Dec 1, 2015 - In consideration of the Company agreeing to defer the payment of the Disposal .... DOCI was incorporated i
Type Subject
1.
: Announcement : DAYA MATERIALS BERHAD (“DMB” OR “THE COMPANY”) PROPOSED DISPOSAL OF 1,690,000 ORDINARY SHARES OF RM1.00 EACH IN DAYA OCI SDN. BHD. (“DOCI”) REPRESENTING 16.9% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF DOCI TO RANCAK NIKMAT SDN. BHD. (“THE PURCHASER”) FOR A TOTAL CASH CONSIDERATION OF RM9,200,000 INTRODUCTION The Board of Directors of DMB wishes to announce that the Company, had on 30 November 2015 entered into a Sale and Purchase Agreement ("SPA") with the Purchaser to dispose 1,690,000 ordinary shares of RM1.00 each in DOCI (“the Sale Shares") representing 16.9% of the issued and paid-up share capital of DOCI to the Purchaser at a total cash consideration of RM9,200,000 (“Consideration”) (“Proposed Disposal”).
2.
DETAILS OF THE PROPOSED DISPOSAL
2.1
Disposal Consideration The total Proposed Disposal Consideration of RM9,200,000 (“Disposal Consideration”) was arrived on a willing buyer-willing seller basis negotiated between DMB and the Purchaser after taking into consideration the net assets of DOCI of RM28,173,172 based on the audited accounts of DOCI for the financial period ended 31 December 2014. The Disposal Consideration is arrived after considering the strategic nature of the Purchaser and its future contribution to the oil & gas business of the Company.
2.2
Utilisation of Proceeds Cash proceeds amounting to RM9,200,000 will be utilised by DMB for its working capital purposes within six (6) months from the receipt of the proceeds. The amount allocated for working capital will be utilized to meet DMB and its group of companies’ (“DMB Group” or “the Group”) general working capital requirements such as the operating expenses of the DMB Group which include purchase of raw materials as well as repayment of trade and other payables. At present, DMB has not determined the exact breakdown of the proceeds in respect of the aforesaid working capital requirements.
2.3
Original Date and Cost of Investment The original date and cost of investments in DOCI is as set out as below. Company
DOCI
Original date of investment
19 April 2010
No. of Shares
Cost of Investment
(Ordinary Shares of RM1 each)
Ringgit Malaysia
5,000,000
30,337,946
2.4
Assumed Liabilities There are no liabilities to be assumed by the Purchaser pursuant to the Proposed Disposal other than those reflected in the Statement of Financial Position of DOCI upon completion of the Proposed Disposal.
2.5
Expected Gains or Losses to the Group The gains or losses to the Group are expected to be minimal as the transaction is done on a guaranteed yield basis whereby the Company guarantees a fixed return to the Purchaser annually. In exchange for this guaranteed return, the Purchaser agrees to waive all excess profits of DOCI back to the Company. If based on the DMB Group’s carrying value relating to the disposal percentage of equity interest in the Companies as at 31 December 2014 and on the assumption that the Proposed Disposal was completed on 31 December 2014 , the Proposed Disposal will result in a loss of approximately RM57,985 attributable to the DMB Group.
3.
Salient Terms of the SPA The salient terms of the SPA are as follows:
3.1
The Disposal Consideration for the Sale Shares shall be paid by the Purchaser to the Company in immediately available funds on the expiry of five (5) years from the date the SPA is rendered unconditional in accordance with Clause 4 of the SPA or such other period as shall be mutually agreed by the parties hereto.
3.2
In consideration of the Company agreeing to defer the payment of the Disposal Consideration as set out in Item 3.1 above, the Purchaser agrees to pay interest on the Disposal Consideration to the Company. The interest rate shall be equivalent to the Malayan Banking Berhad’s base lending rate plus point Five percent (0.5%) per annum for so long as the Disposal Consideration remains unpaid, with the first (1st) year commencing on the date the SPA is rendered unconditional in accordance with Clause 4 of the SPA.
3.3
The SPA is conditional upon the fulfilment of the following conditions: a)
the Company obtaining the approval Hong Leong Bank Berhad (“First Chargee”) in respect of a first third party legal charge over the Sale Shares (“First Charge”), for the sale by the Company of the Sale Shares to the Purchaser; and
b) if applicable, the Company procuring that DOCI obtain the approval or consent of their financiers for the changes in its shareholdings arising from the sale and purchase of the Sale Shares envisaged in the SPA; within Thirty (30) days from the date of the SPA or such other period as shall be mutually agreed between the parties hereto ("Conditions Precedent"). 3.4
Forthwith upon the fulfilment of the Conditions Precedent or the waiver of the same pursuant to Clause 4.3 of the SPA, the SPA shall become unconditional and shall be completed in accordance with and subject to the terms and conditions of the SPA.
3.5
If the Conditions Precedent are not fulfilled within the period stipulated above in Item 3.3 or waived as the case may be, the SPA shall be deemed null and void and of no further force and
effect with neither party having any rights and obligations against the other save and except for any antecedent breaches. 3.6
The Company and the Purchaser may mutually agree to waive the fulfilment of any of the Conditions Precedent.
3.7
On the Completion Date, which is a day falling on the expiry of seven (7) business days after the SPA is rendered unconditional in accordance with Item 3.3 above (“Completion Date”), the Company shall deliver to the Purchaser the following: a)
the original share certificate in respect of the Sale Shares;
b)
the Form of Transfer of Securities (Form 32A) in respect of the Sale Shares, duly executed by the Company in favour of the Purchaser; and
c)
the resolution of the directors of the DOCI approving the transfer of the Sale Shares in favour of the Purchaser;
and thereafter, the sale and purchase of the Sale Shares shall be deemed completed and the Purchaser shall be deemed to be the beneficial owner of the Sale Shares notwithstanding that the Disposal Consideration has not been paid to the Company. 3.8
The Purchaser irrevocably authorises the Company to attend to the adjudication and stamping of the document specified in Item 3.7 above and the eventual transfer of the share certificates issued in respect of the Sale Shares in favour of the Purchaser. The Purchaser further irrevocably authorises the Company to take and retain custody and possession of the original share certificates issued in respect of the Sale Shares in favour of the Purchaser and forward the same to the First Chargee, for the purposes of perfecting the First Charge.
3.9
The Purchaser shall execute the First Charge and all other relevant documents required by the First Chargee simultaneously with its execution of this Agreement or within such time as shall be stipulated by the First Chargee.
3.10
In consideration of the Purchaser agreeing to purchase the Sale Shares upon the terms and subject to the conditions set out in the SPA, the Company hereby guarantees to the Purchaser that DOCI shall declare and pay the sum of Ringgit Malaysia Six Hundred Ninety Thousand (RM690,000) or Seven point Five percent (7.5%) of the Disposal Consideration for DOCI on each of the financial year so long as the Purchaser is at the material times, a shareholder of DOCI entitled to such yield declared by DOCI (“Guaranteed Yield”).
3.11
If DOCI does not pay the Guaranteed Yield or pay yields which is less than the Guaranteed Yield to the Purchaser for any financial year while the Purchaser is a shareholder of DOCI entitled to such yield declared by DOCI, the Company shall be obliged to make good to the Purchaser the Guaranteed Yield within thirty (30) days after the end of the relevant financial year or such shortfall between the actual yield paid by the DOCI and the Guaranteed Yield for the relevant financial year within thirty (30) days after receipt by the Purchaser of such yield from DOCI.
3.12
In consideration of the Company guaranteeing that DOCI will pay the Guaranteed Yield to the Purchaser, the Purchaser agrees that any yield declared and payable or paid by DOCI to the Purchaser for any of its financial year which is in excess of the Guaranteed Yield and all rights, interests, benefits and titles of the Purchaser in and to such yield exceeding the Guaranteed Yield and in and to the Purchaser’s entitlement or share of the net assets and profits of DOCI
(“Excess”) shall and are hereby assigned absolutely to the Company. Simultaneously with its execution of SPA, the Purchaser shall execute a letter in the form and substance set out in Annexure 1 of the SPA and hereby irrevocably authorises the Company to deliver the aforesaid letter to the DOCI. Any Excess received by the Purchaser shall be received and held by the Purchaser as trustee for the Company and shall be immediately remitted to the Company whether or not demanded in writing. 3.13
The abovementioned provisions in Item 3.11 to 3.12 shall survive the completion of the sale and purchase transaction herein contemplated and continue to have full force and effect for so long as may be required to give effect to the Guaranteed Yield upon the terms and conditions herein contained.
4.
RATIONALE FOR THE PROPOSED DISPOSAL The Proposed Disposal is to meet the objectives of enhancing the Bumiputera equity ownership in DOCI. In its ordinary course of business, the DMB Group requires certain licenses and permits to operate its business. The licenses issued enable the DMB Group to market the Group’s products and services and are subject to Bumiputera shareholding requirements and various employment and operating conditions. Therefore it is crucial and important for DMB Group to ensure that there is sufficient Bumiputera equity ownership in DOCI.
5.
INFORMATION ON DOCI AND THE PURCHASER
5.1
DOCI DOCI was incorporated in Malaysia under the Act on 2 March 1994 as a private limited company under the name of Purata Bintang Sdn. Bhd, subsequently change the name to OCI Energy Sdn.Bhd. on 20 April 1994 and assumed its current name on 20 August 2010. DOCI’s principal business activities are acting as a supply agent of equipment and specialty chemicals for oil and gas process plants, a provider of installation and maintenance services for air conditioning and ventilation system, automatic welding services for offshore pipeline installation, maintenance services for both onshore plants and offshore facilities, warehousing and forwarding agency. DOCI commenced business operations on 2 March 1994. DOCI’s present authorised share capital is RM10,000,000 comprising of 10,000,000 DOCI Shares and the issued and fully paid up share capital is RM10,000,000 comprising 10,000,000 DOCI Shares. The existing shareholders of DOCI and their respective shareholdings are as follows:-
Name
Place of Direct
No of shares held % Indirect
%
Incorporation DMB Rancak Nikmat Sdn. Bhd. Wiramas Baiduri Sdn. Bhd. Total
Malaysia Malaysia Malaysia
6,700,000 2,490,000 810,000 10,000,000
67.0 24.9 8.1 100.0
-
-
The Board of Directors of DOCI and their interest in shares in its holding company, DMB based on the Register of Directors’ Shareholdings as at 30 November 2015 are as follows:Name
Zaidi Bin Ayub Datuk Lim Thean Shiang Norzain Bin Abdul Wahab
Nationality
Malaysian Malaysian Malaysian
No of shares held Direct
%
100,000,000 50,000,000
6.05 3.03
Indirect
%
5,644,100 0.34* -
* Deemed interested by virtue of the shareholdings of his spouse and mother pursuant to section 134(12) of the Companies Act. 5.2
Purchaser The Purchaser, Rancak Nikmat Sdn. Bhd. was incorporated on 10 May 2011 under the Companies Act, 1965 as a private limited company with an authorised share capital of RM100,000 divided into 100,000 ordinary shares of RM1.00 each, of which 2 ordinary shares of RM1.00 each have been issued and fully paid-up. The Purchaser is principally engaged in investment holding. The Board of Directors of the Purchaser and their shareholdings based on the Register of Directors’ Shareholdings as at 30 November 2015 are as follows:Name
Nationality
No of shares held Direct
Norzain Bin Abdul Wahab Abdul Majid Bin Abdul Karim
Malaysian Malaysian
1 1
6.
EFFECTS OF THE PROPOSED DISPOSAL
6.1
Share capital and shareholdings of the substantial shareholders
%
Indirect
%
50 50
-
-
The Proposed Disposal will not have any effect on the issued and paid-up share capital and the shareholdings of the substantial shareholders of DMB. 6.2
Earnings The Proposed Disposal is not expected to have any material effect on the earnings and EPS of the DMB Group for the financial year ending 31 December 2015 and in the future. As set out in Section 3.13, the Purchaser agrees that any yield declared and payable or paid by DOCI to the Purchaser for any of its financial year which is in excess of the Guaranteed Yield and all rights, interests, benefits and titles of the Purchaser in and to such yield exceeding the Guaranteed Yield and in and to the Purchaser’s entitlement or share of the net assets and profits of the Companies are assigned absolutely to the Company. As a result, the management expects
that the Proposed Disposal would not have any financial effect on the Group’s future earnings except for those disclosed below. For illustrative purposes, the proforma effects of the Proposed Disposal on the audited profit attributable to ordinary equity holders of the Company for the year and earnings per share of DMB based on its audited consolidated financial statements as at 31 December 2014 are set out below:
Loss attributable to ordinary equity holders of the Company (RM) Weighted average number of shares in issue (‘000) Earnings per share (sen)
Audited as at 31 December 2014 (35,162,017)
After Proposed Disposal (35,175,817)
1,396,277 (2.52)
1,396,277 (2.52)
The reconciliation of the above profit attributable to ordinary equity holders of the Company is arrived as follow:
Audited as at 31 December 2014 Interest income Guarantee yield After the Proposed Disposal
6.3
RM (35,162,017) 676,200 (690,000) __________ (35,175,817) =========
Net assets (“NA”) and gearing For illustrative purposes, the proforma effects of the Proposed Disposal on the audited NA and gearing of DMB based on its audited consolidated financial statements as at 31 December 2014 are set out below:
Share capital Share premium Retained profits Foreign translation reserves Available-for-sale reserves Treasury shares Non-controlling interests
Audited as at 31 December 2014 RM 165,181,875 71,440,135 51,925,203 (3,085,252) 5,333,334 (697) 20,250,646
After Proposed Disposal RM 165,181,875 71,440,135 51,853,418 (3,085,252) 5,333,334 (697) 20,250,646
311,045,244
310,973,459
Shareholders’ funds/ NA No. of shares in issue NA per share (RM)
(1)
1,651,816,754 0.19
(2)
1,651,814,754 0.19
Total borrowings
138,018,857
138,018,857
0.44
0.44
Gearing ratio (times) (1) (2)
6.4
Computed net of 2,000 Treasury Shares as at 31 December 2014. Adjustments for subsequent event for the purchase of additional 2,000 Treasury Shares by the Company for a total cash consideration of RM324.48
Financial Information of DOCI The following is the summary of the proforma consolidated financial results of DOCI for the past three (3) financial years ended 31 December 2014.
Revenue Profit before Tax Taxation Profit after tax Net EPS (RM) No. of shares in issue (‘000) Shareholders’ funds (RM) Total borrowings (RM)
7.
2012 RM’000 52,956 10,296 (2,678)
2013 RM’000 41,559 8,626 (2,620)
2014 RM’000 34,083 2,821 (1,029)
7,618 1.49
6,006 0.62
1,792 0.18
5,000
5,000
10,000
24,379 3,114
27,621 21,497
28,173 1,802
APPROVALS REQUIRED The Proposed Disposal is not subject to the approval of any governmental authorities or the shareholders of DMB.
8.
DIRECTORS' AND MAJOR SHAREHOLDERS' INTEREST Pursuant to Chapter 10 - Part E, Paragraph 10.08 (11)(n) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad, the Proposed Disposal is an exception to the related party transaction rules in the MMLR, in view of the interested major shareholders and directors as set out below: Encik Norzain Bin Abdul Wahab is a director of the Purchaser and DOCI. He is also a shareholder of DMB with 3.03% direct shareholdings and a major shareholder of the Purchaser via his direct shareholdings in the Purchaser as set out in Section 5.2 above. Encik Norzain Bin Abdul Wahab has accordingly abstained and will continue to abstain from deliberating and voting at any Board meetings of DOCI or at any shareholder meetings of the Purchaser in respect of the Proposed Disposal.
Except for the Purchaser and Encik Norzain Bin Abdul Wahab, none of the Directors, major shareholders or persons connected with such directors or major shareholders of the Company have any interest, direct or indirect, in the Proposed Disposal.
9.
DIRECTORS' STATEMENT The Board of Directors of DMB, having considered all aspects of the Proposed Disposal, is of the opinion that the Proposed Disposal is in the best interest of DMB.
10.
HIGHEST PERCENTAGE RATIO APPLICABLE The highest percentage ratio is 2.96% which is the aggregate value of the consideration and liabilities assumed in relation to the Proposed Disposal, compared with the net assets of DMB.
11.
ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED DISPOSAL Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed by the first quarter of 2016.
12.
DOCUMENTS AVAILABLE FOR INSPECTION The copies of the SPA are available for inspection at the registered office of DMB at Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan during normal office hours from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement.
This announcement is dated 1 December 2015
