SASBADI HOLDINGS BERHAD - PROPOSED ACQUISITION OF 100% EQUITY INTEREST IN UNITED PUBLISHING HOUSE (M) SDN BHD

Transcription

1 SASBADI HOLDINGS BERHAD - PROPOSED ACQUISITION OF 100% EQUITY INTEREST IN UNITED PUBLISHING HOUSE (M) SDN BHD 1. INTRODUCTION The Board of Directors of Sasbadi Holdings Berhad ( Sasbadi Holdings or the Company ) is pleased to announce that the Company has on 15 July 2016 entered into a share acquisition agreement ( SAA ) with Wong Chee Kheong and Lim Biou Chong (collectively referred to as the Vendors ) to acquire 100% of the issued and paid-up share capital of United Publishing House (M) Sdn Bhd ( United Publishing ), comprising 200,000 ordinary shares of RM1.00 each ( Sale Shares ), for a purchase price of RM4,350, only ( Purchase Price ) subject to the terms and conditions in the SAA ( Proposed Acquisition ). Upon completion of the Proposed Acquisition, United Publishing will become a wholly-owned subsidiary of Sasbadi Holdings. 2. DETAILS OF THE PROPOSED ACQUISITION 2.1 Proposed Acquisition The Proposed Acquisition entails the proposed acquisition of the Sale Shares by the Company from the Vendors at the Purchase Price and upon the terms and conditions in the SAA. 2.2 Information on Sasbadi Holdings Sasbadi Holdings was incorporated in Malaysia under the Companies Act, 1965 ( the Act ) as a private limited company on 30 October 2012 and converted into a public limited company on 15 March It was listed on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 23 July Sasbadi Holdings is principally involved in investment holding whilst the Sasbadi Holdings Group (i.e. Sasbadi Holdings and its subsidiaries) is principally involved in providing education solutions, focusing on publishing printed and online/digital educational materials and resources (catering mainly to students in national schools), supplementary educational materials and general titles, and distribution of applied learning products. As at 15 July 2016, Sasbadi Holdings has an authorised share capital of RM500,000, comprising 2,000,000,000 ordinary shares of RM0.25 each, of which RM69,850, comprising 279,400,000 ordinary shares of RM0.25 each have been issued and fully paid-up. 2.3 Information on United Publishing and the Vendors United Publishing was incorporated in Malaysia under the Act as a private limited company on 5 June 1973 under the name of United Publishing House & Stationers Sdn Bhd. On 21 December 1988, it changed to and assumed its present name. It is a major dictionary publisher but also engaged in the publishing of books and trading of all kind of printed matters, focusing on early education materials, novels, story books, comic books and school reference and work books in the Chinese language.

2 As at 15 July 2016, United Publishing does not have any subsidiary or associated company. Nevertheless, United Publishing has, on 15 July 2016, entered into various share transfer agreements with Wong Chee Kheong ( WCK ) (i.e. the controlling shareholder of United Publishing) and a few other shareholders of the following companies: (iii) (iv) UPH Distributor Sdn Bhd ( UPHDist ); Penerbitan Minda Sdn Bhd ( PMinda ); Penerbitan Daya Sdn Bhd ( PDaya ); and G-Apple Studio Sdn Bhd ( GApple ), (collectively, Future Subsidiaries ), for the acquisition by United Publishing of 100% equity interests in each of the Future Subsidiaries for a total purchase consideration of RM800, ( STA Consideration ) ( Share Transfer Agreements ). WCK is the controlling shareholder of the Future Subsidiaries. The Future Subsidiaries are involved in the publishing, trading and distribution of books, magazines and educational materials/products, but are currently inactive. The STA Consideration was arrived at after taking into consideration the unaudited net assets/ adjusted net assets of UPHDist, PMinda, PDaya and GApple as at 31 December 2015 of RM142,176.00, RM22,271.00, RM516, and RM24,903.00, respectively. As at 15 July 2016, United Publishing has an authorised share capital of RM1,000, comprising 1,000,000 ordinary shares of RM1.00 each, of which RM200, comprising 200,000 ordinary shares of RM1.00 each have been issued and fully paid-up. The shareholders/vendors of United Publishing are as follows: Shareholder/Vendor No. of ordinary shares held % held Wong Chee Kheong 199, % Lim Biou Chong % Total 200, % The directors of United Publishing are Wong Chee Kheong, Lim Biou Chong and Cheah Mei Wan. United Publishing had recorded an audited profit after tax of RM114, for the financial year ended ( FYE ) 30 June 2015, while UPHDist, PMinda and GApple had recorded audited loss after tax of RM545,777.00, RM4, and RM12,045.00, respectively for the FYE 30 June PDaya had recorded an audited loss after tax of RM888, for the FYE 31 December The audited net assets/(liabilities) of United Publishing, PMinda, UPHDist and GApple as at 30 June 2015 were RM1,887,145.00, RM22,698.00, (RM319,149.00) and (RM57,741.00), respectively while the audited net assets of PDaya as at 31 December 2015 was RM186,

3 2.4 Basis of Arriving at the Purchase Price The Purchase Price was arrived at on a willing buyer willing seller basis after taking into consideration, inter alia, the following: (iii) (iv) The opportunity for the Sasbadi Holdings Group to enhance its presence in the Chinese language publication segment in Malaysia; The unaudited book value of the net assets of United Publishing as at 31 December 2015 of RM2,116,274.00; The intellectual property rights and the production files for the titles owned by United Publishing and the Future Subsidiaries which total approximately 880 titles at present; and ; The future earnings potential of United Publishing and the Future Subsidiaries. 2.5 Mode of Satisfaction The Purchase Price shall be satisfied entirely by way of cash in the following manner: Upon execution of the SAA, a sum of RM1,300, shall be paid by the Company to the Vendors by way of deposit and towards the payment of the Purchase Price; and On the completion date, the balance purchase price of RM3,050, shall be paid by the Company to the Vendors. The parties agree that in the event the due diligence review as stated in paragraph 3(v) below shows that the book value of the net assets of United Publishing as at 31 December 2015 shall be less than RM2,116, by a sum of RM100, or more ( Shortfall ), the Company shall have the right to reduce the Purchase Price by the amount of the Shortfall. In addition to the Purchase Price, the Company will settle the STA Consideration of RM800, on behalf of United Publishing on the completion date. The Purchase Price and the STA Consideration will be entirely funded by the portion of the proceeds raised by the Company from its private placement exercise completed on 20 January 2016, which has been earmarked for financing of acquisition(s) of publishing/ education/ education-related business(es), or intellectual property rights. 2.6 Liabilities to be Assumed by the Company Save for the settlement of the STA Consideration of RM800, by the Company on behalf of United Publishing as disclosed in paragraph 2.5 above, there are no other liabilities to be assumed by the Company pursuant to the Proposed Acquisition. United Publishing and the Future Subsidiaries will settle their existing liabilities, as and when due, in the ordinary course of business. 3

4 3. SALIENT TERMS OF THE SAA The completion of the sale and purchase of the Sale Shares is conditional upon the following conditions being satisfied within a period of three (3) months from the date of the SAA or within such further period as may be mutually agreed upon by the parties in writing, namely: (iii) (iv) (v) (vi) the approval or consent of the financiers of United Publishing and/or the Future Subsidiaries (if required) in respect of the change in shareholdings contemplated in the Proposed Acquisition in accordance with the terms of any banking or financial facilities granted to United Publishing and/or the Future Subsidiaries; the approval or consent of any third party to the sale and purchase of the Sale Shares (if required) in accordance with the terms of any contract or agreement of a material nature entered into between United Publishing or any of the Future Subsidiaries and such third party; the approval or waiver of any regulatory requirement by any other relevant authorities, if required; the completion of the acquisition by United Publishing of each of the Future Subsidiaries pursuant to the terms and conditions of the Share Transfer Agreements; the Company having conducted a legal, financial, tax and operational due diligence review on the affairs of United Publishing and the Future Subsidiaries and being reasonably satisfied with the due diligence findings thereof; and resolution of any issues arising from the said due diligence findings to the reasonable satisfaction of the Company. Although it is intended that the sale and purchase of the Sale Shares will only be completed upon all the relevant conditions precedent stated above being satisfied, the parties acknowledge that the relevant conditions are stipulated for the benefits of the Company and therefore the Company shall be entitled at its sole discretion and to the extent permissible by law, waive any of the said conditions not satisfied. 4. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 4.1 Share Capital The Proposed Acquisition will not have any effect on the issued and paid-up share capital of Sasbadi Holdings as it is satisfied entirely by cash. 4.2 Earnings and Net Assets Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed before the end of the financial year ending 31 August In this regard, the Proposed Acquisition is expected to start contributing to the earnings and net assets of the Sasbadi Holdings Group in the financial year ending 31 August

5 4.3 Substantial Shareholders Shareholdings The Proposed Acquisition will not have any effect on the shareholdings of the substantial shareholders of Sasbadi Holdings as it is satisfied entirely by cash. 4.4 Gearing Given that the Proposed Acquisition is financed entirely by cash from the private placement proceeds as described in paragraph 2.5 above, it will not have any effect on the gearing of Sasbadi Holdings. 5. RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition will provide the Sasbadi Holdings Group with the opportunity to increase its market presence in the Chinese language publication segment and enhance its product offerings in the form of dictionaries, early education materials, novels, story books, comic books, etc. In addition, the Sasbadi Holdings Group intends to leverage on its competitive strengths such as economies of scale, wide distribution network, expansive digital/online resources, etc, to enhance the profitability and product offerings of United Publishing and the Future Subsidiaries. 6. PROSPECTS The Malaysian Economy The Malaysian economy expanded by 4.2% in the first quarter of 2016 (4Q 2015: 4.5%). The slight moderation in growth mainly reflected external shocks to the economy and cautious spending by the private sector. On the supply side, growth continued to be driven by the major economic sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 1.0% (4Q 2015: 1.2%). Private sector activity remained the key driver of growth, although the pace of expansion moderated amid on-going adjustments in the economy. Private consumption expanded by 5.3% (4Q 2015: 4.9%), supported by continued wage and employment growth. Private investment grew at a slower rate of 2.2% (4Q 2015: 4.9%). This was mainly attributable to the cautious business sentiments and lower investments in the upstream mining sector. Growth of public consumption improved to 3.8% in the first quarter (4Q 2015: 3.3%) due to higher spending on emoluments. On the other hand, public investment declined by 4.5% (4Q 2015: 0.4%), due to lower spending on fixed assets by the public corporations. On the supply side, the major economic sectors registered a moderate growth performance. The services sector recorded a sustained growth on account of the continued expansion in domestic demand. In the manufacturing sector, growth was supported by the continued expansion in both export- and domestic-oriented industries, although at a slower pace. The agriculture sector registered a contraction, as adverse weather conditions led to lower production of palm oil. The mining sector turned around to record a marginally positive growth following an improvement in the production of natural gas. 5

6 Inflation, as measured by the annual change in the Consumer Price Index (CPI), was higher at 3.4% in the first quarter of 2016 due to the reduction in electricity tariff rebates in January 2016 and the base effect from the larger decline in domestic fuel prices in the first quarter of Going forward, the Malaysian economy is expected to remain on a sustained growth path of 4-4.5%, despite the challenging economic environment globally and domestically. Domestic demand will continue to be the principal driver of growth, sustained primarily by private sector spending. However, domestic consumption is expected to grow at a moderate pace as households continue to adjust to the higher cost of living. Overall investment is also expected to grow at a slower pace but will remain supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors. Uncertainties in the external environment and the on-going adjustments in the domestic economy pose downside risks to growth. (Source: Bank Negara Malaysia Quarterly Bulletin, First Quarter 2016) The Company The Sasbadi Holdings Group has been pursuing growth via a two (2) - pronged strategy, i.e. organic and inorganic. As discussed in paragraph 5 above, the Proposed Acquisition will provide the Sasbadi Holdings Group with the opportunity to enter into the dictionary segment. It will also increase the Sasbadi Holdings Group s market presence in the Chinese language publication segment and enhance its product offerings in the form of early education materials, novels, story books, comic books, etc. The Proposed Acquisition is therefore in line with the overall growth strategy of the Sasbadi Holdings Group to enhance its earnings and position as a provider of education solutions. 7. RISK FACTORS The Sasbadi Holdings Group does not foresee any exceptional risks in connection with the Proposed Acquisition other than the normal operational risks associated with the Sasbadi Holdings Group s business, such as the risk of increase in paper prices, risk of stock returns and obsolescence, credit risk, dependency on experienced and skilled editors, risk of infringement of intellectual property rights, etc. The Proposed Acquisition is also subject to the risk of non-completion of the SAA. Having been in the publishing industry for more than 30 years, the Sasbadi Holdings Group has the necessary experience and expertise to address and mitigate the above risks. 8. APPROVALS REQUIRED The Proposed Acquisition is not subject to the approval of the shareholders of Sasbadi Holdings or any relevant authorities. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed before the end of the financial year ending 31 August

7 10. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or major shareholders of Sasbadi Holdings or persons connected to them has any interest, direct or indirect, in the Proposed Acquisition. 11. DIRECTORS STATEMENT The Board of Directors of Sasbadi Holdings is of the opinion that the Proposed Acquisition is in the best interest of the Sasbadi Holdings Group. 12. PERCENTAGE RATIO APPLICABLE TO THE TRANSACTIONS PURSUANT TO PARAGRAPH 10.02(g) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA SECURITIES The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Securities is 12.40%. 13. DOCUMENTS AVAILABLE FOR INSPECTION A copy of the SAA is available for inspection at the registered office of Sasbadi Holdings at Suite 11.1A, Level 11, Menara Weld, 76, Jalan Raja Chulan, Kuala Lumpur, during office hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 15 July