OCEAN SKY INTERNATIONAL LIMITED (Incorporated in the Republic of Singapore) (Company Registration No E)

Transcription

1 OCEAN SKY INTERNATIONAL LIMITED (Incorporated in the Republic of Singapore) (Company Registration No E) PROPOSED DISPOSAL OF OCEAN SKY GLOBAL (S) PTE. LTD. 1. INTRODUCTION The Board of Directors (the Board ) of Ocean Sky International Limited ( OSIL or the Company and together with its subsidiaries, the Group ) wishes to announce that the Company has entered into a conditional sale and purchase agreement dated 6 January 2013 (the Agreement ) with Luen Thai Holdings Limited ( Luen Thai ) and Sunny Force Limited (the Purchaser ), pursuant to which the Company has agreed to sell and the Purchaser has agreed to acquire all of the issued share capital of Ocean Sky Global (S) Pte. Ltd. ( OSG ) for an aggregate cash consideration of US$55,000,000, subject to the terms and conditions of the Agreement (the Proposed Disposal ). Unless otherwise stated, an exchange rate of US$1 : S$ has been used in this announcement. 2. INFORMATION ON OSIL AND OSG OSIL is listed on the main board of the Singapore Exchange Securities Trading Limited, and is primarily engaged in the business of designing, manufacturing, sales and marketing of apparel (the Apparel Operations ). As announced by the Company on 10 August 2012, pursuant to an internal restructuring exercise (the Reorganisation ), the Company will transfer the entire Apparel Operations as engaged by the Company and certain of its subsidiaries as a going concern to its wholly-owned subsidiary, OSG. As announced by the Company earlier today, the Company and OSG have entered into a supplemental deed dated today to amend the terms of the Reorganisation (the Supplemental Deed ). Pursuant to the Supplemental Deed, OSG will transfer certain assets to the Company, which will result in a reduction in the consideration to be paid by OSG to OSIL for the Reorganisation from US$37,240,657 to US$16,223,245. Pursuant to the terms of the Agreement, the Company shall effect the Reorganisation such that OSG will become the immediate holding company of the following subsidiaries (the Target Subsidiaries ) on or before completion of the Proposed Disposal ( Completion ): (a) Sunglobe Pte Ltd ; (b) Ocean Sky Apparel (VN) Limited Company; (c) Suntex Pte Ltd.; (d) Bright Sky Pte Ltd; (e) Bloom Time Embroidery Pte Ltd; and (f) Ocean Sky Marketing (H.K.) Limited. In this announcement, OSG and the Target Subsidiaries shall collectively be referred to as the OSG Group, and the Group excluding the OSG Group shall be referred to as the Retained Group. 1

2 3. INFORMATION ON THE PURCHASER AND LUEN THAI Luen Thai, together with its subsidiaries, is one of the leading apparel manufacturing and supply chain services providers worldwide and is principally engaged in the manufacture, trading, and retail of garments, textile products and accessories and the provision of freight forwarding and logistics services with operations in the United States, Indonesia, Philippines, and the People s Republic of China. Luen Thai is incorporated in the Cayman Islands and is listed on the main board of the Stock Exchange of Hong Kong Limited. The Purchaser is a wholly-owned subsidiary of Luen Thai and is incorporated in the British Virgin Islands. The Purchaser is principally engaged in investment holding. 4. RATIONALE AND BENEFITS The Proposed Disposal represents an excellent opportunity for the Group to unlock the value and realize its investment in the Apparel Operations at a satisfactory price. This will allow the Company to re-strategise its financial and capital resources to expand into other businesses or undertake new investment opportunities that may arise in the future. The Company intends to use the proceeds from the Proposed Disposal for future business and investment opportunities and is considering its options in relation to other business ventures. More information will be provided to the shareholders of the Company ( Shareholders ) at the appropriate juncture. Upon Completion, the Company intends to, subject to prevailing market conditions, pay a taxexempt special dividend of S$0.016 per ordinary share in the capital of the Company ( Share ), amounting to approximately US$5.8 million in aggregate. 5. PRINCIPAL TERMS OF THE AGREEMENT 5.1. Consideration Subject to the terms and conditions of the Agreement, the Company has agreed to sell and the Purchaser has agreed to purchase all the issued share capital of OSG (the Sale Shares ), free from encumbrances and together with all rights, dividends, benefits and entitlements attaching thereto, for an aggregate cash consideration (the Consideration ) of up to US$55,000,000 to be paid by the Purchaser to the Company in the following manner (the Consideration ): (a) (b) the Purchaser shall pay US$35,750,000 (the Initial Consideration ) to the Company at Completion; and subject to the adjustments (if any) provided for below, the Purchaser shall pay to the Company the sum of US$19,250,000 ( Second Tranche Consideration ) within 3 business days of the receipt by the Purchaser of the final balance sheet of the OSG Group as at the Completion Accounts Date 1 (the Final Completion Accounts ). The Second Tranche Consideration shall, in any one or more of the following circumstances, be: 1 Means the earlier of the date of Completion or 31 March 2013, provided that if Completion does not take place on 31 March 2013 it shall be on such other later date as the Company, the Purchaser and Luen Thai (collectively, the Parties ) may agree in writing, but in any event no later than the long-stop date of 30 April 2013 or such other date as the Parties may agree in writing (the Long Stop Date ). 2

3 (i) (ii) (iii) reduced by US$1.00 for every US$1.00 that the Pro Forma FY2012 Net Profit 2 is less than US$10,000,000; reduced by US$1.00 for every US$1.00 that the Completion NTA 3 is less than US$40,000,000; and reduced by US$1.00 for every US$1.00 that the Net Debt 4 exceeds US$2,400,000, provided that: (A) (B) under paragraphs (ii) and (iii) above, any surplus to the Completion NTA or any shortfall to the Net Debt (as defined below) will be set off against any surplus to the Net Debt or any shortfall to the Completion NTA (as the case may be), subject to a maximum set off of US$2,000,000 each; and the Second Tranche Consideration shall not be less than US$1.00 and shall not exceed US$19,250,000. The Consideration was determined at arm s length on a willing-buyer willing-seller basis, after taking into account factors such as the past operating performance of the OSG Group. To achieve a Completion NTA of at least US$40,000,000 and a Net Debt of not more than US$2,400,000 for the purposes of paragraphs (ii) and (iii) above, the Company may effect changes to the capital structure of any company in the OSG Group, including share buybacks, capital reductions, declaring dividends, distributions in specie, factoring of debts or receivables, assignment and/or transfer of debt or receivables, assigning, transferring or selling any aging inventory without active delivery orders and disposing of the Hong Kong Properties (as defined below) (the Restructuring ) Escrow Arrangement Pursuant to the Agreement, the Parties have entered into an escrow agreement (the Escrow Agreement ) with the escrow agent UOB Kay Hian Private Limited (the Escrow Agent ). Upon the signing of the Agreement, the Purchaser shall pay a deposit of US$2,750,000 (the Deposit ) to the Escrow Agent to be held and applied on, inter alia, the following terms and conditions: (a) the Deposit will upon Completion represent part payment of the Initial Consideration and shall be paid to the Company upon Completion; 2 Means the audited combined net profit after tax (prepared in the business perspective in accordance with International Financial Reporting Standards) of the OSG Group excluding one-time disposal of assets and extraordinary gains or losses and any discontinued operations (including but not limited to the reversal of provisions for tax, accounts receivable and inventory, etc), as shown in the audited combined accounts of the OSG Group for the year ended 31 December 2012 and audited by the Purchaser s accountants. The Pro Forma FY2012 Net Profit will be prepared on the assumption that the Reorganisation has been completed on 1 January Means the consolidated tangible net asset value of the OSG Group, as shown in the draft or final balance sheet of the OSG Group as at the Completion Accounts Date (as the case may be). 4 Means the aggregate interest bearing liabilities of the OSG Group with unrelated parties less the aggregate of all cash and bank balances and fixed deposits of the OSG Group as at the Completion Accounts Date, as shown in the draft or final balance sheet of the OSG Group as at the Completion Accounts Date (as the case may be). 3

4 (b) the Deposit shall be refunded and released to the Purchaser upon demand by the Purchaser when the Agreement is rescinded or terminated within the due diligence period, thereafter which subject to paragraph (c) below, the Deposit will (i) upon Completion represent part payment of the Initial Consideration; or (ii) in any other circumstances be released to the Company. If the Deposit is to be refunded and released to the Purchaser in the above manner, the Purchaser shall reimburse the Company the costs and expenses actually incurred by the Company in the negotiation, preparation and performance of the Agreement up to a maximum sum of US$500,000, and the remainder of the Deposit shall be released to the Purchaser. The Company shall execute and deliver to the Purchaser a supplemental disclosure letter upon Completion. In the event that any information disclosed in the supplemental disclosure letter shows that any change, event or circumstance has occurred which has a material adverse change in and effect on the business, assets, liabilities and financial condition of the OSG Group, the Purchaser shall be entitled to have full refund of the Deposit and to terminate the Agreement forthwith. (c) if the due diligence period is extended by mutual agreement between the Company and the Purchaser (the Extended Due Diligence Period ), US$1 million of the Deposit shall become non-refundable and will either (i) upon Completion represent part payment of the Initial Consideration; or (ii) in any other circumstances be released to the Company. The remaining US$1,750,000 of the Deposit (the Remaining Deposit ) shall be refunded and released to the Purchaser only if the Agreement is validly rescinded or terminated within the Extended Due Diligence Period, thereafter which the Remaining Deposit will either (i) upon Completion represent part payment of the Initial Consideration; or (ii) in any other circumstances be released to the Company Conditions Precedent Completion shall be conditional upon, inter alia, the following: (a) (b) (c) (d) the Company and the Purchaser having complied fully with their respective precompletion obligations as provided in the Agreement. Such pre-completion obligations include that the Company shall procure that from the date of the Agreement and up to and including the date of completion (the Completion Date ), each company in the OSG Group will conduct its business in the ordinary course, save for the Restructuring and/or the Reorganisation. the approval of the shareholders of the Company being obtained at any necessary extraordinary general meeting of such shareholders for the sale of the Sale Shares by the Company, on the terms and subject to the conditions of the Agreement; the approval of the shareholders of the Purchaser and Luen Thai being obtained at any necessary extraordinary general meeting of such shareholders for the purchase of the Sale Shares by the Purchaser, on the terms and subject to the conditions of the Agreement; up to and including the Completion Date, no injunction, restraining order or other order or any other legal or regulatory restraint or prohibition having been issued or made by any court of competent jurisdiction or any other person which prevents the 4

5 consummation of the transactions contemplated by the Agreement; (e) (f) (g) (h) (i) (j) (k) (l) (m) all necessary approvals having been obtained for the transactions contemplated under the Agreement and the disclosure letters to the Agreement (collectively, the Transaction Documents ), whether pursuant to law, regulatory compliance or otherwise, and if such approvals are obtained subject to any conditions and where such conditions affect the Company, such conditions being acceptable to the Company, and if such conditions are required to be fulfilled before Completion, such conditions being fulfilled before Completion; the Reorganisation having been fully, validly and legally completed; the warranties given by the Company under the Agreement being true and accurate in all material respects and not misleading at Completion; no change, event or circumstance having occurred which has a material adverse change in and effect on the business, assets, liabilities and financial condition of the OSG Group; the Company having used its reasonable endeavours to facilitate the Purchaser to undertake a legal, financial, operational, tax, accounting and business due diligence investigation in respect of the OSG Group, and the results of which being satisfactory to the Purchaser in its reasonable discretion within the due diligence period. If the Purchaser is not satisfied with the results of the due diligence investigation by the end of the due diligence period, the Company may extend the due diligence period by mutual agreement with the Purchaser; the OSG Group and all its assets and properties having become free from all encumbrances, save for the Hong Kong Properties, and encumbrances entered into in the ordinary course of business; OSG having entered into a service contract with Mr. Ang Boon Chong on terms acceptable to each of the Purchaser and Mr. Ang Boon Chong; the Company having provided to the Purchaser legal opinions issued by reputable professional firms to the Company, in each case appointed by the Company at the Company s cost, in Cambodia, Singapore and Vietnam confirming that the Reorganisation has been validly and legally completed; and the warranties given by the Purchaser and Luen Thai under the Agreement being true and accurate in all material respects and not misleading at Completion. The Purchaser may, to such extent as the Purchaser thinks fit and is legally entitled to do so, waive in whole or in part all or any of the conditions, except the conditions set out in paragraphs (a), (b), (c), (d), (e) and (m) above. If any of the conditions precedent in the Agreement are not satisfied or waived by the Long Stop Date, any party to the Agreement shall be entitled to treat the Agreement as terminated and the rights and obligations of the Parties thereunder shall cease, save in respect of any antecedent breach of the Agreement. 5

6 5.4. Hong Kong Properties One of the Target Subsidiaries, Ocean Sky Marketing (H.K.) Limited, currently owns properties located at (i) Flat D, 11/F., Tower 5, The Waterfront, 1 Austin Road West, Kowloon, Hong Kong and car parking space no. 267 on 2/F; and (ii) Duplex flat D, 33/F., Tower 5, The Waterfront, 1 Austin Road West, Kowloon, Hong Kong and car parking space no. 128 on basement 2 (collectively, the Hong Kong Properties ). The Hong Kong Properties will not be included as part of the assets of the OSG Group to be included in the Proposed Disposal. In the event that Ocean Sky Marketing (H.K.) Limited, has legal title to any of the Hong Kong Properties on Completion, Luen Thai and the Purchaser shall procure that Ocean Sky Marketing (H.K.) Limited shall dispose of such Hong Kong Properties within twelve (12) months of the Completion Date. Subject to the Company s payment of costs and expenses in connection with the disposal, all proceeds arising from the disposal of such Hong Kong Properties shall belong to the Company Obligation of Luen Thai To the extent permitted by the relevant law, Luen Thai shall procure the Purchaser to comply with its obligations under the Agreement, including doing and executing all such further acts, deeds, things and documents as may be reasonably necessary to give effect to the terms of the Agreement. Luen Thai and the Purchaser shall also jointly and severally give warranties and undertakings to the Company in relation to the obligations of the Purchaser under the Agreement Irrevocable Undertaking Capital Glory Limited, a controlling shareholder of Luen Thai, shall irrevocably undertake: (i) to vote in favour of the acquisition of the Sale Shares by the Purchaser for so long as the Purchaser is satisfied with the due diligence conducted pursuant to the Agreement and there has not been any breach of any term by the Company under the Agreement; and (ii) not to sell or otherwise dispose of its respective shares of Luen Thai prior to Completion as will result in Capital Glory Limited holding less than 50% of the voting shares of Luen Thai Banking and Financial Related Obligations Subject to obtaining the required consents from the relevant banks, Luen Thai undertakes to take over from the Company, whether by way of novation, assignment or otherwise, all banking and/or finance related obligations of the Company as set out in the Agreement (the Banking and Financing Obligations ) which were incurred in connection with the OSG Group and which remains outstanding as at the Completion Date. In the event that the above-mentioned required consents from the relevant banks are not granted, the Company shall be entitled to terminate the relevant Banking and Financing Obligations and give notice of such terminations to the relevant banks and Luen Thai. All costs and expenses (including but not limited to (i) the repayment of outstanding principal and interest; and (ii) payment of early termination charges or penalties (if any)) incurred in connection with such termination shall be borne by Luen Thai in full Personal Guarantees Subject to obtaining the required consents from the relevant banks or financial institutions (the HP Companies ), Luen Thai undertakes to (i) procure that Mr. Ang Boon Chong and Ms. Chong Chiak Yee be discharged from all the personal guarantees given by them (the Personal 6

7 Guarantees ); and (ii) procure that a suitable replacement guarantor(s) be appointed, in respect of certain hire purchase agreements as set out in the Agreement. In the event that the required consents from the HP Companies are not granted, the Company shall be entitled to terminate the relevant hire purchase agreements and discharge all corresponding Personal Guarantees (and all liabilities arising therefrom) and give notice of such terminations to the relevant HP Companies and Luen Thai. All costs and expenses (including but not limited to (i) the repayment of outstanding principal and interest; and (ii) payment of early termination charges or penalties (if any)) incurred in connection with such termination and discharge shall be borne by Luen Thai in full Non-compete and Non-solicitation Obligations The Company shall not, and shall procure that each member of the Retained Group will not, directly or indirectly, either alone or jointly with any other person or in any capacity whatsoever, subject to the terms of the Agreement: (a) (b) (c) (d) (e) (f) for three (3) years after the Completion Date, save for Ocean Star Apparel (Guangzhou) Pte Ltd ( 长星服饰 ( 广州 ) 有限公司 ), carry on or be engaged or otherwise interested in any business in Cambodia, Hong Kong or Vietnam which competes with the Apparel Operations or any part of the Apparel Operations; for three (3) years after the Completion Date solicit the custom of any person who is or at any time during the two (2) years prior to Completion has been a customer or client of any company in the OSG Group; for three (3) years after the Completion Date solicit or entice away any employee of, or consultant to, any company in the OSG Group; at any time after Completion in the course of any business, use any trade, business or domain name or mark, design or logo previously used in the Apparel Operations by any company in the OSG Group. For the avoidance of doubt, notwithstanding the foregoing, the Retained Group will continue using its existing trade, business or domain name or mark, design or logo; at any time after Completion, challenge the validity or enforceability of any registered intellectual property of the OSG Group; or assist or incite any other person to do any of the above. The Purchaser and Luen Thai shall not, and shall procure that their subsidiaries shall not, directly or indirectly, either alone or jointly with any other person or in any capacity whatsoever, subject to the terms of the Agreement: (a) prior to Completion, or for a period of three (3) years after the date of the Agreement in the event Completion does not occur for any reason whatsoever, solicit the custom of any person who is or at any time during the two (2) years prior to the date of the Agreement has been a customer or client of any member of the Retained Group or the Group save for (i) existing customers of Luen Thai as at the date of the Agreement; (ii) customers that Luen Thai has approached during the two (2) years prior to the date of the Agreement; (iii) any person who has not issued a purchase order to any member of 7

8 the Retained Group or the Group for a continuous period of more than 12 months prior to the date of the Agreement; and (iv) customers of other companies to be acquired by Luen Thai in the future. (b) (c) (d) (e) prior to Completion, or for a period of three (3) years after the date of the Agreement in the event Completion does not occur for any reason whatsoever, solicit, employ or entice away any person who is or at any time during the year prior to the date of the Agreement an employee of, or consultant to, any member of the Retained Group or the Group with a salary exceeding US$500 per month; prior to Completion, or at any time in the event Completion does not occur for any reason whatsoever, use any trade, business or domain name or mark, design or logo previously used in the Apparel Operations by any member of the Retained Group or the Group or anything which is, in the opinion of the Company, capable of so being confused; prior to Completion, or at any time in the event Completion does not occur for any reason whatsoever, use, copy, pass off or challenge the validity or enforceability of any intellectual property which relates to the Apparel Operations or which has been registered; and assist or incite any other person to do any of the above. 6. FINANCIAL EFFECTS Pro forma unaudited combined financial information of the OSG Group Set out below are certain pro forma unaudited combined financial information of the OSG Group for each of the two financial years ended 31 December 2010 and 31 December 2011 respectively and the nine months financial period ended 30 September 2012, assuming that the Reorganisation has been completed on 1 January 2010: For the year ended 31 December 2010 For the year ended 31 December 2011 For the nine months ended 30 September 2012 Net profits / (loss) before tax (US$) 14.2 million 17.1 million 13.5 million Net profits / (loss) after tax (US$) 13.3 million 15.4 million 12.2 million The pro forma unaudited combined net tangible asset value of OSG as at 30 September 2012 is approximately US$33.3 million and the pro forma unaudited combined net asset value of OSG as at 30 September 2012 is approximately US$33.4 million Assuming that the Completion NTA is US$40,000,000 and there are no other adjustments made to the Consideration, the Consideration represents an excess of approximately US$15,000,000 over the Completion NTA. 8

9 Pro forma financial effects of the Proposed Disposal The pro forma financial effects of the Proposed Disposal, based on the audited consolidated statement of comprehensive income of the Group for the financial year ended 31 December 2011, statement of financial position of the Group as at 31 December 2011, pro forma unaudited combined statement of comprehensive income of OSG Group for the financial year ended 31 December 2011 and the pro forma unaudited statement of financial position of OSG Group as at 30 September 2012 are set out below. The pro forma financial effects are only presented for illustration purposes, and are not intended to reflect the actual future financial situation of the Company or the Group after Completion. Net Tangible Assets Assuming that the Proposed Disposal has been completed on 31 December 2011 with a Completion NTA of US$40,000,000, the effect on the net tangible assets ( NTA ) per share of the Company will be as follows: Before Proposed Disposal After Proposed Disposal NTA (US$) 70.4 million 85.4 million Number of shares 424,865, ,865,053 NTA per share (US cents) Earnings per Share Assuming that the Proposed Disposal has been completed on 1 January 2011, the effect on the earnings per share ( EPS ) of the Company will be as follows: Before Proposed Disposal After Proposed Disposal Profit after tax and minority interest (US$) 9.1 million 8.7 million Number of shares 424,865, ,865,053 EPS (US cents) MAJOR TRANSACTION The relative figures in respect of the Proposed Disposal, as computed on the bases set out in Rule 1006 of the Listing Manual and on the assumption that (i) the Completion NTA of the OSG Group is US$40,000,000; and (ii) the Consideration is US$55,000,000, are as follows: Bases in Rule 1006 (a) Net asset value of the assets to be disposed (US$) 40.0 million Net asset value of the Group as at 30 September million (US$) Size of relative figure 48.2% (b) Net profits (1) attributable to the Apparel Operations (US$) 13.5 million (2) Net profits of the Group for the 9 months ended million September 2012 (US$) Size of relative figure 127.4% 9

10 (c) Aggregate value of the Consideration (US$) 55.0 million Market capitalisation (4) of the Company (US$) 58.1 million (3) Size of relative figure 94.7% (d) Number of equity securities issued for the Acquisition Not applicable (5) Number of shares of the Company in issue - Size of relative figure - Notes: (1) Net profits means profit or loss before income tax, minority interests and extraordinary items. (2) Based on the pro forma unaudited combined net profit attributable to the Apparel Operations for the 9 month period ended 30 September (3) Based on an exchange rate of US$1 : S$ as at 4 January 2013 (4) Market capitalisation is determined by multiplying the number of shares of the Company in issue by the weighted average price of such shares transacted on 4 January 2013 (being the market day preceding the date of the Agreement). (5) This is not applicable to a disposal of assets. As the relative figures as computed on the bases set out in Rule 1006 exceeds 20%, the Proposed Disposal constitutes a major transaction within the meaning of Chapter 10 of the Listing Manual, and will be subject to the approval of Shareholders. The Company will make the necessary announcements and despatch the relevant documents at the relevant times. 8. INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS Save as disclosed above in this announcement, none of the directors or controlling shareholders of the Company has any interest, direct or indirect, in the Proposed Disposal (save for their respective shareholdings in the Company). 9. DOCUMENTS AVAILABLE FOR INSPECTION A copy of the Agreement is available for inspection during normal business hours at the registered office of the Company for three months from the date of this announcement. By Order of the Board Chia Yau Leong Company Secretary 6 January