TECNIC GROUP BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS INDEPENDENT ADVICE CIRCULAR ( IAC ) IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. YOU SHOULD READ THIS IAC IN CONJUNCTION WITH THE OFFER DOCUMENT DATED 2 FEBRUARY 2017 ISSUED BY HONG LEONG INVESTMENT BANK BERHAD ON BEHALF OF THE JOINT OFFERORS (AS DEFINED HEREIN) WHICH HAS BEEN SENT TO YOU. If you are in any doubt as to the action to be taken in relation to the Offer (as defined herein), please consult your stockbroker, solicitor, accountant, bank manager or other professional advisers immediately. If you have sold or transferred all your Offer Shares (as defined herein), you should at once hand this IAC to the purchaser or stockbroker or agent through whom you effected the sale or transfer for onward transmission to the purchaser or transferee of such Offer Shares. Pursuant to Rule 11 of the Rules on Take-overs, Mergers and Compulsory Acquisitions, the Securities Commission Malaysia ( SC ) has notified that it has no further comments to the contents of this IAC. However, such notification shall not be taken to suggest that the SC agrees with our recommendation or assumes responsibility for the correctness of any statements made or opinions or reports expressed in this IAC. TECNIC GROUP BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) INDEPENDENT ADVICE CIRCULAR TO THE HOLDERS OF THE OFFER SHARES IN RELATION TO THE UNCONDITIONAL MANDATORY TAKE-OVER OFFER BY ROHAS-EUCO HOLDINGS SDN BHD, TAN SRI NIK WAN AZMI BIN WAN HAMZAH, PUAN SRI NIK ANIDA BINTI NIK MANSHOR, SIA BUN CHUN AND CHAN LIEW HOON ( JOINT OFFERORS ) THROUGH HONG LEONG INVESTMENT BANK BERHAD (Company No W) (A Participating Organisation of Bursa Malaysia Securities Berhad) TO ACQUIRE ALL THE REMAINING ORDINARY SHARES IN TECNIC GROUP BERHAD NOT ALREADY OWNED BY THE JOINT OFFERORS ( OFFER SHARES ) FOR A CASH CONSIDERATION OF RM0.63 PER OFFER SHARE ( OFFER ) Independent Adviser MERCURY SECURITIES SDN BHD (Company No W) (A Participating Organisation of Bursa Malaysia Securities Berhad) This Independent Advice Circular is dated 13 February 2017

2 DEFINITIONS Except where the context otherwise requires or where otherwise defined herein, the following definitions shall apply throughout this Independent Advice Circular:- Accepting Holder : Holder who accepts the Offer in accordance with the terms and conditions set out in the Offer Document Acquisition : Acquisition by Tecnic of the entire equity interest held by RE Holdings in REI comprising 68,377,306 REI Shares for a purchase consideration of RM200,000,000 to be satisfied via the issuance of 317,460,318 Consideration Shares to Tan Sri Wan Azmi, Puan Sri Nik Anida, George Sia and Madam Chan at an issue price of RM0.63 each, which will result in the increase of the collective shareholdings of the Joint Offerors in Tecnic from nil to approximately 88.71%. Act : Companies Act, 2016 Board : Board of Directors of Tecnic Bursa Depository : Bursa Malaysia Depository Sdn Bhd ( W) Bursa Securities : Bursa Malaysia Securities Berhad ( W) CEO : Chief executive officer Closing Date : First Closing Date; or revised or extended closing date as the Joint Offerors may decide and as may be announced by HLIB, on behalf of the Joint Offerors, at least two (2) days before the Closing Date in the event the Offer is revised or extended in accordance with the Rules and the terms and conditions of the Offer Document, as the case may be CMSA : Capital Markets and Services Act, 2007 Compulsory Acquisition : The right of the Joint Offerors, pursuant to Section 222 of the CMSA, to acquire all the remaining Tecnic Shares from the Dissenting Holders if the Joint Offerors receives valid acceptances from the Accepting Holders of not less than nine-tenths (9/10) in the nominal value of the Tecnic Shares (excluding those already held by the Joint Offerors as at the date of the Offer), subject to Section 224 of the CMSA Consideration Shares : 317,460,318 new Tecnic Shares (88.71% equity interest in Tecnic upon completion of the Acquisition) to be issued to the Vendor s Shareholders at an issue price of RM0.63 as consideration for the Acquisition COO : Chief operating officer DCF : Discounted cash flow Directors : Directors of Tecnic i

3 DEFINITIONS (cont d) Disposal : Disposal by Tecnic of its entire equity interests in Plastictecnic (M) Sdn Bhd, Sun Tong Seng Mould-Tech Sdn Bhd and Bangi Plastics Sdn Bhd to SKP for a total disposal consideration of RM200 million to be satisfied via RM100 million in cash and issuance of 172,413,793 new SKP Shares at an issue price of RM0.58 per SKP Share, which was completed on 6 April 2015 Dissenting Holder : A Holder who has not accepted the Offer in accordance with the terms and conditions as set out in the Offer Document EGM : Extraordinary general meeting of Tecnic Enlarged Tecnic Group : Enlarged Tecnic group of companies after the completion of the Acquisition comprising Tecnic, REI and the subsidiaries and associated companies of REI EPS : Earnings per share FCFE : Free cash flows to equity First Closing Date : 5.00 p.m. (Malaysian time) on 23 February 2017, being the date falling 21 days from the Posting Date Form of Acceptance and Transfer : Form of acceptance and transfer for the Offer Shares enclosed with the Offer Document FPE : Financial period ended FYE : Financial year ended / ending George Sia : Sia Bun Chun, one of the Joint Offerors and the spouse of Madam Chan GP : Gross profit HLIB : Hong Leong Investment Bank Berhad (10209-W) Holder : Holder of the Offer Shares IAC : Independent advice circular comprising Part A: Letter from the Board, Part B: IAL from Mercury Securities and the Appendices IAL : Independent advice letter from the Independent Adviser to the Holders dated 13 February 2017 Joint Offerors : Collectively, RE Holdings, Tan Sri Wan Azmi, Puan Sri Nik Anida, George Sia and Madam Chan LAT : Loss after taxation Listing Requirements : Main Market Listing Requirements of Bursa Securities LPD : 6 February 2017, being the latest practicable date prior to the issuance of this IAC Madam Chan : Chan Liew Hoon, one of the Joint Offerors and the spouse of George Sia Market Day : Any day on which Bursa Securities is open for trading of securities ii

4 DEFINITIONS (cont d) Mercury Securities or Independent Adviser : Mercury Securities Sdn Bhd ( W), appointed by the Board as the independent adviser pursuant to Paragraph 3.06 of the Rules to advise the Directors and the Holders on the Offer MOU : A non-binding Memorandum of Understanding dated 21 September 2015 between Tecnic and RE Holdings in relation to the Acquisition MOU LTD : 18 September 2015, being the last full trading day prior to the date of the MOU NA : Net assets Notice : Notice of the Offer dated 12 January 2017 served on the Board by HLIB on behalf of the Joint Offerors Notice LTD : 11 January 2017, being the last full trading day prior to the date of the Notice Offer : Unconditional mandatory take-over offer by the Joint Offerors through HLIB to acquire all the Offer Shares at the Offer Price in accordance with the terms and conditions as set out in the Offer Document Offer Document : The document dated 2 February 2017, which sets out the details, terms and conditions of the Offer, together with the Form of Acceptance and Transfer enclosed therein, issued by HLIB on behalf of the Joint Offerors Offer Document LPD : 27 January 2017, being the latest practicable date as set out in the Offer Document Offer Period : Period commencing from 21 September 2015, being the date of the MOU until the earlier of either:- the Closing Date; or the date on which the Offer lapses, expires or is withdrawn with the written consent of the SC Offer Price : Cash offer price of RM0.63 per Offer Share Offer Shares : All the remaining 40,397,333 Tecnic Shares (11.29% equity interest in Tecnic upon completion of the Acquisition) not already owned by the Joint Offerors as at the date of posting of the Offer Document Official List : A list specifying all securities which have been admitted for listing on Bursa Securities and not removed PAT : Profit after taxation PBT : Profit before taxation Posting Date : 2 February 2017, being the date of posting of the Offer Document iii

5 DEFINITIONS (cont d) Previous Distribution : Distribution by Tecnic of the following to the entitled shareholders of Tecnic, which was completed on 12 May 2015:- 95% of the cash proceeds arising from the Disposal which amounts to RM95 million and any cash balances of Tecnic as at the entitlement date of 27 April 2015; and the SKP Consideration Shares Proposed Change of Name : Proposed change of the Company s name from Tecnic Group Berhad to Rohas Tecnic Berhad Proposed Offer for Sale : Proposed offer for sale of Tecnic Shares by Tan Sri Wan Azmi, Puan Sri Nik Anida, George Sia and Madam Chan, representing approximately up to 14.51% of the enlarged issued and paid-up share capital of Tecnic, by way of placement to the Selected Investors at the offer price of RM0.63 per Tecnic Share Proposed Offering : Collectively, the Proposed Public Issue and Proposed Offer for Sale Proposed Public Issue : The issuance of up to 42,000,000 new Tecnic Shares, representing approximately up to 10.50% of the enlarged issued and paid-up share capital of Tecnic, to be implemented in the following manner:- by way of placement to Selected Investors; and Public Balloting (if required to address the Public Spread Requirement after the completion of the Offer and placement to the Selected Investors), at an issue price of RM0.63 per Tecnic Share Puan Sri Nik Anida : Puan Sri Nik Anida Binti Nik Manshor, one of the Joint Offerors and the spouse of Tan Sri Wan Azmi Public Balloting : The offering of Tecnic Shares under the Proposed Public Issue to the Malaysian citizens, companies, co-operatives, societies and insitutions incorporated or organised under the laws of Malaysia at an issue price of RM0.63 per Tecnic Share payable in full upon application to meet the public shareholding spread, if required Public Spread Requirement : The requirement pursuant to Paragraph 8.02(1) of the Listing Requirements whereby a listed issuer must ensure that at least 25% of its total listed shares (excluding treasury shares) are in the hands of public shareholders to ensure its continued listing on the Main Market of Bursa Securities RE Holdings : Rohas-Euco Holdings Sdn Bhd ( D), one of the Joint Offerors Regularisation Plan : Collectively, the Acquisition, Special Distribution, Offer, Proposed Offering and Proposed Change of Name REI : Rohas-Euco Industries Berhad (4129-H) REI Group : Collectively, REI, its subsidiaries and associated companies REI Share : Ordinary shares in REI Rules : Rules on Take-overs, Mergers and Compulsory Acquisitions iv

6 DEFINITIONS (cont d) SC : Securities Commission Malaysia Selected Investors : Selected investors as prescribed in Schedule 6 and Schedule 7 of the CMSA to be identified at a later date SKP : SKP Resources Berhad ( T) SKP Consideration Shares : 172,413,793 new SKP Shares issued to Tecnic at an issue price of RM0.58 per SKP Share as part consideration for the Disposal, which was subsequently distributed to the entitled shareholders of Tecnic via the Previous Distribution SKP Share : Ordinary share in SKP Special Distribution : Special cash distribution of RM0.49 per Tecnic Share by Tecnic to the entitled shareholders of Tecnic (other than the Joint Offerors), amounting to all of Tecnic s cash reserves save and except for the sum equivalent to its total issued and paid-up share capital as at 27 January 2017, being the entitlement date for the Special Distribution SSA : Sale and purchase of shares agreement dated 28 January 2016 in relation to the Acquisition SSA LTD : 27 January 2016, being the last full trading day prior to the date of the SSA Tan Sri Wan Azmi : Tan Sri Nik Wan Azmi Bin Wan Hamzah, one of the Joint Offerors and the spouse of Puan Sri Nik Anida Tecnic or the Company or the Offeree : Tecnic Group Berhad ( A) Tecnic Group or the Group : Collectively, Tecnic and its subsidiaries Tecnic Share : Ordinary share in Tecnic UMA : Unusual market activity Vendor : RE Holdings, being the vendor in the Acquisition Vendor s Shareholders : Collectively, Tan Sri Wan Azmi, Puan Sri Nik Anida, George Sia and Madam Chan VWAP : Volume weighted average market price CURRENCIES RM and sen : Ringgit Malaysia and sen v

7 DEFINITIONS (cont d) In this IAC, words referring to the singular shall, where applicable, include the plural and vice versa, and words referring to the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include companies or corporations, unless otherwise specified. All references to you or Holder in this IAC are to each holder of the Offer Shares, being the person to whom the Offer is being made. All references to we, us and our in this IAC (save for the Executive Summary and the letter from the Board) are to Mercury Securities, the Independent Adviser for the Offer. Any discrepancies in the tables between amounts stated and the totals in this IAC are, unless otherwise explained, due to rounding. Any reference to time and date in this IAC shall be a reference to Malaysian time and date, unless otherwise stated. Where a period specified in the Rules, as appearing in this IAC, ends on a day which is not a Market Day, the period is extended until the next Market Day. Any reference in this IAC to any enactment is a reference to that enactment as for the time being amended or re-enacted. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] vi

8 TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY viii PART A: LETTER FROM THE BOARD 1. INTRODUCTION 1 2. PRINCIPAL TERMS AND CONDITIONS OF THE OFFER 3 3. DETAILS OF ACCEPTANCES 3 4. DIRECTORS INTEREST AND INTENTION IN RELATION TO THE OFFER 4 5. DIRECTORS COMMENTS 4 6. INDEPENDENT ADVICE LETTER 5 7. DIRECTORS RECOMMENDATION 5 8. DIRECTORS RESPONSIBILITY STATEMENT 6 PART B: INDEPENDENT ADVICE LETTER FROM MERCURY SECURITIES 1. INTRODUCTION 7 2. PRINCIPAL TERMS AND CONDITIONS OF THE OFFER 7 3. DETAILS OF ACCEPTANCES 8 4. SCOPE AND LIMITATIONS TO THE EVALUATION OF THE OFFER 9 5. EVALUATION OF THE OFFER FAIRNESS OF THE OFFER REASONABLENESS OF THE OFFER RATIONALE FOR THE OFFER AND FUTURE PLANS FOR TECNIC AND ITS EMPLOYEES FURTHER INFORMATION CONCLUSION AND RECOMMENDATION 26 APPENDICES I INFORMATION ON TECNIC 28 II FURTHER INFORMATION 40 vii

9 EXECUTIVE SUMMARY THIS EXECUTIVE SUMMARY HIGHLIGHTS THE SALIENT INFORMATION OF THE OFFER. WE ADVISE HOLDERS TO READ BOTH PART A: LETTER FROM THE BOARD AND PART B: IAL FROM MERCURY SECURITIES (THE INDEPENDENT ADVISER) FOR THEIR VIEWS AND RECOMMENDATIONS IN RELATION TO THE OFFER. THIS IAC SHOULD ALSO BE READ TOGETHER WITH THE OFFER DOCUMENT. 1. INTRODUCTION On 6 April 2015, Tecnic announced that it has completed the Disposal. Upon completion of the Disposal, Tecnic ceased to have any subsidiary and business operation. On 9 April 2015, Tecnic announced that it has triggered Paragraph 8.03A(2) of the Listing Requirements whereby a listed issuer has suspended or ceased all of its business or its major business. On 12 May 2015, Tecnic announced that it has completed the Previous Distribution. On 14 July 2015, Tecnic announced that it has become a cash company pursuant to Paragraph 8.03(1) of the Listing Requirements and that Tecnic must strictly comply with the provision and requirements in Chapter 8.03 and Practice Note 16 of the Listing Requirements. Further thereto, Tecnic is required to submit a regularisation plan which includes an acquisition of a new core business to the SC by 13 July In order to regularise its position, Tecnic had on 21 September 2015 entered into the MOU with RE Holdings and subsequently had on 28 January 2016 entered into the SSA with RE Holdings for the Acquisition. On 29 January 2016, Tecnic announced its Regularisation Plan which includes, amongst others, the Acquisition and Special Distribution. On 16 May 2016, RE Holdings had executed a letter of nomination dated 16 May 2016 to nominate its shareholders, namely:- (iii) (iv) Tan Sri Wan Azmi; Puan Sri Nik Anida; George Sia; and Madam Chan, to receive and accept the Consideration Shares in place of RE Holdings. On 21 October 2016, Tecnic received approval from the SC for the Regularisation Plan (save for the Proposed Change of Name). On 12 January 2017, the shareholders of Tecnic approved the Acquisition at an EGM held on even date and pursuant thereto, the Board announced:- (iii) that the SSA had become unconditional; the receipt of the Notice from HLIB on behalf of the Joint Offerors notifying the Board of the Joint Offerors obligation to undertake the Offer; and the appointment of Mercury Securities as the Independent Adviser in accordance with Paragraph 3.06 of the Rules to advise the Directors and the Holders in relation to the Offer. A copy of the Notice was despatched to you on 19 January The purpose of this IAC is to provide you with relevant information on the Offer, the Directors views and recommendation on the Offer as well as the recommendation of Mercury Securities. viii

10 EXECUTIVE SUMMARY (cont d) 2. PRINCIPAL TERMS AND CONDITIONS OF THE OFFER The principal terms and conditions of the Offer are as follows:- Consideration for the Offer : The cash consideration for the Offer is RM0.63 per Offer Share. The Offer Price is subject to any such reduction for net dividend and/or distribution (save and except for the Special Distribution) declared, made or paid on or after the date of the Notice but prior to the Closing Date, of which the Holder is entitled to retain. For the avoidance of doubt, the Offer Price will not be reduced by the amount of the Special Distribution (1). You may accept the Offer in respect of all or any part of your Offer Shares. The Joint Offerors will not pay fractions of a sen to the Accepting Holders. Entitlement to the cash payment will be rounded down to the nearest whole sen. Note:- (1) On 12 January 2017, the shareholders of Tecnic had approved, amongst others, the Special Distribution of RM0.49 per Tecnic Share. The entitlement date for the Special Distribution was fixed on 27 January Those shareholders who held Tecnic Shares as at 5.00 pm (Malaysian time) on 27 January 2017 would be entitled to receive the Special Distribution on 15 February Condition of the Offer : The Offer is not conditional upon any minimum level of acceptances of the Offer Shares as the Joint Offerors will collectively hold more than 50% of the voting shares of Tecnic upon the completion of the Acquisition. Duration of the Offer : The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on 23 February 2017, unless revised or extended by the Joint Offerors. Notices of such revision or extension will be posted to you accordingly. Please refer to Section 2 in Appendix I of the Offer Document for further details on the duration of the Offer. Method of settlement : The settlement of the consideration for the Offer Shares will be effected via remittance in the form of cheque(s), banker s draft(s) or cashier s order(s) which will be posted by ordinary mail to you (or your designated agent(s), as you may direct) at your registered Malaysian address last maintained with Bursa Depository at your own risk within ten (10) days from the date of valid acceptances. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. ix

11 EXECUTIVE SUMMARY (cont d) 3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings received from the following Holders who will not accept the Offer in respect of all their respective direct interest in the Offer Shares, the Joint Offerors have not received any other undertakings from any other Holder to accept or reject the Offer:- Holder Number of Offer Shares % (1) Dato Gan Kim Huat 9,035, Zenith Highlight Sdn Bhd (2) 6,302, Graceful Assessment Sdn Bhd (3) 8,035, Total 23,372, Notes:- (1) Computed based on the issued and paid-up share capital of 40,397,333 Tecnic Shares as at the LPD. (2) Zenith Highlight Sdn Bhd is a company in which Dato Gan Kim Huat (Executive Chairman of Tecnic) and Gan Poh San (Non-Independent Executive Director of Tecnic) are the substantial shareholders. (3) Graceful Assessment Sdn Bhd is a company in which Dato Gan Kim Huat is a substantial shareholder. As at the LPD, there is no announcement made by HLIB on behalf of the Joint Offerors of any acceptance of the Offer. 4. EVALUATION OF THE OFFER In arriving at the opinion and recommendation in respect of the Offer, Mercury Securities has assessed the fairness and reasonableness of the Offer in accordance with Paragraphs 1 to 6 under Schedule 2: Part III of the Rules whereby:- (iii) (iv) The term fair and reasonable should generally be analysed as two (2) distinct criteria, i.e. whether the Offer is fair and whether the Offer is reasonable, rather than as a composite term; The Offer is considered as fair if the Offer Price is equal to or higher than the market price and is also equal to or higher than the value of the Offer Shares. However, if the Offer Price is equal to or higher than the market price but is lower than the value of the Offer Shares, the Offer is considered as not fair. In making the assessment, the value of the Offer Shares is determined based on the assumption that 100% of the issued and paid-up share capital of the Offeree is being acquired; In considering whether the Offer is reasonable, Mercury Securities has taken into consideration matters other than the valuation of the Offer Shares; and Generally, a take-over offer would be considered reasonable if it is fair. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] x

12 EXECUTIVE SUMMARY (cont d) 4.1 FAIRNESS OF THE OFFER (please refer to Section 6 in Part B of this IAC for further details) In assessing the fairness of the Offer, Mercury Securities has considered the following pertinent factors:- Considerations Valuation of the Tecnic Shares Historical share price performance Currently, Tecnic does not have any business operation. Upon completion of the Special Distribution which is expected to be on 15 February 2017, Tecnic would have distributed its entire cash reserves (save and except for the sum equivalent to the total issued and paid-up share capital of Tecnic of RM4.04 million). Upon completion of the Acquisition which is expected to be on 8 March 2017, Tecnic will be assuming the entire business operations of the REI Group. In view of the above, we have conducted a valuation on the REI Group in order to derive the fair value of the Tecnic Shares. The REI Group is principally involved in the fabrication of steel towers used for power transmission and telecommunications. For the past three (3) financial years up to the FYE 31 December 2015, the REI Group has been consistently generating positive cash flows from its operating activities. In view thereof, the stream of future cash flows to be derived by the REI Group is predictable. In addition, all the land and buildings of the REI Group are currently used to generate income and cash flows for the REI Group. In view of the above, Mercury Securities views that the DCF valuation model is the most appropriate method to estimate the value of the REI Group, which will represent the fair value of the Tecnic Shares. Based on the DCF valuation method, Mercury Securities has derived the fair value for the entire equity interest in Tecnic between RM million to RM million, representing RM0.70 to RM0.76 per Tecnic Share. The Offer Price of RM0.63 represents a discount of RM0.07 (10.00%) to RM0.13 (17.11%) to the abovementioned range of fair values per Tecnic Share. Notwithstanding the above, we wish to highlight that our evaluation is strictly premised on the assumption that the Acquisition will be completed. As at the LPD, the management of Tecnic is not aware of any factors and/or circumstances which may substantially affect the timeline for completion of the Acquisition. The Offer Price is lower than the closing market prices of the Tecnic Shares for approximately 95% of the total Market Days since the announcement of the MOU on 21 September 2015 up to the LPD. The Offer Price represents a discount of up to 25.22% over the five (5)-day, one (1)-month, three (3)-month, six (6)-month and one (1)- year VWAPs of the Tecnic Shares up to the Notice LTD. Mercury Securities view In view that the Offer Price is lower than the value of the Offer Shares and the closing market prices of the Tecnic Shares for approximately 95% of the total Market Days since the announcement of the MOU on 21 September 2015 up to the LPD, the Offer is NOT FAIR. xi

13 EXECUTIVE SUMMARY (cont d) 4.2 REASONABLENESS OF THE OFFER (please refer to Section 7 in Part B of this IAC for further details) In assessing the reasonableness of the Offer, Mercury Securities has considered the following pertinent factors:- Consideration Listing status and Compulsory Acquisition The Joint Offerors intend to maintain the listing status of Tecnic on the Main Market of Bursa Securities. The Joint Offerors do not intend to invoke the provisions of Section 222(1) of the CMSA to compulsorily acquire any outstanding Offer Shares for which valid acceptances have not been received prior to the Closing Date. Mercury Securities view The Offer is NOT REASONABLE as the Tecnic Shares will remain tradable on the Main Market of Bursa Securities. Moreover, upon completion of the Acquisition, the Enlarged Tecnic Group will be involved in new core businesses including the fabrication of steel towers for power transmission and telecommunications, thereby allowing the Holders the opportunity to participate in the growth prospects of these businesses. 5. RECOMMENDATION 5.1 BY MERCURY SECURITIES Premised on the evaluation by Mercury Securities, Mercury Securities is of the opinion that the Offer is NOT FAIR and NOT REASONABLE. Accordingly, Mercury Securities recommends the Holders to REJECT the Offer. Please refer to Section 10 in Part B of this IAC for further details. 5.2 BY THE DIRECTORS After careful examination of the terms and conditions of the Offer as contained in the Offer Document and taking into consideration the evaluation and recommendation by Mercury Securities as set out in Part B of this IAC, the following Directors, being:- (iii) (iv) (v) (vi) (vii) (viii) Dato Gan Kim Huat; Gan Poh San; Gan Chia Siang; Ng Wan Ng Guan Cher; Tan Jing Pho; Teo Chee Kok; Tan Sri Hussin Bin Haji Ismail; and Amirul Azhar Bin Baharom, have CONCURRED with the evaluation and recommendation of Mercury Securities that the Offer is NOT FAIR and NOT REASONABLE. Accordingly, the Board recommends that you REJECT the Offer. xii

14 EXECUTIVE SUMMARY (cont d) 6. IMPORTANT DATES AND EVENTS The important relevant dates in relation to the Offer are as follows:- Event Date Date of the Notice 12 January 2017 Posting of the Offer Document 2 February 2017 Issuance of this IAC 13 February 2017 First Closing Date (1) 23 February 2017 Note:- (1) The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on 23 February 2017, being the Closing Date, unless revised or extended in accordance with the Rules or as the Joint Offerors may decide and as may be announced by HLIB, on behalf of the Joint Offerors, at least two (2) days before the Closing Date. Notices of such revision or extension will be posted to you accordingly. You should carefully consider the terms and conditions of the Offer based on all the relevant and pertinent factors including those which are set out above, and other information as set out in this IAC, the Offer Document and any other publicly available information. You are advised to read this IAC in its entirety, together with the Offer Document, carefully for more information and not rely solely on this Executive Summary before forming an opinion on the Offer. xiii

15 PART A LETTER FROM THE BOARD

16 TECNIC GROUP BERHAD (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) Registered office: 308, Block A (3rd Floor) Kelana Business Centre 97, Jalan SS7/2, Kelana Jaya Petaling Jaya Selangor Darul Ehsan Malaysia Board of Directors 13 February 2017 Dato Gan Kim Huat (Executive Chairman) Gan Poh San (Non-Independent Executive Director) Gan Chia Siang (Non-Independent Executive Director) Ng Wan Ng Guan Cher (Non-Independent Executive Director) Tan Jing Pho (Non-Independent Executive Director) Teo Chee Kok (Independent Non-Executive Director) Tan Sri Hussin Bin Haji Ismail (Independent Non-Executive Director) Amirul Azhar Bin Baharom (Independent Non-Executive Director) To: The Holders Dear Sir / Madam, UNCONDITIONAL MANDATORY TAKE-OVER OFFER BY THE JOINT OFFERORS THROUGH HLIB TO ACQUIRE ALL THE OFFER SHARES FOR A CASH OFFER PRICE OF RM0.63 PER OFFER SHARE 1. INTRODUCTION On 6 April 2015, Tecnic announced that it has completed the Disposal, being the disposal by Tecnic of its entire equity interests in Plastictecnic (M) Sdn Bhd, Sun Tong Seng Mould-Tech Sdn Bhd and Bangi Plastics Sdn Bhd to SKP for a total disposal consideration of RM200 million to be satisfied via RM100 million in cash and issuance of 172,413,793 SKP Consideration Shares at an issue price of RM0.58 per SKP Share. Upon completion of the Disposal, Tecnic ceased to have any subsidiary and business operation. On 9 April 2015, Tecnic announced that it has triggered Paragraph 8.03A(2) of the Listing Requirements whereby a listed issuer has suspended or ceased all of its business or its major business. On 12 May 2015, Tecnic announced that it has completed the Previous Distribution, being the distribution by Tecnic of 95% of the cash proceeds from the Disposal amounting to RM95 million and any cash balances of Tecnic and its subsidiaries as at 27 April 2015, being the entitlement date for the Previous Distribution, together with the SKP Consideration Shares to the entitled shareholders of Tecnic. 1

17 On 14 July 2015, Tecnic announced that it has become a cash company pursuant to Paragraph 8.03(1) of the Listing Requirements and that Tecnic must strictly comply with the provision and requirements in Chapter 8.03 and Practice Note 16 of the Listing Requirements. Further thereto, Tecnic is required to submit a regularisation plan which includes an acquisition of a new core business to the SC by 13 July In order to regularise its position, Tecnic had on 21 September 2015 entered into the MOU with RE Holdings and subsequently had on 28 January 2016 entered into the SSA with RE Holdings for the Acquisition. On 29 January 2016, Tecnic announced its Regularisation Plan which includes, amongst others, the Acquisition and Special Distribution. On 16 May 2016, RE Holdings had executed a letter of nomination dated 16 May 2016 to nominate its shareholders, namely:- (iii) (iv) Tan Sri Wan Azmi; Puan Sri Nik Anida; George Sia; and Madam Chan, to receive and accept the Consideration Shares in place of RE Holdings. On 21 October 2016, Tecnic received approval from the SC for the Regularisation Plan (save for the Proposed Change of Name). On 12 January 2017, the shareholders of Tecnic approved the Acquisition at an EGM held on even date and pursuant thereto, the Board announced:- (iii) that the SSA had become unconditional; the receipt of the Notice from HLIB on behalf of the Joint Offerors notifying the Board of the Joint Offerors obligation to undertake the Offer; and the appointment of Mercury Securities as the Independent Adviser in accordance with Paragraph 3.06 of the Rules to advise the Directors and the Holders in relation to the Offer. A copy of the Notice was despatched to you on 19 January In addition to this IAC, you should have by now received a copy of the Offer Document dated 2 February 2017, which sets out the details, terms and conditions of the Offer as well as the procedures for acceptance and method of settlement of the Offer. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 2

18 As at the LPD, the Joint Offerors do not hold any Tecnic Shares. Upon completion of the Acquisition, the collective shareholdings of the Joint Offerors will increase from nil to approximately 88.71%. The details on the shareholdings of the Joint Offerors in Tecnic upon completion of the Acquisition are as follows:- Name After the Acquisition Direct Indirect No. of Tecnic Shares % (1) No. of Tecnic Shares % (1) Joint Offerors RE Holdings Tan Sri Wan Azmi 41,288, (2) 196,180, Puan Sri Nik Anida 196,180, (3) 41,288, George Sia 34,446, (4) 45,545, Madam Chan 45,545, (5) 34,446, Notes:- (1) Computed based on the issued and paid-up share capital of 357,857,651 Tecnic Shares upon completion of the Acquisition (comprising 40,397,333 Tecnic Shares as at the LPD and 317,460,318 Consideration Shares to be issued to the Vendor s Shareholders). (2) Deemed interested by virtue of his spouse, Puan Sri Nik Anida s shareholding in Tecnic. (3) Deemed interested by virtue of her spouse, Tan Sri Wan Azmi s shareholding in Tecnic. (4) Deemed interested by virtue of his spouse, Madam Chan s shareholding in Tecnic. (5) Deemed interested by virtue of her spouse, George Sia s shareholding in Tecnic. The purpose of this IAC is to provide you with relevant information on the Offer, the Directors views and recommendation on the Offer as well as the recommendation of Mercury Securities. You are advised to read both this IAC and the Offer Document and carefully consider the recommendations contained herein before taking any action. 2. PRINCIPAL TERMS AND CONDITIONS OF THE OFFER The principal terms and conditions of the Offer are set out in Section 2 in Part B of this IAC. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. 3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings received from the following Holders who will not accept the Offer in respect of all their respective direct interest in the Offer Shares, the Joint Offerors have not received any other undertakings from any other Holder to accept or reject the Offer:- Holder Number of Offer Shares % (1) Dato Gan Kim Huat 9,035, Zenith Highlight Sdn Bhd (2) 6,302, Graceful Assessment Sdn Bhd (3) 8,035, Total 23,372, Notes:- (1) Computed based on the issued and paid-up share capital of 40,397,333 Tecnic Shares as at the LPD. (2) Zenith Highlight Sdn Bhd is a company in which Dato Gan Kim Huat (Executive Chairman of Tecnic) and Gan Poh San (Non-Independent Executive Director of Tecnic) are the substantial shareholders. (3) Graceful Assessment Sdn Bhd is a company in which Dato Gan Kim Huat is a substantial shareholder. As at the LPD, there is no announcement made by HLIB on behalf of the Joint Offerors of any acceptance of the Offer. 3

19 4. DIRECTORS INTEREST AND INTENTION IN RELATION TO THE OFFER 4.1 Directors interest As at the LPD, save as disclosed below, the Directors of Tecnic do not have any interest (direct and indirect) in the Tecnic Shares:- Name Direct Indirect No. of Tecnic Shares % (1) No. of Tecnic Shares % (1) Dato Gan Kim Huat 9,035, (2) 14,337, Gan Poh San - - (3) 6,302, Tan Jing Pho 118, Notes:- (1) Computed based on the issued and paid-up share capital of 40,397,333 Tecnic Shares as at the LPD. (2) Deemed interested by virtue of his substantial shareholding in Zenith Highlight Sdn Bhd and Graceful Assessment Sdn Bhd. (3) Deemed interested by virtue of his substantial shareholding in Zenith Highlight Sdn Bhd. 4.2 Directors intention in relation to the Offer The intention of the Directors of Tecnic in relation to the Offer in respect of their interest in Tecnic Shares are as follows:- (iii) in line with Dato Gan Kim Huat s recommendation to the Holders to REJECT the Offer, Dato Gan Kim Huat had indicated his intention (1) to REJECT the Offer in respect of his direct and indirect holdings in the Tecnic Shares; in line with Gan Poh San s recommendation to the Holders to REJECT the Offer, Gan Poh San had indicated his intention (1) to REJECT the Offer in respect of his indirect holdings in the Tecnic Shares; and in line with Tan Jing Pho s recommendation to the Holders to REJECT the Offer, Tan Jing Pho had indicated his intention to REJECT the Offer in respect of his direct holdings in the Tecnic Shares. Note:- (1) Dato Gan Kim Huat, Zenith Highlight Sdn Bhd and Graceful Assessment Sdn Bhd have provided irrevocable undertakings not to accept the Offer in respect of all their direct interest in the Offer Shares, as stated in Section 3 in Part A of this IAC. Zenith Highlight Sdn Bhd is a company in which Dato Gan Kim Huat and Gan Poh San are substantial shareholders. Graceful Assessment Sdn Bhd is a company in which Dato Gan Kim Huat is a substantial shareholder. 5. DIRECTORS COMMENTS 5.1 Rationale for the Offer The Directors have noted the rationale for the Offer as set out in Section 3 of the Offer Document. 5.2 Future plans for Tecnic and its employees The Directors take note of the Joint Offerors future plans for Tecnic and its employees as stated in Section 6 of the Offer Document. 4

20 5.3 Listing status of Tecnic The Directors take note that the Joint Offerors intend to maintain the listing status of Tecnic. Tecnic had announced on 29 January 2016 that it intends to undertake the Proposed Public Issue and Proposed Offer for Sale to comply with the Public Spread Requirement, which was subsequently approved by its shareholders at an EGM held on 12 January Please refer to Section 7.1 in Part B of this IAC for further details. 5.4 Compulsory Acquisition The Directors take note that the Joint Offerors do not intend to invoke the provisions of Section 222(1) of the CMSA to compulsorily acquire any outstanding Offer Shares for which valid acceptances have not been received prior to the Closing Date. Please refer to Section 7.2 in Part B of this IAC for further details. 6. INDEPENDENT ADVICE LETTER The Holders are advised to read and consider the views and recommendation of Mercury Securities, the Independent Adviser appointed to advise the Directors and the Holders on the fairness and reasonableness of the Offer. The IAL is included in Part B of this IAC. 7. DIRECTORS RECOMMENDATION After careful examination of the terms and conditions of the Offer as contained in the Offer Document and taking into consideration the evaluation and recommendation by Mercury Securities as set out in Part B of this IAC, the following Directors, being:- (iii) (iv) (v) (vi) (vii) (viii) Dato Gan Kim Huat; Gan Poh San; Gan Chia Siang; Ng Wan Ng Guan Cher; Tan Jing Pho; Teo Chee Kok; Tan Sri Hussin Bin Haji Ismail; and Amirul Azhar Bin Baharom, have CONCURRED with the evaluation and recommendation of Mercury Securities that the Offer is NOT FAIR and NOT REASONABLE. Accordingly, the Board recommends that you REJECT the Offer. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 5

21 8. DIRECTORS RESPONSIBILITY STATEMENT The Board has seen and approved the contents of this IAC. The Directors, collectively and individually, accept full responsibility for the accuracy and completeness of the information contained in this IAC and confirm that, after making all enquiries as were reasonable in the circumstances and to the best of their knowledge and belief:- (iii) (iv) no statement and/or information relating to Tecnic in this IAC is incomplete, false and/or misleading; there are no other facts and/or information, the omission of which would render any statement and/or information relating to Tecnic herein incomplete, false and/or misleading; all material facts and/or information in relation to the Offer (including those required under the Rules) have been accurately and completely disclosed in this IAC; and opinions expressed by the Board in this IAC have been arrived at after due and careful consideration. The responsibility of the Board in respect of:- the information relating to the Joint Offerors and the Offer (as extracted from the Offer Document and other publicly available information) is to ensure that such information is accurately reproduced in this IAC; and the independent advice and expression of opinion by Mercury Securities in relation to the Offer as set out in Part B of this IAC is to ensure that accurate information in relation to Tecnic was provided to Mercury Securities for its evaluation of the Offer and to ensure that all information in relation to Tecnic that are relevant to Mercury Securities evaluation of the Offer have been completely disclosed to Mercury Securities and that there is no material fact, the omission of which would make any information provided to Mercury Securities false or misleading. THE HOLDERS ARE ADVISED TO CAREFULLY CONSIDER THE INFORMATION CONTAINED IN THE OFFER DOCUMENT AND THIS IAC BEFORE MAKING A DECISION ON THE COURSE OF ACTION TO BE TAKEN. THE DIRECTORS HAVE NOT TAKEN INTO CONSIDERATION ANY SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION, RISK PROFILE AND PARTICULAR NEEDS OF ANY INDIVIDUAL HOLDER OR ANY SPECIFIC GROUP OF HOLDERS. THE DIRECTORS RECOMMEND THAT HOLDERS, WHO REQUIRE ADVICE IN RELATION TO THE OFFER IN THE CONTEXT OF THEIR INVESTMENT OBJECTIVES, FINANCIAL SITUATION, RISK PROFILE OR PARTICULAR NEEDS, SHOULD CONSULT THEIR RESPECTIVE STOCKBROKER, SOLICITOR, ACCOUNTANT, BANK MANAGER OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY. Yours faithfully, For and on behalf of the Board of TECNIC GROUP BERHAD GAN POH SAN Non-Independent Executive Director 6

22 PART B INDEPENDENT ADVICE LETTER FROM MERCURY SECURITIES

23 Registered office: Ground, 1st, 2nd, 3rd Floor Wisma Umno Lorong Bagan Luar Dua Butterworth Seberang Perai 13 February 2017 To: The Holders Dear Sir / Madam, UNCONDITIONAL MANDATORY TAKE-OVER OFFER BY THE JOINT OFFERORS THROUGH HLIB TO ACQUIRE ALL THE OFFER SHARES FOR A CASH OFFER PRICE OF RM0.63 PER OFFER SHARE 1. INTRODUCTION Please refer to Section 1 in Part A of this IAC for the chronological events in relation to the Offer. The purpose of this IAL is to provide our independent evaluation of the terms and conditions of the Offer together with our recommendation thereon, subject to the scope of our role and limitations specified herein. WE ADVISE YOU TO READ AND UNDERSTAND THIS IAL CAREFULLY TOGETHER WITH PART A: LETTER FROM THE BOARD AND THE OFFER DOCUMENT, A COPY OF WHICH YOU SHOULD HAVE RECEIVED BY NOW, BEFORE TAKING ANY ACTION. THIS IAL DOES NOT CONSTITUTE THE OFFER OR ANY PART THEREOF. 2. PRINCIPAL TERMS AND CONDITIONS OF THE OFFER The principal terms and conditions of the Offer are as follows:- Consideration for the Offer : The cash consideration for the Offer is RM0.63 per Offer Share. The Offer Price is subject to any such reduction for net dividend and/or distribution (save and except for the Special Distribution) declared, made or paid on or after the date of the Notice but prior to the Closing Date, of which the Holder is entitled to retain. For the avoidance of doubt, the Offer Price will not be reduced by the amount of the Special Distribution (1). You may accept the Offer in respect of all or any part of your Offer Shares. The Joint Offerors will not pay fractions of a sen to the Accepting Holders. Entitlement to the cash payment will be rounded down to the nearest whole sen. Note:- (1) On 12 January 2017, the shareholders of Tecnic had approved, amongst others, the Special Distribution of RM0.49 per Tecnic Share. The entitlement date for the Special Distribution was fixed on 27 January Those shareholders who held Tecnic Shares as at 5.00 pm (Malaysian time) on 27 January 2017 would be entitled to receive the Special Distribution on 15 February

24 Condition of the Offer : The Offer is not conditional upon any minimum level of acceptances of the Offer Shares as the Joint Offerors will collectively hold more than 50% of the voting shares of Tecnic upon the completion of the Acquisition. Duration of the Offer : The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on 23 February 2017, unless revised or extended by the Joint Offerors. Notices of such revision or extension will be posted to you accordingly. Please refer to Section 2 in Appendix I of the Offer Document for further details on the duration of the Offer. Method of settlement : The settlement of the consideration for the Offer Shares will be effected via remittance in the form of cheque(s), banker s draft(s) or cashier s order(s) which will be posted by ordinary mail to you (or your designated agent(s), as you may direct) at your registered Malaysian address last maintained with Bursa Depository at your own risk within ten (10) days from the date of valid acceptances. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. 3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings received from the following Holders who will not accept the Offer in respect of all their respective direct interest in the Offer Shares, the Joint Offerors have not received any other undertakings from any other Holder to accept or reject the Offer:- Holder Number of Offer Shares % (1) Dato Gan Kim Huat 9,035, Zenith Highlight Sdn Bhd (2) 6,302, Graceful Assessment Sdn Bhd (3) 8,035, Total 23,372, Notes:- (1) Computed based on the issued and paid-up share capital of 40,397,333 Tecnic Shares as at the LPD. (2) Zenith Highlight Sdn Bhd is a company in which Dato Gan Kim Huat (Executive Chairman of Tecnic) and Gan Poh San (Non-Independent Executive Director of Tecnic) are the substantial shareholders. (3) Graceful Assessment Sdn Bhd is a company in which Dato Gan Kim Huat is a substantial shareholder. As at the LPD, there is no announcement made by HLIB on behalf of the Joint Offerors of any acceptance of the Offer. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 8

25 4. SCOPE AND LIMITATIONS TO THE EVALUATION OF THE OFFER We have evaluated the Offer and in rendering our advice, we have considered various factors which we believe are of relevance and general importance to an assessment of the terms and conditions as well as implications of the Offer and would be of general concern to the Holders. Our scope as the Independent Adviser is limited to expressing an independent opinion on the terms and conditions of the Offer as to whether the Offer is fair and reasonable insofar as the Holders are concerned based on information and documents provided to us or which are available to us and making enquiries as were reasonable in the circumstances. In performing our evaluation, we have relied on the following sources of information:- information contained in the Notice, Offer Document and the appendices attached thereto; audited financial statements of Tecnic for the FYE 31 December 2013, 31 December 2014 and 31 December 2015 as well as the unaudited financial statements of Tecnic for the nine (9)-month FPE 30 September 2016; (iii) accountants report on the financial information of the REI Group for the FYE 31 December 2013, 31 December 2014 and 31 December 2015 as well as the six (6)- month FPE 30 June 2016; (iv) (iv) (v) (v) circular to shareholders of Tecnic dated 20 December 2016 in relation to the Regularisation Plan; discussions with and representations by the Board and management of Tecnic as well as the management of REI; other relevant information, documents, confirmations and representations furnished to us by the Board and management of Tecnic as well as the management of REI; and other publicly available information which we deem to be relevant. We have relied on Tecnic, the Board and management of Tecnic as well as the management of REI to take due care to ensure that all information, documents and representations provided by them to facilitate our evaluation of the Offer are accurate, valid and complete in all material aspects. Nonetheless, we have made enquiries as were reasonable in the circumstances and as at the date hereof, we are satisfied that the information provided to us or which are available to us is sufficient and have no reason to believe that the aforementioned information is unreliable, incomplete, misleading and/or inaccurate. Our evaluation as set out in this IAL is rendered solely for the benefit of the Holders as a whole and not for any specific group of Holders. Hence, in carrying out our evaluation, we have not taken into consideration any specific investment objectives, financial situation, risk profile or particular needs of any individual Holder or any specific group of Holders. We recommend that any Holder who is in doubt as to the action to be taken in relation to the Offer in the context of his/her individual investment objectives, financial situation, risk profile or particular needs should consult his/her respective stockbroker, solicitor, accountant, banker or other professional advisers immediately. Our advice should be considered in the context of the entirety of this IAL. Our views expressed in this IAL are, amongst others, based on economic, market and other conditions prevailing, and the information and/or documents made available to us as at the LPD or such other period as specified herein. Such conditions may change significantly over a short period of time. 9