| Type | Announcement |
| Subject | MALAYSIA AICA BERHAD ("MAICA" OR "COMPANY") (I) PROPOSED ACQUISITION OF 2,000,000 ORDINARY SHARES OF RM1.00 EACH IN HYRAX SDN BHD ("HYRAX"), REPRESENTING THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF HYRAX AT A TOTAL PURCHASE CONSIDERATION OF RM50,000,000 TO BE SATISFIED BY THE ISSUE OF 50,000,000 ORDINARY SHARES OF RM0.50 EACH IN MAICA ("MAICA SHARES") AT AN ISSUE PRICE OF RM1.00 PER SHARE ("PROPOSED ACQUISITION"); AND (II) PROPOSED RESTRICTED ISSUE OF 30,000,000 NEW MAICA SHARES AT AN ISSUE PRICE OF RM1.02 PER SHARE FOR CASH ("PROPOSED RESTRICTED ISSUE") (HEREINAFTER COLLECTIVELY REFERRED TO AS THE "PROPOSALS") |
1. INTRODUCTION
We refer to the announcement on 12 January 2003 and on behalf of MAICA, Commerce International Merchant Bankers Berhad ("CIMB") wishes to announce that:
1.1 On 12 January 2004, MAICA entered into a sale and purchase of shares agreement ("SPA") with Md. Nahar Bin Noordin, Hazimah Binti Zainuddin, Shah Hakim @ Shahzanim Bin Zain, Kamaluddin Bin Abdullah, Wan Pauzi Bin Wan Yahya, Dato' Mohamed Azman Bin Yahya and Che Roslan Bin Abdul Ghani (the "Vendors") for the proposed acquisition of 2,000,000 ordinary shares of RM1.00 each in Hyrax ("Hyrax Shares"), representing the entire equity interest in Hyrax for a total purchase consideration of RM50,000,000 to be satisfied by issue of 50,000,000 MAICA Shares at an issue price of RM1.00 per share ("Consideration Shares"); and 1.2 The Company also proposes to implement a proposed restricted issue of 30,000,000 new MAICA Shares at an issue price of RM1.02 per share for cash.
2. DETAILS OF THE PROPOSALS
2.1 Proposed Acquisition
2.1.1 Hyrax Shares to be acquired
The Hyrax Shares are to be acquired free from all charges, liens, pledges, trust and other encumbrances and with all rights, benefits and entitlements as at the execution date of the SPA ("Execution Date") and thereafter attaching thereto, including but without limitation all bonuses, rights, dividends and other distributions declared, paid or made in respect of the Hyrax Shares which relevant book closing date is on or after the Execution Date.
2.1.2 Purchase Consideration
The purchase consideration for the Hyrax Shares to be acquired shall be satisfied by MAICA by the issue of 50,000,000 Consideration Shares and to be apportioned against the names of the Vendors as set out in Table 1 herein, subject to any adjustments required by the Securities Commission ("SC").
2.1.3 Ranking of the Consideration Shares
The Consideration Shares shall be issued on terms that they will be unencumbered and rank pari passu in all respects with the ordinary shares of MAICA in issue at the date of allotment.
2.1.4 Conditions Precedent
The completion of the SPA are conditional on the following conditions precedent being duly satisfied or waived by the date falling six (6) months from the Execution Date or such later date as the parties to the SPA may agree in writing: (a) MAICA being satisfied with the results of the due diligence conducted by the advisers of MAICA on the financial, legal, contractual, tax and trading position and prospects of Hyrax and the Hyrax's title to its assets;
(b) the Vendors being satisfied with the results of the due diligence conducted by the advisers of the Vendors on the financial, legal, contractual, tax and trading position and prospects of MAICA and MAICA's title to is assets;
(c) the approval of the shareholders of MAICA for the Proposed Acquisition and the issue and allotment of the Consideration Shares; and
(d) such other consents or approvals as may be required of any governmental, regulatory body or competent authority or any third party having jurisdiction over the Consideration Shares or any transactions contemplated under the SPA, including but not limited to the SC, Foreign Investment Committee ("FIC") and Malaysia Securities Exchange Berhad ("MSEB").
2.1.5 Profit Guarantee
(a) The Vendors jointly and severally covenant with MAICA that the audited profit after tax ("PAT") of Hyrax for its financial years ending 31 December 2004, 31 December 2005 and 31 December 2006 (the "Guarantee Period") shall not be less than a cumulative aggregate of RM22,500,000 ("Cumulative Guaranteed Profit") and the PAT of Hyrax for each of its financial year during the Guarantee Period shall not be less than RM3,500,000.
(b) In the event the audited PAT of Hyrax for the Guarantee Period is less than the Cumulative Guaranteed Profit, the Vendors undertake to pay MAICA the difference between the Cumulative Guaranteed Profit and the actual PAT of Hyrax for the Guarantee Period ("Cumulative Profit Shortfall").
(c) In the event that the audited PAT of Hyrax for each of its financial year during the Guarantee Period is less than the guaranteed profit per annum ("Guaranteed Profit Per Annum"), the Vendors shall pay MAICA the shortfall between the audited PAT of Hyrax for such financial year and the Guaranteed Profit Per Annum ("Profit Shortfall Per Annum").
(d) Upon completion of the audited annual accounts of Hyrax for the Guarantee Period, parties to the SPA shall procure the auditors for time being and from time to time of Hyrax to certify the PAT of Hyrax for such financial year and the total accumulated and aggregate PAT of Hyrax for the Guarantee Period.
(e) In the event that the certification by Hyrax's auditor reveals a Cumulative Profit Shortfall or Profit Shortfall Per Annum, the Vendors shall within sixty (60) days of the issue of such certification make payment in cash of the amount equivalent to the Cumulative Profit Shortfall or Profit Shortfall Per Annum to MAICA.
(f) Upon receipt of the Consideration Shares, the Vendors shall place such number of Consideration Shares ("Escrow Shares") with a market value equivalent to the Cumulative Guaranteed Profit as at the last trading day of MAICA Shares prior to the date on which such shares are transferred to a stakeholder mutually agreeable to parties to the SPA as a guarantee of the Vendors' obligations pursuant to the profit guarantee as set out in paragraph 2.1.5 (a) above. The number of Escrow Shares shall have the following value:
(i) RM19,000,000 as at the date of certification by Hyrax's auditors in respect of the financial year ending 31 December 2004; and
(ii) RM15,500,000 as at the date of certification by Hyrax's auditors in respect of the financial year ending 31 December 2005.
In the event that there is a Cumulative Profit Shortfall or Profit Shortfall Per Annum and the Vendors or any of them have failed to pay the amount equivalent to the Cumulative Profit Shortfall or Profit Shortfall Per Annum to MAICA, the stakeholder shall dispose of such number of Escrow Shares as may be necessary to make good the Cumulative Profit Shortfall or Profit Shortfall Per Annum and pay such sum to MAICA.
The stakeholder shall release such number of Escrow Shares to the Vendors when the Guaranteed Profit Per Annum is achieved by Hyrax for any of Hyrax's financial year during the Profit Guarantee Period or the Cumulative Guaranteed Profit is achieved by Hyrax at the end of the Guarantee Period, in accordance with the terms set out in the SPA.
(g) The Vendors shall be at liberty to replace all or any of the Escrow Shares by placing cash deposit with the stakeholder and pending release thereof, the stakeholder shall place the cash deposit in an interest earning account. In the event of a default by any of the Vendors of their obligations under the Cumulative Guaranteed Profit or Guaranteed Profit Per Annum, the stakeholder shall first apply the cash deposit and any interest accrued thereon before disposing of any of the Escrow Shares to make good the default.
(h) MAICA shall ensure that the key management personnel of Hyrax are retained in the employment of Hyrax for the duration of the Guarantee Period but shall be entitled to terminate the employment of any key management personnel who commits serious or gross misconduct.
(i) The Vendors agree that in the event that Hyrax incur losses in any year comprised in the Guarantee Period or incur cumulative losses for the Guarantee Period, the Vendors shall in addition to paying the amount of the Profit Shortfall Per Annum or the Cumulative Profit Shortfall, also pay MAICA an amount equal to the losses incurred by Hyrax for the relevant period.
2.1.6 Basis of arriving at the Purchase Consideration and Issue Price
The Purchase Price was arrived at on a willing-buyer willing-seller basis after taking into consideration the information provided by the Vendors on Hyrax, the Cumulative Profit Guarantee of RM22.5 million, the audited PAT of Hyrax for the financial year ended 31 December 2002 of RM0.9 million and the future prospects of Hyrax.
The issue price of the Consideration Shares represents a 2.0% discount from the weighted average market price of MAICA Shares for the five (5) market days up to 9 January 2004, being the last market day prior to the announcement of suspension of trading of its shares pending announcement of the Proposals, of RM1.02.
Other than the abovementioned, MAICA is not expected to assume any liabilities arising from the Proposed Acquisition. However, upon completion of the Proposed Acquisition, Hyrax will become a wholly owned subsidiary of MAICA. Arising thereto, MAICA will assume all assets and liabilities of Hyrax on consolidation.
2.1.7 Cost of Investment
The original cost of investment to the Vendors and the date of such investment by the respective Vendors are as set out in Table 1 herein.
Paragraphs 2.1.1 to 2.1.5 above and paragraph 8 herein are the salient terms of the SPA.
2.2 Proposed Restricted Issue
The Proposed Restricted Issue involves the issue of 30,000,000 new MAICA Shares at an issue price of RM1.02 each for cash ("Restricted Issue Shares") to Tan Sri Dato' Tan Hua Choon ("THC").
.2.1 Basis of Pricing the Restricted Issue Shares
The issue price of the Restricted Issue Shares was arrived at after taking into consideration the weighted average market price of MAICA Shares for the five (5) market days up to 9 January 2004, being the last market day prior to the announcement of suspension of trading of its shares pending announcement of the Proposals, of RM1.02. 2.2.2 Utilisation of Proceeds The proceeds to be raised from the Proposed Restricted Issue of RM30.6 million is proposed to be utilised for working capital requirement, future expansion of MAICA's business and to defray expenses to be incurred in relation to the Proposals.
2.2.3 Ranking of the Restricted Issue Shares
The Restricted Issue Shares shall, upon issue and allotment, rank pari passu in all respects with the then existing issued and fully paid-up MAICA Shares, save and except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date (namely the date as at the close of business on which the shareholders must be registered in order to be entitled to any dividends, rights, allotments and/or other distributions) of which precedes the date of allotment of the Restricted Issue Shares.
3. INFORMATION ON HYRAX
Hyrax was incorporated in Malaysia as a private limited company on 2 November 1991. The company's present authorised share capital is RM2,000,000 comprising 2,000,000 ordinary shares of RM1.00 each, all of which are issued and fully paid-up.
Hyrax is principally engaged in the business of manufacturing and trading of transformer oil and lubricants.
Based on the latest audited accounts of Hyrax for the financial year ended 31 December 2002, the net tangible assets and profit after tax of Hyrax are RM3.7 million and RM0.9 million respectively. A summary of the profit and dividend record of Hyrax based on its audited accounts for the past five (5) financial years ended 31 December 2002 are set out in Table 2 below.
Hyrax does not have any subsidiaries or associated companies as at 14 January 2004.
4. RATIONALE FOR THE PROPOSALS
4.1 Proposed Acquisition
The Proposed Acquisition forms part of MAICA's plan to diversify its business operations. Hyrax's principal activities are manufacturing and trading of transformer oil and lubricants. MAICA believes the lubricants industry is increasingly becoming a global business, with the likes of major international firms such as ExxonMobil, Shell, BP Castrol and Caltex establishing themselves as Hyrax's major competitors in the production of lubricants in Malaysia. Hyrax sets itself apart from these players however, as it dominates in niche markets characterised by relatively smaller volumes which would not be profitable for larger companies. Further, with the benefit of Hyrax's proven business strategies, innovative market programs and supply chain synergies, MAICA believes Hyrax is well positioned to gain from Malaysia's improving economic environment, particularly the automotive, power and manufacturing sectors.
4.2 Proposed Restricted Issue
The Proposed Restricted Issue will enable THC, as the dominant shareholder, to have a meaningful equity stake in MAICA. At the same time, MAICA would be able to raise additional funds via the equity market to meet the future financing requirements of MAICA and its subsidiaries ("MAICA Group").
5. RISK FACTORS
The Proposed Acquisition is subject to various risk factors which include, amongst others, the general business risks in relation to the lubricants industry and the impact of government policies and regulations on the lubricants industry, competition, technology risk, dependency on key personnel and so forth, details of which will be set out in the Circular to be despatched to the shareholders of MAICA at a later date.
6. PROSPECTS OF HYRAX
Hyrax constantly seeks new strategic direction by focusing and exploring in-roads in the local and foreign open market for its lubricating oils. Hyrax foresees a long-term relationship with its current government clients such as Tenaga Nasional Berhad, the Ministry of Defense, the Ministry of Finance, as well as the various agencies under the umbrella of these Ministries such as the Royal Malaysian Navy, Army, Air Force, Police and Works department.
Hyrax has also been successful in expanding market coverage, as proven by the export of its products to Bangladesh, Sri Lanka, Thailand, Nepal, Singapore, Vietnam and Indonesia. Hyrax plans to enhance its market presence in the aforesaid countries, as well as further expand its reach to other countries in the region. To this end, Hyrax has developed several marketing and promotional strategies to create and increase the brand awareness of its products to its targeted markets.
The use of Hyrax's speciality lubricants, automotive lubricants and industrial lubricants across a broad spectrum of industries enables Hyrax to cater to various demands from its diversified customer base. Further the demand for its lubricating oils will be augmented by the projected growth of vehicle sales in Malaysia, the anticipated increase in activities in the power generation and distribution sector, and further extension of long-term contracts with its customers.
7. EFFECTS OF THE PROPOSALS
7.1 Share Capital
The proforma effects of the Proposals are set out in Table 3 herein.
7.2 Substantial Shareholders' Shareholdings
Based on the Register of Substantial Shareholders as at 14 January 2004, the proforma effects of the Proposals on the shareholdings of the substantial shareholders of the Company are set out in Table 4 herein.
7.3 Net tangible assets ("NTA") and Gearing
For illustration purposes, the proforma effects of the Proposals on the audited consolidated NTA of MAICA as at 31 March 2003 and its gearing are set out in Table 5 herein.
7.4 Earnings
The Proposals are expected to be completed by third quarter of year 2004 and hence will not have any impact on the consolidated earnings of MAICA for the financial year ending 31 March 2004. Thereafter, the Proposals are expected to contribute positively to the earnings of MAICA Group.
7.5 Dividend
The Company did not declare any dividend for the financial year ended 31 March 2003 and does not expect to declare any dividend for the financial year ending 31 March 2004.
8. APPROVALS REQUIRED
The Proposals are subject to and conditional upon approvals being obtained from the following: (i) SC;
(ii) SC (on behalf of FIC);
(iii) MSEB, for the listing of and quotation for the new MAICA Shares to be issued pursuant to the Proposals;
(iv) shareholders of MAICA at an Extraordinary General Meeting ("EGM") to be convened; and
(vi) any other relevant authorities. In addition to the above approvals, the Proposed Acquisition is also subject to conditions stipulated in paragraph 2.1.4 herein.
9. DEPARTURE FROM THE SECURITIES COMMISSION'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ("SC GUIDELINES")
Save as disclosed below, there is no departure from the SC Guidelines in respect of the Proposals.
According to Chapter 10 of the SC Guidelines, shares which are placed out to related parties must be priced at least at the weighted average market price of the shares of MAICA for the five (5) market days prior to a price-fixing date to be set on a after the approval of the SC for the placement.
As set out in paragraph 2.2.1 above, the issue price of the Restricted Issue Shares is fixed upfront at RM1.02 instead of at a price fixing date after SC's approval. Waiver will be sought from the SC for the departure from the SC Guidelines.
10. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS
THC is the Chairman and major shareholder of MAICA holding 22,641,985 MAICA Shares or 17.37% equity interest therein as at 14 January 2004. Accordingly, THC is deemed interested in the Proposed Restricted Issue and has abstained from any deliberations and voting at meetings of the Board of Directors of MAICA to consider the Proposed Restricted Issue.
THC will also abstain from voting in respect of his direct and indirect shareholdings in MAICA on the resolution pertaining to the Proposed Restricted Isssue at the EGM of MAICA to be convened and shall undertake to ensure that persons connected to him will abstain from voting on the resolution for the Proposed Restricted Isssue.
Save as disclosed above, none of the Directors and/or major shareholders of the Company or persons connected to them has any interest, direct or indirect, in the Proposals.
11. DIRECTORS' RECOMMENDATION
The Directors of MAICA, save for THC who is deemed interested in the Proposed Restricted Issue, having considered all aspects of the Proposals, are of the opinion that the Proposals are in the best interest of the Company.
12. ADVISER
CIMB has been appointed by MAICA as Adviser for the Proposals.
13. SUBMISSION TO RELEVANT AUTHORITIES
Applications in relation to the Proposals will be made to the relevant authorities within six (6) months from the date of this announcement.
14. DOCUMENTS AVAILABLE FOR INSPECTION
A copy of the SPA is available for inspection at the Registered Office of MAICA at 8-3, Jalan Segambut, 51200 Kuala Lumpur during normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement.
(This announcement is dated 14 January 2004)
| Company Name | MALAYSIA AICA BERHAD |
| Stock Name | MAICA |
| Date Announced | 14 Jan 2004 |
| Category | General Announcement |
| Reference No | MM-040114-63375 |
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