CENTURION CORPORATION LIMITED (Company Registration No W) (Incorporated in the Republic of Singapore) ANNOUNCEMENT

Transcription

1 CENTURION CORPORATION LIMITED (Company Registration No W) (Incorporated in the Republic of Singapore) ANNOUNCEMENT PROPOSED ACQUISITION OF AN 85% STAKE IN DORMITORY INVESTMENTS PRIVATE LIMITED 1. INTRODUCTION 1.1 Signing of SPA. The Board of Directors ( Board ) of Centurion Corporation Limited (the Company ) refers to its announcement dated 31 January 2012, in connection with the acceptance of a tender offer made by the Company to acquire an 85% stake in Dormitory Investments Private Limited ( DIPL ). The Board now wishes to announce that Centurion Dormitories Pte. Ltd. ( CDPL ), a wholly-owned subsidiary of the Company, has today entered into a sale and purchase agreement ( SPA ) with Crest Industrial Holdings Pte. Ltd. ( CIH ) to acquire all 6,800,000 issued ordinary shares in DIPL held by CIH (the Sale Shares ), representing approximately 85% of the equity interest in DIPL (the ). 2. PRINCIPAL TERMS 2.1 SPA. Pursuant to the SPA, CIH shall sell as legal and beneficial owner and transfer to CDPL, and CDPL shall purchase from CIH, all of CIH's rights, title and interest in the Sale Shares free and clear of all encumbrances, together with all rights, dividends, entitlements and benefits as at the Completion Date (as described below) and thereafter attaching thereto. The Completion Date shall occur when all of the conditions precedent in the SPA are satisfied, subject to a long-stop date of 29 February Please refer to paragraph 2.3 of this Announcement for further details. 2.2 Consideration. The consideration payable for the is S$ million (the Consideration ) in cash which will comprise: a non-refundable deposit of one per cent. (1%) of the Consideration, amounting to S$403,750.00, which has been paid to CIH on 30 January 2012; and the balance of the purchase price of ninety-nine per cent. (99%) of the Consideration, amounting to S$39,971,250.00, which shall be paid by CDPL to CIH on the Completion Date. The Consideration was arrived at after taking into account, inter alia, the reserve price of S$45 million for 100% of the equity interest in DIPL set by CIH and a financial evaluation of DIPL and its subsidiaries (the DIPL Group ) based upon the prevailing conditions in the worker dormitory industry in Singapore. 1

2 The Consideration may, in accordance with the terms of the SPA, be adjusted for any difference between the net current assets and the net current liabilities of the DIPL Group as at the completion of the ( Completion ). Any adjustment to the Consideration will be settled in cash. 2.3 Conditions Precedent. Completion is subject to, inter alia,: (iii) each of CIH s warranties under the SPA remaining true and not misleading in all material respects at Completion, as if repeated at Completion and at all times between the date of the SPA and Completion; all other material and necessary consents, approvals, actions on the filing or giving of notice to any governmental body in connection with the, if any, being granted and not withdrawn or revoked by such government bodies and other relevant authorities having jurisdiction over the ; and the results of legal, financial and operational due diligence investigations on the DIPL Group conducted by CDPL and its advisors being satisfactory to CDPL. 2.4 Post Completion. Upon Completion, the Company will hold an 85% equity interest in DIPL through CDPL. The remaining 15% equity interest in DIPL will be held by Mr Kang Choon Boon. Accordingly, DIPL will, on Completion, be an indirect subsidiary of the Company. 3. RATIONALE FOR THE PROPOSED ACQUISITION The Company and its subsidiaries ( Group ) is embarking on the as part of the Group s acquisition growth strategy to be a dominant player in providing dormitory accommodation and services to foreign workers ( Dormitory Business ). The will add 8,600 beds to the Group s portfolio, which will immediately raise the profile of the Group as a dominant independent dormitory operator, enable the Group to enjoy economies of scale in its operations and provide the Group with the necessary infrastructure and platform with which to widen its customer base. As the Tuas Asset (as defined below) is an operating dormitory, the will bolster the Group s revenue from this financial year. The Group also hopes to leverage on the customer base it will gain as a result of the. The Tuas Asset is presently utilized by an existing set of customers, which the Group will absorb upon Completion. The Group will be able to tap its enlarged customer base to promote and fill up its other dormitories when development and upgrading works at such dormitories are completed and become operational in the Company s financial year ended 31 December 2013 or 31 December Increasing the number of its existing customers will facilitate the Group s future marketing efforts (as these customers would be familiar with the Group) and possibly improve the rate at which the Group is able to fill up upcoming vacancies at its dormitories. 2

3 The Group believes that the will also enhance the operational synergies of the Group. The Group has noted that the supply of foreign workers dormitory in Singapore is tight. The Group intends to commence upgrading works at the Group s existing Westlite dormitory later this year and is still in the midst of constructing its Mandai dormitory. With the acquisition of the Tuas Asset, the Group will have the flexibility to offer its existing as well as new customers alternative accommodation pending the completion of the aforementioned upgrading and construction works. This will allow an overall retention of its customers within the Group. 4. FUNDING The Company intends to fund the Consideration by way of a bank financing and the internal resources of the Group. 5. INFORMATION ON THE DIPL GROUP 5.1 DIPL. DIPL is a Singapore-incorporated company which is 85% held by CIH with the remaining 15% owned by Kang Choon Boon. DIPL is an investment-holding company engaged in the dormitory real estate ownership and management business and in particular, owns and operates a dormitory in Tuas ( Tuas Asset ). The Company understands, based on information available to the Company, that the Tuas Asset is a temporary dormitory under a year lease from the Building and Construction Authority with a remaining lease of approximately five years. The Tuas Asset began operations in June 2010 and has a capacity of approximately 8,600 beds with an existing occupancy rate of about 80% to 90%. DIPL has three subsidiaries, 5 Star Supermart Pte. Ltd. ( SSPL ), 5 Star Dormitory Management Pte. Ltd. ( DMPL ) and DI Food Services Pte. Ltd. ( FSPL ). DMPL operates and manages the Tuas Asset, while SSPL and FSPL provide various support and value-added services to DMPL. 5.2 Asset Value. As at 30 September 2011, the book value / net tangible asset value of the Sale Shares was approximately S$27.9 million. 5.3 Net Profits. The net profits before tax, minority interests and exceptional items attributable to the Sale Shares for the nine-month period ended 30 September 2011 is approximately S$6.6 million FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 6.1 Assumptions. The pro forma financial effects of the on selected financial measures and ratios of the Group are set out below, and have been computed using the: announced audited consolidated financial information of the Group for the financial year ended 31 December 2010 ( FY 2010 ); and 1 The net profits reflected in paragraph 5.3 are derived solely from the Tuas Asset. 3

4 the announced unaudited consolidated financial information of the Group for the ninemonth period ended 30 September 2011 ( 3Q 2011 ). For the purpose of illustrating the financial effects of the, the financial effects are based on, inter alia, the assumption that the pro forma financial effects of the on the earnings per share ( EPS ), the net tangible assets ( NTA ) per share, and the share capital of the Company are prepared purely for illustration only and do not reflect the actual future financial situation of the Group after Completion. In addition, upon completion of the, the Company will carry out, in accordance with FRS 103, Business Combinations, a purchase price allocation ( PPA ) exercise to assess the fair values of the net identifiable assets of the DIPL Group. The excess of the cost of acquisition over the fair values of the net identifiable assets will be recorded as goodwill in the balance sheet and subject to an annual impairment test. Accordingly, for the purpose of illustrating the financial effects of the, the Company has assumed, on a provisional basis, that the fair values of the net identifiable assets of the DIPL Group with respect to the are equal to the expected carrying amounts of the DIPL Group with respect to the. As a result, the provisional goodwill on acquisition would approximately amount to S$20.5 million. On the finalization of the PPA, the actual amount of goodwill (if any) arising from the could be materially different because the fair values of the net identifiable assets of the DIPL Group may differ from the varying values of the net identifiable assets of the DIPL Group. As the illustration of the financial effects of the is done on a provisional basis, the impact of potential impairment of goodwill and amortization of other intangible assets identified as part of the PPA has not been taken into account. 6.2 NTA. Assuming that the had been completed on 31 December 2010 and 30 September 2011, the effect on the NTA per share of the Group as at 31 December 2010 and 30 September 2011 respectively are as follows: NTA for FY 2010 Before the After the NTA (S$ 000) 47,158 47,158 Number of shares 362,419, ,419,500 NTA per share (S$ cents) NTA for 3Q 2011 NTA (S$ 000) 78,978 78,978 4

5 NTA for 3Q 2011 Before the After the Number of shares 656,060, ,060,841 NTA per share (S$ cents) Earnings. Purely for illustrative purposes only and assuming that the had been completed on 1 January 2010 and 1 January 2011, the pro forma financial effects on the consolidated earnings of the Group for FY 2010 and 3Q 2011 respectively are as follows: FY 2010 Before the After the Profit attributable to the Shareholders (S$ 000) 688 (195) (1)(4) Weighted average number of shares 362,419, ,419,500 EPS (S$ cents) 0.19 (0.05) (2)(4) 3Q 2011 Profit attributable to the Shareholders 5,093 10,247 (1)(4) (S$ 000) (3) Weighted average number of shares 476,231, ,231,314 EPS (S$ cents) (2)(4) Notes: (1) The profits attributable to the are derived solely from the Tuas Asset. (2) The earnings attributable to the are derived solely from the Tuas Asset. (3) The net profits of the Group have been adjusted for the goodwill written off in relation to the excess of the cost of the reverse acquisition over the net fair values of the Group amounting to S$12.97 million. Accordingly, the net profits for the Group for 3Q 2011 (on an after tax basis) used in the above computation are S$5.09 million. (4) As disclosed in paragraph 6.1 above, the illustration of the financial effects of the is done on a provisional basis. Accordingly, the impact of potential impairment of goodwill and amortization of other intangible assets identified as part of the PPA has not been taken into account. Therefore, Shareholders should note that the profits derived from the may be materially reduced by the impairment of the goodwill and amortization of other intangible assets being determined in future financial periods. 6.4 Share Capital. The will not have any impact on the issued share capital of the Company. 5

6 7. CHAPTER 10 THRESHOLDS 7.1. The relative figures for the computed on the bases set out in Rule 1006 are as follows: Rule 1006 Bases Relative Figures (%) (b) Net profits (1) attributable to the compared with the Group s net profits 106% (c) The aggregate consideration (2) of the compared with the market capitalisation of the Company (3) 28% Notes: (1) Net profits is defined as profit before income tax, minority interest and exceptional items. The figures are based on the Group s net profits as derived from the announced unaudited consolidated financial statements of the Group for 3Q The net profits of the Group have been adjusted for the goodwill written off in relation to the excess of the cost of the reverse acquisition over the net fair values of the Group amounting to S$12.97 million. Accordingly, the net profits of the Group for 3Q 2011 used in the above computation are S$6.26 million (2) The consideration for the is S$ million. The market capitalisation of the Company is based upon a total number of 756,060,841 shares in issue (excluding treasury shares) as at 23 February 2012 at the volume-weighted average price of S$ per share as transacted on 23 February As the relative figures under Rules 1006 (b) and 1006(c) exceed 20 per cent., the constitutes a major transaction as defined in Chapter 10 of the Listing Manual. 7.2 No Shareholders Approval Required. Notwithstanding that the relative figures under Rules 1006 (b) and 1006 (c) exceed 20 per cent., the is not subject to shareholders approval, on the basis that: (iii) the is within the ordinary course of business of the Group; the will result in the expansion of the existing Dormitory Business which is the principal business of the Group; and the will not change the risk profile of the Company in the sense that: 6

7 (a) (b) (c) (d) the will not increase the scale of the Company s existing operations significantly; there will be no change in control of the Company as a result of the ; the will not have a significant adverse impact on the Company s earnings, working capital and gearing; and the Tuas Asset operated by the DIPL Group is located in Singapore, which is the Company s home country and principal place of business. In addition, the is in line with the Company s existing Dormitory Business which is the principal business of the Group. Accordingly, the will not result in an expansion of the Company s business to a new geographical market and/or a new business sector. 8. FURTHER INFORMATION 8.1 Directors Service Contracts. No person is proposed to be appointed as a director of the Company in connection with the. Accordingly no service contract is proposed to be entered into between the Company and any such person. 8.2 Interests of Directors and Substantial Shareholders. None of the Directors or substantial shareholders of the Company has any interest, direct or indirect, in the. 8.3 Documents for Inspection. A copy of the SPA is available for inspection during normal business hours at the registered office of the Company at 45 Ubi Road 1, Summit Building, Singapore for a period of three months commencing from the date of this announcement. BY ORDER OF THE BOARD Kong Chee Min Chief Executive Officer 24 February 2012 CIMB Bank Berhad, Singapore Branch is the financial adviser to the Company in relation to the Westlite and the JVCo (the "Financial Adviser"). The Financial Adviser has not independently verified, and assumes no responsibility for, the contents of this announcement. 7