ECO WORLD DEVELOPMENT GROUP BERHAD ( EW BERHAD OR THE COMPANY )

Transcription

1 ECO WORLD DEVELOPMENT GROUP BERHAD ( EW BERHAD OR THE COMPANY ) (I) (II) SUBSCRIPTION AND SHAREHOLDERS AGREEMENT ( SSA ) BETWEEN EW BERHAD, EMPLOYEES PROVIDENT FUND BOARD OR ITS WHOLLY-OWNED SUBSIDIARY ( EPF ) AND ECO HORIZON SDN BHD (FORMERLY KNOWN AS TERAJU PASIFIK SDN BHD) ( EHSB ), A WHOLLY-OWNED SUBSIDIARY OF EW BERHAD, TO JOINTLY DEVELOP APPROXIMATELY ACRES OF LEASEHOLD LANDS IN MUKIM 13, DAERAH SEBERANG PERAI SELATAN, NEGERI PULAU PINANG ( LANDS ) ( PROPOSED SUBSCRIPTION ); AND PROPOSED PROVISION OF FINANCIAL ASSISTANCE TO EHSB (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) Reference is made to EW Berhad s announcement dated 28 June 2016, 11 November 2016 and 19 December 2016 regarding the proposed acquisition of the Lands by EHSB ( Proposed Acquisition ). 1. INTRODUCTION The Board of Directors of EW Berhad ( Board ) wishes to announce that by a subscription and shareholders agreement ( SSA ) entered into between EW Berhad, EPF and EHSB ( Parties ) on 23 January 2017, EPF agreed to participate in and subscribe for an equity interest in EHSB (presently a wholly-owned subsidiary of EW Berhad) to, jointly undertake, through EHSB, the development of the Lands as a mixed residential and commercial development to be known as Eco Horizon and Eco Sun (collectively, Proposed Development ). Upon completion of EPF s subscription, EW Berhad will hold 60% equity interest in EHSB while EPF will hold the balance 40% thereof. Amongst the salient terms of the SSA, EW Berhad agrees to: provide up to RM140 million of shareholders advances to EHSB to part finance the cost comprising the Lands and development expenditure in relation to the Proposed Development ( Development Cost ) ( EWB Advances ); and provide a guarantee to secure the repayment of all sums of monies due, owing, unpaid or outstanding by EHSB to EPF in respect of EPF s shareholders advances to EHSB of up to RM260 million to part finance the Development Costs ( EPF Advances ) ( EWB Guarantee ). For the purposes of the Proposed Development, EW Berhad may also be required to provide guarantee, indemnity, undertaking, provision of collateral for a debt or assumption of financial obligation, in whatsoever manner by EW Berhad to the respective financiers to secure the repayment of monies owing due, unpaid or outstanding by EHSB in respect of any financing facility to be taken by EHSB from such financiers to fund the Development Cost ( Corporate Guarantee and Indemnity ). EWB Advances, EWB Guarantee and the Corporate Guarantee and Indemnity, are collectively referred to as Proposed Provision of Financial Assistance. Further details of the Proposed Subscription and Proposed Provision of Financial Assistance are set out in Section 3 and Section 4 respectively. 1

2 2. INFORMATION ON THE PROPOSED ACQUISITION On 28 June 2016, EHSB entered into the following agreements: a conditional sale and purchase agreement with Batu Kawan Development Sdn Bhd ( BKDSB ) for the proposed acquisition of a piece of leasehold land held under H.S.(D) for PT 5261 in Mukim 13, Daerah Seberang Perai Selatan, Negeri Pulau Pinang, measuring approximately acres ( Parcel A ) for a cash consideration of RM681,988, ( Parcel A Price ) ( Parcel A SPA ). Pursuant to the terms of the Parcel A SPA, EHSB had also on 28 June 2016, entered into a revocation and rescission agreement with BKDSB and Silver Setup Sdn Bhd ( SSSB ) for the revocation and rescission of a joint development agreement dated 10 October 2012 made between BKDSB and SSSB in respect of the development of Parcel A ( Revocation Agreement ). Pursuant to the Revocation Agreement, Eco Horizon had agreed to pay SSSB a sum of RM50,000, (being the Revocation Sum ), subject to the completion of the Parcel A SPA. As such, the aggregate consideration to be paid by EHSB for the acquisition of Parcel A shall be RM731,988,877.76, comprising the Parcel A Price and the Revocation Sum; and a conditional sale and purchase agreement with BKDSB and Penaga Pesona Sdn Bhd ( PPSB ) for the proposed acquisition of a piece of leasehold land held under part of H.S.(D) for PT 5258 in Mukim 13, Daerah Seberang Perai Selatan, Negeri Pulau Pinang, measuring approximately acres ( Parcel B ) for a cash consideration of RM143,253, ( Parcel B SPA ). (Parcel A SPA, Revocation Agreement and Parcel B SPA are collectively referred to as Transaction Agreements ) Further details of the Proposed Acquisition are available in the announcement dated 28 June Further details of the Proposed Development are set out in Section 7 of the Announcement. 3. DETAILS OF THE PROPOSED SUBSCRIPTION AND THE SSA The SSA entails the participation by EPF in EHSB through a subscription ( EPF Subscription ) of 4,000,000 new ordinary shares of RM1.00 each representing 40% equity interest in EHSB ( EPF Subscription Shares ). Pursuant to the SSA, EHSB will undertake the Proposed Development and EPF and EW Berhad ( collectively, Shareholders ) agree to regulate their relationships as shareholders in EHSB upon the terms and subject to the conditions contained therein. EPF will subscribe for the EPF Subscription Shares through a nominee which shall be whollyowned by EPF and any reference to the EPF in this Announcement shall, depending on context, include such nominee Salient terms of the SSA Business of EHSB The business of EHSB is to purchase the Lands and to undertake the Proposed Development on the Lands. 2

3 EPF Subscription Shares EPF will subscribe for the EPF Subscription Shares as illustrated below, within 15 business days from the day the last of the Conditions Precedent (defined herein) has been duly fulfilled (or waived, where applicable): Shareholder No. of ordinary shares held as at the date of the SSA No. of ordinary shares to be subscribed for Total issue price (RM) No. of ordinary shares held after EPF Subscription Percentage of ordinary shares held after EPF Subscription EW Berhad 6,000, ,000,000 60% EPF - 4,000,000 4,000,000 4,000,000 40% Total 6,000,000 4,000,000 4,000,000 10,000, % Conditions precedent The obligations of the Shareholders and the right and obligations of EHSB to issue the EPF Subscription Shares in accordance with the SSA are conditional upon the fulfilment (or waiver, where applicable) of the following conditions precedent ( Conditions Precedent ): (iii) (iv) (v) (vi) EPF being satisfied with the results of the due diligence on EHSB, the Lands, the Transaction Agreements and all other matters relating to the Proposed Development including, without limitation, its market feasibility study, due diligence on development costs and legal due diligence within two (2) months from the date of the SSA and if required by EPF, a further period of one (1) month and such further extension as may be mutually agreed between EW Berhad and EPF ( DD Period ); the approval by the Parties of the provisional business plan and budget for EHSB to undertake the Proposed Development within the DD Period; the fulfilments of the conditions precedent of the Parcel A SPA, Parcel B SPA and an agreement dated 28 June 2016 entered between BKDSB, PPSB and Penang Development Corporation ( PDC SPA ) within four (4) months from the date of the SSA or such other further extended period as shall be mutually agreed by the Parties ( Approval Period )); the approval of the shareholders of EW Berhad at an extraordinary general meeting to be convened for the Proposed Provision of Financial Assistance within the Approval Period; if required, the approval from the Economic Planning Unit of the Prime Minister s Department of Malaysia being obtained by EHSB for the Proposed Acquisitions pursuant to the Transaction Agreements on terms and conditions acceptable to EPF; and the approvals of any other relevant authorities (if necessary and required) within the Approval Period Funding requirements EW Berhad and EPF agree that the funding requirement for the Development Cost shall be raised by EHSB in the following order of preference: (iii) EWB Advances of up to RM140 million and EPF Advances of up to RM260 million; borrowings from banks and/or financial institutions; proportionate shareholders advances; and 3

4 (iv) increase in paid-up ordinary capital and/or issuance of preference shares. In addition, EW Berhad agrees to give in favour of EPF, the EWB Guarantee Directors, Executive Committee and Senior Management of EHSB The board of directors of EHSB ( EHSB Board ) will comprise a maximum of five (5) directors who shall be appointed by the Shareholders in the following proportions. (a) (b) a maximum of three (3) directors appointed by EW Berhad ( EW Berhad Directors ); and a maximum of two (2) directors appointed by EPF. Following the completion of the EPF Subscription, the EHSB Board shall appoint an executive committee to assist it in the management of EHSB and the undertaking of the Proposed Development, which will comprise three (3) members as follows: (a) (b) two (2) members appointed by EW Berhad; and one (1) member appointed by EPF. (iii) For as long as EW Berhad holds at least 50% equity interest in EHSB: (a) (b) the chairman of the EHSB Board shall be appointed from amongst the EW Berhad Directors; and the Chief Executive Officer, Chief Financial Officer and other senior management team of EHSB shall be appointed from candidates nominated or recommended by EW Berhad Development Management and Brand License In conjunction with the SSA, EHSB enters into the following agreements with Eco World Project Management Sdn Bhd ( EWPM ), a wholly-owned subsidiary of EW Berhad: the development management agreement for the provision of development management, marketing and administration services in relation to the Proposed Development; and the brand license agreement for the non-exclusive license to use the Eco World Brand for the sale and promotion of the Proposed Development Term and Termination The SSA is effective on the date of the SSA and shall continue to be in force and effect for an indefinite term until EHSB is dissolved or the SSA is sooner terminated in accordance with the terms of the SSA Rights of EPF It is a term in the SSA that EPF has the option (but not the obligation) to require EW Berhad to purchase all of EPF shares in and advances to EHSB (including the EPF Advances) at the price to be determined based on a formula applying a fixed mutually agreed internal rate of return on EPF s total investment less any interest or other distributions received by EPF. 4

5 This option is exercisable by EPF after the expiry of 8 years after the first utilisation of the EPF Advances or if the business of EHSB is materially and adversely affected by the noncompletion of the Transaction Agreements and/or the PDC SPA. 4. PROPOSED PROVISION OF FINANCIAL ASSISTANCE Pursuant to Paragraph 8.23(2)(c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ), the issuance of circular and shareholders approval are required where the provision of financial assistance is to an associated company or joint arrangement of the listed issuer, and the aggregate amount provided or to be provided at any time to each associated company or joint arrangement compared to the net tangible assets ( NTA ) of the group is 5% or more. Pursuant to the SSA, EW Berhad will be required to provide the EWB Advances and EWB Guarantee. The key information on the EWB Advances and EPF Advances are as follows: EWB Advances EPF Advances Amount RM140,000,000 RM260,000,000 Tenure Up to 12 years Up to 8 years Utilisation Interest rate Repayment terms Ranking To part finance the Development Cost At an agreed rate between the parties the same rate applies for both the EPF Advances and the EWB Advances To be repaid/ prepaid after full repayment of EPF Advances EWB Advances shall be subordinated to EPF Advances and all senior secured and unsecured financing of EHSB, but shall rank ahead of ordinary equity in distribution of excess cash flow and in the event of default To be repaid in full 8 years after the first utilisation of EPF Advances EPF Advances shall be subordinated to all senior secured and unsecured financing of EHSB, but shall rank ahead of EWB Advances and ordinary equity in distribution of excess cash flow and in the event of default EHSB is presently a wholly-owned subsidiary of our Company. Upon the completion of the EPF Subscription, EHSB will be a joint venture of our Company. As at the 23 January 2017, EW Berhad had advanced approximately RM81.84 million to EHSB. EW Berhad may also be required to provide the Corporate Guarantee and Indemnity. The quantum of the Corporate Guarantee and Indemnity cannot be determined at this juncture as the amount would depend on, amongst others, the amount of external financing obtained by EHSB, the actual development cost required for the Proposed Development and the internal funds from the Proposed Development. The Corporate Guarantee and Indemnity is expected to subsist throughout the development period of the Proposed Development or until the full and final repayment of the external financing, whichever is earlier, in accordance with the terms and conditions of the external financing. 5. INFORMATION ON EHSB EHSB was incorporated in Malaysia as a private limited company under the Companies Act, 1965 on 3 March EHSB is principally involved in property development. As at 23 January 2017, the authorised capital of EHSB is RM10,000,000 divided into 10,000,000 ordinary shares of RM1.00 each, out of which 6,000,000 ordinary shares are held by EW Berhad and are fully paid-up. Upon completion of the EPF Subscription, EW Berhad and EPF will be holding 6,000,000 and 4,000,000 ordinary shares respectively, representing 60% and 40% equity interest in EHSB. As at 23 January 2017, EHSB does not have any subsidiaries or associates companies. 5

6 6. INFORMATION ON EPF EPF is a social security institution established under the Employees Provident Fund Act 1991 (Act 452) which provides retirement benefits for its members through management of their savings in an efficient and reliable manner. The members of EPF are private and nonpensionable public-sector employees. The principal activities of EPF are to receive and to collect contributions, to meet all withdrawals of savings and other benefits to members or their beneficiaries upon satisfaction of conditions for withdrawals, and to invest the monies for the benefit of its members. 7. INFORMATION ON THE LANDS AND THE PROPOSED DEVELOPMENT The Lands, measuring approximately acres, are located in Mukim 13, Daerah Seberang Perai Selatan, Negeri Pulau Pinang. The location map of the Lands is set out below: The Lands are located on the southern part of Batu Kawan, an island situated off the western coast of District of Seberang Perai Selatan in between Penang Island and the mainland. 6

7 The Lands are approachable from the Batu Kawan Interchange of the North-South Highway via expressway linking to the Second Penang Bridge and thence onto Lebuhraya Bandar Cassia. Alternatively, it is accessible from the Bukit Tambun Interchange of the North-South Highway via Jalan Bukit Tambun, Jalan Batu Kawan and thence onto Lebuhraya Bandar Cassia, all being well-maintained metalled roads. The Lands are located in a mixed neighbourhood with prominent landmarks in the immediate vicinity such as the Batu Kawan Stadium and Batu Kawan Industrial Park. Parcel A is situated just off the primary interchange linking the Second Penang Bridge to the North-South Highway right opposite IKEA. Parcel B is located along Lebuhraya Bandar Cassia close to the Penang State Stadium. This will enable our Company to create two (2) proposed complementary mixed township developments to be known as Eco Horizon and Eco Sun. Based on the preliminary master plan, the Proposed Development, which will feature landed homes within Signature EcoWorld gated & guarded strata townships as well as integrated commercial components, are expected to generate a potential combined gross development value of RM7.76 billion. EHSB proposes to develop Eco Horizon over a period of ten (10) years and Eco Sun over a period of seven (7) years pursuant to the development terms agreed with Penang Development Corporation. Further information of the Lands is available in the circular to shareholders dated 20 January 2017 in relation to the Proposed Acquisition. 8. RATIONALE FOR THE PROPOSALS In the announcement dated 28 June 2016, EW Berhad made known its intention to raise equity funding at the project level by inviting suitable institutional/ private equity/ corporate partners to co-invest and fund EHSB s Proposed Development of the Lands pursuant to its partnership for growth business model ( Business Model ). This Business Model was formulated and refined to enable EW Berhad and its subsidiaries ( Group ) to gain access to prime lands as well as acquire and develop sizeable strategic lands without over-extending its balance sheet. EPF had on the same day issued a letter of expression of interest on a non-binding basis to participate in, among others, the joint development of the Lands. On 15 November 2016, EW Berhad and EPF formalised an agreement to jointly develop 2,198 acres of land in Mukim Ijok in the state of Selangor into a mixed residential and commercial development to be known as Eco Grandeur and an integrated business park to be known as Eco Business Park V. EPF s co-investment in EHSB represents EW Berhad s fourth (4 th ) successful venture under the Business Model and third (3 rd ) with EPF to accelerate the expansion of its development presence in Malaysia. Under the Business Model, a wholly-owned subsidiary of EW Berhad (in this case, EWPM) will be appointed by EHSB as the development manager to plan, develop, market and manage the Proposed Development. EHSB will also enter into a brand license agreement with EWPM for the Proposed Development to be marketed as Signature EcoWorld developments (refer paragraph above). This generates a fee-based recurring income stream for the Group and also enables the rewards of value creation to be shared between the Shareholders of EHSB and EWPM as the development manager. 7

8 The Proposed Provision of Financial Assistance forms part of the salient terms of the SSA whereby both EW Berhad and EPF have agreed to provide the EWB Advances and EPF Advances for the purposes of funding the Development Cost. To facilitate the provision of the EPF Advances, EW Berhad has also agreed to give the EWB Guarantee in favour of EPF. In addition, EW Berhad agreed to provide Corporate Guarantee and Indemnity to the respective financiers for financing facility to be taken by EHSB to fund the Development Cost. The availability of the requisite funding from the Shareholders and financiers would help to avoid unnecessary delays during the development period and promote timely completion of the Proposed Development. It should be noted that the entry of EPF as a shareholder and its provision of the EPF Advances will directly reduce the amount of equity and shareholders advances which EW Berhad would otherwise be required to inject into EHSB. The Proposed Provision of Financial Assistance is therefore an integral term of the SSA which provides another opportunity for EW Berhad to work together with EPF to undertake a large-scale mixed township development in the Batu Kawan growth corridor. 9. RISK FACTORS Below is one of the non-exhaustive risk factors which may impact the Group in relation to the Proposals: Risk of Default and/or Disputes Disputes between EW Berhad and EPF as shareholders of EHSB may arise in the course of the SSA, which may materially and adversely affect the business, operation or financial condition of EHSB. The SSA however provides for EW Berhad, EPF and EHSB to firstly endeavor to resolve any dispute amongst them amicably through negotiations in good faith before referring the matter to arbitration. The SSA also provides that notwithstanding any deadlock between EW Berhad and EPF, whether existing or pending resolution, the day-to-day operations and business of EHSB shall continue to be carried on in accordance with the then approved annual business plan and budget. Further, default by any party to the SSA is an inherent risk in any joint venture and similarly, may materially and adversely affect the business, operation or financial condition of EHSB. The SSA has a detailed process to deal with default events, including giving the defaulting party the opportunity to remedy such breach and if not remedied, the option to terminate the SSA. Notwithstanding the provisions of the SSA, the Board will take all reasonable steps to ensure the due performance by EW Berhad and EHSB of the SSA and have continuous discussions with EPF on the affairs of EHSB to avoid any potential disputes. 10. FINANCIAL EFFECTS OF THE PROPOSALS 10.1 Share Capital and substantial shareholders shareholding The Proposals are not expected to have any effects on the share capital and substantial shareholders shareholdings Net assets per share and gearing The Proposals are expected to reduce the borrowings required to fund the Development Cost following the implementation of the Business Model and consequentially the gearing of the Group for the financial year ending 31 October For information purposes, pursuant to the Proposed Subscription, EW Berhad s investment in EHSB will be classified and presented as an investment in a joint venture. 8

9 10.3 Earnings and earnings per share ( EPS ) EHSB is expected to contribute positively to the future earnings and EPS of the Group whereby EW Berhad will be able to proportionately recognise the earnings from sales secured by EHSB. The Proposed Provision of Financial Assistance is not expected to have a material effect on the earnings and EPS of EW Berhad for the financial year ending 31 October PERCENTAGE RATIO FOR THE PROPOSED SUBSCRIPTION Based on the latest audited consolidated financial statements of EW Berhad for the financial year ended 31 October 2016, the highest percentage ratio applicable to the Proposed Subscription pursuant to Paragraph 10.02(g) of the Listing Requirements is 4.49%. 12. APPROVALS TO BE SOUGHT In view that the Proposed Provision of Financial Assistance to be provided to EHSB will exceed 5% of the NTA of the Group, EW Berhad will be seeking the approval of its shareholders for the Proposed Provision of Financial Assistance at an extraordinary general meeting to be convened. 13. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/ OR PERSONS CONNECTED TO THEM None of the directors and/ or major shareholders of EW Berhad, or persons connected with them, have any interest, direct or indirect, in the Proposals. 14. DIRECTORS STATEMENT The Board, after having considered all aspects of the Proposals including but not limited to the salient terms of the SSA, rationale for the Proposals and prospects as well as the risk factors of the Proposals and after careful deliberation, is of the opinion that the Proposals are in the best interest of EW Berhad. 15. ESTIMATED TIMEFRAME FOR COMPLETION The EPF Subscription is expected to be completed by the first half of The EWB Guarantee is expected to be provided by the first half of 2017, and the Proposed Provision of Financial Assistance (other than EWB Guarantee) will be implemented from time to time in accordance with EHSB s requirement for the same, after obtaining the approval from the shareholders of EW Berhad. 16. DOCUMENTS FOR INSPECTION The SSA is available for inspection at the registered office of EW Berhad at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, Kuala Lumpur, Malaysia during normal business hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this Announcement. This Announcement is dated 23 January