ASTRO MALAYSIA HOLDINGS BERHAD ( THE COMPANY OR AMH )

Transcription

1 ( THE COMPANY OR AMH ) WITH GRUP MAJALAH KARANGKRAF SDN BHD ( GMK ) IN RESPECT OF ASTRO DIGITAL SDN BHD S ( ADSB ) PROPOSED INVESTMENT INTO GMK S WHOLLY-OWNED SUBSIDIARY, KARANGKRAF DIGITAL 360 SDN BHD ( KK360 ) 1. INTRODUCTION The Board of Directors of AMH is pleased to announce that ADSB, a wholly-owned subsidiary of AMH, has on 6 December 2017 entered into a binding term sheet ( Term Sheet ) with GMK and its wholly-owned subsidiary, KK360, in respect of a joint venture for the creation and monetisation of content verticals in Malaysia and the Nusantara region ( Proposed Joint Venture ). Pursuant to the Proposed Joint Venture, ADSB and GMK shall subscribe for ordinary shares in KK360 such that the voting rights of ADSB and GMK in KK360 is 51:49 respectively. GMK will transfer its 38 intellectual properties ( IPs ) (as listed in Section 2.2 below) to KK360 for RM96 million and GMK will be issued ordinary shares in KK360 in consideration of such transfer. ADSB s total subscription consideration for its 51% interest in KK360 is RM100,000,104 ( Subscription Consideration ) to be paid in tranches and subject to a reduction mechanism (if applicable) in the manner set out in Section below. The Term Sheet sets out the key terms agreed between the parties in relation to the Proposed Joint Venture, subject to the terms and conditions in the joint venture agreement ( JVA ) to be entered into between the parties at a later date. 2. DETAILS OF THE 2.1 Information on ADSB ADSB was incorporated as a private limited company under the Companies Act, 1965 on 30 June ADSB is principally involved in investment holding. As at the date of this announcement, ADSB has a total issued share capital of RM2 comprising 2 ordinary shares. 2.2 Information on GMK GMK was incorporated as a private limited company under the Companies Act, 1965 on 16 January GMK and its subsidiaries are principally engaged in the business of publishing and distribution of newspapers, books and magazines. As at the date of this announcement, GMK has a total issued share capital of RM3,000,000, comprising 3,000,000 issued shares.

2 Page 2 of 7 GMK owns and/or operates the following content IPs, which will be transferred to KK360:- (1) Mingguan Wanita (16) Nur (31) E-baca (2) Nona (17) Midi (32) Fokus SPM (3) Vanilla Kismis (18) Rapi (33) Majalah PC (4) Maskulin (19) Auto Maskulin (34) E-siswa (5) Umpan (20) Arena Bola Sepak (35) Mingguan Kanak-kanak (6) Keluarga (21) Dara.com (36) G3 (7) Pa & Ma (22) Radiance (37) Bintang Kecil (8) Remaja (23) Yezz (38) Jom! (9) Pesona Pengantin (24) Klik (10) Media Hiburan (25) Bacaria (11) Nona Hijabista Stailo Sopan (26) Bercinta Selepas Nikah (12) Majalah-i (27) Laman (13) Impiana (28) Dapur (14) Rasa (29) Apartmen (15) Libur (30) Traverama Note:- Majalah-i will be rebranded under a new name moving forward with ADSB s approval; and Items (1) (15) are the fifteen (15) active IPs that GMK is currently producing/ monetising content for. 2.3 Information on KK360 KK360 was incorporated as a private limited company under the Companies Act, 2016 on 19 September As at the date of this announcement, KK360 has a total issued share capital of RM100, comprising of 100 issued shares, which are wholly-owned by GMK. Pursuant to the Proposed Joint Venture, the company name shall be changed from KK360 to a name to be proposed by ADSB and decided mutually by ADSB and GMK. KK360 is currently dormant, however, post completion of the Proposed Joint Venture, KK360 will be involved in co-creation and monetisation of Malay-based and Islamic content in Malaysia and Nusantara region through activities such as, amongst others, video production/licensing, publishing, commerce, advertising and events. 2.4 Salient terms of the Term Sheet The salient terms of the Term Sheet are as follows: Execution of the JVA The Term Sheet contains a binding agreement between both parties to form the joint venture. Both parties will in good faith complete the JVA by 6 February 2018 or any extended time as mutually agreed between the parties Conditions Precedent The Proposed Joint Venture is subject to the following conditions precedent ( Conditions Precedent ) being satisfied within a period of four (4) months from the date of execution of the Term Sheet (or such other extended period as may be mutually agreed between the parties in writing) or waived by the party in favour of which such conditions have been set ( Closing Period ):- Completion of due diligence review by ADSB in respect of the GMK s contributions to KK360 and business affairs of KK360 to ADSB s satisfaction;

3 Page 3 of 7 (iii) (iv) (v) (vi) Approval by ADSB or suitable modification to ADSB s satisfaction of the agreements between GMK or its group companies and KK360 for GMK s contributions to KK360; Approval of AMH s Board of Directors and shareholders (if required); All necessary consents, approvals and authorisations (including contractual consents) having been obtained (including printing and publishing approval for all titles/trademarks); All applicable regulatory and/government approvals having been obtained. Both parties will mutually agree on the conditions for (a) the attainment of the publishing permits from the Ministry of Home Affairs for the publication of the titles and trademarks comprised in GMK s contributions ( KDN Permit ), and (b) registration of KK360 with the Ministry of Finance to enable it to tender and participate in government projects or deals ( MOF License ), in the JVA; and Other customary closing conditions. If the Conditions Precedent are not achieved by the Closing Period, the Parties shall agree to either extend the Closing Period, or mutually agree to waive one or more of the unfulfilled conditions, or mutually agree to terminate the Term Sheet / JVA Completion Completion shall take place on the fulfilment of the last Conditions Precedent Subscription Consideration and Mode of satisfaction The total Subscription Consideration of RM100,000,104 (subject to a reduction mechanism, if applicable) will be satisfied in full by cash in the manner set out below:- Upon fulfilment of the Conditions Precedent of the JVA ( Closing ), ADSB will invest RM50,000,104 out of the total Subscription Consideration of RM100,000,104 in the following manner:- (a) ADSB will subscribe for 104 Class A ordinary shares in KK360 for a cash consideration of RM104. GMK s existing 100 shares in KK360 will be reclassified as Class A ordinary shares. As such, the equity interest of ADSB and GMK in Class A ordinary shares and total voting rights in KK360 is 51:49 respectively. Each Class A ordinary share shall carry one (1) vote for each share; and (b) ADSB will subscribe for 50,000,000 Class B ordinary shares in KK360, representing 100% of the total Class B ordinary shares, for a cash consideration of RM50,000,000 paid to KK360 on Closing. Each Class B ordinary share shall carry two (2) votes for each share have one (1) time liquidation rights (subject to Section (iv) below), and (iii) one (1) time dividend entitlement (subject to Section (iv) below). ADSB will invest the remaining RM50,000,000 within a span of five (5) years in five (5) equal tranches of RM10,000,000 each on the anniversary of Closing ( Tranche(s) ) through the subscription of fully paid Class D non-voting ordinary shares in KK360. Each Class D non-voting ordinary shares shall not carry any voting rights have one (1) time dividend entitlement (subject to Section (iv) below) and (iii) have one (1) time liquidation right (subject to Section (iv) below).

4 Page 4 of 7 (iii) If any of the fifteen (15) active IPs are not able to be registered in KK360 s favour at Intellectual Property Corporation of Malaysia ( MyIPO ) in certain mutually agreed identified classes, or if there is an infringement claim in any one (1) of the IPs, ADSB has the right to reduce its investment amount in any one (1) of the above tranches in accordance with a mechanism to be agreed mutually by the Parties in the JVA. ADSB, in its sole discretion, may accelerate its investment in one (1) or more tranches. (iv) ADSB is entitled to (a) 51% of cash surplus if KK360 is wound-up or (b) 51% dividend entitlement, at any time after 5 th Closing anniversary in the event there is no reduction of investment. ADSB s cash surplus entitlement or dividend entitlement is lower than 51% if KK360 is wound-up or the dividend is distributed prior to 5 th Closing anniversary (regardless whether there is a reduction of investment or otherwise), as ADSB has not invested the total Subscription Consideration amount. In the event of a reduction of investment, ADSB s entitlement in relation to surplus cash distribution on winding-up and dividend entitlement, shall be mutually agreed between GMK and ADSB in the JVA GMK Contribution In return for the transfer of GMK s 38 IPs to KK360, GMK will be allotted 96,000,000 Class C ordinary shares in KK360, representing 100% of the total Class C ordinary shares. Each Class C ordinary share shall carry one (1) vote for each share have one (1) time liquidation rights (subject to Section 2.4.4(iv) above) and (iii) one (1) time dividend entitlement (subject to Section 2.4.4(iv) above) Termination In the event a party is in breach of the JVA ( Defaulting Party ), the non-defaulting party shall have the right to purchase all the shares in KK360 held by the Defaulting Party at twenty percent (20%) discount to the fair market value, or to require the Defaulting Party to purchase all the shares in KK360 held by the non-defaulting party at twenty percent (20%) premium to the fair market value. 2.5 Basis and justification for arriving at the Subscription Consideration The Subscription Consideration of RM100,000,104 was arrived at on a willing buyer-willing seller basis after taking into consideration the following:- The estimated valuation of a 51% interest in KK360 was derived using the discounted cash flow method (income approach) as the primary approach. The comparable trading multiples approach was used as the secondary approach; and The future earnings potential to AMH and its subsidiaries ( AMH Group or Group ) arising from the Proposed Joint Venture. 2.6 Liabilities to be assumed by ADSB There is no liability, including any contingent liability and guarantee, to be assumed by ADSB pursuant to the Proposed Joint Venture.

5 Page 5 of 7 3. RATIONALE FOR THE The Proposed Joint Venture is in line with AMH s strategic imperative of co-owning Malaylanguage content IPs that have regional appeal, and towards the group s aspiration of becoming ASEAN s leading content creator, aggregator and distributor. GMK is a leading Malay-language media publisher with many magazine titles and online media assets that are household names such as, amongst others, Mingguan Wanita, Keluarga, Rasa, Impiana, and Pa&Ma. The Proposed Joint Venture is expected to derive synergies from AMH and GMK, leveraging on each other s core capabilities and expertise to jointly develop a strong line-up of content IPs and brands across Malay-language and Islamic verticals to pursue 360 monetisation strategies. Through the combination of GMK s content creation expertise and AMH s ability to position content through multiple platforms of TV, OTT and digital, the Proposed Joint Venture is expected to generate new revenue potential and enable AMH to extend its reach in Malaysia and the Nusantara region. Therefore, the Proposed Joint Venture is consistent with the Company s strategic and financial objectives. 4. PROSPECTS GMK is the largest Malay-language media company in the country with a loyal audience base across its magazine publications and online media assets. With four (4) decades of media publishing experience, GMK s deep expertise lies in curating highly localised content targeted at a diverse group of Malay-language readers ranging from 7 to above 40 years. With GMK s historical grasp of its audience base and AMH s expertise in content creation, aggregation, distribution, KK360 is well-positioned to be a market leader in this space. The Proposed Joint Venture will enable AMH to extend its reach and portfolio of IPs amongst the Malay-language audience online, and enlarge the monetisation potential of the Group by positioning the IPs across the TV, OTT and digital platforms in Malaysia and the Nusantara region. 5. RISK FACTORS IN RELATION TO THE The Proposed Joint Venture is not expected to materially change the business risk profile of AMH Group s business as KK360 will be in a similar industry to that of AMH Group (i.e. publishing). Pursuant to the Proposed Joint Venture, the AMH Group will continue to be exposed to similar business and operational risks inherent to the publishing industry such as, amongst others, rapid technological change, threat of substitutes, shortage of skilled professionals and renewal of permits (if any). The risk factors in relation to the Proposed Joint Venture include but are not limited to, the following:- Competition risk The digital publishing industry has low barriers of entry, where new market entrants are able to scale up rapidly at low costs and minimal capital investment. An increase in the number of established international competitors entering the Malaysian market may intensify the competition landscape. This may result in the reduction of KK360 s market share or eliminate new market opportunities that KK360 intends to enter. To mitigate this risk, ADSB and GMK intends to accelerate digital transformation and 360 exploitation of the long-standing established brands to ensure relevance and be ahead of competitors in the new digital world.

6 Page 6 of 7 Completion risk The Proposed Joint Venture is conditional upon the Conditions Precedent being fulfilled or otherwise waived. There can be no assurance that the Conditions Precedent will be fulfilled or waived within the stipulated timeframe. (iii) Integration risk The synergies and benefits arising from the Proposed Joint Venture is predicated on the successful collaboration between GMK and AMH on the co-creation and monetisation of Malay-language and Islamic content. There can be no assurance that AMH Group is able to fully realise the anticipated synergies and benefits from the Proposed Joint Venture, which may have a material adverse effect on the financial and operating conditions of the enlarged AMH Group. 6. SOURCE OF FINANCING AND FINANCIAL EFFECTS OF THE PROPOSED JOINT VENTURE The Subscription Consideration for the Proposed Joint Venture will be financed via internally generated funds. The Proposed Joint Venture is not expected to have any material effect on the earnings, net assets and gearing of the Company for the financial year ending 31 January It will not have any effect on the share capital and substantial shareholders shareholdings of AMH. 7. APPROVAL REQUIRED The Proposed Joint Venture is not subject to the approval of the Company s shareholders. In terms of regulatory approvals (if required), KDN Permit and MOF License may be sought as stated in Section above. 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the directors and/or major shareholders of the Company and persons connected to them, insofar as the existing directors and major shareholders are able to ascertain and are aware, has any interest, direct or indirect, in the Proposed Joint Venture. 9. DIRECTORS STATEMENT After having taken into consideration all aspects of the Proposed Joint Venture, the Board of Directors of AMH is of the opinion that the Proposed Joint Venture is in the best interest of AMH Group. 10. ESTIMATED TIME FRAME FOR COMPLETION OF THE Barring unforeseen circumstances, the Proposed Joint Venture is expected to be completed by the first (1 st ) half of HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Joint Venture as per Paragraph 10.02(g) Chapter 10 of Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 16.04%.

7 Page 7 of DOCUMENTS FOR INSPECTION The executed binding Term Sheet is available for inspection at the Company s registered office at 3rd Floor, Administration Building, All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong-Sungai Besi, Bukit Jalil, 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 6 December 2017.