GENERAL ANNOUNCEMENT - PROPOSED ACQUISITION OF AN ADDITIONAL 847,059 ORDINARY SHARES OF RM1.00 EACH IN THE CAPITAL OF TANJONG TOKONG GARDEN DEVELOPMENT SENDIRIAN (85510-X) FOR A PURCHASE CONSIDERATION OF RINGGIT MALAYSIA THIRTY-SEVEN MILLION SIX HUNDRED AND FORTY-SEVEN THOUSAND SIXTY-SIX AND SEN SIXTY- SEVEN ONLY (RM37,647,066.67) 1. INTRODUCTION The Board of Directors of Ivory Properties Group Berhad ( IVORY ) wishes to announce that its wholly owned subsidiary, Ivory Associates Sdn. Bhd. (485576-P) [ Ivory Associates ] had on 15 September 2010 entered into an Agreement with the following Shareholders of Tanjong Tokong Garden Development Sendirian Berhad (85510-X) [ TTG ] ( hereinafter collectively referred to as the Vendor ) and Dato Low Eng Hock (NRIC No. 630322-02-5769) of 2182-D, Lorong Kampung Pisang, 05100 Alor Setar, Kedah (hereinafter referred to as The Surety ), to acquire from the Vendor an additional 847,059 ordinary shares of RM1.00 each representing approximately 94.12% of the issued and fully paid-up share capital of TTG for a total cash consideration of Ringgit Malaysia Thirty-seven Million Six Hundred and Forty-seven Thousand Sixtysix and Sen Sixty-seven (RM37,647,066.67) only ( Purchase Consideration ) [ Proposed Acquisition ] free from all charges, liens, pledges, mortgages or any other encumbrances thereto:- A. STRATA LAND SDN. BHD. (311492-M), a company incorporated under the Companies Act, 1965 with its address at Plot 69-70, Persiaran Jawa, Bayan Lepas, Non-FTZ, 11900 Penang (hereinafter called the First Vendor ); B. CJL PROPERTIES SDN. BHD. (409910-M), a company incorporated under the Companies Act, 1965 with its address at 363-N, Hala Pemancar, 11700 Gelugor, Penang (hereinafter called the Second Vendor ); C. KHAW CHIEW KEW SDN. BHD. (237824-U), a company incorporated under the Companies Act, 1965 with its address at 123-E, Jalan Utama, 10450 Penang (hereinafter called the Third Vendor ); D. KUNG TRADING SDN. BHD. (319244-K), a company incorporated under the Companies Act, 1965 with its address at 84-B, Jalan Free School, 11600 Penang (hereinafter called the Fourth Vendor ); E. LEONG BEE & SOO BEE SDN. BHD. (2730-U), a company incorporated under the Companies Act, 1965 with its address at 1, Gat Lebuh Macallum, 10300 Penang (hereinafter called the Fifth Vendor ); F. KHAW AH CHOO (NRIC NO.: 550701-07-5678) of 123-E, Jalan Utama, 10450 Penang (hereinafter called the Sixth Vendor ); G. TEH RESOURCES CORPORATION SDN. BHD. (515815-K), a company incorporated under the Companies Act, 1965 with its address at Plot 69-70, Persiaran Jawa, Bayan Lepas, Non-FTZ, 11900 Penang (hereinafter called the Seventh Vendor ) Ivory Associates is presently an existing shareholder of TTG holding 52,941 ordinary shares of RM1.00 each representing approximately 5.88% of the issued and fully paid-up share capital of TTG. Upon completion of the Proposed Acquisition, which shall be effected upon full payment of the Purchase Consideration, TTG will be a wholly-owned subsidiary of Ivory Associates.
-2-2. DETAILS OF THE PROPOSED ACQUISITION 2.1 Information on Ivory Associates 2.1.1 Ivory Associates is a private limited company incorporated in Malaysia on 10 June 1999 under the Companies Act, 1965. The present authorized share capital of Ivory Associates is RM10,000,000.00 comprising 10,000,000 ordinary shares of RM1.00 each and its issued and paid up share capital is RM6,500,000.00 comprising 6,500,000 ordinary shares of RM1.00 each. Presently, Ivory Associates is principally involved in property development and building and construction. 2.2 Information on TTG 2.2.1 TTG is a private limited company incorporated in Malaysia on 31 May 1982 under the Companies Act, 1965 with its registered office at 2-6-29, Harbour Trade Centre, No. 2, Gat Lebuh Macallum, 10300 Penang and having an authorised capital of RM1,000,000.00 divided into 1,000,000 ordinary shares of RM1.00 each of which 900,000 shares have been issued and are fully paid-up. Presently TTG is principally involved in the development of property. 2.2.2 TTG is presently the registered and beneficial owner of all that pieces of land known as Lot Nos. 1599, 1602 and 1603, all in Seksyen 2, Bandar Tanjong Tokong, Daerah Timur Laut, Pulau Pinang held under Geran No. 70644, 70647 and 70648 respectively and measuring approximately 9,133, 217 and 15 square metres respectively. Lot 435 Seksyen 2, Daerah Timur Laut, Bandar Tanjong Tokong, Pulau Pinang held under Geran Hakimilik No. 32841 measuring 4725 sq ft is registered in the name of TTG as a Trustee to Ivory Associates who had fully paid the purchase consideration of RM270,000.00 to Tenaga Nasional Berhad, vide a Sale and Purchase Agreement dated 13 October 2008. (hereinafter collectively referred to as the Land ). 2.2.3 The present Board of Directors of TTG comprises Lim Chong San, Khaw Kok Leong, Dato Teh Yeong Keat, Khaw Ah Choo, Dato Tan Yew Thong, Khaw Tatt Siew, Datin Low Yeow Siang, Lim Siew Keok (alternate Director to Lim Chong San), Tan Yew Boon (alternate Director to Dato Tan Yew Thong), Khaw Kok Keong (alternate Director to Khaw Kok Leong), Dato Teh Yeong Keat (alternate Director to Datin Low Yeow Siang) and Yeap Kok Lim (alternate Director to Khaw Ah Choo). 2.3 Information on the Land 2.3.1 The Land is freehold development land and is now free from all encumbrances. 2.3.2 The Land is located along Jalan Tanjung Tokong stretching approximately 600ft along the main road and opposite Island Plaza shopping complex. The Land offers a high potential development in light of its strategic location with roads and other infrastructure in place. In its vicinity are shopping complexes, high-end condominiums, luxury hotels and resorts, commercial centre, schools, restaurants, eateries and food outlets. It is also near to hospitals and easily accessible to Georgetown.
-3-2.3.3 Ivory intends to develop the Land under a proposed project named City Mall consisting of approximately 175 units residential condominiums and commercial shopping complex ( Proposed Scheme ) with an estimated gross development value of RM368,000,000.00 and estimated gross development cost of RM173,000,000.00. The expected profit before tax to be derived from the development is RM154,000,000.00. 2.3.4 Ivory Associates had submitted plans to the relevant authority to develop the Land and application for planning permission has been approved by the relevant authority. Subject to other approval(s) from authority(ies), the proposed development is expected to commence in the year 2011 and complete in the year 2014. 2.4 Basis of Arriving at the Purchase Consideration 2.4.1 The Purchase Consideration for the Proposed Acquisition was arrived at on a willing buyer and a willing seller basis:- Vendor No of Ordinary Shares of RM1.00 Each Purchase Consideration (RM) 1. The First Vendor 264,705 11,764,666.67 2. The Second Vendor 105,882 4,705,866.66 3. The Third Vendor 52,941 2,352,933.34 4. The Fourth Vendor 52,942 2,352,977.78 5. The Fifth Vendor 105,883 4,705,911.10 6. The Sixth Vendor 105,882 4,705,866.66 7. The Seventh Vendor 158,824 7,058,844.46 Total 847,059 37,647,066.67 A valuation on the Land was carried out by Henry Butcher Malaysia (Penang) Sdn Bhd, an independent registered valuer, on 8 th September 2010. The methods of valuation adopted are residual and comparison methods. The market value of the property as at 8 th September 2010 is RM52,000,000.00. The net book value of the Land (excluding Lot 435) based on the latest audited financial statement of TTG for the year ended 31 December 2009 was RM14,030,384.80. 2.5 Salient Terms of the S&P Agreement 2.5.1 The Proposed Acquisition is subject to completion of payment of the full Purchase Consideration. 2.5.2 Terms of payment of Purchase Consideration The Purchase Consideration shall be settled in the following manner and upon the terms and conditions stipulated in the Agreement:- (a) 10% of the total Purchase Consideration shall be paid to the Vendor upon execution of the Agreement (the receipt whereof the Vendor hereby acknowledges);
-4- (b) a further 20% of the total Purchase Consideration shall be paid within three (3) months from the date of the Agreement; and (c) the full and final balance 70% of the total Purchase Consideration shall be paid within nine (9) months from the date of the Agreement. 2.6 Source of funding 2.6.1 IVORY Group intends to fund the Proposed Acquisition through internally generated funds and/or proceeds from specific fund raising exercise which would be decided by the management of the IVORY Group at a later stage. 2.7 Assumption of liabilities There are no other liabilities, including contingent liability and guarantee, to be assumed by the IVORY Group arising from the Proposed Acquisition. 3. RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition is to cater for future project development for growth enhancement. 4. PROSPECTS The Proposed Acquisition is for future property development of IVORY Group. The Land is located along Jalan Tanjung Tokong stretching approximately 600ft along the main road and opposite Island Plaza shopping complex. The Land offers a high potential development in light of its strategic location with roads and other infrastructure in place. In its vicinity are shopping complexes, high-end condominiums, luxury hotels and resorts, commercial centre, schools, restaurants, eateries and food outlets. It is also near to hospitals and easily accessible to Georgetown. Given its prime locality, the prospect of the Land is promising. Thus, coupled with the right marketing strategy and well crafted future development plan, the Proposed Acquisition is expected to enhance long term growth of the IVORY Group. 5. RISK FACTORS There is no assurance that the anticipated benefits of the Proposed Acquisition will be realised, or the ability to generate sufficient profits from the future development on the Land to offset the associated costs incurred for the Proposed Acquisition. However, IVORY will seek to mitigate the risks by adopting prudent investment strategies and conducting feasibility assessment and review on the development project on the Land to be constructed. Below are the main risk factors relating to the Proposed Acquisition, which may not be exhaustive:-
-5-5.1 Business Risk The IVORY Group is subject to the inherent risks existing in the property development industry. These include supply of materials, equipment and labour, changes in raw material prices, changes in general economic business and credit conditions, timely completion of development projects, appropriate pricing of development properties that will earn the IVORY Group the required return, the cost of financing, and risks of purchaser default. Although the IVORY Group seeks to limit these risks by planning and adopting an optimal strategy for the subsequent development of the Land, no assurance can be given that any changes to these factors will not have a material adverse effect on the Proposed Acquisition. 5.2 Political, Economic and Regulatory Considerations Like all other business entities, changes in political, economic and regulatory conditions in Malaysia could materially and adversely affect the financial and business prospects of the IVORY Group. 5.3 Dependence of Key Personnel The success of the IVORY Group will depend to a significant extent upon the abilities and continued efforts of the Directors and senior management of the IVORY Group in attracting and retaining skilled personnel who have contributed to the growth of the IVORY Group. In this regard, the IVORY Group has in place fair remuneration packages to attract and retain talents effectively. 6. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION a. Earnings The Proposed Acquisition is not expected to have any significant effect on the IVORY Group s earnings for the financial year ending 31 December 2010. However, the Proposed Acquisition is expected to contribute positively to the future earnings of the IVORY Group. b. Net Assets and Gearing There were no material effects of the Proposed Acquisition on the net assets and gearing level of the IVORY Group for the financial year ending 31 December 2010. c. Share Capital and Substantial Shareholders Shareholding The Proposed Acquisition will not have material effects on the issued and paid-up share capital and substantial shareholding of the Company for the financial year ending 31 December 2010. 7. ESTIMATED TIME FRAME FOR COMPLETION OF THE PROPOSED ACQUISITION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed within nine (9) months from the date of the Agreement.
-6-8. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST AND PERSONS CONNECTED TO DIRECTORS AND MAJOR SHAREHOLDERS None of the Directors, major shareholders, persons connected to Directors or persons connected to the major shareholders of the Ivory Associates and of the Group has any interest, direct or indirect, in the Proposed Acquisition. 9. STATEMENT BY THE BOARD OF DIRECTORS The Board of Directors of IVORY, having considered the rationale for the Proposed Acquisition and after careful deliberation, is of the opinion that the Proposed Acquisition is in the best interest of the IVORY Group and its shareholders. 10. APPROVAL REQUIRED The Proposed Acquisition is not subject to any approval from the shareholders of IVORY or any relevant government authorities. 11. HIGHEST PERCENTAGE RATIO APPLICABLE The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph 10.02(g) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements is 24.23%. 12. DOCUMENTS FOR INSPECTION The Agreement and Valuation Report will be made available for inspection at the Registered Office of the Company at Suite 2-1, 2 nd Floor, Menara Penang Garden, 42A Jalan Sultan Ahmad Shah 10050 Penang during normal working hours from Mondays to Fridays (except public holidays) for a period of one (1) week from the date of this announcement. This announcement is dated 15 September 2010.