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MALAYSIAN RESOURCES CORPORATION BERHAD (“MRCB” OR “COMPANY”)
PROPOSED ACQUISITION OF 200,000 ORDINARY SHARES OF RM1.00 EACH REPRESENTING THE ENTIRE EQUITY INTEREST IN 59 INC SDN. BHD. (“59iNC”) FROM FADZIL BIN AHMAD, USMAN BIN SURATMAN AND MOHD. SHAMIR BIN MOHD. HASSAN (TO BE COLLECTIVELY REFERRED TO AS “VENDORS”) FOR A TOTAL CASH CONSIDERATION OF UP TO RM110,000,000 (“PROPOSED ACQUISITION”)
1. INTRODUCTION
The Board of Directors of MRCB (“Board”) is pleased to announce that MRCB had on 7 April 2011 entered into a Share Sale Agreement (“SSA”) with the Vendors in relation to the Proposed Acquisition, the particulars of which are set out in the ensuing sections below.
2. DETAILS OF THE PROPOSED ACQUISITION
2.1 Particulars
Pursuant to the SSA, MRCB proposes to acquire all 200,000 ordinary shares of RM1.00 each held by the Vendors collectively in 59iNC, representing the entire equity interest in 59iNC (“the Sale Shares”), for a total cash consideration of up to RM110,000,000 (“Purchase Consideration”).
Upon completion of the Proposed Acquisition, 59iNC will become a wholly-owned subsidiary of MRCB.
2.2 Background information on 59iNC
59iNC was incorporated in Malaysia under the Companies Act, 1965 (“Act”) on 30 July 2009 as a private limited company under its present name. As at 31 March 2011, 59iNC has an authorised share capital of RM1,000,000 comprising 1,000,000 ordinary shares of RM1.00 each, of which 200,000 ordinary shares of RM1.00 each have been issued and are fully paid-up.
As at the date of this announcement, 59iNC does not have any subsidiaries and associate companies, and has not commenced operations since its date of incorporation.
59iNC had received a letter from Pejabat Pengarah Tanah dan Galian Wilayah Persekutuan (“Land Office”) dated 7 February 2011 stating that the Land Office has agreed to grant a conditional approval for 59iNC to be the legal and beneficial owner of 3 plots of vacant government land at Mukim Setapak referred to as “Tapak B”, “Tapak C” and “Tapak D” measuring a total of 27.41 acres (“the Land”) for purposes of mixed development. However, for the Land to be granted to 59iNC, a payment of up to RM60.8 million (“Land Revenue”), being the alienation premium, quit rent and other charges, is to be paid to the Land Office within 3 months from 7 February 2011 as detailed out in the Borang-Borang 5A.
The description of the Land as stated in the letter from the Land Office is set out below:-
Size Tapak B : 8.18 acres
Tapak C : 1.03 acres
Tapak D : 18.20 acres
Address : Mukim of Setapak
Tenure : Leasehold 99 years from the date of alienation of the Land
2.3 Salient terms of the SSA
The salient terms of the SSA are as follows:
2.3.1 Sale and purchase of the Sale Shares
Subject to the terms and conditions contained in the SSA and in particular the clause on satisfaction of Purchase Consideration, the Vendors agreed to sell and MRCB agreed to purchase the Sale Shares, for the Purchase Consideration, free from all encumbrances, with all rights now or thereinafter attaching to the Sale Shares including without limitation to all bonuses, rights, dividends and distributions declared, paid or made in respect thereof as from the date of the SSA.
2.3.2 Completion
The completion of the SSA is on the date of the execution of the SSA (“Part 1 Completion Date”).
2.3.3 Payment of the Purchase Consideration
The Purchase Consideration shall be satisfied and paid in the following manner:-
a) On the Execution Date :
the payment of the deposit by MRCB to the Vendors’ solicitors, comprising a sum of RM14,300,000 to be paid directly to the Vendors’ solicitors and with MRCB retaining the additional sum of RM2,200,000, wherein this sum will subsequently be paid either to the Ketua Pengarah Jabatan Hasil Dalam Negeri, Lembaga Hasil Dalam Negeri pursuant to the provisions of the Real Property Gains Tax Act 1976 (the receipt of which the Vendor will acknowledge as part-payment of the Purchase Consideration) or released to the Vendors in accordance with the SSA.
b) On the issue of the Qualified Title to Tapak B on or before 31 December 2011 (“the Completion Conditions Deadline”) :
MRCB to make payment of the sum of RM18,950,383 to the Vendors’ solicitors within seven (7) business days of receipt by MRCB of the Qualified Title to Tapak B. Provided at all times that if the area of Tapak B is reduced from 8.18 acres, the amount payable to the Vendors by MRCB shall be reduced by RM67 for every square feet reduced.
c) On the issue of the Qualified
Title to Tapak C on or before the
Completion Conditions Deadline :
MRCB to make payment of the sum of RM2,386,173 to the Vendors’ solicitors within seven (7) business days of receipt by MRCB of the Qualified Title to Tapak C. Provided at all times that if the area of Tapak C is reduced from 1.03 acres, the amount payable to the Vendors by MRCB shall be reduced by RM67 for every square feet reduced.
d) On the issue of the Qualified
Title to Tapak D on or before the Completion Conditions Deadline :
MRCB to make payment of the sum of RM42,163,444 to the Vendors’ solicitors within seven (7) business days of receipt by MRCB of the Qualified Title to Tapak D. Provided at all times that if the area of Tapak D is reduced from 18.20 acres, the amount payable to the Vendors by MRCB shall be reduced by RM67 for every square feet reduced.
e) On the Part 2 Completion Date – date of payment of balance Purchase Consideration :
MRCB to make payment of the balance Purchase Consideration to the Vendors’ solicitors.
The balance Purchase Consideration shall only be payable to the Vendors’ solicitors in the event the following conditions are fulfilled on or before 31 December 2011 (“Completion Conditions Deadline”):
(a) Qualified Title (as defined under the National Land Code 1965) is issued for all the Land identified as Tapak B, Tapak C and Tapak D;
(b) A development order is issued for the development of the Land by the Dewan Bandaraya Kuala Lumpur on terms which are agreeable to MRCB;
© All unauthorised occupiers on the Land are removed and relocated in accordance with the terms and conditions set out by the Pejabat Pengarah Tanah dan Galian in its letter dated 28 December 2010 [Rujukan No. PTG/WP/ 2/43322/10(13)]; and
(d) the approval of the Economic Planning Unit of the Prime Minister’s Department (“EPU”) for the disposal of the Sale Shares by the Vendors to MRCB.
(all collectively referred to as the “Completion Conditions”)
Within ten (10) business days of the fulfilment of all the Completion Conditions, MRCB shall determine and confirm in writing to the Vendors, the amount of the balance Purchase Consideration by taking into account the value of the Land based on the terms and conditions set out in the development order and applying a formula where the balance Purchase Consideration shall equal to the total of:
(i) RM10,000,000 if the development order provides for a commercial plot ratio of not less than 4; and
(ii) RM20,000,000 if the development order includes a waiver of any requirement to build Low Cost Apartments/Housing and related fees.
In the event all the conditions above are present in the development order for the Land, the Purchase Consideration remains unchanged. The Purchase Consideration shall be adjusted and reduced by the value of RM10,000,000 in the event the development order does not contain a commercial plot ratio of not less than 4 and further reduced by the value of RM20,000,000 in the event the development order does not contain a waiver of any requirement to build Low Cost Apartments/Housing and related fees, and this reduced sum shall be referred to as “the Adjusted Purchase Consideration”.
In the event all the Completion Conditions are not fulfilled and completed on or before the Completion Conditions Deadline, the balance Purchase Consideration shall no longer become due and payable to the Vendors.
2.4 Basis and justification for the Purchase Consideration
The Purchase Consideration was arrived at on a willing buyer-willing seller basis after taking into consideration the outstanding Land Revenue payable by MRCB via 59iNC, the market value of the Land of RM155,200,000 as ascribed by C H Williams Talhar & Wong (“Valuer”) via its report dated 24 March 2011 and the prospects of 59iNC vis-à-vis the intended mixed development on the Land.
The Valuer used the Comparison Method to value the Land based on vacant land basis with the assumption that the Land has not been issued with development order and the Land Revenue is fully paid.
In the event the Completion Conditions are not fulfilled and completed, the Adjusted Purchase Consideration shall amount to only RM80,000,000. Therefore, the aggregate of the Adjusted Purchase Consideration and the Land Revenue which is payable by MRCB to the Vendors and Land Office respectively shall amount up to RM140.8 million.
The Land is intended to be developed from 2012 over a period of 8 years into a mixed development comprising both commercial and residential properties with an estimated gross development value (“GDV”) of approximately RM1.5 billion. At a total development cost of approximately RM1.2 billion, the expected profits to be derived from the said development amount to about RM300 million representing 20% of the GDV.
2.5 Historical financial information of 59iNC
The summary of the financial performance of 59iNC since its incorporation is shown below:
Audited
For the period from 30 July 2009 to 31 July 2010
(RM’000)
Revenue -
Operating loss (7)
Loss before taxation (7)
Taxation -
Loss after taxation (7)
No. of ordinary shares in issue (‘000) 100
Net loss per ordinary share (sen) (7)
Net assets 93
Total borrowings -
2.6 Source of funding
The Purchase Consideration will be funded via a combination of internally generated funds and/or bank borrowings.
2.7 Assumption of liabilities
Save for the Land Revenue to be paid to the Land Office and potential contingent liabilities and/or guarantees to be extended by MRCB in relation to the financing for the development of the Land, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by MRCB pursuant to the Proposed Acquisition.
3. RATIONALE FOR THE PROPOSED ACQUISITION
The Proposed Acquisition provides an opportunity for MRCB to expand its land bank and investment in strategic property developments to enhance the Group’s profile and earnings prospect.
4. PROSPECTS OF 59iNC
The Proposed Acquisition will allow MRCB to hold 100% of the equity interest of 59iNC and thus have full control over its management and operations and reap the full benefits of all future revenues and profits. The Board believes that the Proposed Acquisition represents a good opportunity to further expand MRCB’s land bank and strengthen the future earnings of MRCB.
The Board also believes that the prospects of the mixed development intended for the Land is positive given that the Land is located about 6 kilometres to the north-east of Kuala Lumpur City Centre and has multiple access i.e. via Lebuhraya Bertingkat Ampang-Kuala Lumpur (“AKLEH”), Jalan Pahang, Lebuhraya Duta-Hulu Kelang (“DUKE”) and thereafter onto Jalan Semarak.
5. RISK FACTORS IN RELATION TO THE PROPOSED ACQUISITION
5.1 Acquisition risk
There can be no assurance that the anticipated benefits from the Proposed Acquisition will be realised, or that MRCB will be able to generate sufficient revenue from 59iNC to offset the associated investment costs.
5.2 Business and operational risks
The Proposed Acquisition will not result in MRCB being exposed to any additional business and operational risks in property development industry since MRCB is already principally involved in property development.
5.3 Economic and political risks
Factors that could adversely affect the financial prospects of 59iNC include, but are not limited to changes in interest rates, inflation, economic growth, taxation, accounting policies, regulations, government policies and political stability. Any adverse changes in one or more of these factors could materially affect the financial and business prospects of 59iNC and may consequently affect the recoverability of MRCB’s investment costs in 59iNC.
While MRCB practices prudent financial risk management and efficient operating procedures, there can be no assurance that adverse economic and political developments which are beyond the control of MRCB, will not materially affect MRCB.
6. HIGHEST PERCENTAGE RATIO
The highest percentage ratio applicable for the Proposed Acquisition pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) is 13.28% based on the aggregate of the Purchase Consideration amounting up to RM110.00 million and the Land Revenue to be paid to the Land Office of up to RM60.8 million, compared against MRCB’s audited consolidated net assets attributable to equity holders of RM1,286.22 million as at 31 December 2010.
7. EFFECTS OF THE PROPOSED ACQUISITION
The effects of the Proposed Acquisition on the share capital, substantial shareholders’ shareholdings, earnings, earnings per share, net assets per share and gearing are as follows:
7.1 Share capital and substantial shareholders’ shareholdings
The Proposed Acquisition will not have any effect on the issued and paid-up share capital of MRCB as well as its substantial shareholders’ shareholdings as the Purchase Consideration will be fully satisfied in cash.
7.2 Earnings and earnings per share
The Proposed Acquisition is not expected to have any material effect on the earnings and earnings per share of MRCB for the financial year ending 31 December 2011 as the intended mixed development on the Land is only expected to commence in 2012.
Barring unforeseen circumstances, the intended mixed development on the Land is expected to contribute positively to the future earnings of MRCB.
7.3 Net assets per share and gearing
In the event that borrowings are obtained to partly or fully satisfy the Purchase Consideration, the gearing of MRCB for the financial year ending 31 December 2011 will be accordingly affected.
However, the Proposed Acquisition will not have any effect on the net assets per share of MRCB for the financial year ending 31 December 2011.
8. APPROVALS REQUIRED
The Proposed Acquisition is not subject to the approval of the shareholders of MRCB.
The Proposed Acquisition is not conditional upon any other proposal.
9. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the Directors and/or major shareholders of MRCB or any persons connected with them have any interest, direct and/or indirect, in the Proposed Acquisition.
10. DIRECTORS’ STATEMENT
The Board, having considered all aspects of the Proposed Acquisition including the rationale and effects of the Proposed Acquisition and after careful deliberation, is of the opinion that the Proposed Acquisition is in the best interest of MRCB.
11. ESTIMATED TIMEFRAME FOR COMPLETION
The Proposed Acquisition is completed on the date of the execution of the SSA.
12. DOCUMENTS AVAILABLE FOR INSPECTION
The SSA and the valuation report for the Land are available for inspection at the registered office of MRCB during office hours from Mondays to Fridays (except for public holidays) at Level 21, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral, 50470 Kuala Lumpur for a period of 3 months from the date of this announcement.
This announcement is dated 7 April 2011.
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May 24 2011, 06:13 PM
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when I tell them i stay at setapak, what's wrong with it? 
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