On behalf of the Board of Directors of N2N ( Board ), HwangDBS Investment Bank Berhad ( HwangDBS ) wishes to announce that the Company has:

Transcription

1 N2N CONNECT BERHAD ( N2N OR COMPANY ) PROPOSED PRIVATE PLACEMENT; PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL; AND PROPOSED M&A AMENDMENT. 1. INTRODUCTION On behalf of the Board of Directors of N2N ( Board ), HwangDBS Investment Bank Berhad ( HwangDBS ) wishes to announce that the Company has: (1) on 24 April 2014, entered into Subscription Agreements ( SA(s) ) with Nikkei Inc. (Company Registration No ) and QUICK Corp. (Company Registration No ) respectively, both companies incorporated in Japan to undertake a proposed private placement of a total of 122,027,600 new ordinary of RM0.10 each in the Company ( N2N Shares ) ( Placement Shares ) representing up to approximately 28% of the enlarged issued and paid-up share capital of the Company at an issue price of RM0.89 per Placement Share ( Proposed Private Placement ); (2) proposed to undertake an increase in the authorised share capital of N2N from RM50,000,000 comprising 500,000,000 N2N Shares to RM100,000,000 comprising 1,000,000,000 N2N Shares ( Proposed Increase in Authorised Share Capital ); and (3) proposed to undertake an amendment to the Memorandum and Articles of Association ( M&A ) of N2N as a consequence to the Proposed Increase in Authorised Share Capital ( Proposed M&A Amendment ). (collectively referred to as the Proposals ) 2. DETAILS OF THE PROPOSALS 2.1 Details of the Proposed Private Placement Placement Size The Proposed Private Placement entails the issuance of new N2N Shares representing up to approximately 28% of the enlarged issued and paid-up share capital of N2N, at an issue price of RM0.89 per Placement Share. As at 23 April 2014 (being the latest practicable date prior to the date of this announcement), the issued and paid-up share capital of N2N is RM31,752,407 comprising 317,524,065 N2N Shares (including 3,739,200 treasury ). 1

2 2.1.2 Pricing of the Placement Shares The Placement Shares are proposed to be placed out at an issue price of RM0.89 per Placement Share. The issue price of RM0.89 also represents a (discount)/premium to the 5-day, 1-month and 3- month VWAP of N2N Shares, up to 23 April 2014, being the market day prior to this announcement as set out below: VWAP per N2N Share Issue price Premium/(Discount) RM RM RM % 5-day VWAP up to 23 April (0.03) (3.26) 1-month VWAP up to 23 April month VWAP up to 23 April (Source: Bloomberg) The issue price of RM0.89 per Placement Share was determined after taking into consideration the prevailing market price, the negotiations between the Company and the Placees (as defined herein) as detailed in Section below and the intended utilisation of the gross proceeds to be raised from the Proposed Private Placement, as set out in Section of this announcement. Based on the issue price of RM0.89 per Placement Share, the Proposed Private Placement will raise gross proceeds of RM108,604, Allocation to Placees The Placement Shares are proposed to be placed out to two investors, namely QUICK Corp. ( QUICK ) and Nikkei Inc ( Nikkei ) (collectively referred to as the Placees ), with the following allocations: Placees Placement Shares to be allocated Total Consideration (RM) Nikkei 61,013,800 54,302,282 QUICK 61,013,800 54,302,282 Total 122,027, ,604, Ranking of the Placement Shares The Placement Shares will, upon issue and allotment, rank pari passu in all respects with the existing N2N Shares, save and except that the holders of the Placement Shares will not be entitled to any dividends, rights, allotments and/or any other forms of distributions that may be declared, made or paid by the Company for which the entitlement dates precede the date of allotment of the Placement Shares Listing of and quotation for the Placement Shares An application will be made to Bursa Malaysia Securities Berhad ( Bursa Securities ) for the listing of and quotation for the Placement Shares on the ACE Market of Bursa Securities. 2

3 2.1.6 Utilisation of proceeds Based on the proposed issue price of RM0.89 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of RM108,604,564 for both the Minimum Scenario and Maximum Scenario (as defined in Section 4). The proceeds to be raised from the Proposed Private Placement are intended to be utilised as follows: Description Timeframe for the utilisation of proceeds from completion of the Proposed Private Placement RM 000 Business expansion (1) Within two (2) years 72,000 Repayment of bank Within three (3) months 15,859 borrowings (2) General working capital (3) Within two (2) years 20,000 Estimated expenses in relation to the Proposed Private Placement (4) Within one (1) month ,605 Notes: (1) The N2N group of companies ( Group ) intends to utilise RM10.00 million for the proposed business alliances with Nikkei and QUICK to combine the Company s trading platform expertise with QUICK s and Nikkei s financial and business analytics as detailed in Section 3 of this announcement. This may amongst others include research and development activities and setting up of new offices, the proportion of which have yet to be identified. The balance of RM62.00 million will be utilised for the acquisition and investment into companies, business or assets which have yet to be identified. This may include acquisitions of strategic investments and/or strategic collaborations, joint ventures or alliances. In the event shareholders approval is required pursuant to the Bursa Securities ACE Market Listing Requirements ( Listing Requirements ) for the strategic acquisitions or collaborations, joint ventures and/or alliances, such approval will be sought as per the provisions of the Listing Requirements. During the interim, the Group will place the proceeds into interest bearing accounts, pending the utilisation. Any remaining proceeds not utilised after the two (2) years period will be utilised for the working capital of N2N Group. (2) As at 31 March 2014, the Group has bank borrowings amounting to approximately RM million obtained in relation to the purchase of a leasehold land and building by N2N Group. The amount to be used to repay borrowings is approximately RM million. The savings in interest expenses per annum arising from the repayment of borrowings is expected to be approximately RM1.447 million. (3) The Group intends to use RM20.00 million from the Proposed Private Placement for general working capital purposes of its existing business, such as continuous research and development, repayment to trade and other creditors, purchase of equipment (i.e. computer equipment), electrical components and accessories, maintenance charges for buildings, marketing expenses and general expenses which include, amongst others, salaries, travelling expenses, utilities, staff training and staff welfare. 3

4 The breakdown of proceeds to be utilised for each component of working capital has not been determined at this juncture and will be dependent on the operating and funding requirements at the time of utilisation. (4) Any variation to the estimated expenses will be adjusted to/from the working capital requirements Salient terms of the SAs The terms and conditions of the 2 SAs are the same and shall be applied to each of the proposed subscription of N2N Shares by the Placee on an individual basis and not on a collective basis. The following salient terms are extracted from the SAs: Conditions Precedent The subscriptions of the Placement Shares by the Placee is subject to the following conditions: (i) (ii) (iii) (iv) the issue of the Placement Shares and the obligation of the Placee to subscribe for the Placement Shares not being prohibited or impeded by any statute, order, rule, directive or regulation promulgated by any relevant authorities; the approval of the general meeting of the shareholders of the Company to the issuance of the Placement Shares having been obtained; the Placee being reasonably satisfied that no material change has been made to the basis of emoluments of every description, including, without limitation, salaries, directors fees, bonuses, commissions, profit under any incentive scheme, pension contributions payable by the Company and benefits in kind as quantified for income tax purposes ( Emoluments ) or other terms of employment of all or any of the directors and/or key employees of the Group, save for their annual performance appraisal which the Company may on arm s length basis adjust their Emoluments accordingly; Bursa Securities having granted approval for the listing of the Placement Shares on the ACE Market of Bursa Securities Completion Subject to the fulfilment of the above conditions precedents ( Conditions ) or waiver thereof by the Placee and the payment of the aggregate issue price of RM0.89 per Placement Share, the completion shall take place on the last day of 14 days after the Conditions have been satisfied and/or waived (as the case may be) or such other date (whether earlier or later than such day) as the parties may mutually agree in writing ( Completion ) Warranties The Company hereby represents, warrants and undertakes to the Placee the following: (a) (b) it is a Company duly established and existing under the laws of Malaysia; its ordinary and Warrants have been admitted to the Official List of the ACE Market of Bursa Securities and the entire issued share capital of the Company and the Warrants are listed and quoted on Official List of the ACE Market of Bursa Securities; and the Company undertakes to maintain the admission, listing and quotation on the ACE Market of Bursa Securities of such N2N Shares (including the Placement Shares); save for approval of the shareholders of the Company to be obtained at an extraordinary general meeting, it has the corporate power to enter into, exercise its rights and perform and comply with its obligations under the SA; 4

5 (c) (d) save for approval of the shareholders of the Company to be obtained at an extraordinary general meeting, the execution of the SA by it and the performance of its obligations have been duly authorised by all necessary corporate action, and the obligations expressed as being assumed by it under the SA constitutes valid, legal and binding obligations enforceable against it in accordance with their terms; save as otherwise disclosed, neither the execution and delivery of the SA by it nor the exercise of any of its rights under it nor the performance or observance of any of its obligations under the SA will: (i) conflict with or result in any breach of, any law, statute, regulation, indenture, mortgage, trust deed, agreement or other instrument, arrangement, obligation or duty by which it is bound; or (ii) cause any limitation on any of its powers whatsoever and howsoever imposed, or on the right or ability of its directors to exercise such powers, to be exceeded Termination Any party to the SA may at any time by notice to the other party terminate the SA prior to Completion if: (i) (ii) (iii) (iv) (v) the Conditions are not satisfied within 2 months from the date of the SA or such extended period as the parties may mutually agree in writing; or a party fails to perform its obligations under the Completion; or any party commits a material breach of any of its obligations under the SA; or any of the applications for the approvals referred to in the Conditions is rejected or given on terms and/or conditions reasonably not acceptable to any of the parties and the Placee reasonably decides not to appeal or require an appeal to be made; or any of the parties is or becomes insolvent Information on the Placees Nikkei Nikkei is a private limited company which was incorporated in Japan on 11 August As at 23 April 2014, Nikkei has an issued and paid-up share capital of JPY2,500 million (equivalent to RM79.75 million at an exchange rate of JPY100 : RM3.19 as at 23 April 2014) comprising 25,000,000. Nikkei is an operating holding company with newspaper businesses as its core, while its group operations also ranges from books, magazines to digital media, database service, broadcasting and other activities such as economic/cultural events. As at 23 April 2014, the Board of Directors and shareholders of Nikkei and their shareholdings in Nikkei are as follows: Name Direct Indirect held % held % Tsuneo Kita 300, Yasuo Hirata 250, Masanori Sato 200, Shigeru Komago 180, Naotoshi Okada 180, Kazunori Murakami 170, Ichiro Kifune 170, Tsuyoshi Hasebe 140, Ichiro Ishikawa 140, Hirotomo Nomura 140, Katsuyoshi Kondo 140, Kohei Osada 40, Noboru Yoshioka 70,

6 As at 23 April 2014, the substantial shareholders of Nikkei and their shareholdings in Nikkei are as follows: Name Nihon Keizai Shimbun Kyoei kai Nihon Keizai Shimbun Fukushi kai Direct Indirect held % held % 1,278, ,030, QUICK QUICK is a private limited company which was incorporated in Japan on 1 October QUICK is a 61.21% owned subsidiary of Nikkei. As at 23 April 2014, QUICK has an issued and paid-up share capital of JPY660 million (equivalent to RM21.05 million at an exchange rate of JPY100 : RM3.19 as at 23 April 2014) comprising 1,320,000. The principal activity of QUICK are that of distribution of real-time global securities and financial market and economic information as well as political news and economic information. QUICK also provides comprehensive solutions to the securities and financial market with supporting services for asset management, order routing and execution, and construction and maintenance of information network. As at 23 April 2014, the Board of Directors of QUICK and their shareholdings in QUICK are as follows: Name Direct Indirect held % held % Shinichi Kamata Noboru Yoshioka Naoki Narusawa Toshiaki Hori Osamu Tai Nobuhiko Kanekuni Kunihiro Matsumoto Atsuyuki Nakajima Makoto Horiuchi Tomoko Ito Gakuji Takahashi Etsuya Hirose Masahiro Sasaki Tsuneo Kita Shinzo Takami As at 23 April 2014, the substantial shareholders of QUICK and their shareholdings in QUICK are as follows: Direct Indirect Name held % held % Nikkei 808, Details of the Proposed Increase in Authorised Share Capital As at 23 April 2014, the authorised share capital of N2N is RM50,000,000 comprising 500,000,000 N2N Shares. In order to accommodate the Maximum Scenario (as defined in Section 4), N2N proposed to increase its authorised share capital to RM100,000,000 comprising 1,000,000,000 N2N Shares. 6

7 2.3 Details of the Proposed M&A Amendment The Proposed M&A Amendment entails the consequential amendments to be made to the M&A of N2N to facilitate the Proposed Increase in Authorised Share Capital required for the Proposed Private Placement under the Maximum Scenario (as defined in Section 4). 3. RATIONALE 3.1 Proposed Private Placement The Company is in discussion with Nikkei and QUICK on a proposed business alliance which involves incorporating Nikkei and QUICK s financial news and information services and business analytics with N2N s integrated financial trading platform, TcPro TM. The Proposed Private Placement is in line with the intention of the parties on the proposed business alliance. This proposed business alliance will enable more opportunities for financial traders to compete in the international markets, whereby N2N s TcPro TM system can assist the traders to transact equities, derivatives, futures, options, bonds and commodities across a variety of exchanges and inter-brokerages and in time to include equity derivative products and foreign exchange trading products as well. In addition to Nikkei and QUICK s contents and technologies, the proposed business alliance will extend to the integration and implementation of trade order management system that will create bridges for the asset management companies in Japan to distribute and execute their orders across the ASEAN regions. At this juncture, the proposed business alliance has yet to be finalised or agreed upon. Any new development on the proposed business alliance will be announced in due course and any relevant approvals shall be sought, if required. The Placement Shares to be placed out to the Placees as stated in Section 2.3 above will enable N2N to raise gross proceeds of RM108,604,564 (based on the proposed issue price per Placement Share of RM0.89) for utilisation as set out in Section above. 3.2 Proposed Increase in Authorised Share Capital The Proposed Increase in Authorised Share Capital is to accommodate the Proposed Private Placement under the Maximum Scenario. 3.3 Proposed M&A Amendment The Proposed M&A Amendment entails the consequential amendments to be made to the M&A of N2N to facilitate the Proposed Increase in Authorised Share Capital required for the Proposed Private Placement under the Maximum Scenario (as defined in Section 4). 7

8 4. EFFECTS The proforma effects of the Proposed Private Placement have been shown based on the following scenarios: Minimum Scenario : Assuming none of the 3,739,200 treasury held by the Company as at 23 April 2014 are resold in the market, none of the outstanding employee share option scheme ( ESOS ) are exercised and none of the outstanding Warrants 2013/2018 are exercised, prior to the Proposed Private Placement Maximum Scenario : Assuming all of the 3,739,200 treasury held by the Company as at 23 April 2014 are resold at their carrying value, all of the outstanding ESOS are exercised and all of the outstanding Warrants 2013/2018 are exercised, prior to the Proposed Private Placement The Proposed Increase in Authorised Share Capital and Proposed M&A Amendment will not have any effect on the share capital, earnings, earnings per N2N Share, net assets, gearing and substantial shareholders shareholdings of N2N. 4.1 Issued and paid-up share capital For illustrative purposes, the proforma effects of the Proposed Private Placement on the issued and paid-up share capital of the Company as at 23 April 2014 are shown below: Issued and paid-up share capital as at 23 April 2014 (excluding treasury ) Add: Treasury resold at their carrying value Shares to be issued upon full exercise of the outstanding ESOS Shares to be issued upon full exercise of the outstanding Warrants 2013/2018 Shares to be issued pursuant to the Proposed Private Placement Minimum Scenario Maximum Scenario ( 000) RM ( 000) ( 000) RM ( 000) 313,785 31, ,785 31, , ,842 2, ,887 8, ,785 31, ,253 42, ,028 12, ,028 12,203 Enlarged issued and paid-up share capital 435,813 43, ,281 54, Earnings and Earnings Per Share ( EPS ) The Proposed Private Placement is not expected to have any material effect on the earnings of the N2N Group for the financial year ending 31 December The EPS of the N2N Group may, however, be reduced correspondingly as a result of the increase in the number of N2N Shares in issue pursuant to the Proposed Private Placement. Nevertheless, proceeds to be raised from the Proposed Private Placement are expected to be utilised to fund the N2N Group s expansion plans, which in turn is expected to increase turnover to contribute positively to the future earnings of the N2N Group. Similarly the expected interest savings as mention in Section (2) are expected to contribute positively to the earnings and EPS of the Group in future financial years. 8

9 4.3 Net Assets ( NA ) and Gearing For illustrative purposes only, and based on the latest audited consolidated financial statements as at 31 December 2013, the proforma effects of the Proposed Private Placement on the audited consolidated NA and gearing of N2N Group are set out below: Minimum Scenario Audited as at 31 December 2013 After adjustment for ESOS exercised subsequent to 31 December 2013 I II III After I and adjustment for Warrants 2013/2018 exercised subsequent to 31 December 2013 After II and the Proposed Private Placement RM 000 RM 000 RM 000 RM 000 Share capital 30,407 30,452 31,752 43,955 (1) Share premium 6,634 6,687 9, ,463 Treasury (1,657) (1,777) (1,777) (1,777) Reserves 2,185 2,185 1,925 1,925 Retained profits 11,595 11,595 11,595 11,595 Shareholders funds 49,164 49,142 53, ,161 in issue ( 000) 304, , , ,552 Less: Treasury ( 000) 3,522 (2) 3,739 3,739 3,739 in issue (excluding treasury ) ( 000) 300, , , ,813 NA per share (RM) Total borrowings (RM 000) 18,074 (3) 15,859 15,859 (7) - Gearing ratio (times)

10 Notes: (1) 33,000 and 415,600 ESOS exercised after 31 December 2013 up to 23 April 2014 at an exercise price of RM0.18 and RM0.22 per ESOS (2) 3,739,200 N2N Shares are held as treasury as at 23 April 2014 (3) Total borrowings as at 31 March 2014 (4) Warrants exercised after 31 December 2013 up to 23 April 2014 at an exercise price of RM0.32 per Warrant and after transferring warrants reserve to share premium of RM0.02 per Warrant (5) Based on the issue price of the Placement Shares at RM0.89 per Placement Share (6) After deducting estimated expenses of RM746,000 in respect of the Proposed Private Placement from the share premium account (7) After incorporating the repayment of borrowings of RM million 10

11 Maximum Scenario Audited as at 31 December 2013 After adjustment for ESOS exercised subsequent to 31 December 2013 I II III IV V After I and adjustment for Warrants 2013/2018 exercised subsequent to 31 December 2013 After II and all treasury are resold and ESOS exercised After III and outstanding Warrants 2013/2018 are exercised After IV and the Proposed Private Placement RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Share capital 30,407 30,452 31,752 34,037 42,425 54,628 (1) Share premium 6,634 6,687 9,807 12,395 35, ,539 Treasury (1,657) (1,777) (1,777) Reserves 2,185 2,185 1,925 1, Retained profits 11,595 11,595 11,595 11,595 11,595 11,595 Shareholders funds 49,164 49,142 53,302 59,952 90, ,009 in issue ( 000) 304, , , , , ,281 Less: Treasury ( 000) 3,522 (2) 3,739 3, in issue (excluding treasury ) ( 000) 300, , , , , ,281 NA per share (RM) Total borrowings (RM 000) 18,074 (4) 15,859 15,859 15,859 15,859 (7) - Gearing ratio (times)

12 Notes: (1) 33,000 and 415,600 ESOS exercised after 31 December 2013 up to 23 April 2014 at an exercise price of RM0.18 and RM0.22 per ESOS (2) 3,739,200 N2N Shares are held as treasury as at 23 April 2014 (3) Warrants exercised after 31 December 2013 up to 23 April 2014 at an exercise price of RM0.32 per warrant and after transferring warrants reserve to share premium of RM0.02 per warrant (4) Total borrowings as at 31 March 2014 (5) Assuming all outstanding ESOS are exercised at the exercise price of RM0.18 to RM0.22 per share (6) Assuming Warrants are exercised at an exercise price of RM0.38 per warrant (7) After incorporating the repayment of borrowings of RM million (8) Based on the issue price of the Placement Shares at RM0.89 per Placement Share (9) After deducting estimated expenses of RM746,000 in respect of the Proposed Private Placement from the share premium account 12

13 4.4 Shareholdings of substantial shareholders The effects of the Proposed Private Placement on the shareholdings of the substantial shareholders of N2N based on the Company s Register of Substantial Shareholders as at 23 April 2014 are set out below: Name N2N Connect Holdings Sdn Bhd Amsec Nominees (Asing) Sdn Bhd Exempt An for AmFraser Securities Pte Ltd (66580 A CL) As at 23 April 2014 After the Proposed Private Placement Minimum Scenario Maximum Scenario <------Direct------> <------Indirect-----> <-----Direct-----> <------Indirect------> <------Direct------> <-----Indirect------> 000 % Tiang Boon Hwa 10, Lai Su Ping 12, % 000 % 000 % 000 % 000 % 135, , , , , , (1) 147, , (2) 146, , (1) 147, , (2) 146, , (1) 200, (2) 199, QUICK , , Nikkei , (3) 61, , (3) 61, Notes: (1) Deemed interested by virtue of his interest in N2N Connect Holdings Sdn Bhd and his spouse, Lai Su Ping s interest, pursuant to Sections 6A and 134 of the Act. (2) Deemed interested by virtue of her interest in N2N Connect Holdings Sdn Bhd and her spouse, Tiang Boon Hwa s interest, pursuant to Sections 6A and 134 of the Act. (3) Deemed interested by virtue of its interest in QUICK. 13

14 4.5 Convertible securities Save for the ESOS and Warrants 2013/2018, as at 23 April 2014, the Company does not have any other existing convertible securities. The Proposed Private Placement will not result in any adjustment to the respective exercise price and/or number of outstanding ESOS or Warrants 2013/ APPROVALS REQUIRED The Proposed Private Placement is subject to the approvals being obtained from the following: (i) (ii) (iii) Bursa Securities for the listing of and quotation for the Placement Shares on the ACE Market of Bursa Securities; Shareholders of N2N at an extraordinary general meeting ( EGM ) to be convened; and any other relevant authorities/parties, if required. 6. INTER-CONDITIONALITY The Proposed Private Placement, Proposed Increase in Authorised Share Capital and the Proposed M&A Amendment are inter-conditional upon each other. Save for the above, the Proposals are not conditional upon any other corporate proposals. 7. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders of the Company and/or persons connected to them has any interest, directly or indirectly, in the Proposals. 8. ADVISER AND PLACEMENT AGENT HwangDBS has been appointed by N2N to act as its Adviser and Placement Agent for the Proposed Private Placement. 9. DIRECTORS STATEMENT The Board, after taking into consideration all aspects of the Proposals, is of the opinion that the Proposals are fair and reasonable, and in the best interest of the Company. 10. APPLICATION TO THE REGULATORY AUTHORITIES The relevant applications to the regulatory authorities in relation to the Proposed Private Placement will be made within two (2) months from the date of this announcement. 14

15 11. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, and subject to the receipts of all the required approvals from the relevant parties and authorities, the Proposed Private Placement is expected to be completed by the second quarter of DOCUMENT AVAILABLE FOR INSPECTION The SAs will be made available for inspection at the registered office of N2N during office hours from Monday to Friday (except public holidays) at 3 rd Floor, No. 17 Jalan Ipoh Kecil, Kuala Lumpur, from the date of this announcement up to the date of the EGM to be convened. This announcement is dated 24 April