KENCANA AGRI LIMITED (Incorporated in the Republic of Singapore) Company Registration Number: 200717793E INVESTMENT BY WILMAR INTERNATIONAL LIMITED (THROUGH ITS WHOLLY-OWNED SUBSIDIARY, NEWBLOOM PTE LTD) IN KENCANA AGRI LIMITED 1. INTRODUCTION The Board of Directors of Kencana Agri Limited (the "Company") is pleased to announce that the Company together with its majority shareholder, Kencana Holdings Pte. Ltd. ( Kencana Holdings ) have on 13 August 2010 entered into a subscription and share sale agreement (the "Agreement") with Newbloom Pte Ltd (the "Subscriber"), a wholly-owned subsidiary of Wilmar International Limited ( Wilmar ). Subject to and upon the terms of the Agreement, the Subscriber shall acquire 229,608,944 shares in the share capital of the Company ( Shares ) representing 20.0% of the share capital of the Company on an enlarged basis by way of: (a) (b) a subscription of 150,000,000 new Shares (the Subscription Shares ) to be allotted and issued by the Company (the Subscription ); and the acquisition of 79,608,944 existing Shares (the Vendor Shares ) from Kencana Holdings (the Vendor Placement ), (collectively, the Transaction ). DMG & Partners Securities Pte Ltd acted as the Financial Advisor and Stamford Law as the Legal Counsel to the Company in this transaction. 2. TERMS OF THE TRANSACTION 2.1. The Subscription Issue Price The Subscription Shares shall be allotted and issued at an issue price of S$0.35 per Subscription Share (the Issue Price ). The Issue Price represents a discount of approximately 2.40% to the volume weighted average price of S$0.3586 for trades done on the Shares on the SGX-ST during the one month period up to 13 August 2010. The Issue Price was arrived at following arm s length negotiations between the Company, the Subscriber and Kencana Holdings. The Subscription Shares, when allotted and issued, shall rank pari passu in all respects with the existing Shares except that they will not rank for any dividend, right,
allotment or other distributions, the record date for which falls on or before the completion of the Subscription. The Company will be making an application to the Singapore Exchange Securities Trading Limited (the "SGX-ST") for the listing and quotation of the Subscription Shares on the Official List of the SGX-ST. 2.2. The Vendor Placement Sale Price Under the terms of the Agreement, Kencana Holdings has agreed to sell and the Subscriber has agreed to purchase the Vendor Shares at a sale price of S$0.35 per Sale Share (the Sale Price ). The Sale Price was agreed on between Kencana Holdings and the Subscriber after taking into consideration the Issue Price agreed on between the Company and the Subscriber. 2.3. Conditions Precedent The Subscription and the Vendor Placement are subject to certain conditions precedent set out in the Agreement, including but not limited to, the in-principle approval being obtained from the SGX-ST for the listing and quotation of the Subscription Shares on the Official List of the SGX-ST and the receipt of other applicable approvals required by the parties. The Subscription and the Vendor Placement are also conditional upon the representations, warranties, undertakings and covenants given by the Company and Kencana Holdings being true and correct up to and as at completion of the Transaction. 2.4. Completion of the Transaction Completion of the Transaction ( Completion ) is scheduled to take place no later than three (3) Business Days after the last of the conditions precedent set out in the Agreement are satisfied or waived. The Subscription and Vendor Placement must be completed simultaneously. 2.5. Undertakings to Vote Following Completion, both the Subscriber and Kencana Holdings shall own a controlling interest (as defined in the Listing Manual of the SGX-ST (the Listing Manual )) in the Company. As such, the Company will be prohibited by virtue of Rules 812(1), 812(3)(a)(i) and 812(3)(a)(ii) of the Listing Manual from issuing further Shares to Wilmar and the Kencana Holdings, except with the prior specific approval of the shareholders of the Company in accordance with Rule 812(2). In view of the prohibition set out above and as a term of the Agreement, each of Wilmar and Kencana Holdings has irrevocably undertaken to the other (with effect from the expiration of the Moratorium Period (as hereinafter defined)) to exercise or procure the exercise of all the voting rights attached to the Shares it directly or indirectly owns or controls to vote in favour of any resolution tabled at an extraordinary general meeting of the Company held to consider and approve the issue of further Shares to Wilmar and/or Kencana Holdings, where such issue is required in order to restore (and for the sole purpose of restoring) the shareholdings
of Wilmar and/or Kencana Holdings to the percentage levels existing immediately after Completion (the Irrevocable Undertakings ). A party s obligations with respect to the Irrevocable Undertaking given by it will cease if the other party holds or controls less than 15.00% of the total issued share capital of the Company (excluding treasury shares), for any reason other than a dilution caused by a corporate action undertaken by the Company to increase its share capital in which the latter party is unable (for reasons beyond its control) to participate in order to maintain its shareholding percentage. The cessation of the firstmentioned party s obligations in respect of the Irrevocable Undertaking shall not affect the subsistence of the other Party s obligations in respect of the Irrevocable Undertaking. 2.6. Moratorium Undertakings and Restriction on Changes of Capital The Subscriber has undertaken not to sell, realise, transfer or otherwise dispose of any of the Shares acquired pursuant to the Agreement for a period of 24 months commencing from the date of Completion (the Moratorium Period ). Separately, the Company has also undertaken to the Subscriber not to allot and issue any new Shares or otherwise increase its share capital during the Moratorium Period, except for new Shares allotted and issued on a pro rata basis to the shareholders of the Company. 2.7. Board Representation With effect from Completion, the Subscriber shall be entitled to nominate one (1) nonexecutive director (the Nominee Director ) for appointment to the Board of Directors of the Company in accordance with the terms and subject to the conditions of the Agreement. The Subscriber s right to nominate the Nominee Director shall cease in the event that, subsequent to Completion, the Subscriber holds or controls less than 15.00% of the total issued share capital of the Company (excluding treasury shares) at any point in time. The Subscriber has agreed that upon the occurrence of such an event, it will procure that the Nominee Director tenders his resignation from the Board of Directors of the Company with immediate effect and without any claim for compensation for loss of office. 2.8. Right of First Refusal. The Subscriber and Kencana Holdings have also granted the other a right of first refusal over Shares they own following Completion should either of them choose to sell any of their Shares. The key terms of this right of first refusal are as follows: (a) (b) Neither the Subscriber nor Kencana Holdings shall dispose of or transfer any interest in any of its Shares (whether legal or beneficial, in whole or in part) to any third party unless it first complies with the terms of the right of first refusal set out in the Agreement; Under the terms of the Agreement, the disposing Shareholder (the Selling
Shareholder ) shall give a notice in writing ( Transfer Notice ) to the other Shareholder (the Other Shareholder ) to offer to sell such Shares to the latter. The Transfer Notice has to specify certain information including the number of Shares to be sold and the price at which such Shares are to be sold; (c) (d) (e) The Transfer Notice shall specify a period (being a period not less than ten business days) within which the Other Shareholder shall be entitled to accept the offer. If by the end of the aforesaid period, no acceptance of the offer is made by the Other Shareholder, the Selling Shareholder shall be entitled to sell its Shares to a bona fide third party purchaser at a price no lower than the price stated in the Transfer Notice and on terms substantially similar to and no more favourable than those set out in the Transfer Notice. The right of first refusal will not apply to the following transfers: (i) (ii) any proposed transfer of Shares or interests therein by Kencana Holdings to its subsidiaries or Henry Maknawi and his family members (as specified in the Agreement); and any proposed transfer of Shares or interests therein by the Subscriber to any member of the Wilmar Group, Each party s right of first refusal as aforesaid shall cease upon occurrence of the earlier of the following: (aa) in the event that, subsequent to Completion, such party holds or controls less than 15.00% of the total issued share capital of the Company (excluding treasury shares) at any point in time; or (bb) upon the expiry of two years after the date of Completion. 3. SUBSCRIBER The Subscriber is a wholly owned subsidiary of Wilmar. Wilmar, founded in 1991, is today Asia s leading agribusiness group. It ranks amongst the largest listed companies by market capitalisation on the SGX-ST. Its business activities include oil palm cultivation, edible oils refining, oilseeds crushing, consumer pack edible oils processing and merchandising, specialty fats, oleochemicals and biodiesel manufacturing, and grains processing and merchandising. Headquartered in Singapore, its operations are located in more than 20 countries across four continents, with a primary focus on Indonesia, Malaysia, China, India and Europe. Backed by a multi-national staff force of more than 80,000 people, over 300 processing plants and an extensive distribution network, its products are sold to more than 50 countries globally. Over the years, it has established a resilient integrated agribusiness model that captures the entire value chain of the agricultural commodity processing business,
from origination and processing to the branding, merchandising and distribution of a wide range of agricultural products. Through scale, integration and the logistical advantages of its business model, it is able to extract margins at every step of the value chain, resulting in significant operational synergies and cost efficiencies. 4. FINANCIAL EFFECTS OF THE SUBSCRIPTION The illustrative financial effects of the Transaction on the share capital, net asset value, earnings and net gearing of the Company based on the unaudited financial statements of the Group for the period ended 30 June 2010 are set out below. (a) Share Capital As at the date of this Announcement, the issued and paid-up share capital of the Company is US$55.77 million divided into 998,044,720 Shares. Following Completion, the issued and paid-up share capital of the Company will increase to US$93.84 million divided into 1,148,044,720 Shares. (b) Net Asset Value Assuming the Transaction was completed on 30 June 2010, the net asset value per Share would increase from 15.10 US cents to 16.43 US cents. (c) Earnings Assuming the Transaction was completed on 30 June 2010 with all the Placement Shares in issue during the financial period, the earnings per Share of the Group after adjusting for the Placement Shares would decrease from 0.33 US cents to 0.29 US cents. (d) Gearing Assuming the Transaction was completed on 30 June 2010, the net gearing of the Group would decrease from 0.67 to 0.33. Gearing is computed based on total borrowings less cash and cash equivalents divided by shareholders' funds. Shareholders should note that the illustrative financial effects should not be construed to mean that the Group's actual results, performance or achievements will be as expected, expressed or implied in such financial effects. 5. RATIONALE FOR THE TRANSACTION AND USE OF PROCEEDS The placement of the Subscription Shares will provide the Company with additional funding to meet its new planting targets and capital expenditure needs for the next couple of years. It will also strengthen the equity base of the Company and reduce its gearing.
The net proceeds of approximately S$51.64 million, after deducting estimated expenses of approximately S$0.86 million, from the Subscription (the Net Proceeds ) will be used for the following purposes: Use of Proceeds Estimated Allocation (a) To finance new planting and capital expenditures 85% to 95% (b) For general working capital 5% to 15% The actual apportionment of Net Proceeds for the aforementioned purposes will be subject to the relative timing of various requirements for funds, and the Company s overall objective of achieving an optimal cost of capital to fund its growth initiatives. Pending utilisation, the net proceeds from the Subscription may be deposited with banks and/or financial institutions or invested in short-term money markets and/or marketable securities, as the Directors may deem appropriate in the interests of the Company. The Company will make periodic announcements on the utilisation of proceeds from the Subscription as and when such proceeds are materially disbursed. 6. AUTHORITY FOR THE ISSUANCE OF THE SUBSCRIPTION SHARES The Subscription Shares will be issued pursuant to the general share issue mandate granted by the shareholders of the Company pursuant to Section 161 of the Companies Act (Cap. 50) at the annual general meeting of the Company held on 29 April 2010. 7. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS None of the Directors and substantial Shareholders of the Company have any interest, direct or indirect, in the Transaction (other than through their respective direct and indirect shareholdings in the Company). The Company will make the necessary announcements once the in-principle approval for the listing and quotation of the Subscription Shares has been obtained from the SGX-ST. By Order of the Board Mr Henry Maknawi Chairman and Chief Executive Officer 13 August 2010