MTQ CORPORATION LIMITED (Incorporated in Singapore) (Co. Reg. No Z)

Transcription

1 MTQ CORPORATION LIMITED (Incorporated in Singapore) (Co. Reg. No Z) MAJOR TRANSACTION: ACQUISITION OF ALL THE ISSUED SHARE CAPITAL OF THE PREMIER GROUP 1) INTRODUCTION The Board of Directors of MTQ Corporation Limited ( Company or MTQ ) wishes to announce that the Company has today entered into a Share Purchase Agreement ( SPA ) with Integrated Production Services Ltd ( Vendor ) and Complete Production Services, Inc. ( Vendor Parent ) whereby the Company will acquire 100% of the issued shares ( Sale Shares ) of Premier Sea & Land Limited ( Premier ) from the Vendor. The sale and purchase of the Sale Shares under the SPA was also completed today. The Vendor, a Canadian company, is a leading provider of production enhancement services for North American oil and gas producers. The Vendor Parent is listed on the New York Stock Exchange, Inc.. 2) INFORMATION ON PREMIER Premier is an investment holding company incorporated in Hong Kong and through its wholly owned Singapore incorporated subsidiaries, were engaged in the following activities: Sales and rental of Oilfield equipment through Premier Sea & Land Pte Ltd ( PSL ); Machine Shop specialising in repair/retrofitting/component manufacturing of oilfield equipment and machinery through Pemac Pte Ltd ( Pemac ). Premier and its subsidiaries are referred to herein as the Premier Group. The unaudited consolidated net book value of the Premier Group as at 31 December 2010, based on the financial information issued by the Vendor to the Company, is approximately US$15.0 million, inclusive of US$2.5 million cash and equivalents. The unaudited consolidated profit after tax of the Premier Group for the financial year ended 31 December 2010 is approximately US$4.1 million. 3) RATIONALE FOR ACQUISITION MTQ views the acquisition of Sale Shares as an opportunity to increase the scope and scale of its core Oilfield operations in the following ways Acquisition of PSL will expand the current rental equipment range offered by MTQ Group and potentially achieve synergies in packaging the different equipments for rental, and enables it to act as a direct seller or re-seller of a wider range of oilfield equipment and products. Furthermore, MTQ could potentially capitalise on PSL s business relationships

2 2 with the respective Original Equipment Manufacturers ( OEMs ) and achieve synergies in the area of cross selling the MTQ Group s services to the respective OEMs. Acquisition of Pemac will add production capacity to MTQ Group s current machining and fabrication business and potentially increase the equipment range that the MTQ Group is currently servicing. Moreover, the respective American Petroleum Institute ( API ) certifications owned by Pemac would also add comprehensiveness to MTQ Group s oilfield services. 4) CONSIDERATION FOR THE ACQUISITION The purchase consideration for the acquisition of the Sale Shares is US$19.3 million subject to adjustments which are dependent on the eventual audited consolidated NTA referred to below and the level of cash balances of the Premier Group as at 30 June The deal structure was arrived at on a willing buyer, willing seller basis. In the event the audited consolidated NTA as at 30 June 2011 is found to be less than US$14.4 million, the Vendor will pay to the Company the difference between the said US$14.4 million and the audited figure. In the event the audited consolidated NTA as at 30 June 2011 is found to be above US$14.4 million, the Company will pay to the Vendor an amount being the lesser of: 1. Total of all cash balances of the Premier Group as at 30 June 2011; or 2. The difference between the said US$14.4 million and the audited consolidated NTA. The Vendor Parent also agreed to guarantee to the Company the accuracy of the warranties given by the Vendor and the timely and due observance and performance by the Vendor of its obligations under the SPA and indemnify the Company against, among other things, any breach by the Vendor of its warranties or obligations under the SPA. The upfront purchase consideration of US$19.30 Million was funded by US$13.51 million in external bank borrowings and US$5.79 million in internal funds and was paid to the Vendor in cash on completion of the sale and purchase of the Sale Shares today. The external bank borrowings of US$13.51 million is a short term bridging loan repayable before 31 March 2012 secured by the Sale Shares with interest chargeable at market rate. The financial effects of the bank borrowings are disclosed in Financial Effects of the Acquisition below. 5) RELATIVE FIGURES UNDER RULE 1006 OF THE LISTING MANUAL OF THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED ( SGX-ST ) The relative figures computed under Rule 1006 and Rule 1006(c) of the SGX-ST Listing Manual based on a purchase consideration of US$19.30 million exceed 20% and the acquisition of the Sale Shares would be classified as a major transaction under Rule 1014 of the SGX-ST Listing Manual.

3 3 The relative figures under Rule 1006 are: 33% Purchase Consideration US$19.3 million Rule 1006a NAV of assets disposed/group net NAV N/A Rule 1006b Net profits attributable to assets acquired 1 / Group s net 48% profits Rule 1006c Aggregate value of consideration given / Issuer Market Capitalisation 2 Rule 1006d Number of equity securities issued / Equity securities N/A previously in issue Note: 1 Based on pro forma net profit after tax for the financial year ended 31 December The functional currency of the Premier Group is in United States Dollars. For the purposes of this comparison, the net profits attributable to Premier Group is converted into Singapore dollars at an exchange rate of 1.25SGD-1USD. 2 Based on the market capitalisation of the Company as of 5 th July ) CONDITIONS TO SGX-ST WAIVER Rule 1014(2) of the SGX-ST Listing Manual requires the Company to make the acquisition of the Sale Shares conditional upon the approval of the Company s shareholders in general meeting for a major transaction. The Company has applied to SGX-ST for a waiver of the requirement to seek shareholder approval and has obtained a no objection letter dated 11May 2011 from SGX-ST in respect of its application, of which a copy is attached in Appendix A ( SGX-ST Letter ). Conditions for waiver under the SGX-ST Letter are listed as follow: (c) An opinion from the Company s Board of Directors that there will be no material change in the risk profile of the Company arising from the transaction, including the basis for their opinion; The Company announcing the Board s opinion and basis for the opinion; and The Company announcing the waiver, the reasons for seeking the waiver and the conditions as required under Listing Rule 107. The Board of Directors has deliberated and, for the reasons set out under Rationale For Acquisition, Reasons for seeking waiver and Financial Effects Of The Acquisition, is of the opinion that the acquisition of the Sale Shares will result in an extension of the MTQ Group s current Oilfield business and will not materially change the risk profile of the MTQ Group or its ability to meet its obligations to its banks and creditors in repaying debts as they fall due.

4 4 Reasons for seeking waiver MTQ has been seeking expansion via organic growth as well as via external acquisitions. The activities of Premier Group are complementary to and will result in an expansion of MTQ Oilfield Division s core businesses and are seen to be of good strategic fit to the MTQ Group. In view of the above, acquisition of Premier Group can be regarded as in the ordinary course of business for MTQ and not an expansion into a new business sector. (c) (d) (e) The bid is entirely in cash and is not expected to lead to a change in control of MTQ. The acquisition will increase MTQ Oilfield Division s customer base but is unlikely to result in any material change in its overall geographical coverage, as the Premier Group largely operates in the same geographical region as MTQ Oilfield Division, namely, in the South East Asian region. In the bid process, the Vendor has indicated that it desires a quick close. The requirement to seek shareholders approval will prolong the process. The acquisition will not increase the scale of the existing operations of the MTQ Group significantly as the relative figures computed on the basis set out in Rule 1006(c) and 1006(d) of the SGX-ST Listing Manual is not 100% or more. With regard to Rule 1006(c), the aggregate value of the consideration given for the acquisition compared to the Company s market capitalization is 33%. Rule 1006(d) is not applicable to the transaction. 7) FINANCIAL EFFECTS OF THE ACQUISITION The financial effects of the acquisition of the Sale Shares based on (i) the latest announced consolidated accounts of the Company for Financial Year ended 31 March 2011, (ii) the unaudited consolidated income statement of the Premier Group for Financial Year ended 31 December 2010 and (iii) unaudited consolidated balance sheet of the Premier Group as at 31 March 2011 are set out below. Effect of the Acquisition on the Earnings per share ( EPS ) of MTQ Group Assuming that the acquisition had been completed on 1 April 2010, the effect of the acquisition on MTQ Group s EPS for Financial Year ended 31 March 2011 would have been: Before Acquisition After Acquisition EPS (Singapore cents) Effect of the Acquisition on the Net Tangible Assets ( NTA ) per share of MTQ Group Assuming that the acquisition had been completed on 31 March 2011, the effect of the acquisition on MTQ Group s NTA per share as at 31 March 2011 would have been: Before Acquisition After Acquisition NTA per share (Singapore cents)

5 5 (c) (d) Effect on MTQ Group s gearing (gearing being defined as total debt over shareholder funds) Before Acquisition After Acquisition Group gearing As computed in paragraphs, and (c) above, the Board of Directors is of the view that the acquisition will not have a material adverse impact on MTQ Group s earnings, gearing or working capital. 8) INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS None of the Directors of the Company has any direct or indirect interest in the aforesaid acquisition. The Directors are not aware of any controlling shareholder having any interest, direct or indirect, in the investment and have not received any notification of interest in the investment from any controlling shareholders. 9) MISCELLANEOUS A copy of the SPA is available for inspection from, Monday to Friday, 8.00 am to 5.45 pm at the Company s registered office at 182 Pandan Loop, Singapore for 3 months from the date of this announcement By Order of the Board MTQ CORPORATION LIMITED Submitted by Tan San-Ju, Company Secretary on 6 July 2011 to the SGX

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