SASBADI HOLDINGS BERHAD - PROPOSED ACQUISITION OF 30% EQUITY INTEREST IN SANJUNG UNGGUL SDN BHD

Transcription

1 SASBADI HOLDINGS BERHAD - PROPOSED ACQUISITION OF 30% EQUITY INTEREST IN SANJUNG UNGGUL SDN BHD 1. INTRODUCTION The Board of Directors of Sasbadi Holdings Berhad ( Sasbadi Holdings or the Company ) is pleased to announce that the Company has on 25 July 2017 entered into a sale and purchase agreement ( SPA ) with Law En Tzer ( the Vendor ) to acquire the remaining 30% of the issued share capital of Sanjung Unggul Sdn Bhd ( Sanjung Unggul ), comprising 2,400,000 ordinary shares ( Sale Shares ), for a purchase consideration of RM9,400, only ( Purchase Consideration ) subject to the terms and conditions in the SPA ( Proposed Acquisition ). Upon completion of the Proposed Acquisition, Sanjung Unggul will become a wholly-owned subsidiary of Sasbadi Holdings. 2. DETAILS OF THE PROPOSED ACQUISITION 2.1 Proposed Acquisition The Proposed Acquisition entails the proposed acquisition of the Sale Shares by the Company from the Vendor at the Purchase Consideration and upon the terms and conditions in the SPA. 2.2 Information on Sasbadi Holdings Sasbadi Holdings was incorporated in Malaysia as a private limited company on 30 October 2012 and converted into a public limited company on 15 March It was listed on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 23 July Sasbadi Holdings is principally involved in investment holding whilst the Sasbadi Holdings Group (i.e. Sasbadi Holdings and its subsidiaries) is principally involved in providing education solutions, focusing on publishing printed and online/digital educational materials and resources (catering mainly to students in national schools), supplementary educational materials and general titles, and provision of STEM (i.e. science, technology, engineering and mathematics) products and services. As at 25 July 2017, Sasbadi Holdings has an issued share capital of RM69,850, comprising 279,400,000 ordinary shares (including 1,000 shares held as treasury shares). 2.3 Information on Sanjung Unggul and the Vendor Sanjung Unggul was incorporated in Malaysia as a private limited company on 22 August 2001 under its present name. Its principal activity is investment holding. As at 25 July 2017, Sanjung Unggul has a wholly-owned subsidiary, The Malaya Press Sdn Bhd, which in turn, has three (3) wholly-owned subsidiaries, i.e. Big Tree Publications Sdn Bhd, Jinbang Publication Sdn Bhd and Media Distribution Sdn Bhd. The Sanjung Unggul Group (i.e. Sanjung Unggul and its subsidiaries) is principally involved in publishing books and educational materials catering to students in national-type Chinese schools ( Sekolah Jenis Kebangsaan (Cina) ).

2 As at 25 July 2017, Sanjung Unggul has an issued share capital of RM8,000, comprising 8,000,000 ordinary shares. The shareholding structure of Sanjung Unggul before and after the Proposed Acquisition is as follows: Shareholder/Vendor As at 25 July 2017 No of ordinary shares held % held Upon completion of the Proposed Acquisition No of ordinary shares held % held Sasbadi Holdings 5,600, ,000, Law En Tzer 2,400, Total 8,000, ,000, As at 25 July 2017, the directors of Sanjung Unggul are Kuan Shaw Ping and Lim Jit Ping. The Sanjung Unggul Group recorded an audited consolidated profit after tax of RM1,774, for the financial year ended 31 August 2016, while its audited consolidated net assets as at 31 August 2016 stood at RM16,684, Basis of Arriving at the Purchase Consideration The Purchase Consideration was arrived at on a willing buyer willing seller basis after taking into consideration the following: (i) (ii) The opportunity for the Sasbadi Holdings Group to have 100% control over the business operations of the Sanjung Unggul Group; The audited consolidated profit after tax of the Sanjung Unggul Group of RM1,774, for the financial year ended 31 August 2016, and the estimated profit after tax of approximately RM630, derived by the Sanjung Unggul Group for the supply of reprinted textbooks ( Buku Cetakan Semula ) to schools in October 2016 (Note: The supply of Buku Cetakan Semula to schools by the Sanjung Unggul Group usually happens in the last quarter of the financial year, i.e. during the June to August period, but last year, the orders by the Ministry of Education Malaysia only came in after the financial year-end of August). With the combined pro forma profit after tax of RM2,404, (i.e. RM1,774, RM630,000.00) and the Purchase Consideration of RM9,400, for the 30% equity interest, this translates to a price-to-earnings ( PE ) multiple of 13.0 times (i.e. 9,400, / (30% x 2,404,690.00)). The PE multiple of 13.0 times is within the range of PE multiples of comparable companies (i.e. companies that are involved in the education sector, including Sasbadi Holdings) listed on Bursa Securities of between 11.3 times and 32.9 times, and lower than the average PE multiple of the said comparable companies of 24.1 times; and (iii) The future earnings potential of the Sanjung Unggul Group whereby, upon the completion of the Proposed Acquisition, the Sasbadi Holdings Group will have full control over how it leverages on its competitive strengths such as its online and digital technological capabilities, extensive distribution network, economies of scale, etc., to enhance the product offerings and drive growth in the Sanjung Unggul Group. 2

3 2.5 Mode of Satisfaction The Purchase Consideration shall be paid in cash by the Company to the Vendor on the completion date, and it will be entirely financed by bank borrowings. 2.6 Liabilities to be Assumed by the Company There are no other liabilities to be assumed by the Company pursuant to the Proposed Acquisition. The Sanjung Unggul Group will continue to settle its existing liabilities, as and when due, in the ordinary course of business. 3. SALIENT TERMS OF THE SPA The obligations of the Company and the Vendor to complete the sale and purchase of the Sale Shares are conditional upon the following conditions being fulfilled on or before the expiry of the cut-off date (which is a date no later than three (3) months from the date of the SPA, with an automatic extension for a further period of three (3) months or for such other period as may be agreed upon in writing between the parties): (i) (ii) (iii) The approval of the directors of the Company for the acquisition of the Sale Shares from the Vendor; The approval of the directors and/or members of Sanjung Unggul for the sale of the Sale Shares to the Company; and If necessary, the approval of any other relevant governmental, administrative or regulatory authorities whose approval is deemed necessary by the Company and the Vendor to complete the sale and purchase of the Sale Shares. 4. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 4.1 Share Capital The Proposed Acquisition will not have any effect on the issued and paid-up share capital of Sasbadi Holdings as it is satisfied entirely by cash. 4.2 Earnings and Net Assets Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed before the end of the financial year ending ( FYE ) 31 August In this regard, the Proposed Acquisition is expected to start contributing to the earnings and net assets of the Sasbadi Holdings Group in FYE 31 August 2017 whereby Sasbadi Holdings Group is able to increase the percentage of consolidation of the earnings and net assets of the Sanjung Unggul Group from 70% to 100% upon the completion of the Proposed Acquisition. 4.3 Substantial Shareholders Shareholdings The Proposed Acquisition will not have any effect on the shareholdings of the substantial shareholders of Sasbadi Holdings as it is satisfied entirely by cash. 3

4 4.4 Gearing Based on the Sasbadi Holdings Group s audited consolidated net assets of RM million and borrowings of RM20.04 million as at 31 August 2016, and the Proposed Acquisition being entirely financed by bank borrowings, the Proposed Acquisition will increase the gearing of the Sasbadi Holdings Group from 0.14 times to 0.20 times. 5. RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition will enable the Sasbadi Holdings Group to have full control over the Sanjung Unggul Group, and how it leverages on its competitive strengths such as its online and digital technological capabilities, extensive distribution network, economies of scale, etc., to enhance the product offerings and drive growth in the Sanjung Unggul Group. 6. PROSPECTS The Malaysian Economy The Malaysian economy continued to expand in the first quarter of 2017, driven mainly by domestic demand activity. Looking ahead, leading indicators such as the Department of Statistics Malaysia s composite leading index, MIER Business Conditions Index and MIER Consumer Sentiments Index, point to continued expansion of the domestic economy. Private consumption will be sustained by continued wage and employment growth, with additional lift coming from various policy measures to raise disposable income. Investment activity is projected to expand, driven mainly by the implementation of new and ongoing projects in the manufacturing and services sectors. The stabilisation of commodity prices is also expected to lend support to investment activity in the mining sector. On the external front, exports are expected to benefit from the improvement in global growth, especially among Malaysia s key trading partners. Overall, the economy remains on track to expand as projected in On the supply side, the improvement in external trade will benefit the export-oriented industries in the manufacturing and services sectors, particularly the E&E industry and traderelated services. The agriculture sector will continue to recover as CPO yields improve post-en Nino. Growth in the mining sector is projected to be supported by output from the ramping up of production in new oil and gas facilities. In the construction sector, new and existing civil engineering projects will drive the sector going forward. Inflation increased to 4.3% in the 1Q 2017 driven by higher costs, but is expected to moderate in the second quarter onwards. However, compared to the forecast at the beginning of the year, the upside risks to global oil prices have increased given the rising geopolitical tensions in the Middle East and the possibilities of an extension to OPEC s output cut agreement. While the impact of these developments on global oil prices remain limited at this juncture, if they persist, inflation could average higher than forecasted. (Source: Quarterly Bulletin, First Quarter 2017, Bank Negara Malaysia) The Sasbadi Holdings Group The Sasbadi Holdings Group continues to pursue growth via a two (2) pronged strategy, i.e. organic and inorganic. As discussed in paragraph 5 above, the Proposed Acquisition will enable 4

5 the Sasbadi Holdings Group to have full control over the Sanjung Unggul Group, and how it leverages on its competitive strengths to enhance the product offerings and drive growth in the Sanjung Unggul Group. In this regard, the Proposed Acquisition is in line with the Sasbadi Holdings Group s overall growth strategy. 7. RISK FACTORS The Sasbadi Holdings Group does not foresee any exceptional risks in connection with the Proposed Acquisition, save for the risk of non-completion of the SPA. 8. APPROVALS REQUIRED The Proposed Acquisition is not subject to the approval of the shareholders of Sasbadi Holdings or any relevant authorities. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed before the end of FYE 31 August DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or major shareholders of Sasbadi Holdings or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 11. DIRECTORS STATEMENT The Board of Directors of Sasbadi Holdings is of the opinion that the Proposed Acquisition is in the best interest of the Sasbadi Holdings Group. 12. PERCENTAGE RATIO APPLICABLE TO THE TRANSACTIONS PURSUANT TO PARAGRAPH 10.02(g) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA SECURITIES The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is 6.37%. 13. DOCUMENTS AVAILABLE FOR INSPECTION A copy of the SPA is available for inspection at the registered office of Sasbadi Holdings at Suite 11.1A, Level 11, Menara Weld, 76, Jalan Raja Chulan, Kuala Lumpur, during office 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 25 July