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MALAYSIAN RESOURCES CORPORATION BERHAD (“MRCB” OR “COMPANY”) ACQUISITION OF 18,000 ORDINARY SHARES OF RM1.00 EACH REPRESENTING EIGHTEEN PERCENT (18%) OF THE EQUITY INTEREST IN COSY BONANZA SDN. BHD. (“CBSB”) TOGETHER WITH 2,482,000 REDEEMABLE PREFERENCE SHARES OF RM1.00 EACH IN CBSB AND 3,775,000 REDEEMABLE PREFERENCE SHARES-A OF RM0.01 EACH IN CBSB FROM KUWAIT FINANCE HOUSE (MALAYSIA) BERHAD (“KFH”), FOR A PURCHASE CONSIDERATION OF RM7.775 MILLION (“ACQUISITION”) 1. INTRODUCTION The Board of Directors of MRCB (“Board”) wishes to announce that MRCB had on 28 December 2010 entered into a KFH Musyarakah Buy-Out Agreement (“Agreement”) with KFH and Quill Sentral Sdn. Bhd. (“Quill”) in relation to the Acquisition, the particulars of which are set out in the ensuing sections below. This announcement is made by the Company pursuant to paragraph 9.19(23) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the Acquisition is a non-related party transaction. 2. DETAILS OF THE PROPOSED ACQUISITION 2.1 Particulars Pursuant to the Agreement, MRCB will acquire all the fully paid-up shares of RM6.275 million held by KFH in CBSB comprising 18,000 ordinary shares of RM1.00 each in CBSB (“Shares”), representing 18% equity interest in CBSB together with 2,482,000 redeemable preference shares of RM1.00 each in CBSB (“RPS”) and 3,775,000 redeemable preference shares of RM0.01 each in CBSB (“RPS-A”) (“the Sale Shares”) for a total purchase consideration of RM7.775 million (“Purchase Consideration”). Pursuant to the Agreement, the Purchase Consideration shall be paid on or before 31 December 2010 (“Completion Date”) whereupon the legal and beneficial owner of the Sale Shares shall pass to MRCB. On 30 December 2010, KFH has delivered the share certificate and all other documents for the purposes of registration of the transfer of the Sale Shares in favour of MRCB in exchange of the Purchase Consideration paid by MRCB to KFH on 29 December 2010. In this regard, the Agreement has been completed and CBSB has effectively become a subsidiary of MRCB having a total equity interest of 62.5% in CBSB. 2.2 Background information of CBSB CBSB was incorporated in Malaysia under the Companies Act, 1965 (“Act”) on 1 October 2007 as a private limited company under its present name. As at 30 November 2010, CBSB has an authorised share capital of RM5,000,000 comprising 5,000,000 Shares, 20,000,000 RPS and 2,500,000,000 RPS-A, of which 100,000 Shares together with 9,900,000 RPS and 15,100,000 RPS-A have been issued and paid. CBSB is principally involved in property development and is the legal owner of a piece of land measuring approximately 7,503 square metres held under Geran 46092, Lot 70, Seksyen 70, Bandar Kuala Lumpur, District of Kuala Lumpur, Negeri Wilayah Persekutuan KL (“Lot B”). Lot B has been approved for development of an office tower with a total gross floor area (“GFA”) of approximately 1.5 million square feet (“sf”) and having an estimated Gross Development Value (“GDV”) of over RM1,000 million. The net book value of Lot B as at 31 December 2009 was RM133 million. 1 2.3 Basis of arriving at the Purchase Consideration The Purchase Consideration which represents RM1.5 million premium over the cost of the Sale Shares was determined on a willing buyer-willing seller basis after taking into consideration the prevailing market value of the land without any development on Lot B and the prospect of CBSB (please refer to paragraph 4). A valuation of the land on Lot B was performed by an independent professional valuer in March 2008 for the purpose of credit security and the market value of the land was approximately RM141 million. 2.4 Historical financial information The summary of the financial performance of CBSB since its incorporation is as shown below: Revenue Operating loss Loss before taxation Taxation Loss after taxation No. of ordinary shares in issue (‘000) Net loss per ordinary share (RM) Net assets Total borrowings 2.5 Audited 1 October 2007 to 31 FYE 31 December December 2008 2009 RM’000 RM’000 (764) (960) (764) (960) (764) (960) 100 100 (7.64) (9.60) 9,236 14,276 146,702 157,911 Unaudited 11-months period ended 30 November 2010 RM’000 (6,252) (6,252) (6,252) 100 (62.5) 17,123 169,977 Satisfaction of Purchase Consideration The Purchase Consideration was fully paid in cash raised through MRCB’s Rights Issue in March 2010. 2.6 Assumption of liabilities Save for the potential contingent liabilities and/or guarantees to be extended by MRCB as a shareholder of CBSB in relation to the financing of the development of Lot B, there are no other liabilities, to be assumed by MRCB pursuant to the Acquisition. 3. RATIONALE FOR THE PROPOSED ACQUISITION The Acquisition provides an opportunity for MRCB to consolidate its investment in strategic properties with good potential capital appreciation in the near future, since Lot B is within the KL Sentral Development. 2 4. PROSPECTS Prospects of CBSB The Acquisition will allow MRCB to hold 62.5% of the equity interest in CBSB and thus has significant control over its management and operations and reap the full benefits of all future revenues and profits. With the anticipation of official sales launch in early 2011, the Board believes that the Acquisition represents a good opportunity to further strengthen the future income of the MRCB Group. 5. RISK EVALUATION 5.1 Acquisition risk There is no assurance that the anticipated benefits from the Acquisition will be realised, or that MRCB will be able to generate sufficient revenues from CBSB to offset the associated investment costs. 5.2 Business and operational risk The Acquisition will not result in MRCB being exposed to any additional business and operational risks in property development industry since MRCB is already principally involved in property development. 6. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable for the Acquisition pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) is 1.16% which is derived based on the total Purchase Consideration amounting to RM7.775 million compared with MRCB’s audited consolidated net assets attributable to equity holders of RM671.92 million as at 31 December 2009. 7. EFFECTS OF THE ACQUISITION 7.1 Share capital and substantial shareholders’ shareholdings The Acquisition will not have any effect on the issued and paid-up share capital of MRCB as well as its substantial shareholders’ shareholdings as the Acquisition does not involve any issuance of shares. 7.2 Earnings The Acquisition is not expected to have any effect on the earnings and earnings per share of MRCB Group for the financial year ending 31 December 2010. 3 7.3 Net assets and gearing The proforma effects of the Acquisition on the consolidated net assets and gearing of MRCB based on the latest audited financial statements as at 31 December 2009 are shown below. Audited consolidated as at 31 December 2009 RM’000 Share capital RM’000 907,625 907,625 79,913 79,913 (49) (49) 7,835 7,835 (323,405) (323,405) Net assets attributable to equity holders of MRCB 671,919 671,919 No. of shares in issue (‘000) 907,625 907,625 0.74 0.74 1,643,009 1,800,920 2.4 2.7 Share premium Currency translation reserve Share option reserve Accumulated losses NA per share (RM) Borrowings Gearing ratio (times) 8. After Acquisition APPROVALS REQUIRED No approval from the shareholders is required as the highest percentage ratio applicable for the Acquisition pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is only 1.16% as mentioned in Section 6 above. The Acquisition is not conditional upon any other proposal. 9. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS None of the Directors and/or major shareholders of MRCB or any persons connected to them have any interest, direct and/or indirect, in the Acquisition. 10. DIRECTORS’ STATEMENT The Board, having considered all aspects of the Acquisition and after careful deliberation is of the opinion that the Acquisition is in the best interest of MRCB. 4 11. TIMEFRAME FOR COMPLETION As stated in Section 2.1, the Acquisition has been completed on 30 December 2010. 12. DOCUMENTS AVAILABLE FOR INSPECTION The Agreement in respect of the Acquisition is available for inspection at the registered office of MRCB during office hours from Mondays to Fridays (except for public holidays) at Level 21, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral, 50470 Kuala Lumpur for a period of 3 months from the date of this announcement. This announcement is dated 30 December 2010. 5