LION CORPORATION BERHAD ( LCB or the Company )

Transcription

1 LION CORPORATION BERHAD ( LCB or the Company ) Proposed disposal by Lion General Trading & Marketing (S) Pte Ltd, a wholly-owned subsidiary of the Company, of its entire 100% equity interest in Lion Plate Mills Sdn Bhd to Maximum Protection Services Sdn Bhd for a cash consideration of RM33 million. 1. INTRODUCTION The Board of Directors of LCB wishes to announce that Lion General Trading & Marketing (S) Pte Ltd ( LGTM ), a wholly-owned subsidiary of the Company, had on 3 September 2013 entered into a sale and purchase agreement ( Agreement ) with Maximum Protection Services Sdn Bhd ( MPS ) for the disposal by LGTM of its entire 100% equity interest in Lion Plate Mills Sdn Bhd ( LPM ) comprising 10,000 ordinary shares of RM1.00 each fully paid ( Sale Shares ) to MPS for a cash consideration of RM33 million ( Disposal Consideration ) ( Proposed Disposal ). At the point of sale, LPM will only own fixed assets with near-zero net current assets. 2. INFORMATION ON THE PROPOSED DISPOSAL 2.1 Information on LPM LPM was incorporated in Malaysia under the Companies Act, 1965 on 17 February 1997 as a private limited liability company under the name of Mission Possible Sdn Bhd and LPM assumed its present name on 16 August LPM is principally involved in the manufacturing and marketing of hot rolled steel plate. The authorised share capital of LPM is RM100,000 comprising 100,000 ordinary shares of RM1.00 each and its issued and paid-up share capital is RM10,000 comprising 10,000 ordinary shares of RM1.00 each. LPM is a wholly-owned subsidiary of LGTM. Based on its audited financial statements for the financial year ended ( FYE ) 30 June 2012, LPM recorded a loss after tax( LAT ) of RM3.06 million whilst its net assets ( NA ) were RM44.68 million as at 30 June LPM owns a piece of 44-year leasehold land expiring on 14 May 2055, held under title no. PN 9150 Lot 60084, Mukim Teluk Kalung, Daerah Kemanan, Terengganu, measuring approximately 8.33 hectares in area, bearing postal address, Lot 3916, Kawasan Perindustrian Teluk Kalung, Kemaman, Terengganu located about 3 kilometers from Chukai town centre ( Land ). A 3-storey office building was erected 16 years ago on the Land ( Property ) together with a hot rolled plate manufacturing plant ( Plant ) which has a capacity of 170,000 metric tonne ( MT ) per annum. The Plant and machinery of LPM comprise a 3-zone reheating furnace, one (1) primary descaler, one (1) secondary descaler, one (1) high mill stand, one (1) hot leveller (up to 40 mm thickness), a 2-zone cooling bed and one (1) shear line ( Plant and Equipment ). The Property and the Plant and Equipment are free from encumbrances. 1

2 The net book value of the Property and the Plant and Equipment is RM10.48 million based on the audited accounts of LPM as at 30 June Information on MPS MPS was incorporated in Malaysia under the Companies Act, 1965 on 11 April 2013 as a private limited liability company. The authorised capital of MPS is RM500,000 comprising 500,000 ordinary shares of RM1.00 each and its issued and paid-up share capital is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The Directors of MPS are Mr Wong Teck Siong, Mr Low Kok Sing and Mr Wong Kai Long. The shareholders of MPS and their respective shareholdings are as follows: Shareholders Percentage (%) Number of ordinary shares Wong Teck Siong ,000 Wong Kai Long 1 5,000 Low Kok Sing 1 5,000 Total , Basis and justification for the Disposal Consideration The Disposal Consideration of RM33 million was arrived at on a willing-buyer willingseller basis after taking into consideration the following:- (i) (ii) (iii) On Completion Date, LPM will only own the fixed assets i.e. the Property and the Plant and Equipment with near-zero net current assets. All stocks will be disposed before the Completion Date. The unaudited book value of LPM s Property and the Plant and Equipment as at 30 June 2013 of RM9.83 million; and LPM s unaudited LAT of approximately RM8.03 million for the FYE 30 June 2013 and audited LAT of approximately RM3.06 million for the FYE 30 June The proceeds from the sale of all LPM s stocks and its cash holdings shall be utilised to repay borrowings owing to the lenders of LCB. It should be noted that the Disposal Consideration represents a price to book multiple of 3.36 times based on LPM s unaudited book value of the Property and the Plant and Equipment of RM9.83 million as at 30 June Based on the unaudited accounts as at 30 June 2013, the net current assets of LPM is RM26.82 million. Thus, excluding any future losses pending completion of the Proposed Disposal, the disposal of 100% equity interest in LPM will generate a total of approximately RM60 million cash (comprising net current assets and Disposal Consideration) to the LCB Group. 2

3 2.4 Payment terms for the Proposed Disposal Set out below are the payment terms for the Proposed Disposal: RM 000 Timing Deposit 10% 3,300 On the execution of the Agreement, the Deposit will be placed with the stakeholder. Balance Disposal Consideration 90% 29,700 On or before the completion date of the Agreement in one payment. 2.5 Salient terms for the Proposed Disposal The salient terms of the Agreement are as follows: (i) (ii) The Sale Shares shall be free from all charges, liens and other encumbrances and with all rights attaching on the completion date. The Agreement is conditional, inter alia, upon: (a) (b) (c) (d) (e) the completion of a satisfactory due diligence investigation on LPM by MPS. The lenders of LCB approving the disposal of the Sale Shares to MPS. The delivery by LGTM to MPS of a guarantee and indemnity by LCB, guaranteeing the representations, warranties and undertakings of LGTM in the Agreement. The issuance of a legal opinion by LGTM s Singapore lawyers confirming that LGTM has complied with all of its corporate requirements to enter into the Agreement. the delivery to MPS of a certified true copy of the Certificate of Fitness for the Property. 2.6 Proposed utilisation of proceeds The entire proceeds from the Proposed Disposal will be utilised to repay borrowings owing to the lenders of LCB. 2.7 Liabilities to be assumed by MPS There is no liability, including contingent liabilities and guarantees, to be assumed by MPS arising from the Proposed Disposal. 2.8 Date and original cost of investment to LGTM LGTM acquired LPM on 17 March 2006 at a purchase consideration of RM70 million. 2.9 Expected gains or losses arising from the Proposed Disposal Upon completion of the Proposed Disposal, the LCB Group is expected to realise a gain of approximately RM23 million in the financial year ending 30 June

4 3. RATIONALE FOR THE PROPOSED DISPOSAL LPM has been making losses since the FYE 2012 as it is unable to maintain its market share as a result of heavy influx of imported plates into the domestic market. Furthermore, the rising cost of raw materials which constitute a substantial portion of LPM s cost of production eroded its competitiveness. The proceeds from the Disposal Consideration and proceeds from the sale of all LPM s stocks and its cash holdings which will be utilised to repay borrowings owing to the lenders of LCB is expected to result in interest savings of RM3.6 million per annum to LCB. The Proposed Disposal which is expected to realise a gain of approximately RM23 million to the LCB Group will enable it to unlock its investment. 4. EFFECTS OF THE PROPOSED DISPOSAL (i) Share Capital and Substantial Shareholders Shareholdings There will be no effect on the issued and paid-up capital of LCB as well as the substantial shareholders shareholding in LCB as the Proposed Disposal does not involve any issuance of new LCB shares. (ii) Earnings and Earnings Per Share ( EPS ) The Proposed Disposal is expected to result in an estimated gain of approximately RM23 million to the LCB Group for the financial year ending 30 June 2014 which will translate to an increase in EPS of approximately 2 sen. (iii) Net Assets ( NA ) and NA Per Share On a proforma basis, the LCB Group s audited NA as at 30 June 2012 will increase by about RM23 million, which will translate to an increase in the NA per share by approximately 2 sen. (iv) Gearing The Proposed Disposal is not expected to have a material impact on the gearing of the LCB Group. 5. APPROVALS REQUIRED The Proposed Disposal is subject to the approval of the lenders of LCB. The Proposed Disposal is not subject to the approval of the shareholders of the Company or any relevant authorities. 6. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THE DIRECTORS AND MAJOR SHAREHOLDERS None of the Directors, major shareholders of the Company and/or persons connected with them has any interest, direct or indirect, in the Proposed Disposal. 4

5 7. STATEMENT BY THE BOARD OF DIRECTORS The Board of Directors after having considered all relevant aspects of the Proposed Disposal is of the opinion that the Proposed Disposal is in the best interest of LCB. 8. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Disposal is estimated to be completed by the fourth quarter of HIGHEST PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL The highest percentage ratio applicable to the Proposed Disposal pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 6.72%. 10. DOCUMENTS FOR INSPECTION The Agreement dated 3 September 2013 is available for inspection by the shareholders of the Company at the Registered Office of the Company at Level 14, Office Tower, No. 1 Jalan Nagasari (Off Jalan Raja Chulan), Kuala Lumpur during normal office hours from Mondays to Fridays (except for public holidays) for a period of three months from the date of this announcement. 5