DECLOUT LIMITED (Incorporated in the Republic of Singapore on 21 August 2010) (Registration No. 201017764W) PROPOSED ACQUISITION OF 30.0% INTERESTS OF VCARGO CLOUD PTE. LTD. 1. INTRODUCTION The board of directors (the Directors or the Board ) of DeClout Limited (the Company, and together with its subsidiaries, the Group ) wishes to announce that the Company had on 10 July 2015 entered into a sale and purchase agreement (the Agreement ) with its wholly-owned subsidiary, Corous360 Pte Ltd ( C360 ) and the shareholders of vcargo Cloud Pte. Ltd. (the Target ), pursuant to which C360 will acquire 999,900 ordinary shares in the capital of the Target (the Sales Shares ), representing 30.0% of the issued and paid-up share capital of the Target from the existing shareholders of the Target (the Vendors ) (the Proposed ) on the terms and subject to the conditions of the Agreement. 2. INFORMATION ON THE TARGET The Target was incorporated in Singapore on 20 February 2013. As at the date of this announcement, the Target has an issued and paid-up share capital of S$3,333,000 comprising 3,333,000 ordinary shares. The Target is primarily engaged in the business of providing e-trade services and cargo cloud solutions which enable a myriad of stakeholders in the trade, logistics and supply chain industry (such as shippers, freight forwarders and consignees) to converge and leverage on a unified and secured platform. Based on the unaudited management accounts of the Target for the financial year ended 31 December 2014 ( FY2014 ), the net tangible liabilities value was approximately S$403,000 and the net loss after tax was approximately S$1,106,000. In addition, based on the unaudited management accounts of the Target for the period from 1 January 2015 to 31 May 2015, the net profit before tax of the Target was approximately S$42,000. No independent valuation was conducted on the Target. The following are the Target s shareholding structures before and after the Proposed : Before the Proposed After the Proposed Tay Khoong Phong ( TKP ) 65.700% 45.990% Chan Allen ( CA ) 17.150% 12.005% Tan Wei Meng 17.150% 12.005% C360-30.000% Total 100.000% 100.000% The directors of the Target are TKP and CA. The Vendors are not related to the Directors, controlling shareholders of the Company and their respective associates. Mr Tan Wei Meng is also an Executive Officer of the Company and Executive Director of Procurri Singapore Pte Ltd, Procurri Malaysia Sdn Bhd and Procurri Asia Pacific Pte. Ltd. (subsidiaries of the Company). 1
3. PRINCIPAL TERMS OF THE PROPOSED ACQUISITION 3.1 Consideration The aggregate consideration for the Proposed is up to S$6,900,000, subject to the satisfaction of targets described in section 3.2 of this announcement (the Consideration ). Subject to the approval of the Singapore Exchange Securities Trading Limited (the SGX-ST ), the Consideration shall be payable by the allotment and issue of new ordinary shares ( Shares ) in the capital of the Company (the Consideration Shares ) to the Vendors at an issue price ( Issue Price ) which shall be the higher of: 3.1.1 the average of the closing market prices of Shares over the last five (5) market days on which trades in Shares were recorded, immediately preceding the date of the Agreement; and 3.1.2 90% of the volume-weighted average price (the VWAP ) of Shares for trades done on the date of the Agreement. If there is no trade recorded on the date of the Agreement, the VWAP of Shares for trades recorded on the last day with trades immediately preceding the date of the Agreement. In view of the above, the Issue Price is S$0.240, and the Consideration Shares are up to 28,750,000 Shares. The Consideration Shares represent approximately (i) 6.3% of the existing issued Shares in the capital of the Company as at the date of this announcement; and (ii) 5.9% of the enlarged issued Shares in the capital of the Company upon completion of the Proposed ("Completion") (assuming no further Shares are issued prior to Completion). The Consideration was determined based on arm s length negotiations and arrived at on a willing buyer willing seller basis, after taking into account, inter alia, the growth potential of the Target and the high barrier of entry to the Target s business which requires accreditation from the government. Please see section 4 of this announcement on the rationale for the Proposed. The Consideration Shares will be issued pursuant to the general share issue mandate granted by shareholders of the Company ( Shareholders ) by way of ordinary resolution at the annual general meeting held on 28 April 2015 ( 2015 Share Issue Mandate ) for the issue of new Shares and/or convertible securities not exceeding 100% of the total number of issued Shares of the Company (excluding treasury Shares), of which the aggregate number of new Shares to be issued other than on a pro rata basis to all existing Shareholders shall not exceed 50% of the total number of issued Shares of the Company (excluding treasury Shares) at the date of the 2015 Share Issue Mandate. As at the date of this announcement, the Company has not issued any Shares pursuant to the 2015 Share Issue Mandate. The Consideration Shares represent approximately 6.3% of the Company s total number of issued Shares of 455,100,030 at the time the approval for the 2015 Share Issue Mandate was granted. Accordingly, the proposed allotment and issuance of the Consideration Shares falls within the limit of the 2015 Share Issue Mandate. The Consideration Shares, when allotted and issued, will be credited as fully paid for, free and clear of all encumbrances and will rank pari passu with all existing Shares in the capital of the Company. The Company will be making an application to the Singapore Exchange Securities Trading 2
Limited ("SGX-ST") via the Company's sponsor, Canaccord Genuity Singapore Pte. Ltd. ("Sponsor") for the listing of and quotation for the Consideration Shares on Catalist upon date of Completion ("Completion Date"). The Consideration Shares shall rank in all respects pari passu with the existing issued Shares save for any dividends, rights, allotments or any distribution, the record date for which falls before the date of issue of the Consideration Shares. 3.2 Payment of the Consideration C360 shall pay the Consideration and the Company shall allot and issue the Consideration Shares to the Vendors in the following manner: 3.2.1 Consideration Shares equivalent to the sum of S$4,500,000 shall be allotted and issued on Completion; 3.2.2 subject to the Target securing 50 new freight forwarder sign-ups for the Target s new high-end comprehensive suite of e-trade, e-freight and logistics cloud solution ( New Product ) within 24 months from the Completion Date (the First Target ), Consideration Shares equivalent to the sum of S$600,000 shall be allotted and issued upon the satisfaction of the First Target; 3.2.3 subject to the Target securing another 50 new freight forwarder sign-ups for the New Product within 24 months from the Completion Date (the Second Target ), Consideration Shares equivalent to the sum of S$600,000 shall be allotted and issued upon the satisfaction of the Second Target; and 3.2.4 subject to the Target establishing a platform for its cargo cloud solution for 5 new ports in at least 2 continents, including Asia and Africa, within 24 months from the Completion Date (the Third Target ), Consideration Shares equivalent to the sum of S$1,200,000 shall be allotted and issued upon the satisfaction of the Third Target. For the avoidance of doubt, in the event that none of the First Target, the Second Target and the Third Target is achieved by the Target, the total Consideration shall only be S$4,500,000. The Company will be making an application to the SGX-ST, through its sponsor, Canaccord Genuity Singapore Pte. Ltd., for the listing and quotation of the Consideration Shares on the Catalist of the SGX-ST in due course. The Company will make the relevant announcement upon receipt of the listing and quotation notice from the SGX-ST. 3.3 Conditions precedent Pursuant to the Agreement, the Proposed is conditional upon, inter alia, the fulfillment of the following key terms and conditions: 3.3.1 the Company and/or C360 having been satisfied with the results of an internal valuation and due diligence conducted on the Target, including but not limited to financial, legal, tax and other commercial due diligence; 3.3.2 all necessary approvals from the Boards, as well as the board of directors of C360 and the Vendors in respect of the Proposed having been obtained; 3.3.3 (if required) all necessary approvals from the Shareholders, the Company (being the shareholder of C360) as well as the shareholders of the Vendors in respect of the Proposed having been obtained; 3
3.3.4 the SGX-ST approval for the listing and quotation of the Consideration Shares on Catalist; 3.3.5 all approvals, consents and permits (if any) as may be necessary from any third party, governmental or regulatory body being granted or obtained, and being in full force and effect and not having been withdrawn, suspended, amended or revoked; 3.3.6 the negotiation, finalisation and execution of the Agreement and such other definitive ancillary agreements and documents as may be necessary to effect the Proposed, including a shareholders agreement to be made between the shareholders of the Target (post-completion) and the Target ( Shareholders Agreement ); 3.3.7 there being no material adverse change to assets, business, financial condition, prospects or results of operations of the Target as a whole having occurred; and 3.3.8 there being no litigation, winding up (whether initiated by creditors or otherwise), judicial management, arbitration, prosecution or other legal proceedings having been instituted, announced or threatened by or against or remaining outstanding against the Target which could have a material adverse effect on the Target. Subject to the fulfillment of the conditions precedent, the Completion Date shall be a date to be agreed by the parties in writing. 3.4 Other salient terms of the Agreement Pursuant to the terms of the Shareholders Agreement to be entered upon Completion, C360 shall have the right to appoint up to one-third of the board of the Target and to remove and replace such appointees. 4. RATIONALE FOR THE PROPOSED ACQUISITION The rationale for the Proposed includes the following: 4.1 the Proposed is aligned with the Group s plans to diversify and expand into the e-logistics business domain within the Group s Vertical Domain Cloud segment; 4.2 the Proposed will allow the Group to gain a foothold in the Business-To- Business ( B2B ) and Business-To-Government ( B2G ) e-commerce segments via the platform which the Target has established for its cargo cloud solution; 4.3 the Proposed will allow the Group to tap on the Target s valuable assets and resources, in particular its technology or solutions developed or to be developed; and 4.4 the Proposed will allow the Group to cross sell the different information technology and telecommunication products of other subsidiaries in the Group. The Board considers the Proposed to be in the interest of and is beneficial to the Group and the Shareholders. 5. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 4
The financial effects of the Proposed are for illustration purposes only and do not reflect the actual future financial position of the Group after the completion of the Proposed. The pro forma financial effects have been computed based on (a) the audited consolidated accounts of the Group for the financial year ended 31 December 2014 ( FY2014 ); (b) the unaudited management accounts of the Target for FY2014; (c) the issue and allotment of up to 28,750,000 Consideration Shares at the issue price of S$0.240 per Consideration Share; and (c) the expenses incurred in relation to the Proposed of approximately S$57,000. 5.1 Net tangible assets ( NTA ) per Share Assuming that the Proposed had been completed on 31 December 2014, the effect of the Proposed on the Group s NTA per Share as at 31 December 2014 would have been: Before the Proposed After the Proposed NTA of the Group (S$ 000) 35,318 42,218 Number of Shares ( 000) 334,841 363,591 NTA per Share (S$ cents) 10.55 11.61 5.2 Earnings per Share ( EPS ) Assuming that the Proposed had been completed on 1 January 2014, the effect of the Proposed on the EPS for FY2014 would have been: Before the Proposed After the Proposed Net profit attributable to the shareholders of the Company for FY2014 (S$ 000) Weighted average number of shares ( 000) 1,708 1,319 318,489 347,239 EPS (S$ cents) 0.54 0.38 6. RELATIVE FIGURES UNDER RULE 1006 Based on the Group s latest audited consolidated accounts for FY2014, and the unaudited management accounts of the Target for FY2014, the relative figures for the Proposed computed on the applicable bases set out in Rule 1006 of the Listing Manual, Section B: Rules of Catalist of the SGX-ST (the Catalist Rules ) are as follows: 5
Rule 1006 (a) Bases Net asset value of the assets to be disposed of, compared with the Group s net asset value Relative Figures (%) Not Applicable (b) (c) Net profits attributable to the assets acquired compared with the Group s net profits (1) -10.7% Aggregate value of the Consideration, compared with the 6.4% Company s market capitalisation (2) (d) (e) Number of equity securities issued as consideration for the Proposed, compared with the number of equity securities previously issued (3) Aggregate volume or amount of proven and probable reserves to be disposed of, compared with the aggregate of the Group s proven and probable reserves 6.3% Not Applicable Notes: (1) The Group s profit before tax for FY2014 was approximately S$3,645,000. The Target s loss before tax for FY2014 was approximately S$1,106,000. (2) The Company s market capitalization of approximately S$108,249,000 was computed based on the Company s existing issued share capital of 455,400,030 Shares and the volume weighted average price of S$0.2377 per Share on 9 July 2015, being the market day preceding the date of the Agreement. (3) Based on the maximum 28,750,000 Consideration Shares to be issued for the Proposed and the Company s existing issued share capital of 455,100,030 Shares as at the date of this announcement. Having regarded to the above, as the relative figures computed on the bases set out in Rule 1006 exceeds 5% but does not exceed 75%, the Proposed constitutes a discloseable transaction under Chapter 10 of the Catalist Rules. 7. INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS None of the Directors, controlling Shareholders or their respective associates has any interest, whether direct or indirect, in the Proposed, other than through their respective shareholdings in the Company. 8. SERVICE CONTRACTS No person is proposed to be appointed as a Director in connection with the Proposed. Accordingly, no service contract is proposed to be entered into between the Company and any such person. 9. DIRECTORS RESPONSIBILITY STATEMENT The Directors collectively and individually accept full responsibility for the accuracy of the information given in this announcement and confirm, after making all reasonable enquiries, that to the best of their knowledge and belief, this announcement constitutes full and true disclosure of all material facts about the Proposed, the Company and its subsidiaries, and the Directors are not aware of any facts the omission of which would make any statement in this announcement misleading. Where information in this 6
announcement has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this announcement in its proper form and context. 10. DOCUMENTS AVAILABLE FOR INSPECTION A copy of the Agreement will be made available for inspection during normal business hours at the registered office of the Company at 29 Tai Seng Avenue #05-01 Natural Cool Lifestyle Hub Singapore 534119 for a period of three (3) months from the date of this announcement. 11. ANNOUNCEMENTS Further announcements on the Proposed will be made in due course as and when appropriate. BY ORDER OF THE BOARD DECLOUT LIMITED Wong Kok Kun Chairman and Group Chief Executive Officer 10 July 2015 This announcement has been prepared by the Company and its contents have been reviewed by the Company s sponsor, Canaccord Genuity Singapore Pte. Ltd. ( Sponsor ), for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (the SGX-ST ).The Sponsor has not independently verified the contents of this announcement. This announcement has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of this announcement including the correctness of any of the statements or opinions made or reports contained in this announcement. The contact person for the Sponsor is Ms. Alice Ng, Director and Head of Continuing Sponsorship, Canaccord Genuity Singapore Pte. Ltd., at 77 Robinson Road #21-02 Singapore 068896, telephone: (65) 6854-6160. 7