OAKWELL ENGINEERING LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: H)

Transcription

1 CIRCULAR DATED 25 SEPTEMBER 2013 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. This Circular is issued by Oakwell Engineering Limited (the Company ). If you are in any doubt about this Circular, or the action you should take, you should consult your stockbroker, bank manager, solicitor or other professional adviser immediately. If you have sold or transferred all your shares in the capital of the Company held through the Central Depository (Pte) Limited ( CDP ), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDP for a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your shares represented by physical share certificate(s), you should at once hand this Circular, the enclosed Notice of Extraordinary General Meeting and the Proxy Form to the purchaser or transferee or to the bank, stockbroker or other agent through whom you effected the sale or transfer, for onward transmission to the purchaser or transferee. This Circular has not been examined or approved by the Singapore Exchange Securities Trading Limited ( SGX-ST ) and the SGX-ST assumes no responsibility for the contents of this Circular, including the correctness of any of the statements or opinions made or reports contained in this Circular. This Circular has been prepared by the Company and its contents have been reviewed by the Company s sponsor, RHT Capital Pte. Ltd. (the Sponsor ) for compliance with the relevant rules of the SGX-ST. The Sponsor has not independently verified the contents of this Circular, including the correctness of any of the figures used, statements or opinions made. The contact person for the Sponsor is Mr Wong Chee Meng Lawrence, Registered Professional (Contact No ). OAKWELL ENGINEERING LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: H) CIRCULAR TO SHAREHOLDERS IN RELATION TO (1) THE PROPOSED DISPOSAL OF THE COMPANY S AND THE GROUP S DISTRIBUTION BUSINESS (2) THE PROPOSED CHANGE OF NAME OF THE COMPANY TO OEL (HOLDINGS) LIMITED (3) THE PROPOSED SHARE BUYBACK MANDATE IMPORTANT DATES AND TIMES: Last date and time for lodgement of Proxy Form : 16 October 2013 at 3.00 p.m. Date and time of Extraordinary General Meeting : 18 October 2013 at 3.00 p.m. Place of Extraordinary General Meeting : No.8 Aljunied Ave 3 Oakwell Building Singapore

2 TABLE OF CONTENTS DEFINITIONS... 1 LETTER TO SHAREHOLDERS INTRODUCTION THE PROPOSED DISPOSAL PRINCIPAL TERMS OF THE PROPOSED DISPOSAL DIRECTORS SERVICE CONTRACTS RATIONALE FOR THE PROPOSED DISPOSAL INTENDED USE OF THE PROPOSED DISPOSAL PROCEEDS RELATIVE FIGURES UNDER CHAPTER 10 OF THE LISTING MANUAL FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL THE PROPOSED CHANGE OF NAME THE PROPOSED SHARE BUYBACK MANDATE UNDERTAKING FROM SUBSTANTIAL SHAREHOLDER TO VOTE IN FAVOUR OF THE RESOLUTION INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS DIRECTORS RECOMMENDATIONS CAUTIONARY STATEMENT EXTRAORDINARY GENERAL MEETING ACTION TO BE TAKEN BY SHAREHOLDERS DIRECTORS RESPONSIBILITY STATEMENT ABSTENTION FROM VOTING DOCUMENTS AVAILABLE FOR INSPECTION NOTICE OF EXTRAORDINARY GENERAL MEETING PROXY FORM... 39

3 DEFINITIONS The following definitions apply throughout in this Circular except where the context otherwise requires:- ACRA Act AGM Articles The Accounting and Corporate Regulatory Authority of Singapore The Companies Act, Chapter 50 of Singapore, as may be amended, supplemented or modified from time to time The annual general meeting of the Company The articles of association of the Company, as may be amended, supplemented or modified from time to time Associate (a) In relation to any Director, the chief executive officer of the Company, Substantial Shareholder or a Controlling Shareholder (being an individual) means: (i) (ii) (iii) his immediate family, the trustees of any trust of which he or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object, and any company in which he and his immediate family together (directly or indirectly) have an interest of 30% or more (b) In relation to a Substantial Shareholder or a Controlling Shareholder (being a company) means any other company which is its Subsidiary or holding company or is a Subsidiary of such holding company or one in the equity of which it and/or such other company or companies taken together (directly or indirectly) have an interest of 30% or more Base Consideration Board Business Day Catalist CDP or Depository Circular Company Completion Completion Date Consideration Means S$70,000,000 The board of Directors of the Company A day (other than a Saturday, Sunday or public holiday in Singapore) on which commercial banks are open for business in Singapore The Catalist Board of the SGX-ST The Central Depository (Pte) Limited This circular to the Shareholders Oakwell Engineering Limited The performance of all the obligations of the Parties set out in Paragraph 3.6 of this Circular 31 October 2013 or any other date as may be mutually agreed in writing between the Parties Has the meaning ascribed to it in Paragraph 3.2 of this Circular 1

4 control Controlling Shareholder The capacity to dominate decision-making, directly or indirectly, in relation to the financial and operating policies of a company A person who: (i) (ii) holds, directly or indirectly, 15% or more of the total number of issued shares excluding treasury shares in a company (provided that the SGX-ST may determine that a person who satisfies this definition is not a controlling shareholder); or in fact exercises control over a company Directors Distribution Business Due Diligence EGM Elec EPS Group Latest Practicable Date Listing Manual LOI Market Day M&I FE NAV The directors of the Company as at the date of this Circular The business of the distribution of (i) electrical and mechanical parts and accessories, together with related systems engineering and assembly services (including, without limitation, fire control and suppression systems) and (ii) security and access control solutions (biometric or otherwise) as engaged in by the Company, through its special projects division, or by the Subsidiaries, as at the date of the SPA The legal, financial and taxation due diligence exercises conducted by the Purchasers in relation to the Distribution Business The extraordinary general meeting of the Company to be convened and held on 18 October 2013 at 3.00 p.m., notice of which is set out on page 35 of this Circular Elec Holdings Limited Earnings per Share Means the Company, and its subsidiaries 19 September 2013 being the latest practicable date prior to the printing of this Circular Section B: Rules of Catalist of the Listing Manual of the SGX-ST, or the rules contained therein, which apply to entities listed on the Catalist, as may be amended, varied or supplemented from time to time The letter of intent dated 23 May 2013 and entered into between the Company and Sonepar A day on which the SGX-ST is open for trading in securities M&I Electric Far East Pte Ltd Net asset value Non-transferable Agreements Has the meaning ascribed to it in paragraph 3.1 of this Circular NTA ODS Net tangible asset value Oakwell Distribution (S) Pte Ltd 2

5 Parties Proposed Change of Name Proposed Disposal Purchasers Relevant Period Sale Group Securities Account SGXNET SGX-ST SIC Share Buyback Mandate Shareholders Shares Sonepar Collectively the Company and the Purchasers, and Party means any of them The proposed change of name of the Company to OEL (HOLDINGS) LIMITED The proposed disposal of the Company s and the Group s Distribution Business pursuant to the SPA Collectively Sonepar and Elec, and Purchaser means either one of them Has the meaning ascribed to it in Paragraph 10.1 of this Circular Has the meaning ascribed to it in Paragraph 2.2 of this Circular A securities account maintained by a Depositor with CDP (but does not include a securities sub-account) The SGXNET Corporate Announcement System Singapore Exchange Securities Trading Limited The Securities Industry Council of Singapore The general mandate to enable the Company to purchase or otherwise acquire its issued Shares Persons (not being Depositors) who are registered as holders of Shares in the Register of Members of the Company and Depositors, who have Shares entered against their names in the Depository Register except where the registered holder is CDP, the term Shareholder shall in relation to such Shares mean the Depositors whose Securities Accounts are credited with the Shares. Any reference to Shares held by or shareholdings of Shareholders shall include Shares standing to the credit of their respective Securities Accounts Ordinary shares in the capital of the Company Sonepar Asia Pacific Limited SPA The conditional sale and purchase agreement dated 20 August 2013 Sponsor Subsidiaries Substantial Shareholder Takeover Code RHT Capital Pte. Ltd., the Company s continuing sponsor Has the meaning ascribed to it in Paragraph 2.2 of this Circular, and Subsidiary means any of them A Shareholder who has an interest in the voting Shares in the Company representing not less than 5% of all the voting Shares The Singapore Code on Takeover and Mergers, as modified, supplemented or amended from time to time 3

6 Treasury Share(s) Undertaking A Share that was or is treated as having been acquired and held by the Company and has been held continuously by the Company since it was so acquired and has not been cancelled Has the meaning ascribed to it in Paragraph 11 of this Circular % or per cent. Percentage or per centum HK$ and cents S$, $ and cents Hong Kong dollars and cents respectively Singapore dollars and cents respectively The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Act or any statutory modification thereof as the case may be. The term subsidiary shall have the meaning ascribed to it in Section 5 of the Act. Words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations. The headings in this Circular are inserted for convenience only and shall be ignored in construing this Circular. Any reference in this Circular to an enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Act or the Listing Manual or any statutory modification thereof and used in this Circular, and not otherwise defined in this Circular shall, where applicable, have the same meaning assigned to it under the Act or the Listing Manual or any statutory modification thereof, as the case may be. Any reference in this Circular to a time of day and date shall be a reference to Singapore time and date respectively, unless otherwise stated. Any discrepancies in tables included in this Circular between the total sum of amounts listed and the totals shown are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. 4

7 OAKWELL ENGINEERING LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number: H) LETTER TO SHAREHOLDERS Directors: Registered Office: Low Beng Tin (Chairman and Managing Director) No.8 Aljunied Ave 3 Alex Long Yoke Hian (Executive Director) Oakwell Building Jeffrey Hing Yih Peir (Non-Executive Director) Singapore Renny Yeo Ah Kiang (Independent Non-Executive Director) Bernard Tay Ah Kong (Independent Non-Executive Director) Lai Kwok Seng (Independent Non-Executive Director) Goh Yeow Tin (Independent Non-Executive Director) To: The Shareholders of Oakwell Engineering Limited Date: 25 September 2013 Dear Sir or Madam (1) THE PROPOSED DISPOSAL OF THE COMPANY S AND THE GROUP S DISTRIBUTION BUSINESS (2) THE PROPOSED CHANGE OF NAME OF THE COMPANY TO OEL (HOLDINGS) LIMITED (3) THE PROPOSED SHARE BUYBACK MANDATE 1. INTRODUCTION The Board is convening the EGM, to be held on 18 October 2013 at 3.00 p.m. at No.8 Aljunied Ave 3 Oakwell Building Singapore , to seek approval from the Shareholders for the following matters: (a) (b) (c) the Proposed Disposal; the Proposed Change of Name; and the proposed Share Buyback Mandate. The purpose of this Circular is to provide Shareholders with relevant information pertaining to the above-mentioned proposals to be tabled at the EGM and to seek Shareholders approval for the resolutions relating to the same. The notice of the EGM is set out on page 35 of this Circular. The SGX-ST assumes no responsibility for the contents of this Circular, including the correctness of any of the statements or opinions made or reports contained in this Circular. 2. THE PROPOSED DISPOSAL 2.1 Background On 23 May 2013, the Board announced that the Company entered into a LOI with Sonepar. On 21 August 2013, the Board announced that the Company has entered into a conditional SPA with the Purchasers for the sale of 100% of the total paid-up and issued share capital (the Sale Shares ) of ODS for S$70,000,000 ( Base Consideration ) with an adjustment amount ( Adjustment Amount ) (collectively, the Consideration ) in accordance with the terms and conditions of the SPA. On 4 September 2013, the Board clarified that following the completion of the Pre-Completion Restructuring (as defined below), ODS would hold 100% of Oakwell Do Brasil Comercio De Equipmentos Ltda. 5

8 The relevant announcements issued by the Company in relation to the Proposed Disposal are available on the SGX-ST s website at The Company s interest in the Group, prior to and after, completion of the Proposed Disposal, is set out as follows: Before: Oakwell Engineering Limited Oakwell Engineering International Pte. Ltd. [100%] Oakwell Corporation Thailand Co.,Ltd [49%] M&I Electric Far East Pte. Ltd. [51%] Oakwell Marine Services (S)Pte.Ltd. [100%] Oakwell Engineering (M) Sdn Bhd [70%] Oakwell Shipbuilding Engineering & Construction Pte.Ltd. [100%] FST Protection Pte. Ltd. [100%] OID Pte. Ltd. [100%] BioFuel Research Pte. Ltd. [51%] Oakwell Engineering (Vietnam) Company Limited [100%] Oakwell Do Brasil Comercio De Equipmentos Ltda [100%] Oakwell Korea Co., Ltd [100%] Oakwell Inc. [100%] Oakwell Shipyard Co., Ltd [100%] Oakwell International Trading (Shanghai) Co., Ltd [100%] Oakwell Engineering Equipment (Shanghai) Co., Ltd [100%] Oakwell Distribution (S) Pte Ltd [100%] After: Oakwell Engineering Limited Biofuel Research Pte. Ltd. [51%] Oakwell Corporation Thailand Co., Ltd [49%] Oakwell Shipbuilding Engineering & Construction Pte. Ltd. [100%] Oakwell Shipyard Co., Ltd [100%] In italics and underlined: Non-distribution business 6

9 2.2 Information on the Assets to be Disposed The Company is in the process of undertaking a pre-completion restructuring whereby it has incorporated ODS as a wholly-owned subsidiary of the Company which shall, on completion of the Proposed Disposal, hold the Distribution Business ( Pre-Completion Restructuring ). ODS was incorporated in Singapore on 31 May 2013 and has its registered office at No.8 Aljunied Avenue 3, Oakwell Building, Singapore As at the Latest Practicable Date, ODS has an issued and paid-up share capital of S$10,000 comprising 10,000 ordinary shares, entirely held by the Company. Following the completion of the Pre-Completion Restructuring, the subsidiaries of ODS will be as follows: Percentage of Entities Place of Incorporation shareholding held by ODS Oakwell Engineering International Pte Ltd Singapore 100% Oakwell Marine Services (S) Pte Ltd Singapore 100% Oakwell Engineering (M) Sdn Bhd Malaysia 100% OID Pte. Ltd. Singapore 100% M&I FE Singapore 51% Following the completion of the Pre-Completion Restructuring, the following companies will be indirectly owned by ODS through the aforementioned entities: Place of Entities Incorporation Oakwell Engineering (Vietnam) Company Limited Vietnam 100% Oakwell Inc. 100% United States of America Oakwell Do Brasil Comercio De Equipmentos Ltda Brazil 100% Oakwell Korea Co., Ltd South Korea 100% Oakwell Engineering Equipment China 100% (Shanghai) Co., Ltd Oakwell International Trading (Shanghai) Co., Ltd China 100% Percentage of indirect shareholding held by ODS Each of the above is referred to as a Subsidiary or collectively referred to as Subsidiaries. ODS and its Subsidiaries, following the Pre-Completion Restructuring, will be collectively referred to as the Sale Group. The Sale Group will be primarily involved in the Distribution Business. 2.3 Information on the Purchasers Sonepar is a company incorporated in Hong Kong with an issued and paid up capital of HK$3,800,000,000. Elec is a company incorporated in Hong Kong with an issued and paid up capital of HK$119,000,000. Both Sonepar and Elec are part of the Sonepar group of companies (collectively referred to as the Sonepar Group ). Based on public records, the Sonepar Group is in the logistics and distribution of electrical equipment business. The Sonepar Group has a presence in 36 countries. Pursuant to the SPA, Sonepar shall purchase 80% of the Sale Shares and Elec shall purchase 20% of the Sale Shares. The Purchasers are not in any way related to the Group, the Directors or any of the Substantial Shareholders. 7

10 3. PRINCIPAL TERMS OF THE PROPOSED DISPOSAL The principal terms of the Proposed Disposal, inter alia, are set out below. 3.1 Pre-Completion Restructuring The Pre-Completion Restructuring, inter alia, shall be carried out in the following manner: (a) (b) (c) (d) (e) (f) (g) the Company has, by the date of the SPA, submitted an application to strike off FST Protection Pte. Ltd. from the Register of Companies maintained by ACRA in Singapore and provided to the Purchasers the relevant documentary proof of such submission; the Company shall, prior to the Completion Date, complete or procure the completion of the transfer, novation or assignment to ODS of all that part of the Distribution Business (and all related contracts, employees and assets) that are being conducted or engaged in by the Company itself as at the date of the SPA (and for the avoidance of doubt, excluding the Distribution Business being conducted through the Subsidiaries as at the date of the SPA). In respect of any contracts which are unable to be transferred, novated or assigned to ODS prior to the Completion Date ( Non-transferable Agreements ), the Company shall continue to perform its obligations under such contracts, but shall ensure that ODS obtains the margin or profit under the relevant contracts in the manner set out in the SPA; the Company shall, prior to the Completion Date, procure the passing of all required resolutions for the renaming of all entities within its Group (including, without limitation, the Company itself) that are not Subsidiaries to exclude the name Oakwell or any name similar thereto; the Company shall, prior to the Completion Date, complete or procure the completion of the transfer and/or assignment to ODS of all rights to the Oakwell name, and any service marks and/or domain names containing the Oakwell name; the Company shall, prior to the Completion Date, complete or procure the completion of the transfer or assignment to ODS of the trademarks and those which are relevant to the Distribution Business and all rights in respect thereof; the Company shall, prior to the Completion Date, complete or procure the completion of the transfer and/or assignment to ODS the Company s product liability insurance policies numbered 8-L PLB-R003 and 8-L PLB-R003 maintained with QBE Insurance (International) Limited; the Company shall, prior to the Completion Date, complete or procure the completion of the transfer to ODS of the entire issued share capital (unless otherwise expressly indicated) of the following Subsidiaries: (i) (ii) (iii) (iv) Oakwell Engineering International Pte. Ltd.; Oakwell Marine Services (S) Pte. Ltd.; Oakwell Engineering (M) Sdn Bhd; OID Pte. Ltd.; and (v) M&I FE (transfer of all issued shares being held by the Company, amounting to 51% of the total issued share capital); (h) the acquisition of ODS is on a cash-free and debt-free basis (including, without limitation, debts owed to the Company), and ODS shall, prior to the Completion Date, increase its share capital and allot additional shares to the Company. The Purchasers and the Company shall, by no later than one week prior to the Completion Date, agree in writing (and such agreement not being unreasonably withheld or delayed) on the increased amount of authorised capital of ODS and the number of additional shares to be allotted to the Company. 8

11 3.2 Consideration The Consideration will be paid by the Purchasers in the following manner: (a) (b) Sonepar shall be liable to pay 80% of the Consideration; and Elec shall be liable to pay 20% of the Consideration. The Consideration for the Proposed Disposal comprises the Base Consideration and the Adjustment Amount. An amount of S$60,000,000 from the Base Consideration in cash together with the Adjustment Amount, if any, will be paid on the Completion Date and the balance of S$10,000,000 will be withheld as the retention fund (the Retention Fund ), which amount will be retained towards the satisfaction of any claims by the Purchasers under the SPA. If any amount by way of compensation, damages or indemnity shall become payable to the Purchasers out of the Retention Fund in accordance with the provisions of the SPA, the Consideration shall be reduced by the amount so payable, and any right of the Purchasers to such compensation, damages or indemnity shall be reduced to the same extent, but without prejudice to the right of the Purchasers to recover the excess of any compensation, damages or indemnity, or any costs, interest or expenses, from the Company. The amount of the Retention Fund shall be paid on Completion (as defined below) by the Purchasers into a separate interest bearing bank account in the joint names of the Company and the Purchasers, which account shall have been opened prior to the Completion Date at a bank to be agreed between the Company and the Purchasers (the Retention Account ). The Company and the Purchasers shall as soon as practicable sign and return to such bank a bank mandate in respect of the Retention Account. Subject to claims deducted against the Retention Fund, the Purchasers shall release the Retention Fund or the balance thereof to the Company in the following manner: (i) 50% of the amount held in the Retention Account to the Company at the expiration of 12 months from the Completion Date; and (ii) the remainder of the amount held in the Retention Account, including any interest earned on balances held in the Retention Account, to the Company at the expiration of 24 months from the Completion Date. The Base Consideration will be increased by the Adjustment Amount which shall be determined in the manner set out below, and will be based on the findings of the Due Diligence: (aa) if no Write-offs (as defined below) are applicable, the Adjustment Amount shall be S$4,500,000. (bb) if the value of the Write-offs is less than S$4,500,000, the Adjustment Amount shall be the difference between the aggregate value of the Write-offs and S$4,500,000. (cc) if the value of the Write-offs is equal to or greater than S$4,500,000, the Adjustment Amount shall be zero. Write-offs means the reduction in the net value of any of the assets, or of the Company and/or the Subsidiaries resulting from the application of the International Financial Reporting Standards, as determined by the Purchasers and their financial and accounting advisers prior to Completion. The Consideration was arrived at on a willing-buyer, willing-seller basis, following arms length negotiations between the Company and the Purchasers, after taking into account, the NAV of the Distribution Business as at 31 December 2012 which is approximately S$28.6 million. 9

12 No valuation was done because the Consideration is based on the NAV of the Distribution Business of the Company and the Group. The Base Consideration was also based on a multiple of eight times on the average earnings before interest, tax, depreciation and amortization ( EBITDA ) of the Distribution Business for the financial years ended 31 December 2010, 31 December 2011 and 31 December The excess of the Consideration over the NAV as at 31 December 2012 of the Distribution Business is S$45,900, Conditions The Proposed Disposal is subject to the satisfaction and continued satisfaction at Completion or (where permitted) waiver of the conditions precedent stated below (the Conditions ): (a) (b) (c) (d) (e) (f) (g) the passing at a duly convened extraordinary general meeting of the Company of such resolution(s) as may be necessary to approve, implement and effect the sale and purchase of the Distribution Business and Pre-Completion Restructuring; the Company having obtained all the necessary consents and approvals regarding the Pre- Completion Restructuring and sale of the Sale Shares from government, administrative or regulatory bodies in Singapore and the jurisdictions in which the Subsidiaries are located, including, but without limitation, the SGX-ST; the Company having completed the Pre-Completion Restructuring and to the reasonable satisfaction of the Purchasers; the Purchasers having notified the Company in writing within 20 Business Days of the execution of the SPA that they are satisfied with the Due Diligence results; M&I Electric Industries, Inc. and the Company are parties to a joint venture agreement (the JVA ) in relation to M&I FE and that under the terms of the JVA, M&I Electric Industries, Inc. has the right to terminate the JVA by giving one year prior notice to the other party; accordingly, M&I Electric Industries, Inc. confirming in writing, in terms satisfactory to the Purchasers in their sole discretion, that it consents to the indirect acquisition of 51% issued shares of M&I FE by the Purchasers and will not exercise its right to terminate the JVA in relation to M&I FE; each of the key senior management personnel of the Company or the Group, namely, LOW Beng Tin, LIM Chien Joo Derick, TAN Christine, GOH Vincent and NG Chuan Yong having entered into new employment agreements with ODS and/or agreeing to remain in employment with ODS or the relevant Subsidiaries (as the case may be) after Completion, on terms satisfactory to the Purchasers in their sole discretion; each of the employees of the Company to be transferred to ODS and employees of the Subsidiaries having entered into new employment agreements with ODS or agreeing to remain in employment with the relevant Subsidiary (as the case may be), on terms satisfactory to the Purchasers in their sole discretion and which shall be: (i) (ii) (iii) for employment in a capacity the same or substantially the same as their employment with the Company at the date of the SPA; on terms and conditions of employment which are the same or substantially the same as those applying to that employee at the date of the SPA; and to take effect from Completion of the SPA; (h) ODS or the relevant Subsidiary having entered into a tenancy agreement with the Company as the landlord, on terms satisfactory to the Purchasers, in their sole discretion, in respect of the warehouse located at No.8 Aljunied Avenue 3, Singapore , for rent not exceeding 10

13 S$60,000 per calendar month for the initial term of two years and with an option to renew the tenancy for a term of three years with rent not exceeding S$85,000 per calendar month and including a provision giving ODS naming rights over the building; (i) (j) (k) (l) (m) (n) the Company having obtained the written consent from the Housing and Development Board of Singapore in relation to the tenancy agreement stated in Paragraph 3.3(h) above; ODS or the relevant Subsidiary having entered into a tenancy agreement with the relevant landlord, on terms satisfactory to the Purchasers, in their sole discretion, in respect of the warehouse located at 204 Bedok South Avenue 1, Singapore for a term of not less than two years; Oakwell International Trading (Shanghai) Co. Ltd. having renewed its lease agreement number for its office located at the Shanghai Free Trade Zone; each of the Subsidiaries having notified any parties which it has contracted with, in respect of the change of the relevant Subsidiary s control as contemplated under the SPA, and where applicable, obtained such parties written consent for such change of control; the Purchasers and the Company having opened the Retention Account; no government, governmental department, state agency or governmental, quasi governmental, supranational, statutory, regulatory, supervisory or investigative body, authority, agency, trades union, works council, trade association or agency, institution or professional or environmental body or any other person or organisation in any jurisdiction having: (i) (ii) (iii) instituted or threatened any action, suit or investigation to restrain, prohibit or otherwise challenge the Pre-Completion Restructuring or the purchase of the Sale Shares by the Purchasers; or threatened to take any action as a result or in anticipation of the implementation of the Pre-Completion Restructuring or the sale of the Sale Shares or, to challenge or materially impede the Pre-Completion Restructuring, the sale of the Sale Shares or the rights and powers ordinarily available to the Purchasers following such events; or proposed or enacted any statute or regulation or delivered any judgment which would prohibit, materially restrict or materially delay implementation of the Pre-Completion Restructuring, the sale of the Sale Shares or the operation of the business of any member of the Sale Group after Completion or materially reduce the profitability of the Sale Group or the Purchasers collection of distributions from them; (o) (p) (q) no material part of the assets of the Distribution Business, or any member of the Sale Group being destroyed, damaged, lost, confiscated (whether such confiscation is lawful or not), taken in execution or sequestration, passed from the control of the Company or any member of the Sale Group or is found not to be the property of the Company or the Sale Group or to be subject to an encumbrance (not referred to in the disclosure letter), where any such event has, or is likely to, prevent or materially adversely affect the operation of the business of the Distribution Business or the Sale Group or materially reduce the profitability thereof either permanently or for a material time; none of the members of the Sale Group ceasing its business for any reason, becoming insolvent, becoming the subject of a bona fide petition for, or entering into, liquidation or suffering the appointment of a receiver or administrative receiver of the whole or any part of its assets or undertaking, or making, or seeking to make any compromise or arrangement with its creditors or similar or analogous proceedings or matters occurring in any jurisdiction; no strike, lock-out or other significant industrial dispute arising or being threatened in relation to any member of the Sale Group; 11

14 (r) (s) save for those already disclosed in the disclosure letter, no litigation or arbitration proceedings being instituted or threatened by or against any member of the Sale Group, or by or against the Company in respect of the Distribution Business or any member of the Sale Group; no material adverse change in the business, operations, position (financial, trading or otherwise), profits or prospects of any member of the Sale Group or any event or circumstance that may result in such a material adverse change excluding, in any such case, event, circumstance or change resulting from: (i) (ii) (iii) (iv) (v) matters otherwise disclosed in the disclosure letter or the SPA; changes in stock markets, interest rates, exchange rates, commodity prices or general economic conditions; changes in conditions generally affecting the industry in which the Company or any of the Subsidiaries operates; changes in laws, regulations or accounting practices; or the SPA or the change in control resulting from the SPA; (t) (u) the Company having confirmed in writing to the Purchasers that there is no event or matter which results or may result in any of the warranties in the SPA being unfulfilled, untrue, misleading or incorrect in any respect as at Completion; and the Company having settled in full all invoices and amounts payable (including applicable interest, if any), owed by it or any of its subsidiaries to the Sonepar Group in respect of purchases of goods from any member of the Sonepar Group. If any of the Conditions is not satisfied (or is otherwise expressly waived in writing by the Purchasers) by 31 December 2013, then except for certain clauses which will survive the termination of the SPA, the SPA shall be deemed terminated. On 16 September 2013, the Purchasers have confirmed that they are satisfied with the results of the Due Diligence. As such, the condition precedent at paragraph 3.3(d) of this Circular has been fulfilled. 3.4 Other material terms The Purchasers rights and remedies in respect of any breach of any of the Company s warranties will survive for 24 months after the Completion Date The Company undertakes to and covenants with the Purchasers that it will not, and shall procure that its subsidiaries, and its Directors, managers, officers and employees and those of such subsidiaries and entities shall not, from the date of the SPA for a period of two years after the Completion, either on their own behalf or jointly with any other person, directly or indirectly (including through an entity in which they own shares or equity, or are directors or controllers, except for a listed entity in which they own not more than 5% of the issued shares): (a) approach, canvass, solicit or otherwise act with a view to enticing away from or seeking, in competition with the Distribution Business, the custom of any person who, at any time during the period of 12 months preceding the Completion or at any time after the Completion is or has been a customer of the Distribution Business or any member of the Sale Group, and, during the aforementioned period between the date of the SPA and the Completion, the Company must not use its knowledge of or influence over any such customer to or for its own benefit or the benefit of any other person carrying on business in competition with the Distribution Business or any member of the Sale Group or otherwise use its knowledge of or influence over any such customer to the detriment of the Purchasers or any member of the Sale Group; 12

15 (b) (c) (d) seek to contract with or engage (in such a way as adversely to affect the business of any member of the Sale Group as carried on at Completion) any person who has been contracted with or engaged to manufacture, assemble, supply or deliver products, goods, materials or services to the Distribution Business or any member of the Sale Group at any time during the period of 12 months preceding the date he ceases to be engaged by the Distribution Business or any member of the Sale Group; approach, canvass, solicit, engage or employ or otherwise endeavour to entice away any person who, at any time during the period of six months preceding the date of his ceasing to be employed in relation to the Distribution Business by the Purchasers or any member of the Sale Group, will be or will have been an employee, officer, manager, consultant, sub-contractor or agent in relation, to the Distribution Business, of the Purchasers or any member of the Sale Group with a view to the specific knowledge or skills of such person being used by or for the benefit of any person carrying on business in competition with the Distribution Business or any member of the Sale Group; and be engaged, concerned or interested, in any capacity, in carrying on any business in competition with the Distribution Business within Singapore, or any jurisdictions in which the Subsidiaries are located, or where any member of the Sonepar Group is located or has business interest The Company undertakes to and covenants with the Purchasers that it will not, and shall procure that its subsidiaries, any entities in which it has a direct or indirect minority interest, and its directors, managers, officers and employees, and those of such subsidiaries and entities shall not, from the Completion Date and for a period of two years thereafter, either on their own behalf or jointly with any other person, directly or indirectly (including through an entity in which they own shares or equity, or are directors or controllers, except for a listed entity in which they own not more than 5% of the issued shares), be engaged, concerned or interested, in any capacity, in carrying on any business or activity, whether for profit or otherwise, using the trademark, company name, or trading name Oakwell or any name which is likely to be confused therewith or otherwise The Company acknowledges that the name Oakwell shall be the exclusive property of ODS and shall be exclusively owned by ODS after Completion. The Company undertakes to and covenants with the Purchasers that it shall procure that: (a) (b) (c) any and all rights to the Oakwell name, brand name, trade mark, service mark and/ or domain name containing the Oakwell name shall be assigned to ODS prior to the Completion Date; all entities within the Company s Group (including, without limitation, the Company itself) that are not Subsidiaries shall be renamed to exclude the Oakwell name or any name similar thereto, within four weeks from the Completion Date; and any costs and expenses incurred in effecting the name change shall be the sole liability of the Company. 3.5 Transitional Services The following are some of the salient terms concerning the Non-transferable Agreements: (a) The Company shall complete prior to Completion the novation, transfer or assignment to ODS of all agreements relating to the Distribution Business, of which it is a party. Where any of such agreements cannot be novated, transferred or assigned in favour of ODS without causing a breach of such agreements, subject to the relevant waiver of the Conditions granted by the Purchasers, the Company shall continue to perform its obligations under the Non-transferable Agreements, but shall ensure that ODS obtains the margin or profit thereunder. 13

16 (b) In relation to the Non-transferable Agreements: (i) The Company shall notify the counterparties of the Non-transferable Agreements of the transfer of the Distribution Business to ODS and advise them to place future orders directly with ODS. For counterparties that decline to place orders with ODS due to their internal policies or other restrictions, the Company shall continue to accept and administer future orders from such counterparties solely on behalf of ODS. The term Non-transferable Agreements shall be deemed to include all such future orders; and (ii) from Completion, legal title to and liability under the Non-transferable Agreements shall remain with the Company which shall hold all of its rights, title and interest in the Nontransferable Agreements on trust for the benefit of ODS. (c) For the matters referred to Paragraphs 3.5(a) and 3.5(b) above, the Purchasers, the Company and ODS shall enter into a formal agreement at Completion in a form agreeable to the Purchasers at their sole discretion (the Transitional Services Agreement ), which shall contain, inter alia, the following material terms: (i) (ii) (iii) (iv) (v) (vi) the Company shall act in accordance with the directions of the Purchasers in relation to the performance of the Non-transferable Agreements at all times; the Company shall only administer the Non-transferable Agreements on behalf of ODS and all of the products shall be provided, supplied, fabricated or installed by ODS and/ or the Subsidiaries as representatives of the Company; the Company shall receive payments under the Non-transferable Agreements on behalf of ODS and shall dispose of monies received from customers as the Purchasers shall instruct. The Company shall report to the Purchasers and ODS on a monthly basis all receipts and payments made in respect of the Non-transferable Agreements, which shall also account for any margin or profit made; save for the Non-transferable Agreements, the Company shall not carry out any business that is in competition with the Distribution Business or any part of it, nor shall the Company be permitted to enter into new contracts or obligations related to the Distribution Business after the Completion on its own behalf; a complete list of the Non-transferable Agreements shall be annexed to the Transitional Services Agreement; and the Transitional Services Agreement shall be valid for 24 calendar months after the Completion. If there are outstanding Non-transferable Agreements at the expiry of the term, the Company and the Purchasers shall re-negotiate for an extension of or other amendments to the Transitional Services Agreement. (d) Solely in relation to matters arising out of the due performance by the Company of its obligations as set out in Paragraphs 3.5(a) and 3.5(b) above and under the Transitional Services Agreement, and provided that the Company has complied with and continues to comply with its obligations under the SPA, the Purchasers shall jointly and severally indemnify the Company and hold the Company harmless for a period of 24 calendar months after the Completion against all and any costs, claims, expenses, liabilities, demands, losses and actions (including legal costs on an indemnity basis) arising from any claims: (i) (ii) made against the Company by customers or suppliers by virtue of the Company s performance of its obligations under the Non-transferable Agreements; and in respect of any liabilities attributable to the Company for products that were provided, supplied, fabricated or installed by ODS and/or the Subsidiaries pursuant to the Nontransferable Agreements, 14

17 provided that the Purchasers shall not be liable to indemnify the Company for any claims caused by the negligence and/or wilful default of the Company, its officers, directors, employees, consultants or agents. If any amount was paid by the Purchasers to the Company in respect of claims made by the Company of the nature as set out in this Paragraph 3.5(d) and which are subsequently found to have resulted from negligence and/or wilful default, the Company shall promptly refund to the Purchasers, without any deduction, the whole sum of indemnity so paid. (e) If the Company becomes aware of any claim or proceeding which might lead to a claim of a nature as set out in Paragraph 3.5(d), the Company shall: (i) (ii) notify the Purchasers as soon as reasonably practicable of such claim or proceeding; not, without the prior agreement of the Purchasers (which shall not be unreasonably withheld or delayed), in relation to any such claim or proceeding: a. make any admission of liability, agreement or compromise with or conduct any negotiations with any person, body or authority; b. engage any legal or technical expert; c. design or implement any response activity; d. take such action as the Purchasers may reasonably request to avoid, dispute, resist, appeal, compromise or defend such claim or proceeding or any adjudication in respect thereof; e. take such action as the Purchasers may reasonably request in respect of the conduct of all proceedings and/or negotiations of whatever nature arising in connection with the claim or proceeding in question and, if requested by the supplier, shall join the Company as a party to any proceedings; and f. provide such information and assistance as the Purchasers may reasonably require in connection with the preparation for and conduct of such proceedings and/or negotiations; (iii) Any failure of the Company to comply with any of its obligations as set out in this Paragraph 3.5(e) shall not prevent the Company from making a claim against the Purchasers in respect of such claim. 3.6 Completion (a) The Completion of the Proposed Disposal shall take place on 31 October 2013 or any other date as may be mutually agreed in writing between the Parties. (b) The Purchasers will not be obliged to complete the purchase of the Sale Shares under the SPA unless the Company complies fully with its obligations under SPA and unless the purchase of all of the Sale Shares is completed simultaneously. 4. DIRECTORS SERVICE CONTRACTS No additional person is proposed to be appointed as a director of the Company in connection with the Proposed Disposal. Accordingly, no service contract is proposed to be entered into between the Company and any such person in connection with the Proposed Disposal. 5. RATIONALE FOR THE PROPOSED DISPOSAL The Directors are of the view that the Proposed Disposal is in the best interests of the Company and its Shareholders. The Directors have considered the likelihood that the Distribution Business may require significant capital injection to grow and the Proposed Disposal will enable the Company to realise its investment in the Distribution Business and to unlock the value thereof for its Shareholders. 15

18 6. INTENDED USE OF THE PROPOSED DISPOSAL PROCEEDS It is the intention of the Directors to deploy the proceeds from the Proposed Disposal to fund future acquisitions and its working capital, consider reducing its bank borrowings, provide a dividend distribution and for any other purpose as the Directors may deem fit. The Company will make the necessary announcements as and when such funds are materially disbursed and subsequently provide a status report on the use of such proceeds and any material deviations therefrom in its annual report. Pending the deployment of the net proceeds from the Proposed Disposal, the net proceeds may be deposited with banks and/or financial institutions, invested in short-term money market instruments and/or marketable securities, or used for any other purpose on a short-term basis, as the Directors may deem fit. 7. RELATIVE FIGURES UNDER CHAPTER 10 OF THE LISTING MANUAL For the purpose of Chapter 10 of the Listing Manual, the relative figures for the Proposed Disposal, based on the latest unaudited results of the Group as at 30 June 2013, using the applicable bases of comparison set out in Rule 1006 of the Listing Manual are as follows: Rule 1006 (a) Bases of Computation Size of Relative Figure (%) Net asset value of the assets to be disposed of, compared with the Group s net asset value 92.4% S$30.2m/ S$32.7m Rule 1006 (b) Rule 1006 (c) Rule 1006 (d) Net profits (1) attributable to the assets of S$6.2 million, compared with the Group s net profit of S$1.2 million as at 30 June 2013 Consideration received based on aggregate total of the Base Consideration and Adjustment Amount of S$74,500,000, compared with the market capitalisation based on the total number of issued shares excluding treasury shares as of the Market Day preceding the date of the SPA on 20 August 2013 (based on weighted average price of S$0.0775) Number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue 516.7% 143.8% N.A. Notes: (1) Under Rule 1002(3)(b) of the Listing Manual, net profits means profit or loss before income tax, minority interests and extraordinary items. As the relative number under Rule 1006(a) and Rule 1006(c) exceeds 50%, the Proposed Disposal would therefore constitute a major transaction under Chapter 10 of the Listing Manual. Rule 1014(2) of the Listing Manual provides, inter alia, that a major transaction must be made conditional upon the Shareholders approval in a general meeting. Therefore, the Proposed Disposal is conditional upon the approval by the Shareholders in a general meeting. 8. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL The proforma financial effects of the Proposed Disposal on the Company are set out below. The proforma financials are theoretical in nature and are only for illustrative purposes; they do not represent the actual financial position and/or results of the Company s operations after the completion of the Proposed Disposal and are not indicative of the future financial position and earnings of the Company. 16

19 For the purpose of illustration and assuming that the Proposed Disposal had been completed on 31 December 2012, being the end of the most recently audited completed financial year, and based on the Group s audited consolidated financial statements as at 31 December 2012 and the aggregate total of the Base Consideration and Adjustment Amount of S$74,500,000, the effect on the NTA per share of the Group as at 31 December 2012 would be as follows: Effect of the Proposed Disposal on NTA per share Before Proposed Disposal After the Proposed Disposal NTA S$29,553,000 S$77,305,000 Number of Shares 668,266, ,266,667 NTA per share 4.42 cents 11.6 cents Based on the above table, there will be a 162.4% increase in the NTA per share after the Proposed Disposal. Effect of the Proposed Disposal on EPS Assuming that the Proposed Disposal had been completed on 1 January 2012, being the beginning of the most recently audited completed financial year, and based on the Group s audited consolidated financial statements for the financial year ended 31 December 2012 and the aggregate total of the Base Consideration and Adjustment Amount of S$74,500,000, the effect on the EPS of the Group for the financial year ended 31 December 2012 would be as follows: Before Proposed Disposal After the Proposed Disposal Earnings (S$29,257,000) S$5,572,000 Number of Shares 668,266, ,266,667 EPS (4.38 cents) 0.83 cents Based on the above table, there would be a change from a loss per share to EPS after the Proposed Disposal. Based on the latest announced unaudited financial statements of the Group for the financial period ended 30 June 2013, the gain on disposal to the Group would be expected to be as follows: Total Amount (S$) Group s share Consideration* 74,500, % Net book value of assets and distribution 30,202,000 business 100% Gain on Disposal** 44,298, % * Consideration includes Base Consideration of S$70,000,000 and full Adjustment Amount of S$4,500,000. ** Assuming the Consideration is fully received by the Company. 9. THE PROPOSED CHANGE OF NAME Pursuant to the terms of the SPA, the Company has undertaken to procure the change of its name to such name that does not contain the word Oakwell and acknowledges that the name Oakwell shall be the exclusive property of ODS and shall be exclusively owned by ODS after Completion. 17