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1. INTRODUCTION
The Company wishes to announce that KAWAN had on 26 September 2007 entered into a Share Sale Agreement (“SSA”) and a Shareholders’ Agreement in relation to the Proposed Acquisition.
2. DETAILS OF THE PROPOSED ACQUISITION
2.1 Proposed Acquisition of KM
The Proposed Acquisition entails the acquisition by KAWAN of 51,000 ordinary shares of par value RM1.00 each in KM (“Sale Shares”) representing 51.00% equity interest in KM for a cash consideration of RM255,000-00.
The Sale Shares shall be acquired free from all encumbrances and with all rights accruing thereon at the purchase price of RM5-00 per Sale Share and upon the terms and conditions contained in the SSA.
2.2 Brief Information On KM
Kayangan Manisan (M) Sdn Bhd (Company No. 767223-X) is a private limited company incorporated in Malaysia with its registered office at No. 39, Lintasan Perajurit 10, Taman Ipoh Timur, 31400 Ipoh, Perak. The Company carries on the business of producing/manufacturing, trading, wholesaling and retailing food products, more particularly desserts and sweetmeats.
KM currently has an issued and fully paid-up share capital of Ringgit Malaysia One Hundred Thousand (RM100,000) divided into One Hundred Thousand (100,000) ordinary shares of Ringgit Malaysia One (RM1.00) each.
As at the date of this announcement, KM does not have any subsidiary or associated company.
2.3 Basis Of The Purchase Consideration
The purchase consideration of RM255,000-00 or RM5-00 per Sale Share was arrived at on a willing buyer-willing seller basis.
2.4 Brief Information On The Vendor
MR. QUAH HUAT AUN (NRIC No. 471010-08-5361), of No. 39, Lintasan Perajurit 10, Taman Ipoh Timur, 31400 Ipoh, Perak (“the Vendor”) is the registered and beneficial owner of Ninety Nine Thousand (99,000) ordinary shares in KM, representing 99.0% of the issued and fully paid up share capital of KM.
2.5 Sources of Funding and Liabilities To Be Assumed By KAWAN
The purchase consideration is expected to be funded by internally generated funds.
Save for the purchase consideration, there is no other liability to be assumed by KAWAN arising from the Proposed Acquisition.
3. SALIENT TERMS OF THE SSA
3.1 Warranties
The Vendor represents and warrants to KAWAN as follows:
a) that KM is duly incorporated and validly existing under the laws of Malaysia and has the power to own its assets and carry on its business as now being conducted;
b) that the Vendor is the registered and beneficial owner of all of the Sale Shares and that all of the Sale Shares are fully paid-up;
c) that the Vendor is entitled to transfer the legal and beneficial ownership of all of the Sale Shares to KAWAN free from all encumbrances, mortgages, charges, pledges, liens, assignments, equities, options, right of first refusal, right of pre-emption, security interests, title retentions, preferential rights, trust arrangements or other security arrangements;
d) that KM’s Accounts made up to 31 August 2007 have been prepared in accordance with the requirements of all relevant statutes and applicable approved accounting standards in Malaysia and are true and accurate in all material respects and give a true and fair view of the financial position and the assets and liabilities of KM as at 31 August 2007;
e) that KM has no outstanding debts, liabilities, contracts or engagements other than those disclosed in KM’s Accounts;
f) the execution, delivery and performance of the SSA as well as the consummation of the transactions contemplated under the SSA (i) do not and will not conflict with, or result in a breach of any of the provisions of KM’s Memorandum or Articles of Association, and (ii) do not and will not conflict with, or result in a breach of or violation of, or constitute a default in the performance, observance or fulfilment of any obligation, covenant or condition contained in, or constitute, or, but for any requirement of notice or lapse of time or both, would constitute, an event or default by KM under any agreement to which KM is a party or by which it is bound; and
g) that no resolution has been passed for winding up of KM and no winding up proceedings have been commenced against KM and no receiver, trustee or similar officer has been appointed over KM or its assets.
3.2 Completion
The completion of the SSA shall take place fourteen (14) days after the date of the execution of the SSA or such other date as the Parties may agree.
3.3 Shareholders’ Agreement
Upon the completion of the SSA, the provisions set out under the agreement between the Vendor, KAWAN and Mr. Tsao Tun Yao (a Taiwanese individual) as shareholders of KM shall immediately take effect (“Shareholders’ Agreement”). The salient terms of the Shareholders’ Agreement include, amongst others, the following:
(a) Restrictions on transfer
The Shareholders shall not sell, transfer or otherwise dispose of the legal or beneficial ownership of shares held by it in KM otherwise than in accordance with the provisions of the Shareholders’ Agreement and the Articles of Association of KM.
(b) Pre-emptive Rights
Subject to the provisions of the Articles of Association of KM and the Shareholders’ Agreement, any share in KM proposed to be sold by any Shareholder shall first be offered in writing to the other Shareholders in the proportion which the voting rights represented by their ordinary shareholdings in KM bear to each other at such purchase price to be mutually agreed upon by the Shareholders.
(c) Nomination
The Board of Directors of KM (“Board of KM”) will consist of a maximum of four (4) directors, of whom two (2) shall be nominated by KAWAN, one (1) shall be nominated by Tsao Tun Yao and one (1) shall be nominated by Quah Huat Aun.
(d) Quorum
The quorum for any meeting of the Board of KM shall be two (2) Directors consisting of one (1) Director representing KAWAN and one (1) Director representing either Tsao Tun Yao or Quah Huat Aun.
(e) Dividend Policy
The dividend policy for the distribution of profits of KM shall be determined by the Board of KM based on principles of prudent financial management and the Shareholders shall, after taking into consideration the financial position of KM, procure that profits available for distribution as dividend be distributed.
4. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION
4.1 Share Capital
The Proposed Acquisition will not have any effect on the issued and paid-up share capital of KAWAN as the consideration is satisfied entirely by cash.
4.2 Earnings And Earnings Per Share
The Proposed Acquisition is not expected to have any material effect on the earnings of KAWAN and its subsidiaries (“KAWAN Group”) for the financial year ending 31 December 2007. However, it is expected to positively contribute to the KAWAN Group’s future earnings.
4.3 Substantial Shareholding
The Proposed Acquisition will not have any effect on the substantial shareholdings structure of KAWAN as the consideration is satisfied entirely by cash.
4.4 Net Assets And Gearing
The Proposed Acquisition is not expected to have any material effect on the Net Assets and Gearing of KAWAN Group.
5. APPROVALS REQUIRED
The Proposed Acquisition is not subject to any approval from Shareholders or relevant authorities.
6. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST
None of the Directors nor substantial shareholders of KAWAN, nor persons connected to them has any interest, whether direct or indirect in the Proposed Acquisition.
7. DIRECTORS’ STATEMENT
The Board, after having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interests of the Company.
This announcement is dated 26 September 2007.
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