SAN TEH LTD. (the Company ) (Company Registration No W) (Incorporated in the Republic of Singapore)

Transcription

1 SAN TEH LTD. (the Company ) (Company Registration No W) (Incorporated in the Republic of Singapore) PROPOSED DISPOSAL OF: (1) 91.13% OF THE TOTAL NUMBER OF SHARES OF SAN TEH (CHINA) CEMENT CO., LTD ( 三德 ( 中国 ) 水泥股份有限公司 ) ( ST CHINA ) DIRECTLY AND INDIRECTLY HELD BY THE COMPANY (2) 30% EQUITY INTERESTS IN DALI SANTEH CEMENT CO., LTD ( 大理三德水泥有限公司 ) ( ST HEQING ) DIRECTLY HELD BY THE COMPANY (3) 30% EQUITY INTERESTS IN DALI SANTEH BUILDING MATERIALS INDUSTRY CO., LTD ( 大理三德建材工业有限公司 ) ( ST MIDU ) DIRECTLY HELD BY THE COMPANY 1. INTRODUCTION The board of directors (the Directors ) of the Company wishes to announce the following: disposal of 91.13% of the total number of shares of ST China directly and indirectly held by the Company the Company has entered into a share purchase agreement (the ST China Agreement ) with China Resources Cement Holdings (Hong Kong) Limited ( CRC ) on 26 August 2011 pursuant to which the Company has agreed to sell, and CRC has agreed to acquire from the Company 87.8% of the total number of shares of ST China held by the Company, for an aggregate cash consideration of RMB949,600,000 (approximately S$181,088,000) ( ST China Consideration ); and San Teh Xing (Xiamen) Trade Co., Ltd ( 厦门三德兴贸易有限公司 ) ( ST Xiamen ), a wholly-owned subsidiary of the Company as at the date hereof, has entered into a share purchase agreement (the ST Xiamen Agreement ) with CRC on 26 August 2011 pursuant to which ST Xiamen has agreed to sell, and CRC has agreed to acquire from ST Xiamen, 3.33% of the total number of shares of ST China held by ST Xiamen, for an aggregate cash consideration of RMB36,000,000 (approximately S$6,865,000) ( ST Xiamen Consideration ). (collectively, the ST China Disposal ) Under the ST China Agreement and the ST Xiamen Agreement, the total direct and indirect shares of ST China to be disposed by the Company to CRC will represent 91.13% of the total number of shares of ST China. ST China is a company incorporated in the People s Republic of China (the PRC ), and is principally engaged in the sale of cement and related products. The net asset value ( NAV ) of ST China valued as at the Basis Date (as defined below) was RMB1,081,550,000. ST China owns 70% equity interests in each of ST Heqing and ST Midu as at the date hereof. CRC is an investment holding company and a wholly-owned subsidiary of China Resources Cement Holdings Limited, a company listed on the main board of The Stock Exchange of Hong Kong Limited. Its subsidiaries are engaged in the production and sale of cement, clinker and concrete in the PRC. 1

2 disposal of 30% equity interests in ST Heqing directly held by the Company and 30% equity interests in ST Midu directly held by the Company The Company has also entered into the following agreements with CRC on 26 August 2011: an equity transfer agreement ( ST Heqing Agreement ) pursuant to which the Company has agreed to sell and CRC has agreed to acquire from the Company, 30% equity interests held by the Company in ST Heqing for an aggregate cash consideration of RMB205,280,000 (approximately S$39,147,000) ( ST Heqing Consideration ) (the ST Heqing Disposal ). ST Heqing is a company incorporated in the PRC and is principally engaged in the manufacturing and sale of cement and related products in Yunnan Province, the PRC. ST Heqing currently owns and operates two cement production lines in the county of Heqing in the Yunnan Province, the PRC. The NAV of ST Heqing valued as at the Basis Date was RMB684,280,000. The remaining 70% equity interests in ST Heqing are owned by ST China as at the date hereof; and an equity transfer agreement ( ST Midu Agreement ) pursuant to which the Company has agreed to sell and CRC has agreed to acquire from the Company, 30% equity interests held by the Company in ST Midu for an aggregate cash consideration of RMB96,250,000 (approximately S$18,355,000) ( ST Midu Consideration ) (the ST Midu Disposal ). ST Midu is a company incorporated in the PRC and is principally engaged in the manufacturing and sale of cement and related products in Yunnan Province, the PRC. ST Midu currently owns and operates one cement production line in the county of Midu in the Yunnan Province, the PRC. The NAV of ST Midu valued as at the Basis Date was RMB320,820,000. The remaining 70% equity interests in ST Midu are owned by ST China as at the date hereof. For the purposes of this announcement: (1) The terms ST China Disposal, ST Heqing Disposal and ST Midu Disposal shall collectively be referred to as the. (2) The terms ST China Agreement, ST Xiamen Agreement, ST Heqing Agreement and ST Midu Agreement shall collectively be referred to as the Agreements. (3) The terms ST China Consideration, ST Xiamen Consideration, ST Heqing Consideration and ST Midu Consideration shall collectively be referred to as the Total Consideration. (4) The term Basis Date shall mean 31 May 2011, the basis date stated under (i) the ST China Agreement and the ST Xiamen Agreement to value the net assets of ST China in order to determine the ST China Consideration and the ST Xiamen Consideration respectively; and (ii) ST Heqing Agreement and the ST Midu Agreement to value the net assets of ST Heqing and ST Midu respectively in order to determine the ST Heqing Consideration and the ST Midu Consideration respectively. 2. RATIONALE FOR THE PROPOSED TRANSACTIONS 2.1 Opportunity to Realise Investment The cement industry in the PRC is undergoing a period of severe consolidation with major cement operators aggressively acquiring the smaller operators. With the rapid economic development and the vast potential in the Southwestern part of the PRC (including the Yunnan Province), the Southwestern part of the PRC (including the Yunnan Province) has become the 2

3 focus of the major cement operators in the PRC in their expansion plans. This creates and presents an excellent opportunity for the Company and its subsidiaries (the Group ) to realise all its cement investments in the PRC at a satisfactory price. In addition, the current operating environment of the cement industry in the PRC, which requires enormous economies of scale and capital-intensive investments, makes it increasingly difficult for smaller cement operators such as our Group to compete with the larger competitors, especially the government-linked operators. Our Group expects competition in the cement industry in the PRC to continue to intensify and against the foregoing, believes that the presents an opportunity for the Group to exit the highly competitive cement market in the PRC. 2.2 Capital Gain and to Unlock Shareholders Value The shares of the Company ( Shares ) have been trading at a significant discount from the Group s NAV per Share over the last five years. At the close of trading on 25 August 2011, being the date preceding the date of the Agreements, the closing price of the Shares was S$0.395, which represents a discount of forty-one percent (41%) to the Group s NAV per Share as at 30 June The Company is of the view that the current price of the Shares is not reflective of its share value. The would assist to unlock such share value by allowing the Company to realise capital gains and to be in a position to return capital to and reward its shareholders. The Company intends to pay a special dividend of S$0.30 per Share or a total dividend payout of S$103,174,000 to its shareholders upon the completion of the. 2.3 Liquidity Preference in Times of Economic Uncertainties The world economy is facing an uncertain future since the global financial crisis in 2008 as the Euro zone is saddled with sovereign debt problem and growth in the US and other major economies are showing signs of slowing down. The Company has always subscribed to the merits of prudence, especially in such times of economic uncertainties. The would enable the Group to completely repay its external borrowings, reward shareholders via special dividend and increase its cash balance by S$136,377,000, which can be utilised to capitalise on any investment opportunity, especially during times of economic uncertainties. In view of the above, the Directors are of the opinion that the will serve the best interest of the Company s shareholders. Following completion of the, the Group will exit from its cement business in the PRC. The Group s remaining businesses are hotel and polyvinyl chloride (PVC) pipes and fittings operations. The Group will be vigilant to any investment opportunity that may arise in future. 3. CONSIDERATION AND ADJUSTMENTS TO CONSIDERATION, REPAYMENT OF SHAREHOLDER S LOANS AND USE OF PROCEEDS 3.1 Consideration and adjustments to consideration Under the Agreements, the Total Consideration to be received by the Group pursuant to the shall be the aggregate sum of RMB1,287,130,000 (approximately S$245,455,000), subject to adjustments for any movement in the NAV between the Basis Date and the completion date of the relevant Agreement. The Total Consideration was determined on a willing-buyer willing-seller basis after arm s length negotiations with reference to the NAV of ST China, ST Heqing and ST Midu as at the Basis Date. The consideration under the Agreements shall be made by CRC in the following manner: 1) First Payment RMB193,069,500 (approximately S$36,818,000) (equivalent to 15% of the consideration payable under the Agreements) shall be payable by CRC to the Company and ST Xiamen, as the case may be, within 5 working days (being any day other than a Saturday, 3

4 Sunday or a designated holiday in the PRC) ( Working Day ) after the execution of the Agreements. 2) Second Payment RMB28,800,000 (approximately S$5,492,000) (equivalent to 80% of the consideration payable under the ST Xiamen Agreement) shall be payable by CRC to ST Xiamen upon the fulfillment of conditions precedents under the ST Xiamen Agreement, and within 5 Working Days after the completion of the procedures with the local foreign exchange control bureau. RMB1,000,904,000 (approximately S$190,873,000) (equivalent to 80% of the consideration payable under the ST China Agreement, the ST Heqing Agreement and the ST Midu Agreement) shall be payable by CRC to the Company upon the fulfillment of conditions precedents under the ST China Agreement, the ST Heqing Agreement and the ST Midu Agreement, as the case may be, and within 3 Working Days before the submission of the changes to the local administration for industry and commerce. The date of second payment shall be the completion date of the relevant Agreement. 3) Final Payment RMB64,356,500 (approximately S$12,272,000) (equivalent to 5% of the consideration payable under the Agreements) shall be payable by CRC to the Company and ST Xiamen, as the case may be, within 5 Working Days after one year from the completion date of the relevant Agreement. 4) Adjustments to consideration The parties under the Agreements agreed that CRC shall conduct an audit of the assets and liabilities of ST China, ST Heqing and ST Midu as at the completion date of the relevant Agreement and shall issue an audit report within 21 days thereafter. The audit report, after approval by the parties, shall form the basis to ascertain any movement in the NAV between the Basis Date and the completion date of the relevant Agreement and would be used to adjust the consideration under the relevant Agreement. In the event that the NAV at the completion date of the relevant Agreement is higher than that of the Basis Date, CRC shall pay the difference to the Company and/or ST Xiamen, as the case may be, and vice versa, and such payment shall be made within 5 Working Days after such adjustment amount has been determined. 3.2 Repayment of Shareholder s Loans Under the Agreements, CRC has undertaken, amongst others, that it shall procure that all foreign shareholder s loans owed by ST China, ST Heqing and ST Midu, as the case may be, to the Company and its related parties, shall be repaid within 2 Working Days after approval from the local foreign exchange control bureau has been obtained, and all other shareholder s loans in RMB shall be repaid within 5 Working Days after the completion date of the relevant Agreement. As at the date hereof, the shareholder s loans owing from ST Heqing and ST Midu to the Company aggregates approximately US$51,600,000 (approximately S$63,674,000). 3.3 Use of Proceeds Upon completion of the, the Group expects to receive a total cash inflow of S$309,129,000, being the aggregate amount of the Total Consideration of RMB1,287,130,000 (approximately S$245,455,000) and repayment of shareholder s loans of US$51,600,000 (approximately S$63,674,000). The Group intends to utilise the amount for the following purposes: To fully repay the Group s existing bank borrowings of S$69,578,000; 4

5 (c) (d) To pay a special dividend of S$0.30 per Share or a total dividend payout of S$103,174,000 to the shareholders of the Company upon completion of the ; To retain the balance as working capital in the Company for the Group s hotel and PVC pipes business operations; and To undertake new investment opportunities that may arise in the future. 4. DETAILS OF THE AGREEMENTS 4.1 Conditions Precedents The completion of the under the Agreements, which are governed by and to be interpreted in accordance with PRC law, is subject to, amongst others, the following conditions: (c) (d) all relevant corporate and third party approvals for the, including without limitation the approval from the board and/or shareholders of ST China, ST Heqing and ST Midu for the amendment of the articles of association of ST China, ST Heqing and ST Midu respectively for the purposes of the, having been obtained; there are no material adverse changes to the business, operation, assets and liabilities of ST China, ST Heqing and ST Midu; the Company and ST Xiamen having complied with all procedures for announcement and having obtained all necessary corporate approvals from their board and/or shareholders and all third party approval for the having been obtained; and all approval from and registration with the relevant PRC authorities in relation to the having been obtained and completed. 5. FINANCIAL EFFECTS OF THE PROPOSED TRANSACTIONS 5.1 Illustrative effects of the on the NTA and EPS of the Group The excess of the Total Consideration over the total book value of ST China, ST Heqing and ST Midu as at the Basis Date is approximately RMB486,680,000 (approximately S$92,810,000). After providing for income taxes and expenses to be incurred by our Group in relation to the, the Group is expected to record a net profit of approximately RMB421,680,000 (approximately S$80,410,000) from the. The pro forma financial effects of the on the Group have been prepared based on the Group s audited consolidated financial statements for the financial year ended 31 December These pro forma financial effects are purely for illustrative purposes only and do not reflect the future actual financial position and results of the Group after the completion of the. (A) Net Tangible Asset ( NTA ) Assuming that the had been completed on 31 December 2010, the pro forma financial effects of the on the NTA per share of the Group as at 31 December 2010 would have been as follows: 5

6 Before the After the NTA (S$ 000) 234, ,900 Number of issued shares excluding Treasury 343, ,915 Shares ( 000) NTA per share (S$) (B) Earnings per share ( EPS ) Assuming that the had been completed on 1 January 2010 and the proceeds are used to completely repay the Group s bank borrowings and pay the special dividend of S$103,174,000 to the shareholders of the Company with the remaining balance to be placed as fixed deposits in a financial institution, the pro forma financial effects of the on the EPS of the Group for the financial year ended 31 December 2010 would have been as follows: Before the After the Profit/(Loss) attributable to Shareholders (S$ 000) (35,879) 35,003 Basic EPS Weighted average number of issued shares ( 000) 346, ,101 Basic EPS (cents) (10.37) Diluted EPS Weighted average number of issued shares ( 000) 346, ,101 Diluted EPS (cents) (10.37) Relative Figures Calculated on the Bases set out in Rule 1006 of the Listing Manual ( Listing Manual ) of the Singapore Exchange Securities Trading Limited ( SGX- ST ) Rule 1006 The NAV of ST China, ST Heqing and ST Midu of S$154.3 million as at 30 June 2011 compared with the Group's NAV of S$231.0 million as at 30 June % Rule 1006 The net profit (1)(2) attributable to ST China, ST Heqing and ST Midu of S$8.5 million compared with the Group's net profit (1)(2) of S$6.7 million 127% (c) Rule 1006(c) (d) The aggregate value of the Total Consideration of RMB1,287.1 million (approximately S$245.5 million) compared with the Company's market capitalisation (3) of approximately S$133.8 million (based on the weighted average price of the Company s shares on the SGX-ST of S$0.389) on 25 August 2011 Rule 1006(d) 183% Not applicable 6

7 Notes: (1) (2) (3) Under Rule 1002(3) of the Listing Manual, net profits means profit or loss before income tax, minority interests and extraordinary items. Based on the latest announced unaudited profit and loss accounts for the financial period ended 30 June Under Rule 1002(5) of the Listing Manual, the market capitalisation of the Company is determined by multiplying the number of shares in issue by the weighted average price of such shares transacted on the market day preceding the date of the sale and purchase agreements. As each of the relative figure calculated under Rules 1006, and (c) of the Listing Manual is more than 20%, the is considered a major transaction under Chapter 10 of the Listing Manual, and is therefore subject to Shareholders approval. 6. DIRECTORS AND CONTROLLING SHAREHOLDERS INTERESTS Save for their respective shareholdings in the Company, if any, none of the Directors or controlling Shareholders of the Company has any interest, direct or indirect, in the. 7. EXTRAORDINARY GENERAL MEETING (THE EGM ) AND CIRCULAR As set out in paragraph 5.2 of this announcement above, the relative figures calculated under each of Rules 1006, and (c) of the Listing Manual is more than 20%. Pursuant to Rule 1014 of the Listing Manual, the Company has to obtain the approval of its shareholders for the. A circular containing further details of the and enclosing a notice of EGM in connection therewith will be despatched to the shareholders of the Company in due course. 8. AGREEMENTS AVAILABLE FOR INSPECTION A copy of each of the Agreements will be made available for inspection during normal business hours at the Company s registered office for a period of three months from the date of this announcement. Note(s): (1) For the purpose of this announcement, the exchange rate of S$1.00 to RMB5.2438; and US$1.00 to S$1.234 have been used for purposes of calculation. (2) The total aggregated figures included in this announcement may not be the same as the arithmetic addition of the figures. Any discrepancies therefore are due to rounding. BY ORDER OF THE BOARD Kao Shin Ping Executive Chairman 26 August