TAI SIN ELECTRIC LIMITED (Incorporated in the Republic of Singapore on 4 January 1980) (Company Registration No. 198000057W) ACQUISITION BY TAI SIN ELECTRIC LIMITED OF 52.5% OF THE ISSUED SHARE CAPITAL OF CAST LABORATORIES PTE LTD FOR AN AGGREGATE PURCHASE CONSIDERATION OF S$4.5 MILLION 1. INTRODUCTION 1.1 The Board of Directors ( Directors ) of Tai Sin Electric Limited ( Tai Sin or the Company ) wishes to announce that the Company has, on 12 January 2012, entered into a conditional Investment Agreement ( IA ) to acquire 52.5% of the issued and fully paid-up share capital of Cast Laboratories Pte Ltd ( Cast Lab ) for a total purchase consideration of S$4,500,000 ( the Acquisition ) and to regulate the affairs of Cast Lab and the respective rights of its shareholders on the terms and conditions set out in the IA. The IA is scheduled to be completed on 31 January 2012. 2. INFORMATION ON CAST LAB 2.1 Cast Lab was incorporated in Singapore on 16 February 1981. Its issued and paid-up share capital is S$3,106,667 comprising 2,731,196 fully paid-up ordinary shares. 2.2 The Cast Lab Group offers independent testing, inspection and certification services as well as heat treatment and specialised geotechnical services in Singapore with regional presence in Malaysia, Indonesia and Thailand. 2.3 As of the date of this announcement, Cast Lab has the following subsidiaries and associated corporations:- Name of company Country of incorporation Principal activities Percentage of equity held by Cast Lab and its subsidiaries CPG Laboratories Pte Ltd (1) Singapore Provision of technical testing services, analysis services, construction and infrastructure maintenance activities 100% Castlab International Pte Ltd (2) Singapore Investment holding and provision of management services 100% United Geotechnics Singapore Provision of specialised Pte Ltd (2) geotechnical services 100% Cast Consult Sdn Bhd Malaysia Provision of general construction and technical engineering services 51% Castlab (Thailand) Company Limited Thailand Provision of specialised geotechnical services 45% Page 1
Name of company Country of incorporation Principal activities Percentage of equity held by Cast Lab and its subsidiaries PT. Cast Lab Indonesia Indonesia Provision of oil and gas non-construction testing services 29% Notes: (1) Acquired by Cast Lab on 21 June 2011. (2) Acquired by Cast Lab on 13 December 2011. 2.4 Based on the audited financial statements of the Cast Lab Group for the 6 months ended 30 June 2011:- the net tangible assets ( NTA ) of the Cast Lab Group as at 30 June 2011 was S$7,512,361; and the 6 months profit before income tax, minority interests and extraordinary items of the Cast Lab Group was S$120,368. 2.5 Based on the audited financial statements of Castlab International Pte Ltd and its subsidiary United Geotechnics Pte Ltd for the 6 months ended 30 June 2011:- the net tangible liabilities ( NTL ) of the Castlab International Group ( Castlab International ) as at 30 June 2011 was (S$303,885); and the 6 months loss before income tax, minority interests and extraordinary items of the Castlab International Group was (S$409,481). A major portion of the losses mentioned above relate to expenses of a non-recurring nature. The acquisition of the Castlab International and its subsidiary is not expected to materially impact the results or net tangible assets of the Cast Lab Group. 3. PURCHASE CONSIDERATION 3.1 The Acquisition comprises of:- the purchase from shareholders of Cast Lab ( Vendors ) of the following shares in Cast Lab ( Vendor Shares ):- Name Mr. Lim Chye Huat @ Bobby Lim Chye Huat ( Bobby Lim ) No. of Vendor Shares Purchase Consideration 409,679 $800,000 Mr. Tay Yew Chye, William 128,205 $250,000 Mr. Tian Mong Ching 128,205 $250,000 Mr. Lim Eng Heng 25,641 $50,000 ------------ 691,730 ======= ---------------- $1,350,000 ========= and the subscription by Tai Sin of 1,562,417 new Cast Lab shares ( Subscription Shares ) for S$3,150,000. Page 2
3.2 Post acquisition, Tai Sin would own 2,254,147 out of 4,293,613 issued and fully paid-up shares of Cast Lab, representing 52.5% of its issued and fully paid-up share capital. 3.3 The aggregate purchase consideration of S$4,500,000 for the Acquisition is payable in cash and funded from the internal resources of Tai Sin. 3.4 The Purchase Consideration was agreed upon between the Company, the Vendors and Cast Lab on a willing buyer and willing seller basis. 3.5 In arriving at the Purchase Consideration, the Company took into account:- the audited accounts of Cast Lab for the year ended 31 December 2010 and also for the six months ended 30 June 2011; the audited accounts of Castlab International Pte Ltd and its subsidiary United Geotechnics Pte Ltd for the period ended 31 December 2010 and also for the six months ended 30 June 2011; and the activities of the Cast Lab Group and its future business prospects. 4. VENDORS UNDERTAKING 4.1 All the Vendors (save and except for Mr. Bobby Lim) have agreed to jointly and severally warrant and undertake to Tai Sin ( Personal Undertaking ) that the Net Tangible Assets ( NTA ) of the Cast Lab Group based on management accounts or the audited consolidated financial statements for the period up to financial year ending 30 June 2012 ( NTA June 2012 ), whichever is available at the material time, will not decrease more than 5% of its NTA based on the audited consolidated financial statements for the period ended 30 June 2011 ( NTA June 2011 ). In the event that the NTA June 2012 of the Cast Lab Group shall decrease by more than 5% of its NTA June 2011, the Vendors (save and except for Mr. Bobby Lim) shall transfer such additional shares in Cast Lab at the consideration of S$1.00 to Tai Sin according to the formulae set out in the IA. In general terms, the total dollar amount of shortfall in NTA will be compensated by an equivalent number of shares in Cast Lab (valued at NTA June 2012 per share) to be transferred to Tai Sin. The Personal Undertaking shall terminate on 29 August 2012 or any other date to be mutually agreed upon. 5. PRINCIPAL TERMS OF INVESTMENT AGREEMENT 5.1 Payments The Purchase Consideration is paid or payable by Tai Sin in the following manner: upon execution of the IA, Tai Sin paid the sum of S$1,575,000 to Cast Lab as part payment towards account of the consideration for the Subscription Shares; and on Completion Date, the sums of: (i) (ii) S$1,575,000 shall be paid to Cast Lab in full and final satisfaction of the consideration for the Subscription Shares; and S$1,350,000 shall be paid to the Vendors in full and final satisfaction of the purchase of the Vendor Shares. Page 3
5.2 Conditions Precedent Under the terms of the IA, the Proposed Acquisition is conditional upon, inter alia: Tai Sin having been satisfied with their due diligence investigations into the business, finance, operations and affairs of the Cast Lab Group; Tai Sin having been reasonably satisfied with the contents of the legal due diligence reports in respect of Cast Lab and/or its Subsidiaries (if required by Tai Sin); the receipt by Tai Sin of: (i) (ii) (iii) duly executed copies of the Personal Undertaking to be issued by Mr. Tay Yew Chye, Mr. Tian Mong Ching and Mr. Lim Eng Heng respectively in the form as set out in the IA; duly executed copies of service agreements from Mr. Tay Yew Chye, Mr. Tian Mong Ching and Mr. Lim Eng Heng to be employed by Cast Lab in the capacity of Executive Chairman, Executive Director and Chief Executive Officer/Director respectively; and copies of the management accounts of the Group for the four months ending 31 October 2011. 6. RELATIVE FIGURES COMPUTED ON THE BASES SET OUT IN RULE 1006 6.1 The relative figures for the Acquisition computed on the relevant bases set out in Rule 1006 of the listing manual of the Singapore Exchange Securities Trading Limited ( Listing Manual ) are as follows:- Rule 1006 Base The net asset value of the assets to be disposed of, compared with the Group's net asset value Relative figure computed in accordance with the bases set out in Rule 1006 Not applicable as this transaction is not a disposal of assets The net profits attributable to the assets acquired, (1) 1.43% compared with the Group's net profits The aggregate value of the consideration given, compared with the Company s market capitalisation (2) 6.17 % (d) The number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue Not applicable as no new equity securities are issued for the Acquisition Notes: (1) The net profit before income tax, minority interests and extraordinary items of Cast Lab based on its audited consolidated financial statements of Cast Lab for the Page 4
6 months ended 30 June 2011 of S$120,368 has been pro rated to S$60,184 (representing 3 months) and compared to the net profits of Tai Sin shown in its latest announced unaudited financial statements for the three months ended 30 September 2011. (2) Purchase Consideration of S$4,500,000 is compared to the market capitalisation of Tai Sin on 11 January 2012 of S$72,990,515. 6.2 As the relative figure under Rule 1006 exceeds 5% but does not exceed 20%, the Acquisition constitutes a disclosable transaction pursuant to Rule 1010 of the Listing Manual. 7. RATIONALE FOR THE PROPOSED ACQUISITION 7.1 In making the Acquisition, the Directors have taken into account, inter alia, the following factors: The Acquisition will allow the Tai Sin Company to diversify its business activities. The Cast Lab Group has a strong management team with significant market knowledge and management experience in the business in which the Cast Lab Group is engaged. The Cast Lab Group has been profitable for the past five financial years ended 31 December for 2006 to 2010. For these reasons, the Directors consider the Acquisition beneficial for the Tai Sin Group. 8. FINANCIAL EFFECTS OF THE ACQUISITION 8.1 For the purposes of illustration only, the financial effects of the Acquisition taken as a whole are as set out below based on the unaudited proforma consolidated management accounts of Cast Lab for the 12 months ended 30 June 2011. They do not necessarily reflect the exact future financial position and performance of the Company and its subsidiaries (the Group ). Net Tangible Assets ( NTA ) Per share Assuming that the Proposed Acquisition was completed on 30 June 2011 and based on the Tai Sin Group s audited consolidated financial statements for the financial year ended 30 June 2011, the Acquisition would have the following pro forma impact on the consolidated NTA of the Tai Sin Group:- As at 30 June 2011 NTA of the Group (S$ million) NTA per share (Singapore cents) Before the Acquisition $104.179 26.06 cents After the Acquisition $102.847 25.72 cents Page 5
Consolidated earnings per share ( EPS ) Assuming that the Acquisition had been completed on 1 July 2010 and based on the Tai Sin Group s audited consolidated financial statements for the financial year ended 30 June 2011, the Acquisition would have the following pro forma impact on the consolidated earnings per share of the Tai Sin Group:- Financial Year ended 30 June 2011 Net Profit after Tax (S$ million) EPS Basic (Singapore cents) Before the Acquisition $10.509 2.66 cents After the Acquisition $10.322 2.62 cents 9. INTERESTS OF THE DIRECTORS AND SUBSTANTIAL SHAREHOLDERS 9.1 Mr. Bobby Lim, who is one of the Vendors, is disposing of 409,679 fully paid-up shares in Cast Lab at a total consideration of S$800,000 (which is equivalent to the sum he has paid for those shares). His shareholding represents 15% of the pre-acquisition share capital of Cast Lab. In addition, part of the proceeds received from the Subscription by Tai Sin will be used by Cast Lab to redeem its Redeemable Singapore Dollar Bond with an aggregate principal amount of S$700,000 currently held by Mr. Bobby Lim. 9.2 Mr. Bobby Lim is the managing director and a substantial shareholder of Tai Sin. 9.3 Mdm. Goh Soo Luan, Mr. Lim Boon Hock Bernard, Mdm. Pang Yoke Chun, Mr. Lim Boon Chin Benjamin, Mr. Lim Chai Lai @ Louis Lim Chai Lai, Mdm. Chan Kum Lin, Mr. Chia Ah Heng and Mdm. Lim Lian Hiong, being the immediate family members of Mr. Bobby Lim, are regarded as his associates. They do not have a direct interest in the Acquisition. 9.4 None of the other directors or substantial shareholders of Tai Sin have any interest, direct or indirect, in the Acquisition. 10. REVIEW BY AUDIT COMMITTEE 10.1 The Acquisition, including the terms of the IA, purchase consideration payable, and the interest of Mr. Bobby Lim in the Acquisition, have been reviewed by the Audit Committee of the Company. The Audit Committee is of the opinion that the Acquisition is not prejudicial to the interests of Tai Sin and its minority shareholders. 11. AGREEMENT AVAILABLE FOR INSPECTION 11.1 A copy of the IA is available for inspection during normal business hours at the registered office of Tai Sin situated at 24 Gul Crescent, Jurong Town, Singapore 629531 for 3 months from the date of this announcement. By Order of the Board Mrs. Low nee Tan Leng Fong Tan Shou Chieh Secretaries 12 January 2012 Page 6