THIS INDEPENDENT ADVICE CIRCULAR ( IAC ) IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. YOU SHOULD READ THIS IAC IN CONJUNCTION WITH THE OFFER DOCUMENT DATED 13 JUNE 2017 ISSUED BY MAYBANK INVESTMENT BANK BERHAD ON BEHALF OF THE JOINT OFFERORS (AS DEFINED HEREIN) WHICH HAS BEEN SENT TO YOU. If you are in any doubt as to the action to be taken in relation to the Offer (as defined herein), please consult your stockbroker, solicitor, accountant, bank manager or other professional advisers immediately. If you have sold or transferred all your Offer Shares (as defined herein), you should at once hand this IAC to the purchaser or stockbroker or agent through whom you effected the sale or transfer for onward transmission to the purchaser or transferee of such Offer Shares. Pursuant to Rule 11 of the Rules on Take-overs, Mergers and Compulsory Acquisitions, the Securities Commission Malaysia ( SC ) has notified that it has no further comments to the contents of this IAC. However, such notification shall not be taken to suggest that the SC agrees with our recommendation or assumes responsibility for the correctness of any statements made or opinions or reports expressed in this IAC. WING TAI MALAYSIA BERHAD (Company No. 6716-D) (Incorporated in Malaysia under the Companies Act, 1965) INDEPENDENT ADVICE CIRCULAR TO THE HOLDERS OF THE OFFER SHARES IN RELATION TO THE UNCONDITIONAL TAKE-OVER OFFER BY WING TAI HOLDINGS LIMITED (Company Registration No. 196300239D) (Incorporated in the Republic of Singapore) AND WING TAI INVESTMENT & DEVELOPMENT PTE LTD (Company Registration No. 198300630N) (Incorporated in the Republic of Singapore) (COLLECTIVELY, THE JOINT OFFERORS ) THROUGH MAYBANK INVESTMENT BANK BERHAD (Company No. 15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) TO ACQUIRE ALL THE REMAINING ORDINARY SHARES IN WING TAI MALAYSIA BERHAD (EXCLUDING TREASURY SHARES) NOT ALREADY OWNED BY THE JOINT OFFERORS ( OFFER SHARES ) FOR A CASH OFFER PRICE OF RM1.80 PER OFFER SHARE ( OFFER ) Independent Adviser MERCURY SECURITIES SDN BHD (Company No. 113193-W) (A Participating Organisation of Bursa Malaysia Securities Berhad) This Independent Advice Circular is dated 23 June 2017
DEFINITIONS Except where the context otherwise requires or where otherwise defined herein, the following definitions shall apply throughout this Independent Advice Circular:- Accepting Holder : Holder who accepts the Offer in accordance with the terms and conditions set out in the Offer Document Act : Companies Act, 2016 Awards : Share awards granted under WTM s Restricted Share Plan. As at the LPD, there are 512,900 outstanding Awards under the Restricted Share Plan Board : Board of Directors of WTM Bursa Depository : Bursa Malaysia Depository Sdn Bhd (165570-W) Bursa Securities : Bursa Malaysia Securities Berhad (635998-W) CBRE-WTW (C H Williams) : C H Williams Talhar & Wong Sdn Bhd (18149-U) Cheston : Cheston International (KL) Sdn Bhd (647245-W) Closing Date : First Closing Date unless extended in accordance with the Rules or as the Joint Offerors may decide and announced by Maybank IB, on behalf of the Joint Offerors, no later than two (2) days before the Closing Date CMSA : Capital Markets and Services Act, 2007 Compulsory Acquisition : The right of the Joint Offerors, pursuant to Section 222 of the CMSA, to acquire all the remaining WTM Shares from the Dissenting Holders if the Joint Offerors receive valid acceptances from the Accepting Holders of not less than nine-tenths (9/10) in the value of the Offer Shares (excluding WTM Shares already held at the date of the Offer by the persons acting in concert with the Joint Offerors), subject to Section 224 of the CMSA DCF : Discounted cash flow Directors : Directors of WTM Dissenting Holder : A Holder who has not accepted the Offer and/or failed to transfer the Offer Shares to the Joint Offerors in accordance with the terms and conditions as set out in the Offer Document Edmund Cheng : Edmund Cheng Wai Wing FCFE : Free cash flows to equity First Closing Date : 5.00 p.m. (Malaysian time) on 4 July 2017, being at least 21 days from 13 June 2017, being the date of despatch of the Offer Document Form of Acceptance and Transfer : Form of acceptance and transfer for the Offer Shares enclosed with the Offer Document FPE : Financial period ended FYE : Financial year ended Holder : Holder of the Offer Shares i
DEFINITIONS (cont d) IAC : Independent advice circular dated 23 June 2017 comprising Part A: Letter from the Board and Part B: IAL from Mercury Securities as well as the attached appendices IAL : Independent advice letter from the Independent Adviser to the Holders dated 23 June 2017 Interested Directors : Collectively, Cheng Wai Keung and Edmund Cheng (by virtue of them being the PACs) and Tan Sri Dato Paduka Dr. Mazlan bin Ahmad (by virtue of him being an independent and non-executive director of WTH) who are deemed interested in the Offer and have abstained from deliberations and making any recommendation in relation to the Offer Joint Offerors : Collectively, WTH and WTID Listing Requirements : Main Market Listing Requirements of Bursa Securities LPD : 16 June 2017, being the latest practicable date prior to the issuance of this IAC LTD : 22 May 2017, being the last full trading day prior to the date of the Notice Market Day : Any day on which Bursa Securities is open for trading in securities Maybank IB : Maybank Investment Bank Berhad (15938-H) Mercury Securities or Independent Adviser : Mercury Securities Sdn Bhd (113193-W), the independent adviser appointed by the Board to provide comments, opinions, information and recommendation on the Offer to the Non-Interested Directors and the Holders NA : Net assets NBV : Net book value Non-Interested Directors : Directors of WTM (excluding the Interested Directors who have abstained from deliberations and making any recommendation in relation to the Offer) Notice : Notice of the Offer dated 23 May 2017 issued by Maybank IB, on behalf of the Joint Offerors, and served on the Board Offer : Unconditional take-over offer by the Joint Offerors, through Maybank IB, to acquire all the Offer Shares at the Offer Price in accordance with the terms and conditions as set out in the Offer Document Offer Document : The document dated 13 June 2017 together with all the accompanying appendices and the Form of Acceptance and Transfer enclosed therein, issued by Maybank IB on behalf of the Joint Offerors Offer Document LPD : 6 June 2017, being the latest practicable date prior to 13 June 2017, being the date of despatch of the Offer Document Offer Period : Period commencing from 23 May 2017, being the date of the Notice, until the earlier of either:- (i) (ii) the Closing Date; or the date on which the Offer is withdrawn with the written consent of the SC ii
DEFINITIONS (cont d) Offer Price : Cash offer price of RM1.80 per Offer Share Offer Shares : All the remaining WTM Shares not already owned by the Joint Offerors (excluding treasury shares) and new WTM Shares (if any) that may be issued by WTM upon vesting of the Awards before the Closing Date. As at the Offer Document LPD, the Offer Shares comprise 160,997,459 WTM Shares, which represent approximately 33.87% of the voting shares of WTM Official List : A list specifying all securities which have been admitted for listing on Bursa Securities and not removed PACs : Wing Sun, Cheng Wai Keung and Edmund Cheng, being the persons acting in concert with the Joint Offerors in relation to the Offer as at the Offer Document LPD in accordance with Sections 216(2) and/or 216(3) of the CMSA Public Spread Requirement : The requirement pursuant to Paragraph 8.02(1) of the Listing Requirements whereby a listed issuer must ensure that at least 25% of its total listed shares (excluding treasury shares) are in the hands of public shareholders to ensure its continued listing on the Main Market of Bursa Securities Restricted Share Plan : Restricted share plan for the grant of Awards by WTM to the eligible employees and directors of WTM and/or its subsidiaries (excluding the dormant subsidiaries), which came into effect on 5 January 2012 for a period of ten (10) years RNAV : Revalued net asset value Rules : Rules on Take-overs, Mergers and Compulsory Acquisitions SC : Securities Commission Malaysia SFA : Securities and Futures Act (Chapter 289) of the Republic of Singapore SOPV : Sum-of-parts valuation sq. ft. : Square feet Valuers : CBRE-WTW (C H Williams) and Cheston VWAMP : Volume weighted average market price Wing Sun : Wing Sun Development Private Limited (197401184D) WTH : Wing Tai Holdings Limited (196300239D) WTID : Wing Tai Investment & Development Pte Ltd (198300630N) WTM or the Company or the Offeree : Wing Tai Malaysia Berhad (6716-D) WTM Group or the Group : Collectively, WTM, its subsidiaries, associated company and joint ventures WTM Share : Ordinary share in WTM CURRENCIES RM and sen : Ringgit Malaysia and sen iii
DEFINITIONS (cont d) In this IAC, words referring to the singular shall, where applicable, include the plural and vice versa, and words referring to the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include companies or corporations, unless otherwise specified. All references to you or Holder in this IAC are to each holder of the Offer Shares, being the person to whom the Offer is being made. All references to we, us and our in this IAC (save for the Executive Summary and the letter from the Board) are to Mercury Securities, the Independent Adviser for the Offer. Any discrepancies in the tables between amounts stated and the totals in this IAC are, unless otherwise explained, due to rounding. Any references to time and date in this IAC shall be references to Malaysian time and date, unless otherwise stated. Where a period specified in the Rules ends on a day which is not a Market Day, the period is extended until the next Market Day, as appearing in this IAC. Any references in this IAC to any enactment are references to that enactment as for the time being amended or re-enacted. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] iv
TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY vi PART A: LETTER FROM THE BOARD 1. INTRODUCTION 1 2. TERMS AND CONDITIONS OF THE OFFER 2 3. DETAILS OF ACCEPTANCES 3 4. DIRECTORS INTENTION IN RELATION TO THE OFFER 3 5. NON-INTERESTED DIRECTORS COMMENTS 3 6. INDEPENDENT ADVICE LETTER 4 7. NON-INTERESTED DIRECTORS RECOMMENDATION 4 8. DIRECTORS RESPONSIBILITY STATEMENT 5 PART B: INDEPENDENT ADVICE LETTER FROM MERCURY SECURITIES 1. INTRODUCTION 7 2. TERMS AND CONDITIONS OF THE OFFER 7 3. DETAILS OF ACCEPTANCES 8 4. SCOPE AND LIMITATIONS TO THE EVALUATION OF THE OFFER 8 5. EVALUATION OF THE OFFER 10 6. FAIRNESS OF THE OFFER 11 7. REASONABLENESS OF THE OFFER 27 8. LISTING STATUS OF WTM 31 9. COMPULSORY ACQUISITION AND RIGHTS OF DISSENTING HOLDERS 33 10. RATIONALE FOR THE OFFER AND FUTURE PLANS FOR WTM AND ITS SUBSIDIARIES AND THEIR EMPLOYEES 34 11. FURTHER INFORMATION 34 12. CONCLUSION AND RECOMMENDATION 34 APPENDICES I INFORMATION ON WTM 37 II FURTHER INFORMATION 45 v
EXECUTIVE SUMMARY THIS EXECUTIVE SUMMARY HIGHLIGHTS THE SALIENT INFORMATION OF THE OFFER. WE ADVISE HOLDERS TO READ BOTH PART A: LETTER FROM THE BOARD AND PART B: IAL FROM MERCURY SECURITIES (THE INDEPENDENT ADVISER) FOR THEIR VIEWS AND RECOMMENDATIONS IN RELATION TO THE OFFER. THIS IAC SHOULD ALSO BE READ TOGETHER WITH THE OFFER DOCUMENT. 1. INTRODUCTION On 23 May 2017, the Board announced the receipt of the Notice from Maybank IB on behalf of the Joint Offerors notifying that the Joint Offerors intend to undertake the Offer. The Board deliberated on the Offer and on 25 May 2017, announced that:- (i) (ii) they decided not to seek an alternative person to make a take-over offer for the Offer Shares; and they have resolved to appoint Mercury Securities as the Independent Adviser in accordance with Paragraph 3.06 of the Rules to provide comments, opinions, information and recommendation on the Offer to the Non-Interested Directors and the Holders. A copy of the Notice was despatched to you on 30 May 2017. There is no ultimate offeror for the Offer. As at the Offer Document LPD, the PACs in accordance with Sections 216(2) and/or 216(3) of the CMSA are as follows:- (i) (ii) (iii) Wing Sun, a substantial shareholder of WTH, WTID and WTM; Cheng Wai Keung, a director and substantial shareholder of Wing Sun, WTH and WTM, a substantial shareholder of WTID and brother to Edmund Cheng; and Edmund Cheng, a director and substantial shareholder of Wing Sun, WTH and WTM, a substantial shareholder of WTID and brother to Cheng Wai Keung. For the avoidance of doubt, the Offer shall extend to the WTM Shares held by the PACs. As at the Offer Document LPD, the Joint Offerors have obtained irrevocable undertakings from the PACs to accept the Offer in respect of all their Offer Shares. On 22 June 2017, the SC has notified that it has no further comments to the contents of this IAC. However, such notification shall not be taken to suggest that the SC agrees with the recommendations contained herein or assumes responsibility for the correctness of any statements made or opinions or reports expressed in this IAC. The purpose of this IAC is to provide you with relevant information on the Offer, the Non- Interested Directors views and recommendation on the Offer as well as the recommendation of Mercury Securities. vi
EXECUTIVE SUMMARY (cont d) 2. TERMS AND CONDITIONS OF THE OFFER The terms and conditions of the Offer are as follows:- Consideration for the Offer : The cash consideration for the Offer is RM1.80 per Offer Share. The Offer Price is subject to any such reduction for net dividend and/or distribution declared, made or paid on or after the date of the Notice but prior to the Closing Date, of which the Holder is entitled to retain. You may accept the Offer in respect of all or any part of your Offer Shares. The Joint Offerors will not pay fractions of a sen to the Accepting Holders. Entitlement to the cash payment will be rounded down to the nearest whole sen. Condition of the Offer : The Offer is not conditional upon any minimum level of acceptances of the Offer Shares as the Joint Offerors already hold more than 50% of the voting shares in WTM. Duration of the Offer : The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on 4 July 2017, unless extended by the Joint Offerors. Notices of such extension will be posted to you accordingly. Please refer to Section 2 in Appendix I of the Offer Document for further details on the duration of the Offer. Method of settlement : The settlement of the consideration for the Offer Shares will be effected via remittance in the form of cheque(s), banker s draft(s) or cashier s order(s) which will be despatched by ordinary mail to you (or your designated agent(s), as you may direct) at your registered Malaysian address last maintained with Bursa Depository in respect of valid acceptances, at your own risk, within ten (10) days from the date of such valid acceptances. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. 3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings from the PACs to accept the Offer in respect of all their Offer Shares, the Joint Offerors have not received any other irrevocable undertaking from any Holder to accept the Offer. Based on the notices pursuant to Section 138 of the Act received by WTM, the Joint Offerors have received valid acceptances of 18,851,480 Offer Shares up to 19 June 2017. vii
EXECUTIVE SUMMARY (cont d) 4. EVALUATION OF THE OFFER 4.1 FAIRNESS OF THE OFFER (please refer to Section 6 in Part B of this IAC for further details) In assessing the fairness of the Offer, Mercury Securities has considered the following pertinent factors:- Consideration Valuation of the WTM Shares In arriving at the fair value of the WTM Shares, Mercury Securities has adopted the SOPV model as the sole valuation method, in which the following valuation methods have been adopted for the respective business segments:- Segments Valuation method (i) Property development and RNAV property investment (ii) Retailing of garments DCF (iii) Manufacturing of textile NA garments (iv) Investment holding NA Mercury Securities views the SOPV model to be the most appropriate method to estimate the value of the WTM Shares for the reasons as set out in Section 6 in Part B of this IAC. Based on the SOPV method, Mercury Securities has derived a range of estimated fair value for the entire equity interest in WTM of RM1,688.5 million to RM1,708.7 million or a fair value per WTM Share of RM3.55 to RM3.59. Mercury Securities view In view that the Offer Price of RM1.80 is lower than and represents a discount of RM1.75 to RM1.79 or 49.30% to 49.86% over the range of estimated fair value per WTM Share, the Offer is NOT FAIR. Nevertheless, the Holders are advised to read the ensuing sections of this Executive Summary for a comprehensive evaluation of the Offer and not to rely solely on the valuation of the WTM Shares derived based on the SOPV method as the sole criteria when assessing the Offer. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] viii
EXECUTIVE SUMMARY (cont d) 4.2 REASONABLENESS OF THE OFFER (please refer to Section 7 in Part B of this IAC for further details) In assessing the reasonableness of the Offer, Mercury Securities has considered the following pertinent factors:- Considerations Historical share price performance The Offer Price is higher than the daily VWAMPs* of the WTM Shares for 99% of the total Market Days over the past one (1) year up to the LPD (approximately 92% over the past three (3) years and 73% over the past five (5) years). The Offer Price represents a premium of 61.75% to the average daily VWAMP* of the WTM Shares over the past one (1) year up to the LPD of RM1.1128 (36.36% to RM1.3200 over the past three (3) years and 19.59% to RM1.5052 over the past five (5) years). The Offer Price represents a premium of between 47.29% and 72.02% over the five (5)-day, one (1)-month, three (3)- month, six (6)-month and one (1)-year VWAMPs* of the WTM Shares up to the LTD. * As extracted from Bloomberg which have been adjusted for the effects of any dividends and corporate exercises throughout the period Historical liquidity analysis of the WTM Shares No competing take-over offer The WTM Shares are illiquid, with a simple average monthly trading volume-to-free float for the past one (1) year up to April 2017 (being the last full trading month prior to the LTD) of 0.74%. As at the LPD, the Board has not received any competing take-over offer for the Offer Shares or any other offer to acquire the assets and liabilities of the WTM Group. In addition, the Non-Interested Directors do not intend to seek an alternative person to make a take-over offer for the Offer Shares in view that the Joint Offerors hold a controlling stake of more than 50% equity interest in WTM and hence, any such offer will not be successful unless with the support of the Joint Offerors. Mercury Securities view The Offer is REASONABLE as it provides an exit opportunity to the Holders (especially for those holding a significant number of the WTM Shares) to realise their investment in the WTM Shares in cash at the Offer Price, which is higher than the daily VWAMPs of the WTM Shares for 99% of the total Market Days over the past one (1) year up to the LPD as well as approximately 92% of the total Market Days over the past three (3) years up to the LPD, with a premium of 61.75% and 36.36% to the average daily VWAMP of the WTM Shares over the respective period. ix
EXECUTIVE SUMMARY (cont d) 5. RECOMMENDATION 5.1 BY MERCURY SECURITIES Although the Offer is deemed not fair as the Offer Price of RM1.80 represents a discount of 49.30% to 49.86% over the range of estimated fair value per WTM Share derived using the SOPV method, Mercury Securities is of the view that the reasonable view outweighs the not fair view as:- (i) the Offer Price is higher than the daily VWAMPs of the WTM Shares for 99% of the total Market Days over the past one (1) year up to the LPD as well as approximately 92% of the total Market Days over the past three (3) years up to the LPD; (ii) (iii) the Offer Price represents a premium of 61.75% to the average daily VWAMP of the WTM Shares over the past one (1) year up to the LPD of RM1.1128 (36.36% to RM1.3200 over the past three (3) years); and taking into consideration the illiquidity of the WTM Shares, the Offer provides an exit opportunity to the Holders (especially for those holding a significant number of the WTM Shares) to realise their investment in the WTM Shares in cash at the Offer Price. Accordingly, Mercury Securities recommends the Holders to ACCEPT the Offer. Please refer to Section 12 in Part B of this IAC for further details. 5.2 BY THE NON-INTERESTED DIRECTORS Cheng Wai Keung and Edmund Cheng (by virtue of them being the PACs) and Tan Sri Dato Paduka Dr. Mazlan bin Ahmad (by virtue of him being an independent and nonexecutive director of WTH) are deemed interested in the Offer and have abstained from deliberations and making any recommendation in relation to the Offer. After careful examination of the terms and conditions of the Offer as contained in the Offer Document and taking into consideration the evaluation and recommendation by Mercury Securities as set out in Part B of this IAC, the following Non-Interested Directors, being:- (i) (ii) (iii) (iv) Dato Ghazi bin Ishak; Dr. Poh Soon Sim; Siew Kah Toong; and Tan Sri Datuk Seri Dr. Zulkurnain bin Hj. Awang have CONCURRED with the evaluation and recommendation of Mercury Securities that the Offer is NOT FAIR but REASONABLE. Accordingly, the Board recommends that you ACCEPT the Offer. x
EXECUTIVE SUMMARY (cont d) 6. IMPORTANT DATES AND EVENTS The important relevant dates in relation to the Offer are as follows:- Event Date Date of the Notice 23 May 2017 Despatch of the Offer Document 13 June 2017 Issuance of this IAC 23 June 2017 Closing Date (1) 4 July 2017 Note:- (1) The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on the First Closing Date unless extended in accordance with the Rules or as the Joint Offerors may decide and announced by Maybank IB, on behalf of the Joint Offerors, no later than two (2) days before the Closing Date. Notices of such extension will be posted to you accordingly. You should carefully consider the terms and conditions of the Offer based on all the relevant and pertinent factors including those which are set out above, and other information as set out in this IAC, the Offer Document and any other publicly available information. You are advised to read this IAC in its entirety, together with the Offer Document, carefully for more information and not rely solely on this Executive Summary before forming an opinion on the Offer. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] xi
PART A LETTER FROM THE BOARD
WING TAI MALAYSIA BERHAD (Company No. 6716-D) (Incorporated in Malaysia under the Companies Act, 1965) Registered office: Level 7, Menara Milenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur 23 June 2017 Board of Directors Tan Sri Dato Paduka Dr. Mazlan bin Ahmad (Chairman, Independent Non-Executive Director) Cheng Wai Keung (Managing Director, Non-Independent Executive Director) Edmund Cheng Wai Wing (Non-Independent Executive Director) Dato Ghazi bin Ishak (Independent Non-Executive Director) Dr. Poh Soon Sim (Independent Non-Executive Director) Siew Kah Toong (Independent Non-Executive Director) Tan Sri Datuk Seri Dr. Zulkurnain bin Hj. Awang (Independent Non-Executive Director) To: The Holders Dear Sir / Madam, UNCONDITIONAL TAKE-OVER OFFER BY THE JOINT OFFERORS THROUGH MAYBANK IB TO ACQUIRE THE OFFER SHARES FOR A CASH OFFER PRICE OF RM1.80 PER OFFER SHARE 1. INTRODUCTION On 23 May 2017, the Board announced the receipt of the Notice from Maybank IB on behalf of the Joint Offerors notifying that the Joint Offerors intend to undertake the Offer. The Board deliberated on the Offer and on 25 May 2017, announced that:- (i) (ii) they decided not to seek an alternative person to make a take-over offer for the Offer Shares; and they have resolved to appoint Mercury Securities as the Independent Adviser in accordance with Paragraph 3.06 of the Rules to provide comments, opinions, information and recommendation on the Offer to the Non-Interested Directors and the Holders. A copy of the Notice was despatched to you on 30 May 2017. 1
There is no ultimate offeror for the Offer. As at the Offer Document LPD, the PACs in accordance with Sections 216(2) and/or 216(3) of the CMSA are as follows:- (i) (ii) (iii) Wing Sun, a substantial shareholder of WTH, WTID and WTM; Cheng Wai Keung, a director and substantial shareholder of Wing Sun, WTH and WTM, a substantial shareholder of WTID and brother to Edmund Cheng; and Edmund Cheng, a director and substantial shareholder of Wing Sun, WTH and WTM, a substantial shareholder of WTID and brother to Cheng Wai Keung. For the avoidance of doubt, the Offer shall extend to the WTM Shares held by the PACs. As at the Offer Document LPD, the Joint Offerors have obtained irrevocable undertakings from the PACs to accept the Offer in respect of all their Offer Shares. In addition to this IAC, you should have by now received a copy of the Offer Document dated 13 June 2017, which sets out the details, terms and conditions of the Offer as well as the procedures for acceptance and method of settlement of the Offer. As at 19 June 2017, the details of the Joint Offerors and PACs holdings in the WTM Shares are as follows:- Name Direct Indirect No. of WTM No. of WTM Shares % (1) Shares % (1) Joint Offerors WTH 222,373,371 46.78 125,306,748 (2) 26.36 WTID 125,306,748 26.36 - - PACs Wing Sun 247,722 0.05 347,680,119 (3) 73.15 Cheng Wai Keung 1,334,450 0.28 347,927,841 (4) 73.20 Edmund Cheng 1,334,450 0.28 347,927,841 (4) 73.20 Notes:- (1) Computed based on 475,309,298 WTM Shares (excluding 12,021,000 treasury shares) as at 19 June 2017. (2) Deemed interested by virtue of its interest in WTID pursuant to Section 8 of the Act. (3) Deemed interested by virtue of its interests in WTH and WTID pursuant to Section 8 of the Act. (4) Deemed interested by virtue of their interests in WTH, WTID and Wing Sun pursuant to Section 8 of the Act. On 22 June 2017, the SC has notified that it has no further comments to the contents of this IAC. However, such notification shall not be taken to suggest that the SC agrees with the recommendations contained herein or assumes responsibility for the correctness of any statements made or opinions or reports expressed in this IAC. The purpose of this IAC is to provide you with relevant information on the Offer, the Non- Interested Directors views and recommendation on the Offer as well as the recommendation of Mercury Securities. You are advised to read both this IAC and the Offer Document and carefully consider the recommendations contained herein before taking any action. 2. TERMS AND CONDITIONS OF THE OFFER The terms and conditions of the Offer are set out in Section 2 in Part B of this IAC. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. 2
3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings from the PACs to accept the Offer in respect of all their Offer Shares, the Joint Offerors have not received any other irrevocable undertaking from any Holder to accept the Offer. Based on the notices pursuant to Section 138 of the Act received by WTM, the Joint Offerors have received valid acceptances of 18,851,480 Offer Shares up to 19 June 2017. 4. DIRECTORS INTENTION IN RELATION TO THE OFFER Save for Cheng Wai Keung and Edmund Cheng (whose interests in the WTM Shares are disclosed in Section 1 in Part A of this IAC), other Directors of WTM do not have any interest (direct and indirect) in the WTM Shares. As Cheng Wai Keung and Edmund Cheng (by virtue of them being the PACs) are deemed interested in the Offer, they have abstained from deliberations and making any recommendation in relation to the Offer. 5. NON-INTERESTED DIRECTORS COMMENTS 5.1 Rationale for the Offer The Non-Interested Directors have noted the rationale for the Offer as set out in Section 3 of the Offer Document. The Non-Interested Directors take cognisance of the principal activities of the Joint Offerors and that:- (i) (ii) the Offer would allow the Joint Offerors and WTM and its subsidiaries to further integrate their financial and operational resources which should result in cost savings and achieve better operational efficiencies; and should the Offer result in the Joint Offerors successfully delisting and owning 100% of WTM, the Joint Offerors shall have greater flexibility should they wish to undertake a review of the business and/or undertake any material transaction or business arrangement, where appropriate. 5.2 Future plans for WTM and its subsidiaries and their employees The Non-Interested Directors take note of the Joint Offerors future plans for WTM and its subsidiaries and their employees as stated in Section 7 of the Offer Document. The Non-Interested Directors take cognisance that as at the Offer Document LPD, the Joint Offerors do not have any plan and/or intention to effect any major change to the business, assets or employment structure of WTM and its subsidiaries, except where such change is necessary for WTM and its subsidiaries:- (i) (ii) (iii) (iv) to remain competitive within the industry; to rationalise their business activities and/or direction; to improve the utilisation of their resources; and/or to improve efficiency of their operations. Notwithstanding the Joint Offerors intention above, the Non-Interested Directors take note that the Joint Offerors retain the flexibility to consider any option which is in the best interest of WTM that may present itself. 3
5.3 Listing status of WTM The Non-Interested Directors take note that the Joint Offerors do not intend to maintain the listing status of WTM. Accordingly, in the event that WTM does not meet the Public Spread Requirement after the Closing Date, the Joint Offerors will not be taking any steps to address the shortfall in the public shareholding spread of WTM. In the event the Joint Offerors and persons acting in concert with them hold 90% or more of the WTM Shares as a result of the Offer, the Joint Offerors will procure WTM to take the requisite steps to withdraw its listing status from the Official List of Bursa Securities in accordance with Paragraph 16.07 of the Listing Requirements. Following such de-listing, the WTM Shares will no longer be traded on the Main Market of Bursa Securities. In the event the Joint Offerors receive valid acceptances under the Offer resulting in the Joint Offerors and persons acting in concert with them holding in aggregate less than 90% but more than 75% of the issued share capital of WTM, the Joint Offerors intend to request WTM to make the necessary application to withdraw its listing status from the Official List of Bursa Securities pursuant to Paragraph 16.06 of the Listing Requirements. Please refer to Section 8 in Part B of this IAC for further details. 5.4 Compulsory Acquisition The Non-Interested Directors take note that in the event the Joint Offerors receive valid acceptances from the Accepting Holders of not less than nine-tenths (9/10) in the value of the Offer Shares (excluding WTM Shares already held at the date of the Offer by the persons acting in concert with the Joint Offerors), the Joint Offerors intend to invoke the provisions of Section 222 of the CMSA, subject to Section 224 of the CMSA, to compulsorily acquire any remaining Offer Shares for which valid acceptances have not been received from the Dissenting Holders. Please refer to Section 9 in Part B of this IAC for further details. 6. INDEPENDENT ADVICE LETTER The Holders are advised to read and consider the views and recommendation of Mercury Securities, the Independent Adviser appointed to provide comments, opinions, information and recommendation on the Offer to the Non-interested Directors and the Holders. The IAL is included in Part B of this IAC. 7. NON-INTERESTED DIRECTORS RECOMMENDATION Cheng Wai Keung and Edmund Cheng (by virtue of them being the PACs) and Tan Sri Dato Paduka Dr. Mazlan bin Ahmad (by virtue of him being an independent and non-executive director of WTH) are deemed interested in the Offer and have abstained from deliberations and making any recommendation in relation to the Offer. 4
After careful examination of the terms and conditions of the Offer as contained in the Offer Document and taking into consideration the evaluation and recommendation by Mercury Securities as set out in Part B of this IAC, the following Non-Interested Directors, being:- (i) (ii) (iii) (iv) Dato Ghazi bin Ishak; Dr. Poh Soon Sim; Siew Kah Toong; and Tan Sri Datuk Seri Dr. Zulkurnain bin Hj. Awang have CONCURRED with the evaluation and recommendation of Mercury Securities that the Offer is NOT FAIR but REASONABLE. Accordingly, the Board recommends that you ACCEPT the Offer. In arriving at the recommendation, the Board has also considered the possibility of a competing take-over offer for the Offer Shares or any other offer to acquire the assets and liabilities of the WTM Group, which has also been considered by Mercury Securities under their evaluation on the reasonableness of the Offer. In view that the Joint Offerors hold a controlling stake of more than 50% equity interest in WTM, any such offer will not be successful unless with the support of the Joint Offerors. Accordingly, on 25 May 2017, the Board announced that they decided not to seek an alternative person to make a take-over offer for the Offer Shares. 8. DIRECTORS RESPONSIBILITY STATEMENT The Board has seen and approved the contents of this IAC. The Board, collectively and individually, accepts full responsibility for the accuracy of the information contained in this IAC (save for the IAL prepared by Mercury Securities set out in Part B of this IAC) and confirm, after having made all reasonable enquiries, that to the best of their knowledge, the opinions expressed in this IAC have been arrived at after due and careful consideration and there are no other facts not contained in this IAC, the omission of which would make any information in this IAC misleading. The responsibility of the Board in respect of:- (i) (ii) the information relating to the Joint Offerors, the PACs and the Offer (as extracted from the Offer Document and other publicly available information) is limited to ensuring that such information is accurately reproduced in this IAC; and the independent advice and expression of opinion by Mercury Securities in relation to the Offer as set out in Part B of this IAC is limited to ensuring that accurate information in relation to the WTM Group was provided to Mercury Securities for its evaluation of the Offer and to ensure that all information in relation to the WTM Group that are relevant to Mercury Securities evaluation of the Offer have been completely disclosed to Mercury Securities and that there is no material fact, the omission of which would make any information provided to Mercury Securities false or misleading. THE HOLDERS ARE ADVISED TO CAREFULLY CONSIDER THE INFORMATION CONTAINED IN THE OFFER DOCUMENT AND THIS IAC BEFORE MAKING A DECISION ON THE COURSE OF ACTION TO BE TAKEN. THE NON-INTERESTED DIRECTORS HAVE NOT TAKEN INTO CONSIDERATION ANY SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION, RISK PROFILE AND PARTICULAR NEEDS OF ANY INDIVIDUAL HOLDER OR ANY SPECIFIC GROUP OF HOLDERS. 5
THE NON-INTERESTED DIRECTORS RECOMMEND THAT HOLDERS, WHO REQUIRE ADVICE IN RELATION TO THE OFFER IN THE CONTEXT OF THEIR INVESTMENT OBJECTIVES, FINANCIAL SITUATION, RISK PROFILE OR PARTICULAR NEEDS, SHOULD CONSULT THEIR RESPECTIVE STOCKBROKER, SOLICITOR, ACCOUNTANT, BANK MANAGER OR OTHER PROFESSIONAL ADVISERS IMMEDIATELY. Yours faithfully, for and on behalf of the Board of WING TAI MALAYSIA BERHAD SIEW KAH TOONG Independent Non-Executive Director 6
PART B INDEPENDENT ADVICE LETTER FROM MERCURY SECURITIES
Registered office: Ground, 1 st, 2 nd, 3 rd Floor Wisma Umno Lorong Bagan Luar Dua 12000 Butterworth Seberang Perai To: The Holders 23 June 2017 Dear Sir / Madam, UNCONDITIONAL TAKE-OVER OFFER BY THE JOINT OFFERORS THROUGH MAYBANK IB TO ACQUIRE THE OFFER SHARES FOR A CASH OFFER PRICE OF RM1.80 PER OFFER SHARE 1. INTRODUCTION Please refer to Section 1 in Part A of this IAC for the chronological events in relation to the Offer. The purpose of this IAL is to provide our independent evaluation of the Offer together with our recommendation thereon, subject to the scope of our role and limitations specified herein. WE ADVISE YOU TO READ AND UNDERSTAND THIS IAL CAREFULLY TOGETHER WITH PART A: LETTER FROM THE BOARD AND THE OFFER DOCUMENT, A COPY OF WHICH YOU SHOULD HAVE RECEIVED BY NOW, BEFORE TAKING ANY ACTION. THIS IAL DOES NOT CONSTITUTE THE OFFER OR ANY PART THEREOF. 2. TERMS AND CONDITIONS OF THE OFFER The terms and conditions of the Offer are as follows:- Consideration for the Offer : The cash consideration for the Offer is RM1.80 per Offer Share. The Offer Price is subject to any such reduction for net dividend and/or distribution declared, made or paid on or after the date of the Notice but prior to the Closing Date, of which the Holder is entitled to retain. You may accept the Offer in respect of all or any part of your Offer Shares. The Joint Offerors will not pay fractions of a sen to the Accepting Holders. Entitlement to the cash payment will be rounded down to the nearest whole sen. Condition of the Offer : The Offer is not conditional upon any minimum level of acceptances of the Offer Shares as the Joint Offerors already hold more than 50% of the voting shares in WTM. Duration of the Offer : The Offer will remain open for acceptances until 5.00 p.m. (Malaysian time) on 4 July 2017, unless extended by the Joint Offerors. Notices of such extension will be posted to you accordingly. Please refer to Section 2 in Appendix I of the Offer Document for further details on the duration of the Offer. 7
Method of settlement : The settlement of the consideration for the Offer Shares will be effected via remittance in the form of cheque(s), banker s draft(s) or cashier s order(s) which will be despatched by ordinary mail to you (or your designated agent(s), as you may direct) at your registered Malaysian address last maintained with Bursa Depository in respect of valid acceptances, at your own risk, within ten (10) days from the date of such valid acceptances. Please refer to Section 2 and Appendix I of the Offer Document for the full terms and conditions of the Offer as well as Appendix II of the Offer Document for the procedures for acceptance and method of settlement of the Offer. 3. DETAILS OF ACCEPTANCES As at the Offer Document LPD, save for the irrevocable undertakings from the PACs to accept the Offer in respect of all their Offer Shares, the Joint Offerors have not received any other irrevocable undertaking from any Holder to accept the Offer. Based on the notices pursuant to Section 138 of the Act received by WTM, the Joint Offerors have received valid acceptances of 18,851,480 Offer Shares up to 19 June 2017. 4. SCOPE AND LIMITATIONS TO THE EVALUATION OF THE OFFER We have evaluated the Offer and in rendering our advice, we have considered various factors which we believe are of relevance and general importance to an assessment of the Offer and would be of general concern to the Holders. Our scope as the Independent Adviser is limited to expressing an independent opinion on the Offer as to whether the Offer is fair and reasonable insofar as the Holders are concerned based on information and documents provided to us or which are available to us and making enquiries as were reasonable in the circumstances. In performing our evaluation, we have relied on the following sources of information:- (i) (ii) (iii) (iv) (v) information contained in the Notice, Offer Document and the appendices attached thereto; audited consolidated financial statements of WTM for the FYE 30 June 2014, 30 June 2015 and 30 June 2016 as well as the unaudited consolidated financial statements of WTM for the nine (9)-month FPE 31 March 2017; discussions with and representations by the Board and management of WTM; other relevant information, documents, confirmations and representations furnished to us by the Board and management of WTM; and other publicly available information which we deem to be relevant. We have relied on the Board and management of WTM to take due care to ensure that all information, documents and representations provided by them to facilitate our evaluation of the Offer are accurate, valid and complete in all material aspects. Nonetheless, we have made enquiries as were reasonable in the circumstances and as at the date hereof, we are satisfied that the information provided to us or which are available to us is sufficient and have no reason to believe that the aforementioned information is unreliable, incomplete, misleading and/or inaccurate. 8
Our evaluation as set out in this IAL is rendered solely for the benefit of the Holders as a whole and not for any specific group of Holders. Hence, in carrying out our evaluation, we have not taken into consideration any specific investment objectives, financial situation, risk profile or particular needs of any individual Holder or any specific group of Holders. We recommend that any Holder who is in doubt as to the action to be taken in relation to the Offer in the context of his/her individual investment objectives, financial situation, risk profile or particular needs should consult his/her respective stockbroker, solicitor, accountant, banker or other professional advisers immediately. Our advice should be considered in the context of the entirety of this IAL. Our views expressed in this IAL are, amongst others, based on economic, market and other conditions prevailing, and the information and/or documents made available to us as at the LPD or such other period as specified herein. Such conditions may change significantly over a short period of time. We shall immediately notify the Holders by way of an announcement if, after despatching this IAC, as guided by Paragraph 11.07(1) of the Rules, we become aware that this IAC:- (i) (ii) (iii) contains a material statement which is false or misleading; contains a statement from which there is a material omission; or does not contain a statement relating to a material development. If circumstances require, we shall send a supplementary IAC to the Holders in accordance with Paragraph 11.07(2) of the Rules. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 9
5. EVALUATION OF THE OFFER In arriving at our opinion and recommendation in respect of the Offer, we have assessed the fairness and reasonableness of the Offer in accordance with Paragraphs 1 to 6 under Schedule 2: Part III of the Rules whereby:- (i) (ii) (iii) (iv) (v) The term "fair and reasonable should generally be analysed as two (2) distinct criteria, i.e. whether the Offer is fair and whether the Offer is reasonable, rather than as a composite term; The Offer is considered as fair if the Offer Price is equal to or higher than the market price and is also equal to or higher than the value of the Offer Shares. However, if the Offer Price is equal to or higher than the market price but is lower than the value of the Offer Shares, the Offer is considered as not fair. In making the assessment, the value of the Offer Shares is determined based on the assumption that 100% of the issued share capital of the Offeree is being acquired; In considering whether the Offer is reasonable, we have taken into consideration matters other than the valuation of the Offer Shares; Generally, a take-over offer would be considered reasonable if it is fair. Nevertheless, an independent adviser may also recommend for shareholders to accept the take-over offer despite it being not fair, if the independent adviser is of the view that there are sufficiently strong reasons to accept the offer in the absence of a higher bid and such reasons should be clearly explained; and In the event the independent adviser concludes that a take-over offer is not fair but reasonable, the independent adviser must clearly explain the following:- (a) (b) (c) What is meant by not fair but reasonable ; How has the independent adviser reached to this conclusion; and The course of action that the shareholders are recommended to take pursuant to the conclusion. We have considered the following pertinent factors in our evaluation of the Offer:- Fairness of the Offer Section 6 Valuation of the WTM Shares Section 6 Reasonableness of the Offer Section 7 Historical share price performance Section 7.1 Historical liquidity analysis of the WTM Shares Section 7.2 No competing take-over offer Section 7.3 [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 10
6. FAIRNESS OF THE OFFER The WTM Group is principally involved in the following business segments:- (i) (ii) (iii) (iv) (v) development of residential and commercial properties ( Property Development ); investment in commercial and hotel properties, project management and maintenance of properties ( Property Investment ); retailing of garments ( Retail Business ); manufacturing of textile garments ( Manufacturing Business ); and investment holding. (Collectively, the Property Development and Property Investment are hereinafter referred to as the Property Business ) In terms of contribution to the Group s financial performance, the Property Business and Retail Business have been the Group s key contributors (about 99%) as shown below:- Unaudited for the nine (9)-month FPE 31 March 2017 Audited for the FYE 30 June 2016 Pre-tax Pre-tax Revenue operating profit Revenue operating profit Segments (RM 000) (%) (RM 000) (%) (RM 000) (%) (RM 000) (%) (i) Property Business 114,475 47.63 16,752 54.06 95,729 34.71 16,951 59.71 (ii) Retail Business 122,279 50.88 14,011 45.22 174,028 63.09 11,074 39.00 (iii) Manufacturing Business 3,582 1.49 448 1.45 6,063 2.20 1,104 3.89 (iv) Investment holding - - (226) (1) (0.73) - - (739) (1) (2.60) Total 240,336 100.00 30,985 100.00 275,820 100.00 28,390 100.00 Note:- (1) Represent unallocated expenses. Similarly, the NA of the Property Business and Retail Business constitute majority of the Group s unaudited NA as at 31 March 2017 (about 91%) as shown below:- Property Retail Manufacturing Investment Business Business Business holding Total As at 31 March 2017 (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) ASSETS Non-current assets Property, plant and equipment 94,201 6,762 3,120 23,575 127,658 Land held for property development 75,054 - - - 75,054 Investment properties 148,660 - - - 148,660 Prepaid land lease payments - - 1,320-1,320 Investment in joint ventures - 73,296 - - 73,296 Deferred tax assets 13,677 2,831 - - 16,508 Total non-current assets 331,592 82,889 4,440 23,575 442,496 Current assets Property development costs 310,934 - - - 310,934 Trade and other receivables 22,941 10,988 2,550 61,936 98,415 Inventories 883,443 16,135 1,080-900,658 Other current assets 6,790 - - - 6,790 Tax recoverable 11,846 1,330 112 3,927 17,215 Cash and bank balances 46,101 25,204 798 26,455 98,558 Total current assets 1,282,055 53,657 4,540 92,318 1,432,570 TOTAL ASSETS 1,613,647 136,546 8,980 115,893 1,875,066 11
Property Retail Manufacturing Investment Business Business Business holding Total As at 31 March 2017 (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) LIABILITIES Non-current liabilities Borrowings 420,000 - - - 420,000 Deferred tax liabilities 1,013-352 944 2,309 Deferred income 25,563 - - - 25,563 Provision - 2,030 - - 2,030 Total non-current liabilities 446,576 2,030 352 944 449,902 Current liabilities Borrowings 14,282 - - - 14,282 Trade and other payables 95,051 9,216 1,594 4,521 110,382 Other current liabilities 2,316 - - 4 2,320 Derivative financial instruments - 49 - - 49 Tax payable 2,596 - - - 2,596 Total current liabilities 114,245 9,265 1,594 4,525 129,629 TOTAL LIABILITIES 560,821 11,295 1,946 5,469 579,531 NA 1,052,826 125,251 7,034 110,424 1,295,535 As a percentage of total NA (%) 81.27 9.67 0.54 8.52 100.00 Valuation of the WTM Shares In arriving at the fair value of the WTM Shares, we have adopted the SOPV model as our sole valuation method, in which the following valuation methods have been adopted for the respective business segments:- Segments Valuation method (i) Property Business RNAV (ii) Retail Business DCF (iii) Manufacturing Business NA (iv) Investment holding NA We view the SOPV model to be the most appropriate method to estimate the value of the WTM Shares for the following reasons:- (i) Property Business By virtue of the nature of Property Business and the Group s strategies, the WTM Group has significant investments in real properties (including commercial and hotel properties, land held for property development, investment properties, development projects as well as completed properties for rent and/or sale). In view that the majority of the assets (which drive the revenue generation for the Property Business) are real properties, we view the RNAV methodology (an asset-based valuation method) as the most appropriate method to derive a valuation of the Property Business. The RNAV methodology is a generally accepted method in the valuation of property development and/or property investment entities. This methodology takes into consideration any surplus and/or deficit (net of tax) arising from the revaluation of material assets in the Property Business to reflect their market values based on presumption that the assets are realisable on a willing-buyer willing-seller basis in the open market. For those assets not wholly-owned by the Group, the net revaluation surplus and/or deficit will be apportioned between WTM and the other shareholder(s) of the relevant entities within the WTM Group based on their respective equity interest therein. Such net revaluation surplus and/or deficit attributable to the other shareholder(s) is excluded from the computation of RNAV of the Property Business. 12