The Company expects that the completion of the Transaction will occur within two weeks following the date of the Agreement.

Transcription

1 Ref. SCCC No. 062/ July 2016 Subject : To: Acquisition of shares in Holcim (Lanka) Limited The President of the Stock Exchange of Thailand Reference is made to the resolution of the Board of Directors Meeting of Siam City Cement Public Company Limited (the Company ) No. 141, which was held on 22 July 2016, approving the Company and/or any of its subsidiary to proceed with an acquisition of an approximately % interest in Holcim (Lanka) Limited, including its subsidiaries, (the HLL ) from LafargeHolcim. The Company would like to inform you that the Company entered into an agreement for the sale and purchase of the shares in Holcim (Lanka) Limited dated 22 July 2016 (the Agreement ) with Holderfin B.V., a subsidiary of LafargeHolcim, (the Seller ). The acquisition of the % interest, comprising 164,065,201 ordinary shares, in HLL from the Seller (the Transaction ) will be made by a wholly-owned subsidiary of the Company, which is under the process of being incorporated, namely INSEE Cement Holdings Company Limited. The Company expects that the completion of the Transaction will occur within two weeks following the date of the Agreement. The Transaction is considered an acquisition of assets in accordance with the Notification of the Capital Market Supervisory Board No. TorJor. 20/2551 Re: Rules concerning the Material Transactions in the Acquisition and Disposition of Assets dated 31 August 2008 (as amended) and the Notification of the Board of Governor of the Stock Exchange of Thailand Re: Disclosure of Information and other Acts of Listed Companies concerning the Acquisition and Disposition of Assets B.E dated 29 October 2004 (as amended) (collectively, the Major Transaction Rule ). The highest comparative value calculation of the transaction size, taking into account the value of the transactions during the past six months, is equal to not more than 40.55% on a total value of consideration basis. The Transaction is categorised as a Type-2 transaction according to the Major Transaction Rule as the highest comparative value of the transaction size is higher than 15% but lower than 50%. Accordingly, the Company is required to disclose the details of the Transaction through the Stock Exchange of Thailand as attached herewith and deliver an information memorandum containing specified information required by the Major

2 Transaction Rule to all the shareholders within 21 days from the date the Company makes the disclosure through the Stock Exchange of Thailand. Please be informed accordingly. Sincerely yours, Siam City Cement Public Company Limited /S/ Wutthipong Songwisit Company Secretary

3 Information Memorandum Re: Acquisition of Shares in Holcim (Lanka) Limited Information under Schedule 1 1 Date of the Transaction Siam City Cement Public Company Limited (the Company ) entered into an agreement for the sale and purchase of the shares in Holcim (Lanka) Limited (the Agreement ) with Holderfin B.V. (the Seller ) on 22 July 2016 under which INSEE Cement Holdings Company Limited ( ICHC ), a wholly-owned subsidiary of the Company which is under the process of being incorporated, will acquire the % interest, comprising 164,065,201 ordinary shares, in Holcim (Lanka) Limited ( HLL ) from the Seller (the Transaction ). 2 Involved Parties and their Relationship with the Company Seller: Holderfin B.V. Relationship with the Company: The Seller has no relationship with the Company in a manner as a connected person under the notification of the Capital Market Supervisory Board No. TorJor. 21/2551 Re: Rules on Connected Transactions. Purchaser: Siam City Cement Public Company Limited (the Company ) through INSEE Cement Holdings Company Limited, a wholly-owned subsidiary of the Company ( ICHC ) 3 General Characteristic and Size of the Transaction The Company has agreed to acquire, or procure the purchase by its subsidiary of, shares of HLL from the Seller by entering into the Agreement with the Seller. The acquisition of the shares will be made by ICHC, a wholly-owned subsidiary of the Company which is under the process of being incorporated. Following completion of the Transaction, ICHC will become a direct shareholder of HLL, holding 164,065,201 ordinary shares, representing approximately % of HLL s share capital and the Company will become an indirect shareholder of HLL through its shareholding in ICHC. In addition, Ceylon Ambuja Cements (Pvt) Limited and Lafarge Mahaweli Cement (Pvt) Limited, which are direct subsidiaries of HLL, will become indirect subsidiaries of ICHC and the Company. The total number of HLL s shares to be acquired by ICHC under the Agreement is 164,065,201 ordinary shares. The total transaction value is equal to approximately not more than THB 13, million or USD million which is equal to THB or USD 2.28 per HLL s share (at the exchange rate of one USD per THB ) subject to the time period taken for closing and pursuant to the terms of the Agreement. The comparative value calculation for the size of Transaction is based on the audited consolidated financial statements of the Company and HLL as of 31 December 2015, and on the criteria according to the Notification of the Capital Market Supervisory Board No. TorJor. 20/2551 Re: Rules concerning the Material Transactions in the Acquisition and Disposition of Assets dated 31 August 2008 (as amended) and the Notification of the Board of Governor of the Stock Exchange of Thailand Re: Disclosure of Information and other Acts of Listed Companies concerning the Acquisition and Disposition of Assets B.E

4 dated 29 October 2004 (as amended) (collectively, the Major Transaction Rule ). Details of the calculation are summarised below: 3.1 Comparison of Net Tangible Assets Size of Transaction = = % Net tangible assets of HLL Net tangible assets of the Company 1, * % THB m 20, THB m = 8.59% 3.2 Comparison of Net Profit Size of Transaction = = * % THB m % Net profit of HLL Net profit of the Company = 10.08% 4, THB m 3.3 Comparison of Total Value of Consideration Size of Transaction = = 13, THB m Total Consideration Paid Total assets of the Company = 34.90% 3.4 Comparison of Equity Share Value Size of Transaction = Number of Shares issued as consideration Total Number of Issued and Paid-up Shares of the Company = Cannot be calculated as there is no share issuance Since the size of the Transaction calculated under the comparison of total value of consideration is the highest value, the Company will refer to the result derived from this calculation as the size of the Transaction, taking into account the value of the transactions during the past six months. The highest comparative value calculation of the transaction size, taking into account the value of the transactions during the past six months, is equal to not more than 40.55% on a total value of consideration basis. The Transaction is categorised as a Type-2 transaction according to the Major Transaction Rule as the highest comparative value of the transaction size is higher than 15% but lower than 50%. Accordingly, the Company is required to disclose the details of the Transaction through the Stock Exchange of Thailand 4

5 and deliver an information memorandum containing specified information required by the Major Transaction Rule to all the shareholders within 21 days from the date the Company makes the disclosure through the Stock Exchange of Thailand. 4 Details of Assets Acquired Assets to be acquired 164,065,201ordinary shares in HLL at the par value of LKR 10, representing approximately % of HLL s share capital 4.1 General Business Information Overview of HLL Company Registration Name Holcim (Lanka) Limited Date of Incorporation 11 May 1993 Place of Incorporation Type of Business Sri Lanka Manufacture, produce, import, sell, distribute market, promote, or otherwise deal in cement and other related products and articles made of cement or cement concrete or other cement mixtures Registered Office No. 413, R.A De Mel Mawatha, Columbo 3 Company Registration No. PB 588 Directors Issued and Paid-up Share Capital 1. Philippe Bernard Richart 2. Nirmala Gihan Wickremeratne 3. Marie Premila Perera 4. Daniel Nikolaus Bach 5. Jerome Enrico Robert Lombardi 6. Withana Thusitha Vipuli Perera LKR 1,663,342,232 consisting of 165,802,140 ordinary shares at a par value of LKR 10 each Registered Shareholders Holderfin B.V % Minority shareholders % Direct Subsidiaries Ceylon Ambuja Cements (Pvt) Limited 100% Lafarge Mahaweli Cement (Pvt) Limited 90% Website 5

6 4.1.2 Overview of HLL s subsidiaries Ceylon Ambuja Cements (Pvt) Limited Company Registration Name Ceylon Ambuja Cements (Pvt) Limited Date of Incorporation 14 July 1998 Place of Incorporation Type of Business Sri Lanka To import, store, pack and sell cement Registered Office No. 413, R. A. De Mel Mawatha, Colombo 3 Company Registration No. PV 7562 Directors Issued and Paid-up Share Capital 1. Philippe Bernard Richart 2. Maria Iglesias Alcazar LKR 1,460,082,420 consisting of 146,008,242 ordinary shares at a par value of LKR 10 each Registered Shareholders Holcim (Lanka) Limited 100% Lafarge Mahaweli Cement (Pvt) Limited Company Registration Name Lafarge Mahaweli Cement (Pvt) Limited Date of Incorporation 11 April 1980 Place of Incorporation Type of Business Registered Office Sri Lanka To import bulk and bagged cement Silo Terminal, P.O Box 1889, Port Premises, Colombo 15 Company Registration No. PV 4478 Directors Issued and Paid-up Share Capital 1. Philippe Bernard Richart 2. Maria Iglesias Alcazar 3. Hussein Ahamed Bhaila LKR 47,999,980 consisting of 4,799,998 ordinary shares at a par value of LKR 10 each Registered Shareholders Holcim (Lanka) Limited 90% Sri Lanka Cement Corporation 10% 4.2 Business Description Holcim (Lanka) Limited ( HLL ) is the only clinker manufacturer operating a fully integrated cement plant with a capacity c.1.3 million ton per annum in Puttalam which has access to the only operational limestone deposit in Sri Lanka. Additionally, HLL operates a cement grinding facility in Galle with a capacity c.1.0 million ton per annum and manages three terminals with packing capacities located in the three local ports with a total import capacity of 1.6 million ton per annum. 6

7 HLL positions itself as the only provider of application based products, to respond to customers various needs and leads the introduction of blended cement in the industry. HLL s local brands such as Sanstha TM enjoy very strong recall levels and are recognised in the market for their superior quality. The brands also benefit from the local manufacturer tag, providing a competitive advantage over importing competitors. The product range is used widely across residential, commercial and infrastructure projects. HLL has long standing relationships with several blue ship customers and has been involved in numerous landmark projects in the country. HLL leverages a nationwide retail and distributor network (approximately 120 distributors and 5,000+ retailers) to allow products to be easily available to any end user across the country in a timely manner. Over the years, HLL has optimised logistics operations and distribution operations, resulting in lower costs, increased operational safety and reduced carbon footprint. 4.3 Key selected financial information of HLL (Units: million) For the years ended 31 December LKR THB 1/ LKR THB 2/ Revenues 19, , , , EBITDA 2, , Net profit 2, , Total assets 17, , , , Total liabilities 7, , , , Total equity 10, , , , Notes : 1/, 2/ THB translation assumed 1 LKR = THB with reference to the average of the selling rate and buying rate available on the Bank of Thailand s website on 21 July Total Value of Consideration 5.1 Value of Consideration The total consideration for the acquisition of 164,065,201 ordinary shares in HLL from the Seller is not more than THB 13, million or equivalent to USD million, comprising the aggregate of: (a) USD 369 million (the Initial Price ); plus (b) an incremental amount calculated at a rate of 5.2% per annum (on a 365-day basis) on the Initial Price from the locked box accounts date to the closing date, as specified in the Agreement. 5.2 Payment Method The Company shall pay the consideration to the Seller at closing. 6 Value of Assets Acquired The total value of the acquisition of HLL's shares from the Seller under the Agreement is not more than THB 13, million or equivalent to USD million subject to the time period taken for closing and pursuant to the terms of the Agreement. 7

8 7 Basis Used to Determine the Value of Consideration The value of consideration is derived from negotiations between the Seller and the Company. The Company adopted a number of methodologies which are internationally accepted including the discounted cash flow methodology and valuation multiples of trading comparables as well as transaction comparables. The Hongkong and Shanghai Banking Corporation Limited has acted as the financial advisor to the Company for the Transaction. 8 Expected Benefits 8.1 The Transaction is expected to generate the following benefits to the Company: Geographical diversification with an immediate largest cement market share in Sri Lanka. Synergy benefits through shared service support, operation best practice and knowhow transfer, procurement with volume pooling, and secured clinker export channel. Opportunity to build a regional network, allowing us to optimise trading across multiple regional assets and diversify ourselves to secure cash flow generation, while also capturing future growth in these markets. Vertical integration with clinker supply from SRB: HLL can become a captive offtaker for SRB s excess clinker given their short position in the market. Opportunity to capture long-term market growth: Sri Lanka has a solid domestic demand projection. Furthermore over the longer term, there will also be new opportunities to transfer advanced construction know-how to capitalize lower construction maturity (e.g. the Company s ready mix and bulk distribution model, Conwood). 9 Source of Fund The source of fund is credit facilities support from Bank of Tokyo-Mitsubishi UFJ, Ltd. ( BTMU ) with 1-year term. 10 Conditions Precedent None. 11 Opinion of the Board of Directors on the Transaction The Board of Directors Meeting of the Company No. 141, which was held on 22 July 2016, resolved to approve the Transaction and the Company and/or any of its subsidiary to proceed with the acquisition of 164,065,201 ordinary shares in HLL and the entry into a definitive sale and purchase agreement with the Seller. 12 Opinion of the Audit Committee and/or the Director(s) of the Company which is Different from the Board of Directors Opinion according to paragraph 11 Neither the audit committee nor any director has any dissenting opinion against those of the Board of Directors in paragraph 11. 8