AEI CORPORATION LTD. (Incorporated in the Republic of Singapore) (Company Registration No G)

Transcription

1 AEI CORPORATION LTD. (Incorporated in the Republic of Singapore) (Company Registration No G) (1) UPDATE ON THE LOAN OF S$3,000,000 GRANTED TO WELL GLOBAL INVESTMENTS (SINGAPORE) PTE. LIMITED; AND (2) DISCLOSEABLE TRANSACTION ACQUISITION OF SHARES IN GLOBAL TONGYI (SINGAPORE) PTE. LTD. 1. INTRODUCTION The Board of Directors (Board) of AEI Corporation Ltd. (Company) refers to the Company s announcements made on 7 April 2009, 2 October 2009, 29 December 2009, 28 June 2010 and 6 July 2011 relating to the loan agreement dated 6 April 2009 (as subsequently amended and supplemented) (Loan Agreement) entered into between the Company and Well Global Investments (Singapore) Pte. Limited (Well Global or the Borrower), for a term loan facility of S$3,000,000 (Loan) granted by the Company to the Borrower for the purpose of financing the working capital of An-Yang United Cooking Oil Co. Ltd ( 安阳统一粮油有限公司 ) (An Yang). The Board would like to announce that the restructuring exercise of An Yang (Restructuring Exercise) has been completed and the Company, through its wholly-owned subsidiary, AEI (China) Holdings Pte. Ltd. (AEI China), had converted the Loan and acquired a 50% equity interest in Global Tongyi (Singapore) Pte. Ltd. (Global Tongyi). Further details of the Restructuring Exercise, the conversion of the Loan and AEI China s investment in Global Tongyi are set out below. 2. RESTRUCTURING EXERCISE AND LOAN CONVERSION Briefly, the Restructuring Exercise involved the following: Global Tongyi, an investment holding company incorporated in Singapore on 9 November 2007, acquired 100% of the registered capital of Well Global Foods (Anyang) Pte. Ltd. (Well Global Anyang); and Well Global Anyang entered into sale and lease-back arrangement with An Yang. In this connection, the following agreements were entered into: (i) (ii) a transfer agreement for the land use rights of an industrial land and building ownership ( 工业用地土地使用权及房屋所有权转让协议 ) (Property Acquisition Agreement) dated 25 June 2011 entered into between An Yang (as vendor) and Well Global Anyang (as purchaser) to acquire the land use rights in respect of an industrial land located at Donghuan Road in Anyang city, Henan province, the PRC with an area of 38,313.5 square metres, the peanut oil refinery factory and other buildings situated thereon (Property) for an aggregate purchase consideration of RMB8,661,297; a facilities purchase agreement ( 设备购买合同 ) (Facilities Acquisition Agreement) dated 25 May 2011 entered into between An Yang (as vendor) and Well Global Anyang (as purchaser) to acquire 125 oil-refinery machinery and equipment (including automatic racking machines and 50T 1

2 refining equipments) (Facilities) for an aggregate purchase consideration of RMB4.8 million; (iii) a property lease agreement (Property Lease Agreement) dated 20 February 2012 entered into between Well Global Anyang (as lessor) and An Yang (as lessee) to lease the peanut oil refinery factory located at Donghuan Road in Anyang city, Henan province, the PRC and certain other buildings situated thereon (the Leased Property) to An Yang at a rent; and (iv) a facilities rental agreement (Facilities Rental Agreement) dated 20 February 2012 entered into between Well Global Anyang (as lessor) and An Yang (as lessee) to lease the Facilities to An Yang at a rent, (the Property Lease Agreement and Facilities Rental Agreement are collectively referred to as the Lease Agreements). Further details of the Lease Agreements are described in Section 4 of this Announcement. Following the completion of the Restructuring Exercise, the following agreements were entered into to restructure and convert the Loan into a 50% equity interest in Global Tongyi: a deed of novation (Deed of Novation) dated 20 February 2012 entered into between the Company (as the original lender), AEI China (as the new lender), Well Global (as the original borrower) and Global Tongyi (as the new borrower) to (i) assign and transfer the Company s benefits and obligations under the Loan Agreement to AEI China; and novate and transfer all the liabilities and obligations of Well Global under the Loan Agreement to Global Tongyi; a subscription agreement (Subscription Agreement) dated 20 February 2012 entered into between AEI China (as subscriber), Well Global and Global Tongyi pursuant to which AEI China subscribed for 40,000,000 ordinary shares representing 50% of the enlarged issued share capital of Global Tongyi (Acquisition) credited as fully paid up at a total consideration of S$3,650,000 which was satisfied (i) as to S$3,000,000, by way of capitalisation of the Loan; and (ii) the balance of S$650,000, in cash; and (c) a shareholders agreement (Shareholders Agreement) dated 20 February 2012 entered into between AEI China and Well Global to regulate the relationship between the shareholders in relation to Global Tongyi. Accordingly, as at the date of this Announcement, the Company, through AEI China, holds 50% of the equity interest in Global Tongyi, which in turn holds 100% of the equity interest in Well Global Anyang. Global Tongyi and Well Global Anyang are therefore associated companies of the Company. 3. INFORMATION ON GLOBAL TONGYI, WELL GLOBAL ANYANG AND AN YANG Global Tongyi, a company incorporated in Singapore on 9 November 2007, is an investment holding company and is also principally engaged in the trading and distribution of edible oil and other agricultural produce. As at the date of this Announcement, Global Tongyi has a total issued share capital of S$7,650,000 comprising 80,000,000 ordinary shares, which are held equally by AEI China and Well Global, and the directors of Global Tongyi are Mr Ho Pong Chong and Mr Khor Chee Peng. It is intended that two representatives of AEI China will be appointed as directors of Global Tongyi after the completion of the Acquisition. Well Global Anyang, a wholly foreign-owned enterprise established in the People s Republic of China (PRC), has a registered capital of USD1,000,000 which has been fully paid up. It 2

3 currently owns the Leased Property and the Facilities, and its sole director and legal representative is Mr Ho Pong Chong. As at the date of this Announcement, it is principally engaged in the lease of the Leased Property and Facilities to An Yang. An Yang, a company established in the PRC, is principally engaged in the manufacture and sale of edible peanut oil in the PRC under its own brand names, Zhong Fu ( 众福 ), Fu Jia Jia ( 福加加 ) and Jia Jia Fu ( 加加福 ). The directors of An Yang are Hong Hongwei ( 洪宏卫 ), Lv Pin ( 吕品 ), Wang Jian ( 王健 ), Zhong Ruiqun ( 钟瑞群 ) and Zhang Xianling ( 张现灵 ), and the legal representative of An Yang is Mr Hong Hongwei. Based on the audited financial statements of An Yang for the financial year ended 31 December 2010 and the six-month period ended 30 June 2011 (HY2011), An Yang incurred a net loss after tax of RMB3,087,868 and RMB1,948,524 in FY2010 and HY2011 respectively. An Yang incurred losses in FY2010 and HY2011 due mainly to the decrease in its profit margin as a result of significant increase in the prices of raw materials and other production costs and the inability of An Yang to increase its selling prices to pass on the cost increases to its customers due to certain long-term supply contracts entered into with the customers; and the demise of Mr Horison Ho resulting in Anyang losing some strategic direction. As part of the restructuring, Global Tongyi has strengthened the management team in Anyang. Global Tongyi will also be making changes to the business model of Anyang with the view of improving its cash flow and profitability. Among other things, it aims to achieve this by: purchasing crude peanut oil from overseas suppliers for processing and selling in the PRC. Where possible, the overseas purchases of crude peanut oil and the sales of refined peanut oil in the PRC would be made on a back-to-back basis. An Yang expects this to (i) reduce its current working capital requirements as overseas suppliers, unlike PRC suppliers, are generally less likely to insist on cash sales and are more willing to accept other forms of financing such as letter of credit or trade receipts facilities; and (ii) lower An Yang s exposure to seasonal fluctuations in the prices of its raw materials, namely, peanut kernels, in the PRC and reduce An Yang s dependence on the PRC suppliers; and increasing its revenue through trading activities. An Yang intends to purchase topgrade peanut kernels from overseas suppliers for trading in the PRC. Shareholders are to note that following the completion of the Restructuring Exercise and the Acquisition, the Group s equity interest will be at the Global Tongyi and Well Global Anyang levels. In this regard, An Yang will be an independent operating entity which will manufacture or process peanut oil for sale using the Leased Property and Facilities leased from Well Global Anyang. Further, going forward, the business model of An Yang is expected to be significantly different from its existing business model. Accordingly, the historical financial performance of An Yang as stated above is purely for illustrative purposes and is not representative of the financial performance of An Yang, Global Tongyi and/or Well Global Anyang going forward. 4. THE LEASE AGREEMENTS 4.1 Property Lease Agreement Pursuant to the terms of the Property Lease Agreement, An Yang agrees to rent the Leased Property from Well Global Anyang for a period of two years with effect from 1 March 2012 with an option to renew for a further period of two years. The rent payable by An Yang is as follows: a fixed monthly rent of RMB100,000, payable on a monthly basis; and 1.0% of the profit before tax (PBT) of An Yang, payable on a quarterly basis based on the quarterly management accounts of An Yang (subject to adjustment based on the year end audited accounts of An Yang). 3

4 4.2 Facilities Lease Agreement Pursuant to the terms of the Facilities Lease Agreement, An Yang agrees to rent the Facilities from Well Global Anyang for a period of two years with effect from 1 March 2012 with an option to renew for a further period of two years. The rent payable by An Yang is as follows: a fixed monthly rent of RMB100,000, payable on a monthly basis; and 1.0% of the PBT of An Yang, payable on a quarterly basis based on the quarterly management accounts of An Yang (subject to adjustment based on the year end audited accounts of An Yang). 5. THE ACQUISITION 5.1 Rationale The Board believes that the Group s investment in Global Tongyi is beneficial to the Group as the Acquisition provides the Group with both short-term and long-term growth opportunities in the edible oil business and related activities in the PRC. The Acquisition also represents an opportunity for the Group to broaden its asset and earnings bases, as well as to provide a potential long-term recurring source of revenue and profit. 5.2 Consideration The subscription consideration of S$3,650,000 was arrived at on a willing buyer-willing seller basis, after arm s length commercial negotiations and taking into account the following: (c) the valuation on the Property and the Facilities as at 31 December 2010 of RMB55,219,561 as stated in a valuation report dated 16 July 2011 by Henan Fangxing Asset Appraisal Firm Co., Ltd ( 河南方兴资产评估事务所有限公司 ) (Valuation Report). The valuation was commissioned by An Yang; the liabilities assumed by Well Global Anyang of approximately RMB10 million; and the registered capital of Well Global Anyang of US$1,000,000. The subscription consideration was satisfied as follows: S$3,000,000, by way of capitalisation of the Loan; and S$650,000, by way of cash. The cash consideration of S$650,000 was funded from the internal resources. 5.3 Relative figures under Rule 1006 of the SGX-ST listing Manual (Listing Manual) The relative figures as computed on the bases set out in Rule 1006 of the Listing Manual are shown in the table below: Rule 1006 Bases of calculation Size of relative figures (%) (to the nearest 1 decimal place) The net asset value of the assets to be disposed of, compared with the Group s net asset value. Not applicable (1) The net profits (2) attributable to the assets acquired or disposed of compared with the Group s net profits. -5.7% (3) (c) The aggregate value of the consideration given compared with the issuer s market capitalisation (4) based on the total 13.2% 4

5 (d) number of issued shares excluding treasury shares. The number of equity securities issued by the issuer as consideration for an acquisition, compared with the number of equity securities previously in issue. Not applicable (4) Notes: (1) Not applicable as this is an acquisition and not a disposal. (2) For this purpose, net profits is defined as profit or loss before income tax, minority interests and extraordinary items. (3) As at the date of this Announcement, Global Tongyi is an investment holding company and has not carried on any business. Well Global Anyang was established in the PRC on 24 February 2011 and there is no historical financial information to determine the net profits of Well Global Anyang. Accordingly, and purely for illustrative purposes, this has been computed based on 50% of An Yang s audited net loss for the financial year ended 31 December 2010 amounted to RMB1,543,934 (equivalent to approximately S$313,362). (4) The Company s market capitalisation of S$27,631,633 is derived from the volume weighted average traded price of S$0.11 on 17,February 2012, being the latest full market day where the Company s shares were traded on the SGX-ST. (5) Not applicable as the subscription consideration was satisfied by way of capitalisation of the Loan and cash. As the relative figures for and (c) above exceed 5% but do not exceed 20%, the Acquisition therefore constitutes a discloseable transaction pursuant to Rule 1010 of the Listing Manual. 5.4 Financial Effects The proforma financial effects of the Acquisition are set out below, assuming that: (i) the Acquisition had been effected at the end of the financial year ended 31 December 2010 for the computation of the effect on the net tangible assets (NTA) per share; and (ii) the Acquisition had been effected at the beginning of the financial year ended 31 December 2010 for the computation of the effect on the earnings per share (EPS). Given that the proforma financial effects set out below are theoretical in nature and only for illustrative purposes, they do not represent the actual financial position and/or the results of the Company or the Group. Based on the Group s consolidated financial statements for the most recently completed financial year for which consolidated financial statements are available, being the financial year ended 31 December 2010, the proforma financial effects are set out below: Before the Acquisition (cents) After the Acquisition (cents) Effects on the NTA per share assuming the Acquisition was completed on 31 December 2010 Effects on the EPS assuming the Acquisition was completed on 1 January INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS None of the directors or controlling shareholders of the Company has any interest, direct or indirect (other than through their shareholdings in the Company), in the Acquisition. 7. DIRECTORS SERVICE CONTRACTS 5

6 No person is proposed to be appointed as a director of the Company in connection with the above transactions. Accordingly, no service contract is proposed to be entered into between the Company and any such person. 8. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be made available for inspection during normal business hours at the Company s registered office at 12 Penjuru Lane, Jurong Town Industrial Estate, Singapore for a period of three months from the date of this Announcement: (c) (d) (e) (f) (g) (h) (i) the Loan Agreement; the Property Acquisition Agreement; the Facilities Acquisition Agreement; the Property Lease Agreement; the Facilities Rental Agreement; the Deed of Novation; the Subscription Agreement; the Shareholders Agreement; and the Valuation Report. 9. RESPONSIBILITY STATEMENT The Directors of the Company (including those who have delegated supervision of this Announcement) collectively and individually accept full responsibility for the accuracy of the information given in this Announcement and confirm, after making all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Announcement are fair and accurate in all material respects as at the date of this Announcement, and that there are no material facts the omission of which would make this Announcement misleading. By Order of the Board Tan Chu En Ian Chief Executive Officer 20 February