DAYANG ENTERPRISE HOLDINGS BHD ("DAYANG" OR THE "COMPANY")

Transcription

1 DAYANG ENTERPRISE HOLDINGS BHD ("DAYANG" OR THE "COMPANY") PROPOSED DISPOSAL BY DAYANG OF 1,800,000 ORDINARY SHARES OF RM1.00 EACH IN SYARIKAT BORCOS SHIPPING SDN BHD ("BORCOS"), REPRESENTING 40% OF THE ISSUED AND PAID-UP CAPITAL OF BORCOS TO AWH EQUITY HOLDINGS SDN BHD ("AWH") FOR A TOTAL CASH CONSIDERATION OF RM135,000,000 ("PROPOSED DISPOSAL") 1. INTRODUCTION On behalf of the Board of Directors of Dayang ("Board"), OSK Investment Bank Berhad ("OSK") wishes to announce that Dayang had, on 8 December 2010 entered into a conditional Share Sale Agreement ("SSA") with AWH ("Purchaser") for the disposal of 1,800,000 ordinary shares of RM1.00 each in Borcos, representing 40% equity interest in Borcos ("Sale Shares"), for a total cash consideration of RM135,000,000 ("Disposal Consideration"). Further details of the Proposed Disposal are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED DISPOSAL 2.1 Information on Borcos Borcos was incorporated in Malaysia on 8 November 1980 under the Companies Act, 1965 ("Act") as a private limited company. Borcos is principally engaged in the provision of marine transportation and support services to the offshore oil and gas industry as well as integrated land-logistics services. For the financial year ended ("FYE") 2009, Borcos recorded an audited consolidated profit after tax of RM21,002,342 while its audited consolidated net assets was RM199,115,771. The authorised share capital of Borcos is RM50,000,000 comprising 25,000,000 ordinary shares of RM1.00 each ("Borcos Shares") and 25,000,000 irredeemable convertible preference shares of RM1.00 each ("ICPS") while its issued and paid-up capital is RM29,500,000, comprising 4,500,000 Borcos Shares and 25,000,000 ICPS. As at 1 December 2010, the shareholders of Borcos are as follows:- Shareholders < Direct > Number of Borcos Shares held % < Indirect > Number of Borcos Shares held % Dayang 1,800, AWH 2,700, Dato' Wan Ariff Bin Wan Hamzah Sidqi Ahmad Said Bin Ahmad - - 2,700, * ,700, *1 Total 4,500, Note:- *1 Deemed interested by virtue of their substantial shareholdings in AWH pursuant to Section 6A of the Act. 1

2 ICPS holders < Direct > Number of ICPS held % < Indirect > Number of ICPS held % Lembaga Haji Tabung 24,750, Vida Partners Sdn Bhd 250, Total 25,000, As at 1 December 2010, the directors of Borcos are Dato' Wan Ariff Bin Wan Hamzah, Nadzru Bin Azhari, Sidqi Ahmad Said Bin Ahmad, Nik Din Bin Nik Sulaiman, Mohd Jafni Bin Mohd Alias, Datuk Hasmi Bin Hasnan, Tengku Dato' Yusof Bin Tengku Ahmad Shahruddin, Ling Suk Kiong and Ahmad Munib Bin Muhamad. Further details of the general nature of business conducted and the audited financial information of Borcos, its subsidiary and associate companies ("Borcos Group") are set out in the Appendix to this Announcement. 2.2 Information on the Purchaser AWH was incorporated in Malaysia on 20 September 2004 under the Act as a private limited company. The principal activity of AWH is investment holding. The authorised and issued and paid-up share capital of AWH is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each ("AWH Shares"). As at 1 December 2010, the directors and substantial shareholders of AWH and their shareholdings in AWH are as follows:- Shareholders < Direct > Number of AWH Shares held % < Indirect > Number of AWH Shares held % Dato Wan Ariff Bin Wan Hamzah Sidqi Ahmad Said Bin Ahmad 3,500, ,500, Total 5,000, Basis and justification of arriving at the Disposal Consideration The Disposal Consideration for the Proposed Disposal was arrived at on a "willingbuyer willing-seller" basis after taking into consideration the book value of investment in Borcos of RM135,008,200 and RM134,956,322, based on the audited financial statements of Dayang for the FYE 31 December 2009 and the unaudited financial statements of Dayang for the financial period ended ("FPE") 30 September 2010, respectively. In arriving at the Disposal Consideration, the Board have also considered the dividends received from Borcos amounting to RM4,000,000 on 31 August The Disposal Consideration represents:- i. a price-to-earnings multiple ("PE Multiple") of approximately times based on the proportionate share of the audited consolidated profit after tax and minority interest ("PATMI") of Borcos of RM21,031,139 as at 31 December 2009; and 2

3 ii. a price-to-book ratio ("PBR") of approximately 1.69 times, based on the proportionate share of the net assets ("NA") of Borcos of RM199,115,771 as at 31 December In arriving at the Disposal Consideration, the Board had also taken into consideration the PE Multiple and PBR of other comparable companies listed on Bursa Malaysia Securities Berhad ("Bursa Securities") ("Comparable Companies"). However, it should be noted that there is no listed company which is considered to be identical to Borcos Group in terms of composition of business, activities, scale of operations, track record and future prospects. Based on the comparison, the PE Multiple and PBR based on the Disposal Consideration of approximately times and 1.69 times respectively are above the range of PE Multiples and PBRs of the Comparable Companies. 2.4 Settlement of the Disposal Consideration The Disposal Consideration shall be satisfied in the following manner:- No. Mode of settlement Date of settlement RM i. Cash Within three (3) business days from the date of fulfilment or waiver of the last conditions precedent set out in Section below *1 ii. Cash Not later than 30 April 2011 or, within three (3) months from the date of fulfilment or waiver of the last conditions precedent set out in Section below, whichever is the later, or such other date as the parties may mutually agree upon in writing 13,500, ,500,000 TOTAL 135,000,000 Note:- *1 The deposit shall form part payment of the Disposal Consideration on completion of the SSA. 2.5 Liabilities to be assumed by the Purchaser There are no liabilities, contingent liabilities or guarantees to be assumed by the Purchaser pursuant to the Proposed Disposal. 2.6 Original cost of investment The original cost of investment by Dayang for its 40% equity interest in Borcos was RM135,008,200 as at 31 December The estimated gain on disposal at group level is RM43,678 (before taking into consideration the estimated expenses in relation to the Proposed Disposal), based on the book value of investment in Borcos of RM134,956,322 as disclosed in the unaudited financial statements of Dayang for the FPE 30 September

4 2.7 Salient terms and conditions of the SSA The salient terms and conditions of the SSA include, amongst others, the following: Sale and purchase Subject to the fulfilment of the conditions precedent set out in Section below and the terms and conditions of the SSA, Dayang shall sell and the Purchaser shall purchase the Sale Shares free from all claims, liens, pledges, charges and other encumbrances whatsoever and with all rights, benefits and entitlements now and thereafter attaching thereto and other distributions declared, paid or made in respect of the Sale Shares before the Completion Date (as defined in the SSA), for the Disposal Consideration. Dayang shall cause the other registered holders of Borcos Shares as at the date of the SSA ("Other Shareholders") to waive their pre-emption rights accruing under the shareholders' agreement dated 20 November 2009 entered into between Dayang, the Purchaser, the Other Shareholders and Borcos to govern certain rights and obligations as shareholders of Borcos and in the management of the business and affairs of Borcos upon terms and conditions agreed between the parties thereto ("Shareholders' Agreement") in respect of the sale of shares to the Purchaser ("Other Shareholders' Waiver") Conditions precedent i. Dayang's shareholders' approval Receipt by the Purchaser s solicitors not later than 7 business days after 31 January 2011 of a certified true copy or extract of the resolutions of the shareholders of Dayang in a general meeting approving the disposal of the Sale Shares upon and subject to the terms and conditions of the SSA and the execution of the SSA and the Transfer (as defined in the SSA) by Dayang ("Shareholders' Approval"); ii. Waiver by Other Shareholders Receipt by the Purchaser's solicitors not later than 3 business days after 31 January 2011 of the duly executed Other Shareholders' Waiver; and iii. Other approvals Application Receipt by the Purchaser s solicitors within 3 months from the date of the SSA of the approvals from all relevant authorities, if any, without any conditions unacceptable to the Purchaser. In order to ensure that the conditions precedent are fully satisfied within the respective period for their satisfaction, the parties agree, undertake and covenant with each other to do the following:- i. Dayang shall duly convene a shareholders meeting on or before 31 January 2011 to obtain its shareholders approval to do all things, pass all resolutions, sign all documents to procure the Shareholders Approval; and 4

5 ii. the parties shall apply for and do all things necessary and effectual to procure such other authorisations, consents, permission or approvals (if required) as soon as is practicable but in any event not later than the expiration of 30 days from the date of the SSA or such extended period, if any, as may be mutually agreed by the parties in writing. 2.8 Utilisation of proceeds The cash proceeds of RM135,000,000 from the Proposed Disposal will be utilised in the following manner:- Total RM Estimated timeframe for utilisation Working capital *1 54,640,000 Within 24 months Capital expenditure and investments *2 80,000,000 Within 24 months Estimated expenses in relation to the 360,000 Within 1 month Proposed Disposal *3 Total proceeds 135,000,000 Notes:- *1 *2 During the year, the Company had embarked on acquisition of vessel and equipments and the working capital will be utilised to finance the day-to-day operations of Dayang and its subsidiaries ("Group"), including amongst others, the payment of salaries, purchase of supplies, expansion of workforce and defrayment of operational expenses. The exact allocation for the working capital has not been determined at this juncture. The funds earmarked for capital expenditure will be used for the Company's core business in the provision of offshore topside maintenance services, minor fabrication works and offshore hookup and commissioning services for the oil and gas industry. The expenditure includes, amongst others, the construction of workboats, purchase of crane and other equipment and machineries. The Group also intends to utilise part of the proceeds for its expansion plans, which may include synergistic investments and/ or acquisitions, in areas relating to the business of the Group as and when such opportunities arise. At present, the Company is in the midst of identifying viable investment opportunities to expand its business, the details of which have not been finalised at this juncture. *3 The estimated expenses consist of estimated professional fees, regulatory fees, printing and advertising costs and miscellaneous expenses. Any variation in the actual utilisation from the estimated amount will be adjusted in the allocation for working capital. Pending utilisation of the proceeds from the Proposed Disposal for the above purposes, the proceeds would be placed in deposits with financial institutions or short-term money market instrument(s). 3. RATIONALE AND BENEFIT OF THE PROPOSED DISPOSAL The Proposed Disposal is consistent with Dayang's strategy to continuously review its business and operations to ensure greater return to its shareholders. The Company had previously acquired Borcos with the intention of expanding its operations into the chartering of offshore support vessels to complement its existing marine support operations and to better utilise its vessels. However, after careful deliberation on the future business direction of the Group, the Group had decided to unlock its investment in Borcos to realise additional cash reserves, which can then be deployed in other projects and investments in areas relating to the business of the Group as and when such opportunities arise to maximise returns to Dayang Group. 5

6 In addition, the PATMI of Borcos had decreased significantly from RM21,031,139 based on the audited financial statements of Dayang for the FYE 31 December 2009 to RM9,012,180 based on the unaudited financial statements of Dayang for the FPE 30 September The decrease was mainly due to the lower vessel utilisation rates as a result from the recent softening of charter rates which was triggered by the oversupply of vessels in the industry. The supply glut was due to the weak demand during the global economic crisis. Hence, the Proposed Disposal represents a good opportunity for Dayang to dispose of its interest in Borcos as there is no assurance that Dayang will be able to find a suitable purchaser within a reasonable time period. Further, the Board is of the view that the utilisation of proceeds as set out in Section 2.8 of this Announcement would be more beneficial to the Company and the shareholders. Upon completion of the Proposed Disposal, the Board would be able to focus on its main income generating business, which is the provision of offshore topside maintenance services, minor fabrication works and offshore hook-up and commission services as well as chartering of marine vessels and services for the oil and gas industry. 4. RISK FACTOR RELATING TO THE PROPOSED DISPOSAL There is no anticipated risk arising from the Proposed Disposal. 5. EFFECTS OF THE PROPOSED DISPOSAL 5.1 Share capital and substantial shareholders' shareholdings The Proposed Disposal will not have any effect on the issued and paid-up share capital as well as the substantial shareholders' shareholdings in Dayang as the Disposal Consideration will be fully satisfied in cash. 5.2 Earnings The Proposed Disposal is not expected to have any material effect on the earnings of the Dayang Group for the FYE 31 December 2010 as the Proposed Disposal is expected to complete by the end of April Nonetheless, the Proposed Disposal is expected to result in a gain on disposal at group level of RM43,678 (before taking into consideration the estimated expenses in relation to the Proposed Disposal), based on the book value of investment in Borcos of RM134,956,322 as disclosed in the unaudited financial statements of Dayang for the FPE 30 September Net Assets ("NA") and gearing The Proposed Disposal is not expected to have a material effect on the NA per Share and gearing of Dayang as the expected reduction in NA of the Group is RM316,322, after taking into consideration the gain on disposal at group level of RM43,678, based on the book value of investment in Borcos of RM134,956,322 as disclosed in the unaudited financial statements of Dayang for the FPE 30 September 2010 and estimated expenses in relation to the Proposed Disposal of RM360, Practice Note 16 ("PN16") and Practice Note 17 ("PN17") of the Main Market Listing Requirements of Bursa Securities ("Listing Requirements") The Proposed Disposal is not expected to result in the Company falling within the ambit of PN16 and PN17 of the Listing Requirements. 6

7 6. APPROVALS REQUIRED The Proposed Disposal is conditional upon approvals being obtained from the following:- i. the shareholders of Dayang at an extraordinary general meeting to be convened; and ii. any other relevant authorities, if required. The Proposed Disposal is not conditional upon any other corporate exercises undertaken or to be undertaken by the Company. 7. ESTIMATED TIMEFRAME FOR SUBMISSION OF THE APPLICATION TO THE RELEVANT AUTHORITIES Save as disclosed in Section 6 of this Announcement, there are no other approvals to be obtained from the relevant authorities. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/ OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders and/ or persons connected to them have any interest, whether direct or indirect, in the Proposed Disposal. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed by the end of April PERCENTAGE RATIOS The highest percentage ratio applicable to the Proposed Disposal as per Paragraph 10.02(g), Chapter 10 of the Listing Requirements of Bursa Securities is approximately 41.70%. 11. DIRECTORS' STATEMENT The Board, having considered all aspects of the Proposed Disposal, is of the opinion that the terms of the Proposed Disposal is in the best interest of Dayang Group. The view of the Board was arrived at after having considered the terms and conditions of the SSA, the rationale for the Proposed Disposal, as well as the effects of the Proposed Disposal on Dayang Group. 12. DOCUMENTS FOR INSPECTION The SSA will be made available for inspection at the registered office of the Company at Sublot 5-10, Lot 46, Block 10, Jalan Taman Raja, Miri, Sarawak, during normal business hours (except public holidays) for a period of three (3) months from the date of this Announcement. This announcement is dated 8 December

8 APPENDIX INFORMATION ON BORCOS 1. GENERAL NATURE OF BUSINESS CONDUCTED Borcos is principally engaged in the provision of marine transportation and support services to the offshore oil and gas industry as well as integrated land-logistics services. To date, Borcos owns thirty-three (33) vessels of various categories including landing crafts, safety standby vessels, fast utility vessels, offshore support vessels and tug boats with an average age for the fleet of seven (7) years. Borcos Group's customers include major oil and gas companies such as Sarawak Shell Bhd, Sabah Shell Petroleum Company, Petronas Carigali Sdn Bhd, Exxonmobil Exploration and Production Malaysia Inc, as well as other listed and unlisted offshore oil and gas support companies in Malaysia, Brunei, and Middle-East countries. In addition to its marine operations, the Borcos Group also operates a sizable integrated landlogistics business. NST Logistics Sdn Bhd,a wholly owned subsidiary of Borcos, is one of the leading logistics companies in Malaysia managing over 400 trucks and has an extensive distribution network throughout Peninsular Malaysia. As at 1 December 2010, the subsidiaries and associates of Borcos are set out below:- Subsidiaries Place of incorporation Effective equity interest (%) Principal activities Wijaya Navigation Sdn Bhd Malaysia 100 Dormant NST Logistics Sdn Bhd Malaysia 100 Logistics and transporting Borcos Shipping (Cyprus) Ltd Cyprus 100 Vessel chartering Borcos Tasneem Offshore Ltd Malaysia 100 Vessel chartering Borcos Franklin Offshore Mooring Sdn Bhd Malaysia 51 Pre-laid mooring services Subsidiaries of NST Logistics Sdn Bhd Jilson Sdn Bhd Malaysia 100 Property investment Smart Warehousing Services Sdn Bhd Malaysia 100 Warehouse and transporting Associate of Borcos Berkat Perkapalan Sdn Bhd Malaysia 49 Vessel chartering 8

9 APPENDIX 2. AUDITED FINANCIAL INFORMATION The audited consolidated results of Borcos for the past three (3) FYE 31 December and the latest unaudited consolidated results for the FPE 30 September 2010 are as set out below:- FYE 31 December FPE 30 September 2010 RM'000 RM'000 RM'000 RM'000 Turnover 142, , , ,511 Profit before taxation ("PBT") 25,984 48,980 29,331 11,084 Taxation (2,908) (8,427) (8,329) (1,989) Profit after taxation ("PAT") 23,076 40,533 21,002 9,095 Minority interest (1,328) (451) 29 (83) Profit after taxation after minority interest 21,748 40,102 21,031 9,012 There were no exceptional and/ or extraordinary items reported in the financial statements of Borcos Group for the period under review. COMMENTARY ON PAST PERFORMANCE FYE 31 December 2007 Revenue for the FYE 31 December 2007 increased due to the commissioning of three (3) fast utility vessels and one (1) offshore support vessel during the year. PBT for the year dropped as a result of the additional depreciation charge arising from the new vessels as well as substantial reduction in gain on disposal of vessels as compared to that recognized in the previous year. FYE 31 December 2008 For the FYE 31 December 2008, the commission of an additional four (4) new offshore support vessels as well as better contribution from mooring equipment had resulted in higher turnover. Better PBT was attributable to better gross profit margin arising from better charter rates for the new vessels as well as substantial gain on disposal of eight (8) units of older vessels. FYE 31 December 2009 Lower revenue for FYE 31 December 2009 was due to the decline in charter rates. Higher operating expenses were due to higher vessel repair costs. The PBT was also affected by the higher operating expenses due to the issuance of ICPS. The poor performance in its logistic subsidiary also contributed to lower EPS. FPE 30 September 2010 The Borcos Group's performance was dampened by the low vessel utilisation rate, the softening of charter rates and the late delivery of vessel offset with higher liquidated ascertained damages claimed for late deliveries of vessels. 9