TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) NON RELATED PARTY TRANSACTIONS

Transcription

1 GENERAL ANNOUNCEMENT BSL CORPORATION BERHAD Type Subject Description ANNOUNCEMENT TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) NON RELATED PARTY TRANSACTIONS Acquisition of shares in Petapak Holdings Ltd by BSL HK Limited, a wholly-owned subsidiary of BSL, from Southern Star Corporation 1. Introduction Pursuant to Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Main LR ), the Board of Directors of BSL Corporation Berhad ( BSL or the Company ) is pleased to announce that BSL HK Limited (Company No ) ( BSL HK ), its wholly-owned subsidiary, has today, entered into a Sale and Purchase of Shares Agreement ( SPA ) with Southern Star Corporation (Company No. LL05942) ( SS ) and Asim Salameh (Passport No. E ) ( AS ) (as Guarantor to guarantee the performance of SS) for the acquisition of 225 ordinary shares by BSL HK from SS representing 22.5% of the total issued and paid-up share capital of Petapak Holdings Ltd (Company No ) ( PHL ), for a total cash purchase consideration of RM3,825,000 ( Acquisition ). Concurrent with the signing of the SPA, the following agreements were executed:- i) A Subscription cum Shareholders Agreement ( SSA ) was executed between PHL, BSL HK and SS to govern the conduct, obligation and understanding amongst the shareholders of PHL [including the subscription of additional new ordinary shares in PHL by BSL HK and SS in the following manner ( Right Issue Shares )] and the manner of payment is stated under Section 2 of this announcement: First Rights Issue Shares Second Rights Issue Shares Shareholders No. of Shares Amount (RM) No. of Shares Amount (RM) SS 775 1,550, ,000 BSL HK , ,000 Total 1,000 2,000,000 1,000 1,000,000

2 ii) A Master Manufacturing Agreement ( MMA ) was executed by Ban Seng Lee Industries Sdn Bhd (Company No P) ( BSLI ), a wholly-owned subsidiary of the Company, with Petapak Aerosol International Limited (Company No ) ( PAIL ), a wholly-owned subsidiary of PHL and a company incorporated in Hong Kong, in respect of the appointment of BSLI by PAIL as an exclusive manufacturer and supplier for metal collars (a component of plastic aerosol containers, as further described hereunder) worldwide save for Australia and New Zealand. The MMA shall become effective on the date of MMA and shall be in full force and effect for 20 years thereafter, and provided that BSLI shall not be in breach of the MMA, the term shall be automatically extended on a yearly basis. 2. Details of the Acquisition BSL HK has agreed to acquire 225 ordinary shares representing 22.5% equity interest in PHL from SS for a total cash consideration of RM3,825,000 in accordance with the terms and conditions as set out in SPA. Simultaneous with the completion of the Acquisition, PHL will undertake a rights issue to raise RM2 million equivalent in US Dollars for working capital. A further rights issue would be called at a later date to raise gross proceeds of RM1 million equivalent in US Dollars as and when required in accordance to the SPA and SSA. Pursuant to the rights issues aforesaid, BSL HK and SS will subscribe for additional shares always in proportion to their shareholdings as set out in Section 1(i) of this announcement. 2.1 Information on PHL, PAIL and Petapak IP Limited ( PIPL ) a. PHL PHL was incorporated in Hong Kong on 27 June 2014 as a private limited company. It presently has an issued share capital of US$1, (equivalent to RM3,173.50*) comprising 1,000 shares of which 1,000 shares have been credited as issued and fully paid up. The principal activity of the company is investment holding. PHL has two wholly owned subsidiaries, namely PAIL and PIPL. PHL is presently a wholly-owned subsidiary of SS. Upon completion of the Acquisition, the particulars of the shareholders of PHL will be as follows:- Name of shareholders No. of ordinary shares Percentage of shareholding (%) SS BSL HK Total 1,

3 The net assets of PHL is US$1, (equivalent to RM3,173.50*) whilst information on net profit of PHL is not available as PHL is a newly incorporated company. b. PAIL PAIL was incorporated in Hong Kong on 10 July 2014 as a private limited company. It presently has an issued share capital of US$1.00 (equivalent to RM3.1735*) comprising 1 share of which 1 share has been credited as issued and fully paid up. PAIL is principally involved in the sales and marketing of polyethelene terephthalate plastic ( PET ) Aerosol Containers. c. PIPL PIPL was incorporated in the Cayman Islands on 11 July 2014 as a private limited company. It presently has an authorized share capital of US$50, (equivalent to RM158,675.00*) comprising 50,000 shares of which 1,000 have been credited as issued and fully paid up. PIPL is principally involved in owning and developing the intellectual property rights ( IPR ). PIPL holds IPR in respect of a product (and associated technology) comprising a PET container, a collar and a valve which when combined and sealed, enables the PET container to hold and dispense its pressured contents in aerosol form ( PET Aerosol Container ). The IPR extends to the design of the metal collars (which are crimped onto the PET Aerosol Container). The metal collars are to be manufactured by BSLI pursuant to the MMA. Patent filings and registration have been made as detailed below. PET Aerosol Containers may be used as alternative packaging for consumer products presently packaged using aluminum or metal alloy containers such as hair mousse, whipped cream, shaving cream, spray gel and lubricants. PIPL holds 3 types of patent registration, with the latest patent being for mounting cup and collar assembly for plastics aerosol container ( Patent #3 ) filed with World Intellectual Property Organization under the Patent Cooperation Treaty on 6 December The other 2 patents:- i) for plastic aerosol container and method of manufacturing the same ( Patent #1 ) has been registered and the patent maintained in 6 countries including France, Germany, United Kingdom and Italy; and ii) for plastic aerosol container with improved annular collar ( Patent #2 ) has been registered and the patent maintained in 15 countries including Germany, France, United Kingdom, Italy, Spain, South Africa, China, United States of America and Mexico.

4 The PET Aerosol Container has been under development for over 14 years and the material used to manufacture the collars has evolved from plastic to metal. Barring any unforeseen circumstances, the PET Aerosol Containers are expected to be commercialised within 12 months. 2.2 Information on SS SS is a corporation incorporated in Labuan, Malaysia on 18 June 2007 with an authorized share capital of AUD10, (equivalent to ) of which 1,000,000 shares have been issued and fully paid up. Its directors are AS, Esther Salameh and Khalil Gibran Salameh. Names of substantial No. of ordinary shares Percentage of shareholders shareholding (%) AS 702, Esther Salameh 100, Robin Fester 50, Mark Terracciano 50, It is a non-trading company that holds some of the IPR registered in amongst others, Malaysia, United Kingdom and various other jurisdictions. 2.3Information on BSL HK BSL HK is a private limited company incorporated in Hong Kong under the Company Ordinance on 10 November The present authorised share capital of BSL HK is HK$10,000 (equivalent to RM4, #), of which 1 ordinary share have been issued and fully paid-up. The principal activity of BSL HK is investment holding. 2.4 Information on AS AS, an Australian citizen, is the founder of SS and the inventor of the PET Aerosol Container in respect of which the IPR has been registered or is pending registration. All such IPR has been assigned to and is now owned by PIPL. AS holds a diploma in business and computer studies from Regency Computer Services Australia. Having owned plastic package manufacturing and filling facilities in Australia, he has a wide range of experience in the plastic packaging and chemical manufacturing industries as well as product development and marketing for the same. AS is a director and shareholder of SS. 2.5 Basis of arriving at and justification for the purchase consideration The purchase consideration for the Acquisition has been arrived at on a willing buyerwilling seller basis after taking into account the IPR, commercialisation potential of the metal collars and future prospects.

5 2.6 Liabilities to be assumed Apart from the existing liabilities in PHL, BSL HK will not assume any other liabilities including contingent liabilities and guarantees pursuant to the Acquisition. 2.7 Salient Terms and Conditions of the SPA The salient terms and conditions of the SPA are summarised as follows: Manner of Payment for the 225 PHL shares totaling RM3,825,000 (i) Deposit A refundable interest free deposit amounting to RM382,500 representing 10% of the total cash purchase consideration payable has been paid upon execution of the SPA; (ii) First Tranche of the Balance of Purchase Consideration The first tranche of the balance of the total cash purchase consideration payable amounting to RM2,667,500 is payable upon completion of the SPA. (iii) Second Tranche of the Balance of Purchase Consideration The second tranche of the balance of the total cash purchase consideration payable amounting to RM775,000 is payable on an interest-free deferred payment basis. The deferred payment is payable upon receipt of the notification from PHL to SS, AS and BSL HK ( Parties ) confirming the full utilization of the subscription monies of First Rights Issue Shares or the amount standing to the credit of the First Rights Issue Shares account is insufficient for the settlement of the costs or payments incurred by PHL for its operations Principal conditions precedent of the SPA includes ( Conditions Precedent ):- i) legal due diligence to be conducted to the satisfaction of BSL HK; and, ii) the procurement from SS of a report from LEREM (Laboratoire d Etudes et de Recherchesdes Emballages Me talliques Metal Packaging Research Laboratory), an independent laboratory in France that performs lab testing inter alia certifying that the PET Container with affixed Metal PET Collar complies with and satisfies the requirements in the European Aerosol Federation s Proposal 1 and Proposal 2 (UNECE (2010): Aerosols (UN 1950).

6 2.7.3 Termination The SPA may be terminated in the event any of the Conditions Precedent stipulated in the SPA are not being obtained within 30 days from the date of the SPA (or such extension as the Parties may mutually agree in writing) or any of such Conditions Precedent being obtained but subject to material conditions or variations not acceptable to the Parties or failure to obtain the necessary corporate approvals Completion Completion of the Acquisition is to take place not later than 3 days after the date when the last of the Conditions Precedent is fulfilled and/or waived (unless mutually agreed to be extended by the Parties) whereupon 225 ordinary shares in PHL will be transferred to BSL HK from SS. 2.8 Details of the SSA The salient terms and conditions of the SSA are summarised as follows: PHL shall undertake a first rights issue to increase its issued and paid up from 1,000 shares to 2,000 shares to raise RM2.0 million equivalent in US Dollars to fund its working capital. PHL shall also undertake a second rights issue to further increase its capital base from 2,000 shares to 3,000 shares to raise a further RM1.0 million equivalent in US Dollars when further working capital is required or a resolution for the second rights issue is called; PHL shall have 5 board members of which 3 directors shall be appointed by SS, 1 of whom shall be AS and 2 are elected by BSL HK. The chair person shall be appointed by SS from amongst the directors nominated by SS. Nevertheless, AS shall be the first Chairman and Managing Director; Subject to legal requirements and there being available distributable profits, at least 50% of the profit after taxation in each financial year of PHL is to be declared, distributed and payable as dividends to the shareholders of PHL; The operating account of PHL shall have dual signatory for transactions involving any amount, one of which is to be BSL HK s nominated officer from the date of the SSA until the expiry of 2 years from the full utilization of the RM 3.0 million working capital, at which time as will be the sole signatory for amount less than RM150,000; Tag alongs and drag alongs rights are provided. Simplistically, it means that in the event SS receives an offer from a third party to acquire all or part of its shareholding in PHL, BSL HK s will have an option to divest its investment on a

7 prorated basis. Similarly, if an offer is received by SS to acquire the entire equity interest in PHL, then BSL HK is compelled to sell its stake in PHL; and Shareholders are to observe that they are prohibited to directly or indirectly be involved in any ventures that compete with PHL other than what is already disclosed earlier amongst the shareholders. 2.9 Details of the MMA The salient terms and conditions of the MMA are summarised as follows: BSLI is appointed as the exclusive master manufacturer to manufacture the metal collars for the PET Aerosol Container. The MMA shall become effective on the date of MMA and shall be in full force and effect for 20 years thereafter, and subject to there being no breach by BSLI of the terms of the MMA, the MMA shall be automatically extended on a yearly basis; In the event that PAIL licences the IPR in any country or part of a country (except for Australia and New Zealand) to one or more third party(ies)and the terms and conditions of such licensing requires PAIL to relinquish the right to supply or manufacture the metal collars for that territory, PAIL agrees to pay BSLI compensation of RM0.005 per collar in such countries of which PAIL shall have received a license fee or royalty; The exclusivity provided in the MMA shall cease upon BSL HK ceasing to be a direct or indirect shareholder of PAIL or upon PAIL being directly or indirectly listed; BSLI shall procure all materials required for the production of the metal collars; and BSLI shall finance and procure the moulds required for the design and manufacturing of the collars. The cost for the moulds shall be defrayed from an increment in the selling price of the collars in an agreed formula and finance cost. 3. Rationale The Group s core business of metal stamping and consumer electronics have been under intense pressure to cost down due to competitive pressures. This, in turn, has adversely affected the Group s financial performance as margins whittled away despite a tight rein on costs. BSL has been looking into new businesses to diversify its income stream and after careful deliberation, has decided to invest in the IPR which includes IPR for metal collar of PET Aerosol Containers. The investment, while new to the Group and carries commercial and

8 business risks being a greenfield project, also entails an exclusive master manufacturing agreement to the Group to contract manufacture the metal collars, an area where BSL has considerable core expertise and competence. This investment accords the Group new potential income stream whilst leveraging on the Group core expertise and know-how of precision metal stamping. 4. Risks The SSA regulates the relationship between BSL HK and SS being the controlling shareholder of PHL while the MMA governs the terms of the appointment of BSLI as exclusive master manufacturer for the metal collars. The SPA involves an acquisition of an equity stake in PHL, which is the holding company of PIPL, an IPR holder of the technology, which has yet to be commercialized. 4.1 Greenfield Investment The investment into PHL carries many commercial and business risks as one could reasonably expect from a new business start up. The metal collar for crimping onto plastic containers is a new technology that has not been proven nor commercialized. However, based on the on-going research and market penetration exercises, the response from market feedback has been encouraging and indications are that the commercialization of these collars are expected within the next 12 months. Notwithstanding the above, BSL has sought to manage the commercialization risks by requesting for independent laboratory testing by LEREM. BSLI has also participated in market survey and acceptance together with SS and AS over the past 12 months and found the same to be encouraging. 4.2 Investment in Associate The investment would result in BSL HK having an equity interest of 22.5% in PHL. Although it has only 2 board representatives out of 5 in PHL, BSL HK could only expect dividends in the future, subject to the business of PHL being profitable. There are limited safeguards on its minority shareholding under the one share, one vote system. BSL has, nevertheless, sought to protect its investment by: i) requesting for important decisions to be listed under Reserved Matters in the SSA, as provided for under Section 7.07(g) of the SSA and the Third Schedule. Reserved Matters are issues where the appointee of BSL HK s affirmative vote is required before proceeding with the next course of action including but not limited to alteration of capital, disposal of subsidiaries, amendment to the Memorandum and Articles of Association, the giving of indemnities and

9 guarantees other than in the ordinary course of business and procurement of any funds or any other form of financing from any financial institutions; and ii) BSL HK s representative is a co-signatory for the rights issue account of PHL and the operating account for any amount from the date of the SSA until the expiry of 2 years from the full utilization of the RM 3.0 million working capital. 4.3 Expertise While the Group does not have direct relevant expertise in the IPR of the technology, the Group is not new to manufacturing of metal collars, one of the key components of the IPR as it falls into its core competency and know-how. The Group intends to leverage on the expertise, market knowledge and product development rollout on SS and AS to fully exploit the commercial interest of the IPRs. 5. Prospects of Consumer and Food Aerosol Packaging and Containers Traditionally, the packaging for consumer and food containers is dominated by aluminum or metal alloy. It is estimated that the global output volume will exceed 16 billion aerosol containers by 2017 according to the Research Report on Global & China Aerosol Industry 2013 to The main drive factor underpinning this niche packaging sector for consumer and food is global consumer demand. There are a few advantages of PET Aerosol Containers over their metal cousins: i) plastics are lighter and cheaper than metal; ii) plastics accord enhanced marketability utilizing transparent nature of PET bottles; and iii) esthetics aside, PET Aerosol Containers also possess characteristics that are more favourable over metal. They are, for instance, more friendly to the touch for whipped cream taken straight out of the fridge as metal feels cold to the touch due to their efficient thermal transmission properties. The prospects for PHL are encouraging as it is enjoying first mover advantage and that its technology is patented in over 20 countries worldwide to fully exploit and protect its economic interest. 6. Financial Effects The Acquisition does not have any material financial effect on the net assets per share, earnings per share or gearing of the Group for the financial year ending 31 August 2014 and have no effect on the share capital and substantial shareholders shareholdings of the Company. The Acquisition is being funded from internally generated funds.

10 7. Interest of Directors, Major Shareholders and/or Persons Connected to them As far as the Directors are able to ascertain, none of the Directors, major shareholders nor persons connected to them has any interest, neither direct nor indirect, in the Acquisition. 8. Approval Required The Acquisition does not require the approval of any government authorities or shareholders of the Company. 9. Directors Statement The Board of Directors, after considering the Acquisition, is of the opinion that the Acquisition is in the best interest of the Company. 10. Highest Percentage Ratio The highest percentage ratio applicable to the Acquisition pursuant to paragraph 10.02(g) of the Main LR based on BSL s latest consolidated financial statements for the financial year ended 31 August 2013 is 5.55%. 11. Completion Timeframe The Acquisition is expected to be completed within 30 days from the date of this announcement. 12. Documents for Inspection Notes: The SPA, SSA and MMA are available for public inspection at the registered office of the Company at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur from Mondays to Fridays at normal working hours, except for public holidays, for a period of three (3) months from the date of this announcement. * Based on the exchange rate of RM1.00:USD on 21 July 2014 as set out in the Bank Negara website, subject to rounding. # Based on the exchange rate of RM1.00:HKD on 21 July 2014 as set out in the Bank Negara website, subject to Based on the exchange rate of RM1.00:AUD on 21 July 2014 as set out in the Bank Negara website, subject to rounding. This announcement is dated 21 July 2014.