ACQUISITION OF 1,000,000 ORDINARY SHARES OF RM1.00 EACH REPRESENTING 100% EQUITY INTEREST IN THE ISSUED AND PAID-UP SHARE CAPITAL OF INNOBIRD (M) SDN BHD 1.0 INTRODUCTION Further to our announcement on 14 August 2009, the Board of Inch Kenneth Kajang Rubber PLC ( IKKR ) wishes to announce that IKKR had on 24 August 2009 entered into a Share Sale Agreement ( Agreement ) with Mhd Tajuddin bin Mhd Taha and Mohd Ridzwan bin Jamaludin (collectively, the Vendors ) to acquire from the Vendors, 1,000,000 ordinary shares of RM1.00 each representing 100% equity interest in the issued and paid-up share capital of Innobird (M) Sdn Bhd ( Innobird ) ( Sale Shares ) for a purchase consideration of RM8,300,000 ( Purchase Price ) ( Acquisition ). Innobird is the beneficial owner of 5,000,000 ordinary shares of Thai Baht Ten (THB 10) each comprising the entire issued and paid up share capital of Supara Company Limited ( Supara ), a private company limited by shares incorporated in Thailand with its principal business in producing constant viscosity (CV) rubber in Thailand. 2.0 THE ACQUISITION 2.1 Details of the Acquisition The Acquisition entails the acquisition of the Sale Shares by IKKR for a cash consideration of RM8,300,000 subject to the terms and conditions stipulated in the Agreement. 2.2 Information of Innobird Innobird is a company incorporated in Malaysia on 28 April 2008. The authorised share capital of Innobird is RM1,000,000 comprising of 1,000,000 shares and its paid up capital is RM1,000,000. The principal business of Innobird is investment holding. Innobird is the registered and beneficial owner of Supara (collectively, the Group ). 2.3 Information of Supara Supara was incorporated in Thailand as a limited company under Thai Civil and Commercial Law on 25 June 1991. The authorised share capital of Supara is 50,000,000 Baht comprising 5,000,000 ordinary shares of 10.00 Baht each whilst its issued and paid-up share capital was 50,000,000 Baht comprising 5,000,000 ordinary shares of 10.00 Baht each. The registered office and the place of business of Supara is located at 77/17 Moo 4, Bangmaruan Road, Tambon Bang Muang, Takuapa, Phang-Nga, Thailand.
Supara is principally engaged in the business of producing and exporting CV rubber blocks mainly to Europe, United States of America, Japan, Singapore and Malaysia. The rubber factory is capable of producing 3 tonnes of processed rubber blocks per hour and running with 3 shifts for a maximum production of 1,800 tonnes of rubber blocks per month. 2.4 Details of the Vendors The shareholders and the directors of Innobird are Mhd Tajuddin bin Mhd Taha (holding 200,000 of shares) and Mohd Ridzwan bin Jamaludin (holding 800,000 of shares). Mhd Tajuddin bin Mhd Taha and Mohd Ridzwan bin Jamaludin are both Malaysian citizen at the age of 59 years and 26 years respectively. 2.5 Basis of Purchase Price and source of funding The Purchase Price was arrived at on a willing buyer-willing seller basis after taking into consideration the following : (i) Supara s Net Tangible Assets as per management accounts as at 31 July 2009 of 64,830,547 Baht. (Note: Supara s Net Tangible assets as at 31 December 2008 (audited accounts) was 64,036,332 Baht.) (THB100 = RM10.3263) (ii) The prospects of rubber market industry (iii) The potential future earnings of Supara in rubber business The cash consideration of RM8,300,000 will be funded via internally generated funds. 2.6 Liabilities to be assumed pursuant to the Acquisition The Group currently has no bank borrowings. Therefore, IKKR will not assume any additional liabilities (including contingent liabilities and guarantees (if any)) under the Acquisition. The existing liabilities of the Group will be settled by the Group in the normal course of business. 3.0 RATIONALE OF THE PROPOSED ACQUISITION IKKR s venture into the rubber business represents part of its strategy to go back to its original business in relations to rubber. IKKR will be able to gain knowledge in the rubber industry and will try to enhance it further by going into different rubber based products. This will then add on to IKKR s product portfolio. Further more, the Acquisition will increase IKKR turnover and to provide some new cashflows to the group.
The Acquisition represents a strategic investment by IKKR and are expected to contribute positively to the earnings as well as the shareholders value of the IKKR Group in the medium to long term. 4.0 SALIENT TERMS OF THE AGREEMENT Salient terms of the Agreement are as follows : (i) (ii) Subject to the terms and conditions of the Agreement, the Vendors hereby agree to sell to IKKR and IKKR hereby agrees to purchase from the Vendors the Sale Shares free from all claims, charges, liens, encumbrances and equities together with all rights attached thereto and all dividends and distributions declared paid or made in respect thereof as at the completion date, for the consideration stated in Section (ii) hereof. The total Purchase Price for the purchase of the Sale Shares shall be the sum of Ringgit Malaysia Eight Million Three Hundred Thousand Only (RM8,300,000.00) only and shall be paid by IKKR to the Vendors in the following manner:- (a) (b) (c) a sum of Ringgit Malaysia Eight Hundred and Thirty Thousand (RM830,000.00) being a sum equivalent to Ten percent (10%) of the Purchase Price on the date of this Agreement as deposit; a sum of Ringgit Malaysia Five Million Eight Hundred and Ten Thousand (RM5,810,000.00) being a sum equivalent to Seventy percent (70%) of the Purchase Price (hereinafter referred to as the Second Installment ) on the completion date as part payment towards the account of the Purchase Price; and the remaining sum of Ringgit Malaysia One Million Six Hundred and Sixty Thousand (RM1,660,000.00) being a sum equivalent to Twenty percent (20%) of the Purchase Price shall be paid on or before the 31 st of December 2009. (iii) (iv) The sale and purchase of the Sale Shares is conditional upon the approval of applicable regulatory authorities in Malaysia which is applicable to this transaction (if any) ( Conditions Precedent ). Completion of the sale and purchase of the Sale Shares shall take place on the completion date at the office of the Company, when the following actions shall be taken by the parties hereto:- (a) By the Vendors The delivery of the Vendors Documents to the Purchaser and the delivery of all accounts, books, registers, records and other documents whatsoever of or pertaining to the Company and its
business to the Purchaser; and (b) By the Purchaser Simultaneously, the Purchaser shall pay the Second Installment to the Vendors in accordance with the provisions of Section (ii) (b) hereof. (v) Notwithstanding anything herein contained to the contrary, if IKKR in its sole and absolute opinion finds anything unacceptable, IKKR shall, at its sole and absolute discretion, be entitled to elect either:- (a) (b) to proceed with the sale and purchase transaction herein contemplated at the price, upon the terms and subject to the conditions to be re-negotiated and agreed upon by the parties hereto mutually; or to rescind the Agreement and the Vendors shall forthwith and in any event within Seven (7) days from the date of the said rescission refund the Deposit to IKKR together with interest whereupon this Agreement shall be of no further effect and shall become null and void, thereafter neither of the parties hereto shall have any further claims against each other. 5.0 FINANCIAL EFFECT OF THE ACQUISITION The acquisition will not have any effect on the share capital and the substantial shareholders shareholding of IKKR. The Acquisition is not expected to have any material effect on the net assets and gearing of IKKR for the financial year ending 31 December 2009 but is expected to contribute positively to the future earnings and earnings per share of the IKKR Group. 6.0 PROSPECTS AND RISKS The prospects of the Group is depending on the prospects of rubber business industry. Supara has a good prospect in view that Supara is producing high end CV rubber products which are mainly used in the production of rubber bearings, mountings, racing and aeroplane tyres and others which requires a high strength rubber. CV rubber supplies are limited as not many rubber factories has the expertise in producing and maintaining the viscosity of the rubber. Furthermore, the purchase of latex were made from the small rubber planters surrounding the factory within 50 to 60 kilometres radius. The Company has no difficulties in getting the supply of latex as there are no nearby competitors. The nearest competitors are in Phang-Nga Town and Surat Thani, both about 100 kilometres of distance. Nevertheless, the Group is subject to general risks such as government policies, economic conditions as well as the business risks inherent in the rubber industry which include but are not limited to the fluctuations in demand and commodity prices, weather conditions, pests
and diseases, threat of substitutes, constraint of supply of labour and rising cost of productions. 7.0 APPROVALS REQUIRED The Acquisition is not subject to the approval of the shareholders of IKKR or any other relevant authorities. 8.0 DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED None of the Directors, major shareholders and or/persons connected with them, has any interest, direct or indirect, in the Acquisition. 9.0 DIRECTORS STATEMENT The Board, having considered all aspects of the Acquisition, is of the opinion that the Acquisition is in the best interest of IKKR Group. 10.0 ESTIMATED TIME FRAME FOR COMPLETION The Acquisition is expected to be completed in a month time or earlier from the date of this announcement subject to Section 4.0(ii)(b) above. 11.0 COMPLIANCE WITH THE SECURITIES COMMISSION S ( SC ) GUIDELINES ON THE OFFERING OF EQUITY AND EQUITY-LINKED SECURITIES ( SC GUIDELINES ) To the best knowledge of the Board of IKKR, the Acquisition do not depart from the SC Guidelines. 12.0 DOCUMENTS FOR INSPECTION A copy of the Agreement will be available for inspection at IKKR registered office in Malaysia at 22 nd Floor, Menara Promet, Jalan Sultan Ismail, 50250 Kuala Lumpur, during business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement.