PARKSON HOLDINGS BERHAD ( PARKSON HOLDINGS or the COMPANY ) Proposed Disposal of KL Festival City Mall 1. INTRODUCTION The Board of Directors of Parkson Holdings wishes to announce that Festival City Sdn Bhd ( FCSB or the Vendor ), a wholly-owned subsidiary of the Company, and Parkson Holdings had on 19 August 2014 entered into a conditional sale and purchase agreement ( SPA ) with Festiva Mall Sdn Bhd ( Festiva Mall or the Purchaser ) and AsiaMalls Sdn Bhd ( AsiaMalls or the Purchaser s Guarantor ), the holding company of Festiva Mall, for the proposed disposal by FCSB of its property known as KL Festival City Mall ( KL Festival City Mall or the Property ) for a cash consideration of RM349 million ( Disposal Consideration ) ( Proposed Disposal ). 2. INFORMATION ON KL FESTIVAL CITY MALL KL Festival City Mall is a 3-level shopping mall with a basement car park constructed on a piece of 99-year leasehold commercial land and held under Pajakan Negeri 46795, Lot 30119, Mukim Setapak, Daerah Kuala Lumpur, Wilayah Persekutuan ( Land ) and situated along Jalan Genting Klang, Setapak, Kuala Lumpur with an unexpired term of approximately 92 years. KL Festival City Mall formed part of a mixed development where Zetapark Development Sdn Bhd ( Zetapark ) had been granted development rights ( Mixed Development ). KL Festival City Mall has a total net lettable area of approximately 487,342 square feet with a current occupancy rate of approximately 99%. It has a total of 1,081 car park bays located at the basement and road surface. KL Festival City Mall recorded an audited revenue of RM39.6 million (inclusive rental income of RM37.4 million) and profit after tax of RM12.1 million for the financial year ended 30 June 2013. The net book value of KL Festival City Mall was RM224.5 million based on the audited financial statements as at 30 June 2013. The original cost of investment of KL Festival City Mall was approximately RM246 million. KL Festival City Mall was acquired on 21 March 2008. 3. DETAILS OF THE PROPOSED DISPOSAL 3.1 The Disposal Consideration shall be satisfied by the Purchaser in the following manner: (i) RM342,020,000 ( Completion Payment ) shall be paid by the Purchaser within 1 month from the date the conditions precedent are fulfilled or the date of receipt by the Purchaser s solicitors of the deed of assignment for the Property duly executed by the Vendor and the original Wintip s Undertaking (as defined in paragraph 3.6(ii)) whichever is later ( Completion Period ) in the following manner: 1
(a) (b) (c) to the Vendor s financier of the redemption sum towards the redemption of the Property, if any; to the Vendor s solicitors a sum of RM150,000 ( Retention Sum ) as stakeholders. The Retention Sum shall be placed in an interest bearing account and will be utilised, amongst others, to pay stamping fees, settle quit rent and assessment, and then released to the Vendor after the discharge documents in relation to the security interest over the Property, the tenancy and other related agreements are stamped and perfected; and to the Vendor, the remaining balance of the Completion Payment subject to delivery of legal possession of the Property and the completion documents and if applicable, the repair of any nonmaterial damage to the Property. The Purchaser agrees that it will notify the Vendor of the targeted date of payment of the said remaining Completion Payment at least 10 business days before the expiry of the Completion Period. (ii) RM6,980,000 being a sum equivalent to 2% of the Disposal Consideration shall be paid by the Purchaser to the Purchaser's solicitors as stakeholder for payment of the real property gains tax payable by the Vendor on the Completion Date (hereinafter defined). In the event that the Purchaser is unable to pay the Completion Payment and/or any part thereof by the expiry of the Completion Period, the Completion Period shall be extended automatically by 1 month ( Extended Completion Period ) from the day following the expiry of the Completion Period subject to the Purchaser paying to the Vendor interest at the rate of 8% per annum calculated on a daily basis from the commencement date of the Extended Completion Period until the day when the unpaid portion of the Completion Payment is received by the Vendor and/or the Vendor s solicitors. The date on which the payment of the Disposal Consideration is paid in full together with any interest (if applicable) by the Purchaser in the manner set out in Section 3.1 above to the Vendor s financier, the Vendor and the Vendor s solicitors, as the case may be, shall be referred to as the completion date ( Completion Date ). 3.2 Parkson Corporation Sdn Bhd ( Parkson ), a wholly-owned subsidiary of Parkson Retail Asia Limited (a company listed on the Singapore Exchange Securities Trading Limited), which is in turn a 67.61% owned subsidiary of Parkson Holdings, had entered into a tenancy agreement dated 3 March 2011 with the Vendor in KL Festival Mall for a 7 terms tenancy of 3 years each, on an automatic renewal basis, commencing from 21 November 2011 at a gross rental rate increase of up to 7%. 2
In the event Parkson terminates the tenancy and vacates the premises or if the rental increase per term is less than 7% per term for the period from 22 November 2014 to 21 November 2024, the Vendor shall make good the shortfall in revenue receivable by the Purchaser. The shortfall is where the rent in which Parkson would have paid for each month based on the agreed rental rate less the actual rent received by the Purchaser in respect of the leased area vacated by Parkson. 3.3 AsiaMalls unconditionally and irrevocably undertakes with the Vendor that if the Purchaser does not pay the Disposal Consideration when due, the Purchaser s Guarantor shall pay that amount to the Vendor as if it was the principal obligor, within 30 days after the issuance of a notice of payment to the Purchaser s Guarantor by the Vendor ( Payment Notice ) if and only after the Purchaser s obligation to pay the Disposal Consideration has become due under Clause 3 above. The liability of the Purchaser s Guarantor shall not arise until the expiry of 30 days after the issuance of the Payment Notice. 3.4 Parkson Holdings irrevocably and unconditionally undertakes that the Vendor shall, at all times, have all financial resources and capabilities to make payments to the Purchaser in respect of claims or indemnity under the SPA and performance by the Vendor on the part of the Vendor in the SPA, and that upon any failure of the Vendor to pay any amount when due, Parkson Holdings shall pay accordingly upon expiry of the relevant notice period under the notice of payment issued by the Purchaser. 3.5 KL Festival City Mall will be disposed of free from any lien, pledge, mortgage, security interest, lease or charge. 3.6 The completion of the Proposed Disposal shall be conditional upon the satisfaction of the following conditions precedent (collectively Conditions Precedent ) on or before 31 December 2014 or such further extended period as may be mutually agreed in writing by the Vendor and the Purchaser ( Conditional Period ): (i) (ii) FCSB obtaining the written consent from its financier for the Proposed Disposal; FCSB obtaining the written letter from Wintip Sdn Bhd ( Wintip ), the registered owner of the Land addressed to the Purchaser ( Wintip s Undertaking ) wherein Wintip confirms and undertakes, inter alia to apply and obtain the strata title to KL Festival City Mall and to deliver the original strata title to KL Festival City Mall upon issuance thereof, a valid and registrable but unstamped memorandum of transfer in respect of the Property ( Transfer ) in favour of the Purchaser and all such documents as may be required for the registration of Transfer to the Purchaser; 3
(iii) (iv) (v) (vi) the Vendor obtaining the written approval from the State Authority in respect of the transfer of the Property in favour of the Purchaser pursuant to the restriction in interest on terms acceptable to the Purchaser ( State Authority s Approval ); the Purchaser obtaining the written approval of the Economic Planning Unit in the Prime Minister s Department ( EPU ) for the purchase of the Property on terms acceptable to the Purchaser, or the written confirmation of EPU that EPU s approval is not required for the purchase of the Property, as the case may be ( EPU Approval/Confirmation ); the Purchaser obtaining the written approval from the State Authority in respect of the purchase of the Property by the Purchaser pursuant to Section 433B of the National Land Code on terms acceptable to the Purchaser ( NLC Section 433B Approval ); and Wintip and Zetapark, the owner of the development rights to the Land, having granted their approvals in writing to the novation of the tripartite agreement (in respect of, inter alia, the application of strata title for the Property) in favour of the Purchaser ( Novation Approval ). Wintip and Zetapark are wholly-owned subsidiaries of FITTERS Diversified Berhad, a public listed company. 4. INFORMATION ON THE PURCHASER Festiva Mall was incorporated in Malaysia on 25 July 2014 with an authorised capital of RM400,000 and a paid-up capital of RM2. Festiva Mall is wholly-owned by AsiaMalls. AsiaMalls is a wholly owned subsidiary of Pramerica Asia Retail Limited (the Fund ), one of the largest private open end property funds in Asia. The Fund has an aggregate gross asset value of over S$3 billion (as of 30 June 2014) with investments in 11 retail properties in Singapore and Malaysia, and is managed by Pramerica Real Estate Investors, the real estate investment and advisory business of Prudential Financial, Inc. (NYSE:PRU) on behalf of institutional investors. Prudential Financial, Inc. is not affiliated in any manner with Prudential Plc, a company incorporated in the United Kingdom. Pramerica Real Estate Investors is a leader in the global real estate investment management business, offering a broad range of investment vehicles that invest in private and public market opportunities in the United States, Europe, the Middle East, Asia, Australia and Latin America. Headquartered in Madison, N.J., the company also has offices in Atlanta, Chicago, Miami, New York, San Francisco, Frankfurt, Lisbon, London, Luxembourg, Munich, Paris, Abu Dhabi, Mexico City, Rio de Janeiro, Hong Kong, Seoul, Singapore, Sydney and Tokyo. Pramerica Real Estate Investors had gross assets under management of USD55.8 billion (USD41.8 billion net), as of 31 March 2014. For more information, visit www.pramericarei.com. 4
5. BASIS OF ARRIVING AT THE DISPOSAL CONSIDERATION The Disposal Consideration of RM349 million was arrived at on a willing buyer - willing seller basis after taking into consideration the market value of KL Festival City Mall of RM353.8 million as appraised by Henry Butcher Malaysia Sdn Bhd, an independent professional valuer using the Investment Method and Comparison Approach of Valuation vide the valuation report dated 3 July 2014. 6. UTILISATION OF THE DISPOSAL CONSIDERATION The Disposal Consideration will be utilised as follows: RM million General investments including acquisition, development and management of retail malls 200 Working capital and expenses related to the Proposed Disposal 149 The timeframe for full utilisation of proceeds is within 24 months from the Completion Date. 7. LIABILITIES TO BE ASSUMED BY FESTIVA MALL There are no liabilities, including contingent liabilities and guarantees to be assumed by Festiva Mall arising from the Proposed Disposal. 8. RATIONALE FOR THE PROPOSED DISPOSAL 349 As the Parkson Holdings Group is embarking on the construction of premium shopping malls (with net lettable areas of approximately 1 million square feet), KL Festival City Mall which has a net lettable area of approximately 487,342 square feet is deemed small to drive the Parkson Holdings Group s expansion plans. The Proposed Disposal will result in a gain of approximately RM110 million. For illustration purposes, the Proposed Disposal will result in a net cash inflow to the Parkson Holdings Group of approximately RM340 million, which can be utilised for the investing activities of the Parkson Holdings Group in brand business and premium shopping mall development. 5
9. EFFECTS OF THE PROPOSED DISPOSAL 9.1 Share capital and substantial shareholders' shareholdings The Proposed Disposal will not have any effect on the issued and paid-up share capital and the substantial shareholders' shareholdings in Parkson Holdings as the Proposed Disposal does not involve the issuance of new shares by Parkson Holdings. 9.2 Net assets ( NA ) and NA per share On a proforma basis, the Proposed Disposal is expected to increase the NA by approximately RM110 million which translates to an increase in NA per share of approximately 10 sen per share to the Parkson Holdings Group based on the audited consolidated statement of financial position of Parkson Holdings as at 30 June 2013. 9.3 Earnings and Earnings per share ("EPS") The Proposed Disposal is expected to result in a gain of approximately RM110 million which translates to an increase in EPS of approximately 10 sen per share to the Parkson Holdings Group for the financial year ending 30 June 2015. 9.4 Gearing The Proposed Disposal is not expected to have a material impact on the gearing of the Parkson Holdings Group. 10. APPROVALS REQUIRED The Proposed Disposal does not require the approval of the shareholders of Parkson Holdings. The Proposed Disposal is subject to the approval being obtained from the following: (i) (ii) (iii) (iv) (v) (vi) FCSB obtaining the written consent from its financier for the Proposed Disposal; FCSB obtaining Wintip s Undertaking; the Vendor obtaining the State Authority s Approval; the Purchaser obtaining the EPU s Approval/Confirmation; the Purchaser obtaining the written approval from the State Authority in respect of the NLC Section 433B Approval; and Wintip and Zetapark having granted their Novation Approval. 6
11. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors and major shareholders of the Company and/or persons connected with them has any interest, direct or indirect, in the Proposed Disposal. 12. STATEMENT BY THE BOARD The Board, having considered all relevant aspects of the Proposed Disposal, is of the opinion that the Proposed Disposal is in the best interest of the Company. 13. HIGHEST PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL PURSUANT TO PARAGRAPH 10.02 (G) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD ( PERCENTAGE RATIO ) The highest Percentage Ratio is 12.55%. 14. EXPECTED TIMEFRAME FOR COMPLETION OF THE PROPOSED DISPOSAL The Proposed Disposal is expected to be completed by the second half of 2014. 15. DOCUMENTS FOR INSPECTION Copies of the SPA dated 19 August 2014 and the valuation report from Henry Butcher Malaysia Sdn Bhd dated 3 July 2014 are available for inspection by shareholders of the Company at the Registered Office of the Company at Level 14, Lion Office Tower, No. 1 Jalan Nagasari, 50200 Kuala Lumpur during normal business hours from Mondays to Fridays (except public holidays) for a period of three months commencing from the date of this announcement. 7