LATITUDE TREE HOLDINGS BERHAD ( LATITUDE TREE OR THE COMPANY ) - ACQUISITION OF PROPERTY BY RHONG KHEN TIMBERS SDN BHD ( RKT ) 1. Introduction The Board of Directors of Latitude Tree is pleased to announce that RKT, a wholly-owned subsidiary of the Company, had on 27 January 2010 entered into a Sale and Purchase Agreement ( Agreement ) with Pelan Teknik Sdn Bhd ( PT ) for the acquisition of all that piece of freehold industrial land free from encumbrances held under GM 2068 Lot No. 3358, in Mukim Kapar, District of Klang and State of Selangor Darul Ehsan measuring approximately 15,682 square metres together with a single storey warehouse, a 3-storey office block and a single storey factory (the Property ) for a total cash consideration of Ringgit Malaysia Ten Million (RM10,000,000.00) only (the Acquisition ). 2. Details of the Acquisition The Property is presently tenanted to Latitude Tree Furniture Sdn Bhd ( LTF ), a wholly-owned subsidiary of the Company. Currently, LTF is using the Property as part of its administrating, manufacturing and warehousing facilities. The approximate age of the building is ten (10) years. The Property is presently charged by PT to Affin Bank Berhad as security for banking facilities granted to PT. The Acquisition by RKT shall be free from encumbrances. The Company is unable to procure the date and original cost of investment and net book value of the Property as it is not privy to such information. 3. Information on RKT RKT is a company incorporated in Malaysia under the Companies Act, 1965 on 23 March 2002 as a private limited company. The nature of business carried out by RKT are manufacturing and sale of wooden furniture and components. The authorised share capital of RKT is RM500,000.00 comprising 500,000 ordinary shares of RM1.00 each whilst the issued and paid-up share capital is RM100.00 divided into 100 ordinary shares of RM1.00 each. 4. Information on PT PT is a company incorporated in Malaysia under the Companies Act, 1965 on 8 June 1994 as a private limited company. The nature of business carried out by PT are investment holding, letting of properties and general trading. The authorised, issued and paid-up share capital of PT is RM500,000.00 comprising 500,000 ordinary shares of RM1.00 each.
5. Basis for Arriving at the Purchase Consideration and Valuation The purchase consideration of Ringgit Malaysia Ten Million (RM10,000,000.00) only (the Purchase Consideration ) was arrived at on a willing buyer and willing seller basis after taking into account the open market valuation of RM12.4 million as appraised by Raine & Horne International Zaki + Partners Sdn Bhd, an independent professional valuer in their valuation report dated 9 December 2009. 6. Funding for the Acquisition The Purchase Consideration shall be satisfied entirely by cash via bank borrowings and internal generated funds, approximately 60% and 40% respectively. 7. Liabilities to be assumed There are no liabilities including contingent liabilities or guarantees to be assumed by Latitude Tree arising from the Acquisition. 8. Rationale for the Acquisition Latitude Tree Group has been renting the Property which is adjacent to Latitute Tree Group s existing factory for the past 10 years. The Property is used for part of Latitude Tree Group s operation. PT has expressed its intention to dispose of the Property and hence the need for Latitude Tree Group to vacate the Property. The Acquisition will ensure Latitude Tree Group is able to continue to have the use of the Property for its operation. 9. Approval Required The Acquisition is not subject to the approval of the shareholders of Latitude Tree and any other relevant authorities and is not conditional upon any other corporate exercise undertaken by Latitude Tree Group. 10. The salient terms of the Agreement are as follows: (a) (b) Upon execution of the Agreement, RKT shall pay to PT, a deposit sum of RM1,000,000.00, representing 10% of the Purchase Consideration, which shall in the event of the completion of the Agreement forms part payment towards the Purchase Consideration; The sale and purchase of the Property shall be subject to and conditional upon the fulfillment of the following condition precedent within six (6) months from the date of the Agreement :- PT having obtained the written consent from Tenaga Nasional Berhad addressed to the relevant Land Registry/Office for the transfer of the Property to RKT and charge to RKT s financier; and
In the event the above condition precedent cannot be fulfilled within six (6) months from the date of the Agreement or within such extension of time as the parties may mutually agree in writing, RKT shall have the option to terminate the Agreement by notice in writing to PT. (c) The Balance Purchase Consideration of RM9,000,000.00 shall be paid by RKT within three (3) months from the Unconditional Date (The date in which the above condition precedent is fulfilled) failing which PT shall grant to RKT an extension of one (1) month to pay the balance Purchase Consideration or such unpaid balance with interest thereon at the rate of eight per centum (8%) per annum on a day-to-day basis. 11. Effects of the Acquisition Share capital and substantial shareholders shareholding The Acquisition will not have any effect on the issued and paid-up share capital of Latitude Tree and substantial shareholders shareholdings as the Acquisition will be fully satisfied by cash and bank borrowings. Gearing Based on the audited consolidated financial statements of Latitude Tree for the financial year ended 30 June 2009, the proforma effects of the Acquisition on the gearing of Latitude Tree are set out in Table 1 herein. Earnings Per Share The Acquisition shall not have any material effect on the earnings per share of Latitude Tree for the financial year ending 30 June 2010. Net Assets ( NA ) Per Share The Acquisition is not expected to have any material effect on the consolidated NA of Latitude Tree Group for the financial year ending 30 June 2010. 12. Prospect and Risk Factors In view of the Property is located in an established industrial area, the Board expects the value of the Property to be maintained in near future with prospect for potential future capital appreciation. Except for general economic risk, business risk and investment risk commonly associated with industrial land acquisition, the Board does not foresee any material risk involved in relation to the Acquisition as the Property is used for Latitude Tree Group s business activities.
13. Statement by Directors The Board, having considered all aspects of the Acquisition, is of the opinion that the Acquisition is in the best interests of Latitude Tree Group. 14. Directors and Major Shareholders Interest None of the Directors, major shareholders and/or persons connected to the Directors and/or major shareholders of Latitude Tree, has any interest, direct or indirect, in the Acquisition. 15. Document for Inspection The Agreement may be inspected at the Registered Office of Latitude Tree at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, during normal business hours from Mondays to Fridays (except public holidays) within 14 days from the date of this announcement. 16. Estimated Time Frame for Completion of the Acquisition Barring any unforeseen circumstances, the Acquisition is expected to be completed within six (6) months from the date of the Agreement. 17. Securities Commission s Equity Guidelines The Securities Commission's Equity Guidelines is not applicable, as the Acquisition will be satisfied by cash and bank borrowings. 18. Highest Percentage Ratio The highest percentage ratio applicable to the Acquisition pursuant to paragraph 10.02(g) of Bursa Malaysia Securities Berhad Main Market Listing Requirements is 8.12%. This announcement is dated 27 January 2010.
Table 1 Effects on gearing Share capital Non-distributable share premium Revaluation reserve Translation reserve Retained profits Audited Financial Statements for the financial year ended 30 June 2009 RM 000 64,805 1,225 1,114 (2,411) 112,753 After Acquisition RM 000 64,805 1,225 1,114 (2,411) 113,113 Minority interest Total Equity 13,439 190,925 13,439 191,285 Total borrowings Gearing (times) 112,356 0.59 118,356 0.62