances and equities whatsoever together with all rights attached thereto and all dividend rights and distribute, declared, paid or made in respect thereof after the date of this Agreement upon the terms and subject to the condition in this Agreement. 4.2 The Purchase Price for the Sale Shares shall be paid by the Purchaser to the Vendor in the manner and at the time as hereinbelow stated:- The Purchaser has paid the sum of Ringgit Malaysia Three Million Three Hundred and Fifty Thousand (RM3,350,000) to the Vendor (the receipt of which the Vendor s hereby acknowledge); The Balance Purchase Price shall be paid by the Purchaser to the Vendor within three (3) months from the date of audit in Paragraph 4.1 above and date of receipt of notification of consent from relevant authorities (where applicable) and whichever is later (hereinafter referred to as the Completion Date ) failing which the parties hereto agree that the Purchaser shall be granted an extension of three (3) months from the expiry of the Completion Date. 4.3 The parties shall jointly procure, as soon as practicable and in any event within three (3) months after the completion of the valuation and due diligence exercise of the company as at 31/12/2008, to determine the final purchase price. 4.4 This sale and purchase of the Sale Shares is conditional upon:- the approval of the Foreign Investment Committee (hereinafter called FIC ) for the sale and purchase of the Shares is obtained (if applicable) ; the Approvals of the Vendor s shareholders in general meeting for the sale of the Shares (if required) is / are obtained: (c) the approval(s) of such other authorities and bodies as is / are necessary; (hereinafter collectively referred to as the Approvals and individually referred to as the Approval ) 4.5 Completion of the sale and purchase of the Sale Shares shall take place on the Completion Date subject to the satisfaction of all the Conditions Precedent and provided the Due Diligence exercise has been conducted and completed to the satisfaction of the Purchaser. Completion shall take place at the office of the company when the following actions shall be taken by the parties hereto :- By the Vendor: 3
The delivery of the Vendor Documents to the Purchaser and the delivery of all accounts, books, registers, records and other documents whatsoever of or pertaining to the Company and its business to the Purchaser ; and By the Purchaser: Simultaneously, the Purchaser shall pay the balance of the purchase price to the Vendor in accordance with the provisions of Clause 4.2 hereof. 5.0 FINANCIAL EFFECT OF THE ACQUISITION The acquisition will not have any effect on the share capital and the substantial shareholders shareholding of IKKR. The Acquisition is not expected to have any material effect on the net assets and gearing of IKKR for the financial year ending 31 December 2009 but is expected to contribute positively to the future earnings and earnings per share of the IKKR Group in the medium to long term financial outlook. 6.0 PROSPECTS AND RISKS The prospects for the Group is depending on the prospects of the tourism industry. During the first eight months of the year, despite the economic slowdown and the Influenza A (H1N1) outbreak, the number of tourist arrivals rose 4.4% to 15.4 million (January August 2008 : 4.9%; 14.7 million). This was mainly attributed to the offering of attractive travel packages by tourism-related agencies and increased connectivity by airlines. In an effort to further enhance the competitiveness of the tourism industry, a total of RM200 million was allocated to upgrade tourism infrastructure, diversify tourism products, improve the homestay programme as well as host more international conferences and exhibitions. In addition, the Government has also rebranded the Malaysia My Second Home (MM2H) programme with the aim making it more appealing and effective, particularly in attracting high net-worth individuals to invest in Malaysia by setting up their business or partnering with local entrepreneurs. (Economic Report 2009/2010) However, the business is also subject to risks inherent to the hotel and tourism sectors. These may include, amongst others, general economic downturn in the global and regional economy, rise of uncertainties from terrorism activities and war, socio-political instability, a decrease in demand and an oversupply of hotels and resorts rooms, an increase in the operating costs due to inflation and other factors such as an increase in energy and labour costs, labour supply shortages, changes in credit conditions, changes in customers tastes and preference and the collectability of debts that may have adverse effects on the hotel business and operations. IKKR will therefore focus on the unique qualities inherent to the said hotel. 4
7.0 APPROVALS REQUIRED The Acquisition is not subject to the approval of the shareholders of IKKR or any other relevant authorities. 8.0 DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED None of the Directors, major shareholders and or/persons connected with them, has any interest, direct or indirect, in the Acquisition. 9.0 DIRECTORS STATEMENT The Board, having considered all aspects of the Acquisition, is of the opinion that the Acquisition is in the best interest of IKKR Group. 10.0 ESTIMATED TIME FRAME FOR COMPLETION The Acquisition is expected to be completed in a month time or earlier from the date of this announcement subject to Section 4.2 above. 11.0 COMPLIANCE WITH THE SECURITIES COMMISSION S ( SC ) GUIDELINES ON THE OFFERING OF EQUITY AND EQUITY-LINKED SECURITIES ( SC GUIDELINES ) To the best knowledge of the Board of IKKR, the Acquisition do not depart from the SC Guidelines. 12.0 DOCUMENTS FOR INSPECTION A copy of the Agreement will be available for inspection at IKKR registered office in Malaysia at 22 nd Floor, Menara Promet, Jalan Sultan Ismail, 50250 Kuala Lumpur, during business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. 5