PROPOSED PLACEMENT OF UP TO 10% OF THE ISSUED SHARE CAPITAL OF CCMB (EXCLUDING TREASURY SHARES) ( PROPOSED PLACEMENT );

Transcription

1 CHEMICAL COMPANY OF MALAYSIA BERHAD ( CCMB OR COMPANY ) (I) (II) PROPOSED PLACEMENT OF UP TO 10% OF THE ISSUED SHARE CAPITAL OF CCMB (EXCLUDING TREASURY SHARES) ( PROPOSED PLACEMENT ); PROPOSED DISPOSAL OF THE FOLOWING THREE (3) PARCELS OF LEASEHOLD LAND MEASURING APPROXIMATELY ACRES FOR A CASH CONSIDERATION OF RM190 MILLION TO GBA CORPORATION SDN BHD ( GBA CORP ): (A) (B) (C) PN LOT 818 SEKSYEN 16 BANDAR SHAH ALAM, DAERAH PETALING, NEGERI SELANGOR ( LOT 818 ) (EXCLUDING THAT PORTION OF LOT 818 MEASURING 11,655 SQUARE METRES WHICH HAS BEEN TAKEN OVER BY PERBADANAN KEMAJUAN NEGERI SELANGOR AND WHICH IS TO BE SURRENDERED TO THE RELEVANT AUTHORITY(IES) PURSUANT TO THE TERMS AND CONDITIONS OF THE LAND EXCHANGE AGREEMENT DATED 1 JULY 2004 AS AMENDED AND SUPPLEMENTED BY A SUPPLEMENTAL AGREEMENT TO THE LAND EXCHANGE AGREEMENT DATED 4 APRIL 2016); HS(D) , PT 757 SEK 16, BANDAR SHAH ALAM, DAERAH KLANG, NEGERI SELANGOR ( PT 757 ); AND HS(D) , PT 758 SEK 16, BANDAR SHAH ALAM, DAERAH KLANG, NEGERI SELANGOR ( PT 758 ), (THE AFORESAID THREE (3) PARCELS OF LAND ARE COLLECTIVELY REFERRED TO AS THE SHAH ALAM LAND ) ( PROPOSED DISPOSAL OF SHAH ALAM LAND ) (III) (IV) PROPOSED DISTRIBUTION OF THE ENTIRE SHAREHOLDING IN CCM DUOPHARMA BIOTECH BERHAD ( CCMD ) ( PROPOSED DISTRIBUTION ) TO THE SHAREHOLDERS OF CCMB BY WAY OF A REDUCTION OF THE PAID UP CAPITAL OF CCMB PURSUANT TO SECTION 116 OF THE COMPANIES ACT 2016 ( PROPOSED DISTRIBUTION AND CAPITAL REDUCTION ); PROPOSED SHARE CONSOLIDATION OF EVERY 3 EXISTING ORDINARY SHARES IN CCMB ("CCMB SHARE(S)" OR "SHARE(S)") INTO 1 ORDINARY SHARE IN CCMB ("CONSOLIDATED SHARE(S)") ("PROPOSED SHARE CONSOLIDATION"). (COLLECTIVELY REFERRED TO AS PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of CCMB ( Board ), Maybank Investment Bank Berhad ( Maybank IB ) wishes to announce that the Company intends to undertake the Proposals. In connection with the Proposed Disposal of Shah Alam Land, on behalf of the Board, we also wish to announce that the Company has today accepted a binding offer from GBA Corp ( Purchaser ) for the Proposed Disposal of Shah Alam Land ( Offer Letter ) on even date which is subject to the terms and conditions of a sale and purchase agreement ( SPA ), to be executed with GBA Corp at a later date. 1

2 2. DETAILS OF THE PROPOSALS 2.1 Proposed Disposal of Shah Alam Land The Proposed Disposal of Shah Alam Land involves the disposal of the three parcels of land held as defined above, measuring approximately acres held by CCMB to GBA Corp for a cash consideration of RM190 million ( Disposal Consideration ), subject to the terms and conditions of the SPA, to be executed later Details of the Shah Alam Land Details Description of the Shah Alam Land and buildings erected thereon Description : The site comprises a parcel of industrial land with commercial zoning, almost trapezoidal in shape. It has a frontage width onto Persiaran Selangor at its boundary, with its northern part of the western boundary abutting a shop-office scheme in Alam Avenue, and a very wide rear width at its southern boundary. The terrain of the land is generally flat except the north-eastern portion which is on higher ground with a reservoir on it. It is sited about level with the frontage road. It is generally defined with masonry wall fencing to the northern front boundary and chain-linked fencing to the others. It has two (2) main entrances, at Persiaran Selangor and the other at Jalan Asam Jawa 16/15, each of which is secured with a metal gate hinged onto concrete pillars, whilst access to the compound is generally tarred. Postal address or identification The Shah Alam Land subject to the proposed disposal include two plots of land held under P.T. No. 757 & P.T. No.758 ( said Lands ) to be received in exchange of surrendering a portion of Lot 818 (of approximately similar land size to said Lands in aggregate) to Perbadanan Kemajuan Negeri Selangor ( PKNS ) under the Land Exchange Agreement dated 1 st July 2004 between CCMB and PKNS. : The Shah Alam Land comprising Lot 818 Seksyen 16 held under PN , Bandar Shah Alam, District of Klang, Selangor Darul Ehsan and P.T. No. 757 Seksyen 16 held under H.S. (D) , and P.T. No.758 Seksyen 16 held under H.S (D) , Bandar Shah Alam, Daerah of Petaling, Selangor Darul Ehsan. The postal address of the Shah Alam Land is Lot 200, Persiaran Selangor, Shah Alam, Selangor Darul Ehsan. Existing use : Currently certain parts of Lot 818 is being tenanted to third parties for an aggregate rental of RM 300, per month / RM 3,610, per annum Land area : Approximately 3,090,696 square feet (70.93 acres) Registered owner : CCMB 2

3 Details Latest audited Net book value ( NBV ) as at 31 December 2016 Description : RM million (including buildings) Tenure : In respect of Lot 818, it has a leasehold period of 99 years, expiring on 16 July In respect of PT 757, it has a leasehold period of 99 years, expiring on 27 February In respect of PT 758, it has a leasehold period of 99 years, expiring on 27 February Market value : RM180 million as at 3 July 2017 (material date of valuation) ( Market Value ) as ascribed by Mohd Nor & Partners ( Valuer ) via its valuation letter dated 31 July 2017 which was derived using comparison method of valuation ( Valuation Letter) Encumbrances : Nil Salient terms of the Offer Letter The Market Value of the Shah Alam Land was valued by the Valuer after disregarding the buildings and structures erected thereof The salient terms of the Offer Letter include, among others, the following: (i) Agreement for Sale The Property shall be sold by CCMB to GBA on as is where is basis and free from encumbrances but subject to such other terms and conditions as stipulated in the sale and purchase agreement ( SPA ) to be entered into between CCMB and GBA. (ii) Terms of Payment The purchase price is RM190 million ( Disposal Consideration ) and is to be paid as follows: (a) Prior to the execution of this Letter of Offer, GBA has forwarded to CCMB a cheque made in favour of CCMB for the sum of Ringgit Malaysia Three Million Six Hundred Thousand (RM3,600,000.00) only; Upon CCMB s acceptance of this Letter of Offer, GBA shall pay directly to CCMB the amount of Ringgit Malaysia Two Hundred Thousand (RM200,000.00) only. The payment by GBA referred to in Paragraph (B)1(a) and (b) totaling Ringgit Malaysia Three Million Eight Hundred Thousand (RM3,800,000.00) only being two percent (2%) of the Purchase Price shall hereinafter be referred to as the Earnest Deposit 3

4 (b) Upon the execution of the SPA, GBA shall pay the following sums in the manner provided below:- (i) (ii) the sum of Ringgit Malaysia Five Million Seven Hundred Thousand (RM5,700,000.00) only being three percent (3%) of the Purchase Price ( Retention Sum ) shall be paid to GBA s Solicitors, Messrs. Anad & Noraini, as stakeholders to be remitted to the Inland Revenue Board pursuant to the Real Property Gains Tax Act 1976; and the sum of Ringgit Malaysia Nine Million Five Hundred Thousand (RM9,500,000.00) only being five percent (5%) of the Purchase Price ( Balance Deposit ) shall be paid directly to CCMB. The Earnest Deposit, Retention Sum and Balance Deposit totaling Ringgit Malaysia Nineteen Million (RM19,000,000.00) only being ten percent (10%) of the Purchase Price shall hereinafter be referred to as the Deposit. (iii) The sum of Ringgit Malaysia One Hundred and Seventy One Million (RM171,000,000.00) only being ninety percent (90%) of the Purchase Price ( Balance Purchase Price ) shall be payable by GBA to CCMB s Solicitors, Messrs. Zain & Co. as stakeholders within a period of THREE (3) MONTHS from the Unconditional Date (as defined hereinafter) ( Payment Deadline ). In the event that GBA is unable to pay the Balance Purchase Price within the Payment Deadline, GBA shall be granted an extension of ONE (1) MONTH or any other time period as mutually agreed between the parties commencing from the expiry of the Payment Deadline to pay the Balance Purchase Price PROVIDED THAT the GBA shall pay to CCMB compensation (ta widh) on the Balance Purchase Price or such amount thereof as shall remain outstanding calculated at the rate of Maybank Islamic Berhad s Base Financing Rate prevailing on the date of full payment of the Balance Purchase Price, calculated on a day to day basis based on a three hundred and sixty five (365) day year on the actual number of days elapsed commencing from the date immediately next after the Payment Deadline to the date of full payment of the Balance Purchase Price or such amount thereof as shall then be outstanding ( Late Payment Charges ). (iii) Conditions Precedent 1. The sale and purchase of the Property shall be conditional upon CCMB s procurement within THREE (3) MONTHS from the date of the SPA ( Conditional Period ) of the approval(s) of CCMB s shareholders for the sale of the Property to GBA on terms acceptable to both parties ( Condition Precedent ). The date of fulfillment of the Condition Precedent shall be referred to as the Unconditional Date. 2. In the event the Condition Precedent cannot be fulfilled by the expiry of the Conditional Period due to no fault of either party, either party may terminate the SPA and CCMB shall refund the Deposit to the Purchaser, free of interest. 4

5 (iv) Other Conditions 1. It shall be conditions to the SPA that: (a) (b) (c) (d) CCMB shall apply for the State Authority s consent to transfer PT 757 and PT 758 to GBA ( State Consent to Transfer ); if applicable, GBA shall apply for the State Authority s consent to charge PT 757 and PT 758 in favour of GBA s financier ( State Consent to Charge ); if required, GBA shall apply for the Economic Planning Unit s approval to the transfer of the Property to GBA ( EPU Approval ); if applicable, CCMB or GBA (as the case may be) is to respectively apply for any other approval required from the relevant governmental authority for the transfer of the Property in favour of GBA. 2. In the event the State Consent to Transfer and/or the State Consent to Charge and/or the EPU Approval cannot be obtained within the period to be stipulated in the SPA or such other period mutually agreed between the parties due to no fault of either party, either party may terminate the SPA and CCMB shall refund the Deposit to the Purchaser, free of interest. (E) Rehabilitation Works (I) Agreed Initial Rehabilitation Works 1. Prior to the execution of the SPA, CCMB s consultant ( CCMB s Consultant ) shall carry out an environmental inspection and investigation over the Property other than the Granulation Plant Area, Calcium Nitrate Plant Area and the Orica Plant Area (all as defined hereinafter) ( Initial Inspection and Investigation ) and shall issue a report in respect of the contamination over the Property ( CCMB s Consultant s Initial Report ) and the parties shall mutually agree on the rehabilitation works to be carried out by CCMB over the Property save and except for the portions of the Property which are subject to all existing tenancies affecting the Property ( Agreed Initial Rehabilitation Works ) pursuant to the CCMB s Consultant s Initial Report and the time period to complete such Agreed Initial Rehabilitation Work ( Agreed Initial Rehabilitation Works Deadline ). 2. CCMB shall undertake and complete the Agreed Initial Rehabilitation Works by the Agreed Initial Rehabilitation Works Deadline or any extension thereto. 5

6 (II) Subsequent Environmental Inspection and Investigation 1. The parties shall agree that CCMB s Consultant is to carry out an environmental inspection and investigation over the area on which the granulation plant is located ( Granulation Plant Area ), area on which the calcium nitrate plant is located ( Calcium Nitrate Plant Area ) and the demised premises tenanted by Orica-CCM Energy Systems Sdn. Bhd. ( Orica Plant Area ) and issue report(s) in respect of the same ( CCMB s Consultant s Subsequent Report(s) ). The parties shall mutually agree on the rehabilitation works to be carried out by CCMB over the Granulation Plant Area, Calcium Nitrate Plant Area and Orica Plant Area pursuant to the CCMB s Consultant s Subsequent Report(s) ( Agreed Subsequent Rehabilitation Works ) and the time period to complete such Agreed Subsequent Rehabilitation Works ( Agreed Subsequent Rehabilitation Works Deadline ). 2. The fees of CCMB s Consultant and costs and expenses for the undertaking of the Agreed Initial Rehabilitation Works and the Agreed Subsequent Rehabilitation Works shall be borne by both parties equally provided always that the costs and expenses to be borne by GBA shall not exceed Ringgit Malaysia Five Million (RM5,000,000.00). (F) Delivery of Possession 1. Subject always to the terms and conditions of the SPA, vacant or legal possession of the Property, subject always to the subsisting existing tenancies over the Property, shall be delivered or deemed delivered (as the case may be) to the Purchaser upon the payment of the Balance Purchase Price. (G) Sale and Purchase Agreement 1. All other terms and conditions of the sale and purchase of the Property herein shall be stipulated in the SPA. 2. The parties shall mutually agree on the terms and conditions of the SPA on or before 15 September 2017 or such other date as mutually agreed between the parties. Subject to the aforesaid, the parties shall execute the SPA as soon as reasonably practicable. 3. In the event the parties fail to mutually agree on the terms and conditions of the SPA within the period stipulated in Paragraph (G)2 above, CCMB shall refund the Earnest Deposit to GBA, free of interest, and the parties shall have no further claims against the other Basis and justification for the Disposal Consideration The Disposal Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the Market Value of the Shah ALam Land as ascribed by the Valuer and the latest audited NBV of the Shah Alam Land as at 31 December 2016 and the valuation as appraised by Valuer. The Disposal Consideration represents a discount of approximately 2.2% to the latest audited NBV of the Shah Alam Land as at 31 December

7 The Board is of the view that the Disposal Consideration is justifiable after taking into consideration that the rationale and benefits of the Proposed Disposal as set out in Section 3 of this Announcement. In justifying the Disposal Consideration, the Board has taken into consideration the following: (i) (ii) (iii) (iv) the original cost of investment of approximately of the Shah Alam Land together with the buildings thereon of RM23.3 million. the latest audited NBV of the Shah Alam Land with the buildings as at 31 December 2016 of RM185.9 million; the Market Value of the Shah Alam Land as at 3 July 2017 of RM180 million as appraised by Mohd Nor & Partners, an independent registered valuer, in the Valuation Letter; and the rationale and benefits of the Proposed Disposal as elaborated further in Section 3 of this Announcement. Further information on the Purchaser are set out in Section below Liabilities to be assumed by the Purchaser There are no liabilities, including contingent liabilities and guarantees, to be assumed by the Purchaser pursuant to the Proposed Disposal.of Shah Alam Land Use of proceeds from Proposed Disposal of Shah Alam Land The gross proceeds arising from the Proposed Disposal.of Shah Alam Land will be used in the following manner: Description of use of proceeds Partial repayment of bank borrowing (1) Defrayment of estimated expenses in relation to the Proposed Disposal of Shah Alam Land (2) Estimated timeframe for utilisation from receipt of proceeds Amount RM million Within 4 months 179 Within 3 months 11 Total 190 Notes: (1) Partial repayment of credit facilities owing to Sumitomo Mitsui Banking Corporation ( SMBC ) (2) Comprising real property gains tax ( RPGT ), professional fees, fees payable to the relevant authorities, cost of convening the extraordinary general meeting ( EGM ) for the Proposed Disposal of Shah Alam Land, printing costs and other incidental expenses for the Proposed Disposal of Shah Alam Land 7

8 2.1.6 Background information of the Purchaser GBA CORP was founded in 1987 and is a wholly owned subsidiary of an unlisted company, GBA Group. Its core activities involve the sales, marketing and distribution of fast moving consumer goods ( FMCG ) products. The principal business of its holding company through its subsidiaries involved sales and marketing of FMCG products with warehousing and logistic support, property development and provision of warehousing on a build and lease basis. The group s principal place of business is in Malaysia with operations throughout Singapore, Brunei and Cambodia. 2.2 Proposed Placement Background information on the Proposed Placement The Proposed Placement entails the issuance of new ordinary shares in CCMB ( CCMB Shares ) ( Placement Shares ), representing 10% of the issued share capital of CCMB (excluding the treasury shares) to investors to be identified later by way of book-building assuming none of the treasury shares will be resold. Based on the issued share capital of the Company as at 28 July 2017, being the latest practicable date prior to this Announcement ( LPD ) of CCMB is RM457,630,000 comprising 457,629,856 CCMB Shares and total treasury shares held by the Company is 2,998,000, the maximum number of the Placement Shares that may be issued pursuant to the Proposed Placement would be up to 45,463,185 CCMB Shares ( Maximum Placement Shares ). CCMB s major shareholder and/or persons connected with them, who fall within Schedule 6 or Schedule 7 of the Capital Markets and Services Act, 2007 ( CMSA ), may participate in the book-building exercise. As at the LPD, CCMB s major shareholder is Permodalan Nasional Berhad ( PNB ) which holds 70.25% of the total issued and paid-up share capital in the Company. In the event PNB participates in the Proposed Placement, the Company will seek shareholders approval at EGM to be convened for the Proposed Placement to PNB and persons connected with it in accordance with Paragraph 6.06 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) in respect of their respective specific allotment (if any). The Proposed Placement will be implemented and completed before the implementation of the Proposed Distribution. Accordingly, the placees will be entitled to the Proposed Distribution Basis and justification for the issue price for the Placement Shares The issue price of the Placement Shares ( Issue Price ) will be fixed and announced later by the Board following the receipt of all requisite approvals for the Proposed Placement ( Price Fixing Date ). The Issue Price shall be determined by way of book-building and shall be fixed at a discount of not more than 10% to the volume weighted average market price ( VWAP ) of CCMB Shares for the five (5) market days immediately prior to the Price-Fixing Date. For illustrative purposes only, assuming a 10% discount on the (5)-day VWAP of CCMB Shares up to and including the LPD of RM1.65, the indicative Issue Price would be RM1.49 per Placement Share ( Placement Pricing Assumption ). 8

9 2.2.3 Ranking for the Placement Shares The Placement Shares shall, upon allotment and issuance, rank equally in all respects with the then existing CCMB Shares, save and except that holders of the Placement Shares shall not be entitled to any dividends, rights, allotments and/or any other distributions that may be declared, made or paid to the shareholders of CCMB prior to the date of allotment and issuance of the said Placement Shares Listing and quotation for the Placement Shares An application will be made to Bursa Securities for the listing and quotation for the Placement Shares on the Main Market of Bursa Securities Use of proceeds For illustration purposes, based on the Maximum Placement Shares Assumption and the Placement Pricing Assumption, the Company may raise up to approximately RM67.6 million which will be utilised in the following manner: Description of use of proceeds Partial repayment of bank borrowing (1) Estimated timeframe for use of proceeds from the date of listing of the Placement Shares Amount RM million Within 4 months 35.0 Working capital (2) Within 12 months 30.0 Defray estimated expenses relating to the Proposals Total 67.6 Notes: (1) Repayment of credit facilities to SMBC, and Affin Bank Berhad (2) Working capital includes capital expenditure and other potential expansion opportunities for the Chemicals and Polymers businesses. 2.3 Proposed Distribution and Capital Reduction Background of Proposed Distribution and Capital Reduction The Proposed Distribution and Capital Reduction involves a capital reduction and repayment exercise of the Company pursuant to Section 116 of the Companies Act The Proposed Distribution and Capital Reduction shall be effected by way of reduction in its share capital by RM462.9 million, in consideration of a capital reduction by the Company of all CCMD Shares (as defined below) held by the CCMB Group to the shareholders of the Company whose names appear in the Company s Record of Depositors ( Distribution Shares ) on an entitlement date to be determined by the Board after the receipt of all relevant approvals ( Entitled Shareholders ). The amount to be reduced from the share capital of the Company represents the book value of investment in CCMD based on the latest audited consolidated financial statements for the FYE 31 December

10 For illustrative purposes only, based on the Company s audited consolidated financial statements for the FYE 31 December 2016, the balance of the Company s share capital after the implementation of the Proposed Distribution and Capital Reduction will be as follows: Audited as at 31 December 2016 (RM 000) Share Capital 457,630 Inclusion of Share Premium account into the Company s Share Capital 39,944 To be issued pursuant to the Proposed Placement 67,636 To be cancelled pursuant to the Proposed Capital Reduction (462,892) 102,318 As at the LPD, CCM Marketing Sdn Bhd ( CCMM ) a wholly owned subsidiary of CCMB holds 204,665,784 ordinary shares in CCMD ( CCMD Shares ) representing 73.37% of the issued share capital of CCMD. Prior to implementing the Proposed Distribution and Capital Reduction, CCMM will transfer the Distribution Shares to CCMB as settlement for an amount owing by CCMM to CCMB at the transfer date to be determined, where the direct shareholding of CCMB in CCMD will increase from zero to 73.37% ( Internal Reorganisation ). As at LPD, the amount owing by CCMM to CCMB is RM474.1 million representing an indicative transfer cost of RM2.32 per CCMD Share. Accordingly pursuant to Section 218(2) of the Capital Markets & Services Act, 2007 ( CMSA ) and Paragraph 4.01 of the Rules on Take-Overs, Mergers and Compulsory Acquisitions ( Rules ), CCMB will be obliged to undertake a mandatory take-over offer ( MO ) for all the remaining CCMD Shares not already owned by CCMB and parties acting in concert ( PAC ) with CCMB in relation to CCMD Shares which includes CCMM, PNB, Amanah Saham Nasional Berhad ( ASNB ) a wholly owned subsidiary of PNB and other funds managed by ASNB including Amanah Saham Bumiputera ( ASB ) who directly owns a 3.26% equity stake in CCMD ( GO1 ). As the purpose of undertaking the Internal Reorganisation is to facilitate the Proposed Distribution and Capital Reduction, CCMB shall seek the necessary exemption from the Securities Commission Malaysia ( SC ) from the obligation to undertake the GO1 ( Proposed GO1 Exemption ). The Proposed Distribution and Capital Reduction will be effected by way of a reduction of the share capital of CCMB as elaborated further in Section 2.4 of this Announcement. Upon the completion of the Proposed Distribution and Capital Reduction, CCMD will cease to be a subsidiary of CCMB Ranking of the Distribution Shares The Distribution Shares will be distributed free from all encumbrances and shall rank equally in all respects with the other CCMD Shares in issue with all rights and entitlements attached including dividends, rights, allotments and/or other distributions that may be declared, made or paid to the shareholders of the Company, on or after the date on which the Distribution Shares are credited into the Central Depository System accounts of the Entitled Shareholders Original cost of investment Since its acquisition back in 2005, CCMB has held CCMD with an average cost of investment of RM2.31 per share. 10

11 2.3.4 Obligations of CCMB and PNB pursuant to the Malaysian Code on Takeovers and Mergers, 2016 ( Take-over Code ) and the Rules CCMB PNB As the direct shareholding of CCMB in CCMD will increase from zero to 73.37% following the Internal Reorganisation, pursuant to Section 218(2) of the Capital Markets & Services Act, 2007 ( CMSA ) and Paragraph 4.01(a) of the Rules on Take-Overs, Mergers and Compulsory Acquisitions ( Rules ), CCMB will be obligated to undertake a mandatory take-over offer ( MO ) for all the remaining CCMD Shares not already owned by CCMB and parties acting in concert ( PAC ) with it after the Internal Reorganisation ( Mandatory Offer 1 ). The PACs are CCMM, PNB, Amanah Saham Nasional Berhad ( ASNB ), a wholly-owned subsidiary of PNB and other funds managed by ASNB including Amanah Saham Bumiputera ( ASB ) who directly owns a 3.26% equity stake in CCMD ( Concert Group ). As the purpose of undertaking the Internal Reorganisation is to facilitate the Proposed Distribution and Proposed Capital Reduction (collectively, Proposed Distribution and Capital Reduction ), CCMB will seek an exemption from the Securities Commission Malaysia ( SC ) from the obligation to undertake the Mandatory Offer 1 ( Proposed Exemption 1 ). As at the LPD, the collective shareholding of the Concert Group in CCMD is approximately 76.63%. Upon completion of the Proposed Placement, Proposed Distribution and Capital Reduction: the collective shareholding of the Concert Group in CCMD will reduce to approximately 50.43% if PNB does not participate in the Proposed Placement; or the collective shareholding of the Concert Group in CCMD will reduce to approximately 57.14% if PNB are allocated to all the Placement Shares In both aforementioned scenarios PNB shareholding in CCMD will increase from zero to at least 47.17% assuming no CCMB Shares are subscribed by PNB under the Proposed Placement. Accordingly, pursuant to Section 218(2) of the CMSA and Paragraph 4.01(a) of the Rules, PNB will be obliged to undertake a MO for all the remaining CCMD Shares not already owned by the Concert Group after the Proposed Distribution and Capital Reduction. It is expected that PNB will at all times observe and ensure compliance with the applicable provisions of the Take-over Code and the Rules or seek the necessary exemption from the SC from the obligation to undertake a MO for all the remaining CCMB Shares not already owned by PNB and its PACs after the Proposed Distribution and Capital Reduction. 11

12 2.3.5 Background information on CCMD CCMD was incorporated in Malaysia under the Companies Act, 1965 as a public company on 23 August 2000 under the name of Duopharma Biotech Berhad ( DBB ) and is deemed registered under the Companies Act, 2016 ( Act ). It was listed on the Second Board of Bursa Securities on 18 July 2002 and was transferred to the Main Market (formerly known as Main Board) of Bursa Securities on 3 November It became a subsidiary of CCMB following the completion of the conditional general offer made by Tekan Maju Sdn Bhd (now known as CCMM ), a wholly owned subsidiary of CCMB where CCMM acquired approximately 73.37% of the paid-up share capital of DBB on 29 August CCMD assumed its present name on 8 June CCMD is principally involved in investment holding whilst its subsidiaries are primarily involved in carrying on business as manufacturer, distributor, importer and exporter of pharmaceutical products and medicines (CCMD and its subsidiaries are to be collectively referred to as CCMD Group ) As at the LPD, the share capital and total number of issued shares of CCMD comprise of RM139,479,500 and 278,959,000 CCMD Shares respectively. A summary of the financial information of CCMD for the past three (3) financial year ended ( FYE ) 31 December 2014 to 31 December 2016 is set out in Appendix I of this Announcement. 2.4 Proposed Share Consolidation The Proposed Share Consolidation entails the consolidation of every 3 existing CCMB Shares into 1 Consolidated Share held by shareholders of CCMB, whose names appear in the Record of Depositors of the Company at the close of business on a date to be determined and announced later by the Board ("Consolidation Entitlement Date"). Upon completion of the Proposed Share Consolidation, the resultant issued share capital of CCMB will be RM102,318,000 comprising 167,698,000 Shares (including 999,333 treasury shares) Ranking of the Consolidated Shares The Consolidated Shares will, upon allotment and issuance, rank equally in all respects with each other Listing of and quotation for the Consolidated Shares An application will be made to Bursa Malaysia Securities Berhad ("Bursa Securities") for the listing and quotation of the Consolidated Shares on the Main Market of Bursa Securities. No suspension will be imposed on the trading of CCMB Shares on the Main Market of Bursa Securities for the purposes of implementing the Proposed Share Consolidation as the Proposed Share Consolidation is prescribed as a Specified Consolidation pursuant to paragraph 13.04(3) of the Main Market Listing Requirements of Bursa Securities. The Consolidated Shares shall be listed and quoted on the Main Market of Bursa Securities on the next market day following the Entitlement Date. 12

13 3. RATIONALE AND BENEFITS OF THE PROPOSALS 3.1 Proposed Placement and Proposed Disposal of Shah Alam Land Over the years the Group has sought to review its portfolio and strengthen its balance sheet. One of the initiatives of this review was to exit from the fertilizer business, which was completed in Thereby freeing up the Shah Alam Land for monetization, to allow the Group to pare down its borrowings and improve its gearing. As part of the continuous de-gearing strategy, the Group has identified other non-core assets for disposal, namely Nilai Industrial Land, as well as its 8.45% equity stake in PanGen Biotech Inc., a company listed on KOSDAQ, Korea. Furthermore, the Board is of the view that in order to raise funds expeditiously and in a cost-effective manner, the Proposed Placement was identified as the most appropriate avenue for raising funds to further repay bank borrowings and further improve the Group s gearing. 3.2 Proposed Distribution and Capital Reduction and Proposed Share Consolidation As part of its strategy to review the Group s portfolio and strengthening its balance sheet, the Company had monetized and consolidated all its pharmaceutical assets under a single entity i.e. CCMD. This strategic initiative was completed back in The Proposed Distribution and Capital Reduction is a natural step in furthering the growth of each division, by ensuring that each division receives the focus and investment needed to support its growth. In addition, the Entitled Shareholders and other investors are able to separately assess and evaluate the individual financial performance, merits and prospects of both CCMB and CCMD. The Proposed Distribution and Capital Reduction, the Entitled Shareholders of the Company will be able to participate directly in the equity of CCMD at no cost. With direct ownership in chemical and polymer coating as well as pharmaceutical company following the completion of the Proposed Distribution and Capital Reduction, the Entitled Shareholders of the Company can manage their investment exposure or rebalance their portfolio in each of these businesses independent of each other according to their individual investment objectives. Following the Proposed Distribution and Capital Reduction, the Proposed Share Consolidation is also part of CCMB s plan to improve its capital structure and is expected to increase the earnings per share ("EPS") and net asset ("NA") per CCMB share without affecting shareholders' shareholding in the Company. 4. RISK FACTORS 4.1 Completion Risks Proposed Disposal of Shah Alam Land The Proposed Disposal of Shah Alam Land is subject to execution of the SPA and conditional upon the fulfilment of the Condition Precedent. There can be no assurance that the Condition Precedent will be obtained or fulfilled. Nevertheless, the Company shall use its best endeavours to finalise and execute the SPA and to obtain all the Condition Precedent in a timely manner to ensure parties proceed with the completion of the Proposed Disposal of Shah Alam Land. 13

14 4.1.2 Proposed Distribution and Capital Reduction The Proposed Distribution and Capital Reduction is conditional upon the approvals set out in Section 6 of this Announcement. There can be no assurance that all such approvals can be obtained, failing which the Proposed Distribution and Capital Reduction may be aborted or its implementation may be delayed. 5. EFFECTS OF THE PROPOSALS 5.1 Shareholding structure of CCMB Group The shareholding structure of CCMB and CCMD before and after the Proposed Placement and Proposed Distribution and Capital Reduction is as follows: Existing structure After Proposed Placement and Proposed Distribution and Capital Reduction Scenario 1: Assuming no subscription of Placement Shares by PNB or any other funds managed by ASNB 14

15 Scenario 2: Assuming full subscription of Placement Shares by PNB or any other funds managed by ASNB 5.2 Share capital The Proposed Disposal of Shah Alam Land will not have any effect on the issued share capital of CCMB as it does not involve any issuance of CCMB Shares. The proforma effects of the Proposed Placement, Proposed Distribution and Capital Reduction and Proposed Share Consolidation on the share capital of the Company are as follows: As at the LPD Number of CCMB Shares Amount (RM 000) 457,629, ,630 Inclusion of Share Premium account into the Company s Share Capital n/a 39,944 To be issued pursuant to the Proposed Placement 45,463,186 67,636 To be cancelled pursuant to the Proposed Distribution and Proposed Capital Reduction (335,395,000) (462,892) Issued Share Capital after Proposed Consolidation 167,698, ,318 15

16 5.3 NA per CCMB Share and gearing For illustrative purposes only, the proforma effects of the Proposals on the NA per CCMB Share and gearing of the CCMB Group, based on the latest audited consolidated statements of financial position of CCMB as at 31 December on the assumption that the Proposals had been effected on that date are as follows: Audited as at 31 December 2016 After the Proposed Placement (1) After the Proposed Capital Reduction, Distribution, and Share Consolidation (2) After the Propose d Disposal of Shah Alam Land (3) RM 000 RM 000 RM 000 RM 000 Share capital 457, , , ,318 Reserves 183, , ,585 25,310 Retained earnings 98,429 98,429 38, ,560 Equity attributable to owners of the Company 739, , , ,187 Non-controlling interest 152, ,188 31,150 31,150 Total equity 891, , , ,338 No. of CCMB Shares ( 000) 457, , , ,698 NA per CCMB Share (RM) Total borrowings 621, , , ,455 Gearing (times) (4) Notes: (1) After taking into consideration of the following: (i) repayment of borrowings of CCMB as at 31 December 2016 of approximately RM35.0 million arising from the Proposed Placement, assuming an indicative Issue Price of RM1.49 per Placement Share; and (ii) Share capital is inclusive of share premium amount of RM39.9 million, transferred from the reserves. (2) After taking into consideration the following: (i) the demerger of the CCMD Group from the CCMB Group and reduction of RM462.9 million in the share capital of CCMB. (ii) Consolidation of 503,093,000 CCMB shares into 167,698,000 shares on the basis of 3 existing ordinary shares into 1 consolidated share (3) After taking into consideration of the following: (i) the loss on disposal of approximately RM8.9 million arising from the Proposed Disposal of Shah Alam Land, including the estimated expenses in relation to the Proposed Disposal of Shah Alam Land of approximately RM13.0 million (RM2.0 million to be paid out of cash); and 16

17 (ii) the repayment of borrowings of CCMD as at 31 December 2016 of approximately RM179.0 million arising from the Proposed Disposal of Shah Alam Land. 5.4 EPS (4) Computed based on total borrowings divided by total equity of the Group. The Proposed Placement is not expected to have any material effect on the consolidated earnings of CCMB for the financial year ending 31 December The repayment of RM35.0 million bank borrowings from part of the proceeds is expected to result in interest savings of approximately RM1.7 million per annum based on the average effective interest rate of 4.92% per annum. Further, barring unforeseen circumstances, the Proposed Placement is expected to contribute positively to the future earnings of the CCMB Group when the benefits of the utilisation of RM30.0 million from part of the proceeds for the purpose of potential investments in capital expenditure and/ or acquisitions of businesses to be identified, are realised. The EPS of the CCMB Group is expected to be diluted as a result of the increase in the number of CCMB Shares in issue pursuant to the issuance of the Placement Shares. The Proposed Shah Alam Land Disposal is expected to result in a loss on disposal of approximately RM8.9 million after taking into account the Disposal Consideration, the latest audited NBV of the Shah Alam Land as at 31 December 2016 and the applicable RPGT and estimated expenses in relation to the Proposed Disposal of Shah Alam Land of approximately RM13.0 million. The repayment of RM179.0 million bank borrowings from part of the proceeds is expected to result in interest savings of approximately RM8.5 million per annum based on the average effective interest rate of 4.73% per annum. For the FYE 31 December 2016, the CCMD Group registered a profit after tax of approximately RM26.8 million and the CCMB Group incurred a loss after tax of approximately RM83.8 million. Upon completion of the Proposed Distribution and Capital Reduction, CCMB Group will cease to consolidate the results of the CCMD Group. The Proposed Share Consolidation is not expected to have any material effect on the consolidated earnings of CCMB Group except for the proportionate increase in the Company's consolidated EPS as a result of the reduction in the number of shares in issue pursuant to the Proposed Share Consolidation. 17

18 5.5 Substantial shareholders shareholdings The Proposed Disposal of Shah Alam Land, Proposed Distribution and Capital Reduction and Proposed Share Consolidation will not have any effect on the shareholdings of the substantial shareholders of CCMB. The Proposed Share Consolidation will not have any effect on the shareholdings of the substantial shareholders of CCMB, save for the proportionate reduction in the number of shares held by each substantial shareholder in CCMB upon completion of the Proposed Share Consolidation. The proforma effect of the Proposed Placement on the shareholdings of the Company s substantial shareholders as at the LPD assuming no subscription of Placement Shares by PNB or any other funds managed by ASNB is as follows: Permodalan Nasional Berhad Yayasan Pelaburan Bumiputera* As at the LPD After the Proposed Placement (1) After Proposed Share Consolidation Direct Indirect Direct Indirect Direct Indirect No. of CCMB Shares % No. of CCMB Shares % No. of CCMB Shares % No. of CCMB Shares % No. of CCMB Shares % No. of CCMB Shares % , , , , , , , , , , *Deemed interest by virtue of its substantial interest in PNB pursuant to Section 8 of the Act. Notes: 1) Scenario 1: Assuming no subscription of Placement Shares by PNB or any other funds managed by ASNB 2) Scenario 2: Assuming full subscription of Placement Shares by PNB or any other funds managed by ASNB 18

19 5.6 Convertible securities As at the LPD, the Company does not have any convertible securities in issue. 6. APPROVALS REQUIRED The Proposals are subject to the following approvals being obtained: (i) (ii) (iii) (iv) (v) (vi) shareholders of CCMB at an EGM to be convened; order of the High Court for the Proposed Distribution and Capital Reduction; the SC s approval for the Proposed Exemption 1 which is required prior to the Proposed Distribution and Capital Reduction; Bursa Securities for the listing of and quotation for the Placement Shares to be issued pursuant to the Proposed Placement on the Main Market of Bursa Securities; approvals, waivers or consents of any lenders/creditors for the Proposed Distribution and Capital Reduction (if required); and any other approvals, waivers or consents of any authorities and/or parties, if required. The Proposals are not conditional upon each other save that the Proposed Share Consolidation is conditional upon the Proposed Distribution and Capital Reduction but not vice versa. The Proposals are not conditional upon any other corporate exercise/scheme of the Company. Barring any unforeseen circumstances, applications to the relevant authorities for the Proposals are expected to be submitted within three (3) months from the date of this Announcement. 7. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors, major shareholders of the Company and/or persons connected with them have any interest, direct or indirect, in the Proposed Disposal of Shah Alam Land. None of the Directors, major shareholders of the Company and/or persons connected with them have any interest, direct or indirect in the Proposed Distribution and Capital Reduction and Proposed Share Consolidation, save for their respective entitlements to the Proposed Distribution and Capital Reduction and Proposed Share Consolidation as shareholders of the Company as at the Entitlement Date (if any), for which all other Entitled Shareholders are similarly entitled to. As highlighted in Section 2.2 of this Announcement, major shareholders of the Company and/or persons connected with them having interest in the shares, either direct or indirect may participate in the Proposed Placement. In the event that PNB as the major shareholder participates in the Proposed Placement, PNB will abstain from voting in respect of its direct and/or indirect shareholding in the Company on the resolution pertaining to the Proposed Placement to PNB to be tabled at EGM to be convened. Further, PNB will undertake that it will ensure that persons connected with it will abstain from voting in respect of their direct and/or indirect shareholdings in the Company on the resolution pertaining to the Proposed Placement to PNB to be tabled at the EGM to be convened. 19

20 8. DIRECTORS STATEMENT The Board, having considered all aspects of the Proposals, is of the opinion that the Proposals are in the best interest of the Company. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposals are expected to be completed during the following period:- Tentative timeline Proposed Placement October 2017 Proposed Distribution and Capital Reduction Jan 2018 Proposed Share Consolidation Jan 2018 Proposed Disposal of Shah Alam Land Mar PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Disposal of Shah Alam Land pursuant to Paragraph 10.02(g) of the LR is approximately 25.03%, based on the Disposal Consideration compared with the market value of all the CCMB shares based on the 5-day VWAP as at LPD. 11. ADVISER Maybank IB has been appointed as Principal Adviser to the Company for the Proposals and Placement Agent for the Proposed Placement. 12. DOCUMENTS AVAILABLE FOR INSPECTION The Offer Letter and Valuation Letter are available for inspection at the registered office of CCMB at 13th Floor, Menara PNB 201-A, Jalan Tun Razak 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 2 August

21 APPENDIX I FINANCIAL INFORMATION ON CCMD A summary of the financial information of CCMD for the past three (3) FYEs 31 December 2014 to 31 December 2016 based on the audited consolidated financial statements of CCMD is as follows: Audited FYE 31 December RM 000 RM 000 RM 000 Revenue 176, , ,940 Profit/(Loss) before tax ( PBT / (LBT) ) 46,501 47,829 31,479 Profit/(Loss) after tax attributable to the equity holders of the company NA attributable to the equity holders of the company 35,275 36,391 26, , , ,516 Total borrowings 0 122, ,296 Commentaries: FYE 31 December 2015 vs. FYE 31 December 2014 Revenue increased by RM92.8 million or 52.46% in FYE 31 December 2015 from RM177 million in FYE 31 December 2014 mainly attributable to increased sales to Government Hospitals and the inclusion of revenues of the various pharmaceutical companies acquired by CCMD from CCMB in June Despite the significant increase in revenue, PBT registered an increase of 2.86% mainly due to the costs associated with the said acquisitions as well as interest cost on bridging and term loans drawn down to fund these acquisitions and for settlement of borrowings and advances from CCMB. In June 2015, CCMD obtained a RM245 million term loan facility of which RM million was used for the acquisitions of companies from CCMB and RM million was utilised to repay borrowings and advances from CCMB. CCMD also undertook rights issue exercise raising RM million in 2015 for the purpose of expanding its factory as well as to repay borrowings which contributed to the increase in NA attributable to the equity holders of the company. FYE 31 December 2016 vs. FYE 31 December 2015 Revenue increased by RM43.1 million or 15.99% in FYE 31 December 2016 mainly attributable to the inclusion of the full year revenue of the companies acquired in Despite the increase in revenue, PBT declined by 34.2% to RM31.48 million from RM47.83 million reported in the previous financial year. The lower profit recorded for the period was primarily attributed by the changes in the product mix of CCMD Group to lower margin products and increased in production cost primarily driven by adverse foreign exchange movements, resulting in lower gross margin. 21