PELIKAN INTERNATIONAL CORPORATION BERHAD ( PELIKAN OR THE COMPANY ) (I) (II) PROPOSED RIGHTS ISSUE; AND PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of Pelikan ( Board ), Maybank Investment Bank Berhad ( Maybank IB ) (formerly known as Aseambankers Malaysia Berhad) wishes to announce that the Company proposes to undertake the following:- (i) (ii) proposed renounceable rights issue of up to 171,584,420 new ordinary shares of RM1.00 each in Pelikan ( Rights Shares ) on the basis of one (1) Rights Share for every two (2) existing ordinary shares of RM1.00 each in Pelikan ( Pelikan Shares ) held at an issue price of RM1.10 per Rights Share ( Proposed Rights Issue ); and proposed increase in authorised share capital of Pelikan from RM500,000,000 comprising 500,000,000 Pelikan Shares to RM1,000,000,000 comprising 1,000,000,000 Pelikan Shares ( Proposed Increase In Authorised Share Capital ). The details of the Proposals are set out in the ensuing sections. 2. DETAILS OF THE PROPOSALS 2.1 Proposed Rights Issue 2.1.1 Details of the Proposed Rights Issue The Board will provisionally allot up to 171,584,420 Rights Shares to the shareholders of Pelikan whose names appear in the Record of Depositors of the Company at the close of business at an entitlement date ( Entitlement Date ) to be determined and announced later by the Board ( Entitled Shareholders ) on a renounceable basis of one (1) Rights Share for every two (2) existing Pelikan Shares held. The exact number of Rights Shares to be issued will depend on the number of treasury shares held by the Company on the Entitlement Date. Based on the total issued and paid-up share capital of the Company of RM343,168,841 comprising 343,168,841 Pelikan Shares (before adjusting for 3,914,400 Pelikan Shares purchased and held as treasury shares as at 30 September 2009), the maximum number of new Pelikan Shares to be issued pursuant to the Proposed Rights Issue will be up to 171,584,420 Pelikan Shares. 1
The Board will deal with the fractional entitlement of the Rights Shares in such manner as they may in their absolute discretion deem fit and expedient in the interest of the Company. The Entitled Shareholders can fully or partially renounce their entitlements for the Rights Shares. Any unsubscribed Rights Shares shall be offered to other shareholders of Pelikan under excess Rights Shares application. 2.1.2 Ranking of the Rights Share The Rights Shares shall, upon issue and allotment, rank pari passu in all respects with the then existing Pelikan Shares in issue except that the holders of the Rights Shares will not be entitled to any dividends, rights, allotment and/or other distributions which may be declared, made or paid prior to the allotment date of the said new Pelikan Shares. 2.1.3 Listing of the Rights Share An application will be made for the listing of and quotation for the Rights Shares to be issued under the Proposed Rights Issue on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ). 2.1.4 Issue price of the Rights Share The issue price for the Rights Shares is arrived at after taking into consideration the theoretical ex-rights price of the Pelikan Shares. The issue price of RM1.10 per Rights Share represents a discount of approximately 23.08% from the theoretical ex-rights price of Pelikan Shares of RM1.43 based on the 5-day volume weighted average market price ( VWAMP ) per Pelikan Share up to 20 October 2009 (being the latest practicable date prior to this announcement) of RM1.59. 2.1.5 Shareholders undertaking and underwriting arrangements The Company intends to request its substantial shareholders to provide written irrevocable undertakings to subscribe or procure the subscription of their direct and indirect entitlements to the Rights Shares as at the Entitlement Date ( Shareholders Undertaking ). In addition, the Company will procure for the underwriting of the remaining portion of the Rights Shares for which no Shareholders Undertaking is provided ( Underwriting ). The level of Underwriting required will be determined after the Company has procured the Shareholders Undertaking. 2.2 Proposed Increase In Authorised Share Capital The present authorised share capital of the Company is RM500,000,000 comprising 500,000,000 Pelikan Shares of which 343,168,841 Pelikan Shares have been issued and credited as fully paid-up. The Board proposes to increase the authorised share capital to RM1,000,000,000 comprising 1,000,000,000 Pelikan Shares by the creation of an additional 500,000,000 new Pelikan Shares to accommodate the Proposed Rights Issue as well as new Pelikan Shares to be issued for future corporate exercises, if any. 2
3. PROPOSED UTILISATION OF PROCEEDS The Proposed Rights Issue is expected to raise gross proceeds of up to RM188.74 million. The Company intends to utilise the net proceeds raised for working capital purposes and defray expenses relating to the Proposed Rights Issue. 4. RATIONALE FOR THE PROPOSALS 4.1 Proposed Rights Issue The primary purpose of the Proposed Rights Issue is to raise funds for the working capital requirements of Pelikan and its subsidiaries ( Pelikan Group ). Pelikan s business was injected into the Company via a reverse takeover in April 2005. Since then, the Pelikan Group has grown its revenue from RM0.5 billion to RM1.3 billion in financial year ended 2008 backed by the current share capital of RM343 million. From April 2005 until todate, the Company has set-up 10 new subsidiaries in Europe and Asia and acquired equity interest in five (5) companies. As the Company has not raised any equity funding since April 2005, the above business expansion of the Pelikan Group and the working capital requirements for the existing and new businesses were mainly financed via internally generated funds and some borrowings. In addition, the Pelikan Group is continuously expanding its global market base and product range as part of its long-term business strategies. Hence, additional working capital is required to support these activities and future expansion plans. The Board is of the view that the Proposed Rights Issue is currently the most appropriate avenue of fund raising for the Company based on the following: (a) (b) the new Pelikan Shares will increase the capital base of Pelikan to a level that commensurate with the value of its assets employed, as well as provide an opportunity to the existing shareholders of Pelikan to further increase their equity participation in the Company; and the Proposed Rights Issue will increase Pelikan s shareholders funds/ capital base and hence lower its gearing level to achieve a more optimal capital structure. 4.2 Proposed Increase In Authorised Share Capital The Proposed Increase in Authorised Share Capital is to accommodate the increase in the issued and paid-up share capital of Pelikan pursuant to the Proposed Rights Issue as well as new Pelikan Shares to be issued for future corporate exercises, if any. 3
5. EFFECTS OF THE PROPOSALS The Proposed Increase in Authorised Share Capital will not have any effect on the issued and paid-up share capital, substantial shareholders shareholdings, earnings, net assets ( NA ) and gearing of the Pelikan Group. For illustrative purposes, the effects of the Proposed Rights Issue is set out below: 5.1 Issued and Paid-up Share Capital The effects of the Proposed Rights Issue on the issued and paid-up share capital of Pelikan are set out in Table 1. 5.2 Substantial Shareholders Shareholdings Assuming all shareholders subscribe for their respective entitlements under the Proposed Rights Issue, the Proposed Rights Issue will not have any effect on their percentage shareholding in Pelikan. 5.3 Earnings There will be no effect on the Earnings Per Share ( EPS ) of the Pelikan Group for the financial year ending 31 December 2009 as the Proposed Rights Issue is only expected to be completed by the first quarter of the financial year ending 31 December 2010. Upon completion of the Proposed Rights Issue, the level of dilution (if any) in EPS of the Pelikan Group as a result of the increase in the number of shares in issue will be dependent on the future earnings of the Pelikan Group arising from the proposed utilisation of proceeds from the Proposed Rights Issue. 5.4 NA and Gearing Based on the latest audited consolidated financial statements of Pelikan as at 31 December 2008, the proforma effects of the Proposed Rights Issue on the consolidated NA per share and gearing of the Pelikan Group, assuming that the Proposed Rights Issue had been effected on that date are set out in Table 2. 5.5 Existing Convertible Securities As at the date of this announcement, Pelikan does not have any convertible securities. 4
6. APPROVALS REQUIRED The Proposed Increase in Authorised Share Capital is subject to the approval of the shareholders of Pelikan at an Extraordinary General Meeting ( EGM ) to be convened. The Proposed Rights Issue is conditional upon the following approvals being obtained: (a) (b) (c) Bursa Securities for the listing of and quotation for the Rights Shares to be issued pursuant to the Proposed Rights Issue on the Main Market of Bursa Securities; the shareholders of Pelikan at an EGM to be convened; and any other relevant authorities, if required. The Proposed Increase in Authorised Share and the Proposed Rights Issue are interconditional upon one other. The Proposals are not conditional upon any other corporate exercise/scheme of the Company. 7. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS None of the Directors, major shareholders of Pelikan and/or any persons connected to them have any interest, direct or indirect in the Proposals beyond their respective entitlements as shareholders under the Proposed Rights Issue, for which all existing shareholders of Pelikan are entitled. 8. BOARD OF DIRECTORS' STATEMENT The Board, after taking into consideration the rationale of the Proposals, is of the opinion that the Proposals are in the best interest of Pelikan and its shareholders. 9. SUBMISSION TO THE AUTHORITIES The application to Bursa Securities for the Proposed Rights Issue is expected to be made within two (2) months from the date of this announcement. 10. APPOINTMENT OF ADVISER The Board has appointed Maybank IB as the Adviser to Pelikan for the Proposals. 11. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Board expects the Proposals to be completed by the first quarter of the financial year ending 31 December 2010. This announcement is dated 21 October 2009. 5
Table 1 The effects of the Proposed Rights Issue on the issued and paid-up share capital of Pelikan are as follows: No. of Pelikan Shares ( 000) Existing as at 30 September 2009 * 343,169 To be issued pursuant to the Proposed Rights Issue 171,584 Enlarged issued and paid-up share capital after the Proposed Rights Issue 514,753 Note: * Including 3.914 million Pelikan Shares that are currently held as treasury shares as at 30 September 2009 Table 2 The proforma effects of the Proposed Rights Issue on the consolidated NA per Pelikan Share and gearing of the Pelikan Group, based on the latest audited consolidated financial statements of Pelikan Group as at 31 December 2008 are set out below: Audited as at 31 December 2008 (RM 000) After Proposed Rights Issue (RM 000) Equity attributable to equity holders of the Company Share capital 343,169 514,753 Share premium 59,869 74,627 (1) Currency translation (34,888) (34,888) Retained profits 188,977 188,977 Treasury shares at cost (13,501) - (2) Shareholders funds/ NA attributable to 543,626 743,469 equity holders Minority interest 19,177 19,177 Total Equity 562,803 762,646 No. of Pelikan Shares in issue ( 000) 339,255 514,753 NA per Pelikan Share attributable to equity 1.60 1.44 holders of the Company Total Borrowings 366,406 366,406 Gearing (times) 0.67 0.49 Notes: (1) Assuming the issue price of RM1.10 per Rights Share after netting off estimated expenses of RM2.4 million for the Proposed Rights Issue (2) Assuming all 3.914 million treasury shares as at 30 September 2009 were fully resold to the open market at no gain/loss 6