HANDAL RESOURCES BERHAD ( HRB or Company )

Transcription

1 HANDAL RESOURCES BERHAD ( HRB or Company ) PROPOSED ACQUISITION BY HRB OF 51,000 ORDINARY SHARES REPRESENTING 51% EQUITY INTEREST IN SIMFLEXI SDN. BHD. ( SIMFLEXI ) FOR A TOTAL PURCHASE CONSIDERATION OF RM 5.1 MILLION ( PROPOSED ACQUISITION ) 1. INTRODUCTION The Board of Directors ( Board ) of HRB wishes to announce that HRB had on 22 nd January 2018, entered into a conditional Share Sale Agreement ( SSA ) with Kemuncak Lanai Sdn Bhd ( Kemuncak or Vendor ) for the proposed acquisition of 51,000 ordinary shares of Simflexi Sdn Bhd ( Simflexi ) held by Kemuncak, representing 51% equity interest in Simflexi for a total purchase consideration of RM5.1 million ( Purchase Price ) ( ). The ordinary shares of Simflexi held by Kemuncak highlighted above are collectively referred to as Sale Shares. 2. INFORMATION ON SIMFLEXI Simflexi was incorporated in Malaysia as a private limited company on 2 nd March 2017 with its registered office at No , Diamond Square, Jalan Semarak Api 2, Off Jalan Gombak, Kuala Lumpur. The issued and paid-up share capital of Simflexi is RM 100, divided into 100,000 ordinary shares. Simflexi is principally engaged in pipeline engineering, composite material supplying, pipeline connector supplying, flexible tank research and development and supplying. 3. INFORMATION ON THE VENDOR Kemuncak was incorporated in Malaysia as private limited company on 17 th October 2011 with its business office at Unit 22-3A, Binjai 8 Premium SOHO, No. 2, Lorong Binjai, Kuala Lumpur. Its Directors are Shazli Razak and Ahmad Syahmy Muhammad Shamsuddin. The issued and paid-up capital of Kemuncak is RM 300, divided into 300,000 ordinary shares held by Shazli Razak and Ahmad Syahmy Muhammad Shamsuddin. The principal activity of Kemuncak are, specialized manpower supply, project management consultancy and engineering services. 4. DETAILS OF THE PROPOSED ACQUISITION 4.1 Salient terms of the SSA Pursuant to the SSA, HRB will acquire 51,000 ordinary shares representing 51% of the issued and paid-up share capital in Simflexi free from all encumbrances at a total purchase consideration of RM 5.1 million ( Purchase Consideration ). 4.2 Settlement of the Purchase Consideration HRB shall pay the Purchase Consideration to Kemuncak in the following manner: Due Date of Payment Upon execution of the SSA, HRB shall pay the first payment to HRB s solicitors to hold as stakeholders After transfer and registration of the Sale Shares under HRB s name and subject to Section 4.3 of this announcement Amount (RM) (a) RM2,550, being fifty percent (50%) of the Purchase Price ( First Payment ) (b) RM2,550, being the balance fifty percent (50%) of the Purchase Price ( Final Payment )

2 4.3 Guaranteed Profit The Vendor, as the Guarantor has agreed to warrant and guarantee that the total audited profit before tax (PBT) of Simflexi computed in accordance with the general accounting standards in Malaysia and confirmed in writing by the auditors of Simflexi shall be as follows:- Warranty Period Financial Year Guaranteed Profit Warranty Period 1 1 January 2018 to 31 December 2018 Not less than RM 2,500, Warranty Period 2 1 January 2019 to 31 December 2019 Not less than RM 3,500, Warranty Period 3 1 January 2020 to 31 December 2020 Not less than RM 5,750, The Guarantor and HRB agreed that the Guaranteed Profit for each of the Warranty Period shall be on a non-cumulative basis and if there is any shortfall amount in respect of any of the Warranty Period, the Guarantor shall be responsible to pay to HRB the Agreed Percentage of Shortfall amount being fifty one percent (51%) of the Shortfall amount within fourteen (14 days) from the Guarantor s receipt of written demand from HRB based on the written confirmation from the auditors of the Company for the respective warranty period and non-compliance to this is a material breach of contract by the Guarantor. If the Guarantor fails to pay to HRB all Agreed Percentage of Shortfall Amount for all Warranty Periods, HRB shall have no obligation to pay the Final Payment to the Vendor within fourteen (14 days) from the Guarantor s receipt of written demand from HRB based on the written confirmation from the auditors of the Company for the respective warranty period and the First Payment paid to the Vendor shall be the full consideration for the Sale Shares. 4.4 Conditions Precedent The SSA is conditional upon the following conditions precedent being satisfied: (i) HRB being satisfied with the Due Diligence Review; (ii) a duly signed letter of waiver from Shanghai EB to waive its right of first refusal to acquire the Sale Shares to be effective prior to the date the Sale Shares are transferred and registered under the HRB s name; (iii) due execution of the Shareholders Agreement which is to take effect from the date Sale Shares are duly transferred and registered under HRB s name; and (iv) Notification to or approvals from the financiers of the Company, the Authorities and/or other stakeholders in respect of the Acquisition to pass good title of the Sale Shares to HRB, free from any encumbrances. 4.5 Completion of the SSA After the fulfillment of the conditions precedent, the completion of the sale and purchase of the Sale Shares shall take place no later than seven (7) business days from the date when the last of the conditions precedent is fulfilled or is deemed to be fulfilled or is waived, or such later date as the Parties may agree in writing. 5. BASIS AND JUSTIFICATION OF THE PURCHASE CONSIDERATION The Purchase Consideration was arrived at based on a willing-buyer willing-seller basis and is arrived at the valuation of Simflexi at the value of RM 10 million (100% equity interest). Pursuant to the SSA, HRB shall acquire 51% equity interest in Simflexi from Kemuncak comprising 51,000 ordinary shares in Simflexi. The Board is of the opinion that the Purchase Consideration is fair after taking into consideration the following: (i) the Vendor, as the Guarantor has agreed to warrant and guarantee of the total actual profit before tax (PBT) of Simflexi for the next 3 financial year 2018, 2019 & 2020 amounting to RM11.75 million. 2

3 (ii) the potential benefits of the to the Handal and its subsidiary companies are by bringing in leading technology with total solutions to decrease oil & gas operators costs and enhancing their capital efficiency. 6. LIABILITIES TO BE ASSUMED Handal will not assume any additional liabilities (including contingent liabilities and guarantees (if any) under the. The existing liabilities of Simflexi will be settled in the normal course of business. There are no additional financial commitments required from HRB in respect of the Proposed Acquisition. 7. RATIONALE FOR THE PROPOSED ACQUISITION Handal and its subsidiaries are principally involved as a fully integrated offshore crane service and manufacturing provider specialising in the both upstream & downstream oil and gas industry. The of Simflexi is expected to be able to provide the Handal Group with the following benefits: (i) Diversification of the existing business into a technology based company focusing on innovation and provide total solutions to decrease major oil & gas operators operating cost and enhancing their capital efficiency. (ii) Minimum integration issues post-acquisition as given opportunity to work with a Simflexi team that is having a patented technology of crude oil storage in reducing oil & gas (O&G) industry operating and capital cost. Low price of oil is both a challenge and an opportunity for the industry. Handal Group will help oil and gas (O&G) companies become strong today via operating with greater efficiency so that they can emerge even stronger after prices rebound. While the availability of oil fields and the associated equipment is always paramount for them, during a slump they have every reason to also focus on cost-effective production. (iii) Shorter gestation period in the new business segment given that Simflexi is an already established company with certain secured contracts in hand. The of Simflexi is in line with the Handal Group s business expansion plan to expand its business via, among others, acquisitions, joint ventures and strategic alliances in the oil and gas industry that will complement its current and future businesses. 8. FINANCIAL INFORMATION OF SIMFLEXI SDN. BHD. Simflexi is a private limited company incorporated in Malaysia under the Companies Act, 2016 on 2 nd March The historical financial information of the Simflexi based on its unaudited financial statements for the financial year ended ( FYE ) 31 December 2017 is set out below: <---FYE 31 December ---> 2017 (Unaudited) (RM 000) Revenue 2,499 Profit before taxation ( PBT ) 373 3

4 9. SOURCE OF FUNDING The Purchase Consideration will be financed by internally generated funds. 10. EFFECTS OF THE PROPOSED ACQUISITION 10.1 Share Capital and Substantial Shareholders Shareholding In view of the fact that the Purchase Consideration will be fully settled in cash and does not involve any new issue of HRB shares, the will not have any effect on the issued share capital and substantial shareholders shareholdings of HRB Earnings per Share ( EPS ) The is expected to materially affect the earnings and EPS of the HRB Group for the Financial Year Ending 31 December Net Assets per Share and Gearing Net Assets Per Share of Simflexi attributable to ordinary equity holders of the Handal=RM2.06/share. Simflexi does not have any bank borrowing. 11. RISK FACTORS 11.1 Non-completion risk The completion of the is subject to the conditions precedent set out in Section 4.4 of this announcement and the fulfillment of some of the conditions precedent may be beyond the control of HRB Acquisition risk While the management of HRB believes that the is expected to contribute positively to HRB Group s revenue and long term profitability, there can be no assurance that the anticipated synergies and other benefits of the will be realized. However, after the completion of the, HRB will work closely with Simflexi to ensure that the operations between the companies are carried out effectively Interest rate risk As highlighted in Section 9 of this announcement, HRB intends to finance the through internally generated funds. 12. INTEREST OF DIRECTORS AND/OR MAJOR SHAREHOLDERS OF HRB AND/OR PERSONS CONNECTED WITH THEM None of the Directors and/or major shareholders of HRB and/or persons connected with them have any interest, direct or indirect, in the. 13. STATEMENT BY THE BOARD OF DIRECTORS The Board of Directors of HRB is of the opinion that the is in the best interest of HRB. 4

5 14. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia is 13.56% based on the latest consolidated unaudited financial statements of HRB for the financial year ended 31 December APPROVAL REQUIRED The does not require approval from the shareholders of HRB or any relevant authorities. 16. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the is expected to be completed by fulfillment of the Conditions Precedent set out in Section 4.4 of this announcement or such other date as may be agreed upon between HRB and the Vendor. 17. DOCUMENTS FOR INSPECTION A copy of the SSA will be made available for inspection at the registered office of HRB at 25-6, Jalan PJU 1/42A, Dataran Prima, Petaling Jaya, Selangor for a period of 3 months during normal business hours from Monday to Friday (except public holidays) from the date of this announcement. This announcement is dated 24 January