PROPOSED DISPOSAL OF THE DAIRIES AND PACKAGING BUSINESS AND THE RELEVANT INTELLECTUAL PROPERTY

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ETIKA INTERNATIONAL HOLDINGS LIMITED (Company Registration No: 200313131Z) PROPOSED DISPOSAL OF THE DAIRIES AND PACKAGING BUSINESS AND THE RELEVANT INTELLECTUAL PROPERTY 1.

1 ETIKA INTERNATIONAL HOLDINGS LIMITED (Company Registration No: Z) PROPOSED DISPOSAL OF THE DAIRIES AND PACKAGING BUSINESS AND THE RELEVANT INTELLECTUAL PROPERTY 1. INTRODUCTION The board of directors (the Board ) of Etika International Holdings Limited (the Company ) wishes to announce that the Company had on 10 April 2014 entered into a conditional share purchase agreement (the SPA ) with Asahi Group Holdings Southeast Asia Pte. Ltd. (the Purchaser ) for the sale of the dairies and packaging business of the Company, its subsidiaries and associated companies (the Group ) and the relevant intellectual property (the Proposed Disposal ). Further details on the principal terms of the SPA are set out in this announcement. 2. INFORMATION ON THE BUSINESS AND THE PURCHASER The Group is one of the world s largest manufacturers and distributors of sweetened condensed milk and is a leading player in the regional food and beverage market with business interests in, amongst others, the dairies, packaging and nutrition sectors. Its operating divisions are principally involved in the manufacturing and distribution of dairy products, wholesale and distribution of frozen and chilled foods, manufacturing of value-added frozen food products as well as bakery and confectionery products, marketer of sports nutrition and weight management food supplements, manufacturing of tin cans and quick service restaurants. Operating from facilities located in Malaysia, New Zealand, Indonesia and Vietnam, the Group s products are distributed to over 70 countries globally. The Group exports products under its Dairy Champ trademark brand which was awarded Superbrand status by the Malaysian Superbrands Council in 2003/2004, 2004/2005 and in The Purchaser is the Singapore subsidiary of Asahi Group Holdings, Ltd. which engages in five main business segments in Japan and internationally, namely alcoholic beverages, soft drinks, food, overseas and other businesses. In each business segment, the entities that generate major profits are Asahi Breweries, Ltd. for the alcohol beverages business, Asahi Soft Drinks Co., Ltd. and Calpis Co., Ltd. for the soft drinks business, Asahi Food &Healthcare Co., Ltd. and Wakodo Co., Ltd. for the food business and Schweppes Australia Pty Limited and Independent Liquor (NZ) Limited for the overseas business. 3. RATIONALE AND USE OF PROCEEDS The Proposed Disposal provides a good opportunity for the Group to unlock value in the business and consequently maximize returns to its shareholders. The Board is of the view that the consideration offered represents an attractive price for the value of the Group s dairies and packaging business. The proceeds from the Proposed Disposal will go towards payment of bank borrowings, thus strengthening the financial position of the Group, to finance the growth of 1

2 the remaining businesses and to capitalise on other business opportunities to enhance the long term value for shareholders. The Company is also considering possible options to distribute part of the proceeds from the Proposed Disposal to its shareholders and will update shareholders in due course. 4. PRINCIPAL TERMS 4.1 SPA The Company has agreed to sell and the Purchaser has agreed to purchase the dairies and packaging business of the Group comprising: the entire issued and paid-up shares owned by the Group in: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) Etika Dairies Sdn Bhd; Etika Global Resources Sdn Bhd; Etika Foods Marketing Sdn Bhd; General Packaging Sdn Bhd; Golden Difference Sdn Bhd and its subsidiaries, namely Susu Lembu Asli Marketing Sdn Bhd, Susu Lembu Asli (Johore) Sdn Bhd and Etika Consumer Sdn Bhd; Etika Vixumilk Pte Ltd; Etika Foods (Singapore) Pte Ltd and its subsidiary, namely Etika Foods Vietnam; PT Etika Marketing; PT Vixon Indonesia; PT Etika Indonesia; PT Sentraboga Intiselera; and Tan Viet Xuan Production Joint Stock Company; and the relevant intellectual property relating to the above companies, on the terms and subject to the conditions of the SPA (the companies described in paragraph 4.1, collectively the Sale Companies and the shares described in paragraph 4.1, collectively the Sale Shares ). As PT Sentrafood Indonusa does not carry out the dairies and packaging business, it is not part of the Proposed Disposal. Accordingly, the issued and paid up shares in PT Sentrafood Indonusa owned by the Sale Companies will be transferred to Etika Foods International Inc on or before completion of the Proposed Disposal. 2

3 4.2 Consideration The aggregate consideration payable by the Purchaser to the Company for the Sale Shares and the relevant IP is US$328,787,704 (equivalent to RM1,062,230,875 at the agreed exchange rate of RM to US$1) (the Consideration ) in cash, on the basis of cash and debt free enterprise value. The Consideration will be adjusted for net debt and working capital as at the date of completion of the Proposed Disposal ( Completion Date ). A final adjustment to the Consideration will be carried out after the Completion Date in accordance with timelines and procedures set out in the SPA. The Consideration was based on arm s length negotiations and was arrived at after taking into account the attractive price for the value of the Group s dairies and packaging business. 4.3 Conditions Precedent Under the terms of the SPA, the completion of the Proposed Disposal is conditional upon, amongst others: (c) (d) (e) the passing at a general meeting of the Company of a resolution to approve the proposed sale of the Sale Shares; the waiver or removal of certain equity conditions and restrictions on the sale and purchase of the shares of Etika Dairies Sdn. Bhd, on terms reasonably acceptable to the Purchaser, in respect of the manufacturing licence of Etika Dairies Sdn Bhd. for its premises at Klang, Selangor, Malaysia; where the terms of certain material contracts contain any restrictions or prohibition on change in control (whether directly or indirectly) of the shareholdings and/or the board of directors of any Sale Company or include any right to terminate exercisable prior to or as a result of any matter contemplated by the SPA, written confirmation in form and on terms reasonably satisfactory to the Purchaser by the counterparties thereto of the waiver of such restrictions or prohibition in relation to any such change arising from the transactions under the SPA or of any such right to terminate; all intercompany loans having being paid, capitalized or otherwise settled and discharged in full; and the Purchaser and the Company having agreed on the terms of a transitional services agreement (the Transitional Services Agreement ) as further described in paragraph 4.5 below, (collectively, the Sale Conditions ). The Purchaser may at any time waive any of the Sale Conditions. If the Sale Conditions are not satisfied or waived on or before the date falling six (6) months after the date of the SPA (or such longer period as the Company and the Purchaser may agree), save as otherwise provided in the SPA, the SPA shall lapse. 4.4 Non-Competition Undertakings The Company undertakes, amongst others, that for three years commencing on the Completion Date, no member of the Group will in any relevant capacity in Brunei, Cambodia, Indonesia, 3

4 Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam directly or indirectly carry on, be engaged in or be economically interested in any business which is of the same or similar type to the business of the Sale Companies and which is or is likely to be in competition with any part of the business of the Sale Companies as now carried on, except for the business of distributing, trading and processing of all food products but excluding any dairy product which is not cheese, butter, powdered milk, yoghurt-based products (including yoghurt drinks), soy milk, cream-based products (including topping cream, whipping cream, fresh cream and longlife cream), creamer, coffee, margarine, butter blend, ice cream powder and liquid mix and bread spread. Subject to the foregoing, Etika Beverage Sdn Bhd, Naturalac Nutrition Limited and Etika Dairies NZ Limited are permitted to carry on their core businesses as the same are being conducted as at the date of the SPA. 4.5 Ancillary Arrangements In conjunction with the completion of the Proposed Disposal, amongst others: (c) the Company and Etika Brands Pte. Ltd. will enter into intellectual property agreements with the Purchaser or its nominated entity, whereby the trademarks relating to the sale Companies which are not owned by a Sale Company will be assigned absolutely or exclusively licensed to the Purchaser or its nominated entity; the Company will provide transitional services to the Sale Companies for an agreed period after the completion of the Proposed Disposal on the terms and conditions of the Transitional Services Agreement; and the Company will procure that each of its affiliates (other than the Sale Companies) change their names so as not to include the name Etika or any other name similar to Etika within six months of the completion of the Proposed Disposal. 5. VALUE OF THE BUSINESS 5.1 Book Value and Net Asset Value Based on the latest unaudited financial statements of the Group for the financial period ended 31 December 2013 ( 1Q2014 ), the book value and the net asset value ( NAV ) of the Sale Shares and the Relevant Intellectual Property was RM386,630,476 (after settlement of all borrowings, intercompany advances owed from/to the Company or related companies and cash and bank balances) and RM40,042,357 respectively. 5.2 Net Profits The audited and unaudited net profits before tax and minority interests attributable to the Sale Shares by the Company is RM42,670,704 for the financial year ended 30 September 2013 ( FY2013 ) and RM9,163,064 for 1Q2014 respectively. 5.3 Gain on Disposal The Consideration represents an excess of RM635,558,042 over the adjusted NAV of the Sale Shares and the Relevant Intellectual Property, and the amount of gain from the Proposed Disposal is estimated to be approximately RM625,947,390 having taken into account estimated incidental costs. 4

5 5.4 Valuation No independent valuation was performed in respect of the Sale Shares and the Relevant Intellectual Property. 6. FINANCIAL EFFECTS 6.1 Assumptions The pro forma financial effects of the Proposed Disposal on the Group have been prepared based on the figures derived from the Group s audited consolidated financial statements for FY2013 and are purely for illustration purposes only and do not reflect the actual future results and financial position of the Group following the completion of the Proposed Disposal. 6.2 Net Tangible Assets For illustrative purposes and assuming the Proposed Disposal had been completed on 30 September 2013, the pro forma financial effects on the consolidated net tangible assets ( NTA ) for FY2013 are as follows: Before the Proposed Disposal After the Proposed Disposal NTA (RM) 160,455, ,817,468 Number of shares 614,795, ,795,528 NTA per share (RM sen) Earnings For illustrative purposes and assuming the Proposed Disposal had been completed on 1 October 2012, the pro forma financial effects on the earnings per share of the Group for FY2013 are as follows: Before the Proposed Disposal After the Proposed Disposal Net profit attributable to shareholders 7,435, ,668,111 after tax (RM) Number of weighted average shares 591,128, ,128,912 Earnings per share (RM sen) Share Capital The Proposed Disposal will not have any effect on the share capital and shareholding structure of the Company as the Proposed Disposal does not involve the allotment and issuance of any new shares in the Company and the Consideration is wholly satisfied in cash. 5

6 7. SHAREHOLDER S APPROVAL 7.1 Major Transaction The relative figures for the Proposed Disposal computed on the bases set out in Rule 1006 ( Rule 1006 ) of the Listing Manual of the SGX-ST ( Listing Manual ) are as follows: Rule 1006 (c) (d) Bases Net asset value of the Sale Shares and the Relevant Intellectual Property to be disposed of, compared with the Group s net asset value Net profits attributable to the Sale Shares and the Relevant Intellectual Property disposed of, compared with the Group s net profits before tax and minority interests The aggregate value of the consideration received, compared with the Company s market capitalization based on the total number of issued shares excluding treasury shares The number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue Size of Relative Figures (%) (1) (2) (3) Not applicable Notes: (1) Based on the net asset value of the Sale Shares and the Relevant Intellectual Property disposed of pursuant to the Proposed Disposal and the net asset value of the Group as at the financial period ended 31 December 2013 of RM143,874,399 (before settlement of the proposed adjustments to all borrowings, intercompany advance owed from or to the Company or its related companies and cash and bank balances) and RM284,765,433 respectively. (2) Based on the profit before tax of the Sale Shares and the Relevant Intellectual Property disposed of pursuant to the Proposed Disposal and the net profit before tax of the Group for the financial period ended 31 December 2013 of RM9,163,064 and RM8,228,925 respectively. (3) Based on the Consideration and the issued share capital of the Company of 623,396,528 ordinary shares in the capital of the Company ( Shares ) and the weighted average price of S$0.497 transacted on the Mainboard of the SGX-ST on 9 April 2014 (being the last market day for which the Shares were traded prior to the day the SPA was entered into). As the relative figures on the bases set out in Rules 1006 and 1006(c) exceed 20%, the Proposed Disposal constitutes a major transaction as defined in Chapter 10 of the Listing Manual and is subject to the approval of shareholders at a extraordinary general meeting ( EGM ) to be convened. 7.2 Extraordinary General Meeting The circular to shareholders setting out information on the Proposed Disposal together with a notice of the EGM to be convened will be dispatched to shareholders in due course. 6

7 7.3 Voting Undertakings Dato Jaya J B Tan, Dato Kamal Y P Tan, Mah Weng Choong, Khor Sin Kok, Kwong Yuen Seng, Tee Yih Jia Food Manufacturing Pte Ltd and Pok York Keng have each given an undertaking to the Purchaser to, amongst others, in respect of each of their respective Shares aggregating to a total of 348,376,154 Shares (collectively representing 55.88% of the existing issued share capital of the Company) vote in favour of the resolution(s) which shall be proposed at the EGM of the Company to approve the Proposed Disposal. 8. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS None of the directors or substantial shareholders of the Company (other than in their capacity as directors or Shareholders of the Company) has any interest, direct or indirect, in the Proposed Disposal. No person is proposed to be appointed as a director of the Company in connection with the Proposed Disposal and accordingly, no service contract is proposed to be entered into between the Company and any such person. 9. DOCUMENTS FOR INSPECTION A copy of the SPA is available for inspection during normal business hours at the registered office of the Company at, 4 Shenton Way #17-01, SGX Centre II Singapore , for a period commencing three (3) months from the date of this announcement. 10. DIRECTORS RESPONSIBILITY STATEMENT The directors of the Company (including any who may have delegated detailed supervision of this Announcement) have taken all reasonable care to ensure that the facts stated and all opinions expressed in this Announcement are fair and accurate and that no material facts have been omitted from this Announcement, and the directors of the Company jointly and severally accept full responsibility accordingly. Where any information has been extracted or reproduced from published or otherwise publicly available sources, the sole responsibility of the directors of the Company has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in this Announcement. By order of the Board ETIKA INTERNATIONAL HOLDINGS LIMITED DATO KAMAL Y P TAN Group Chief Executive Officer 10 April

ETIKA INTERNATIONAL HOLDINGS LIMITED

ETIKA INTERNATIONAL HOLDINGS LIMITED CIRCULAR DATED 29 MAY 2014 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. If you are in any doubt as to the action you should take, you should consult your