ivory properties group berhad - Bursa Malaysia

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31 Oct 2017 - ... side of the intersections of Lumut-Sitiawan-Pantai Remis main road, .... to redeem the Land from MBSB
ANNOUNCEMENT SUBJECT: TRANSACTION (CHAPTER 10 OF LISTING REQUIREMENTS)

IVORY PROPERTIES GROUP BERHAD (“IVORY” OR “THE COMPANY”)

PROPOSED ACQUISITION OF LEASEHOLD LAND HELD UNDER PN 361197, LOT 54140, MUKIM OF SITIAWAN, DISTRICT OF MANJUNG, STATE OF PERAK DARUL RIDZUAN BY THE COMPANY’S WHOLLY-OWNED SUBSIDIARY, SUNLINK PROPERTIES SDN BHD FOR A PURCHASE CONSIDERATION OF RM133,858,137.60 (“PROPOSED ACQUISITION”)

1.

INTRODUCTION The Board of Directors of the Company (“Board”) wishes to announce that on 31 October 2017, a wholly-owned subsidiary of the Company, Sunlink Properties Sdn Bhd (Company No. 836156-U) (“Sunlink”) has entered into a Sale and Purchase Agreement (“SPA”) with Remco Engineering & Construction Sdn Bhd (Company No. 159748-T) (“Vendor”) for the proposed acquisition of a piece of vacant leasehold land in Sitiawan, Perak Darul Ridzuan measuring approximately 259,100 square metres (“Land”), for a purchase consideration of RM133,858,137.60 (exclusive of Goods and Services Tax) (“Purchase Consideration”) on an “as is where is” basis free from all charges, liens, caveats and all encumbrances but subject to the conditions of title express or implied and restrictionsin-interests (if any) endorsed on the document-of-title to the Land or otherwise affecting the Land and upon the terms and conditions of the SPA. Further details of the Land are as set out in sub-paragraph 2.3 herein.

2.

THE PROPOSED ACQUISITION 2.1

Information on Sunlink Sunlink is a private limited company incorporated in Malaysia on 22 October 2008. Its business address is at Ivory Tower @ Penang Times Square, 81-11-1, Jalan Dato’ Keramat, 10150 George Town, Pulau Pinang. The present share capital of Sunlink is RM237,850.00 comprising 100,000 ordinary shares and 137,850 non-cumulative non-convertible redeemable preference shares. Sunlink is currently engaged in the operations of food and beverage business. Subsequent to its financial year end, Sunlink has intended to venture into property development activities through acquisition of lands and real estate investment. The members of the Board of Directors of Sunlink are Mr Loh Chin Chuen, Dato’ Low Eng Hock and Mr Ang Kung San.

2.2

Information on the Vendor The Vendor was incorporated in Malaysia on 25 February 1987 as a private limited company. Its registered and business addresses are at No. 2481-A, Wisma REMCO, Taman Samudera, 32040 Seri Manjung, Perak Darul Ridzuan. The Vendor is involved in the businesses of development of properties and investment holding. As at 22 August 2017, the share capital of the Vendor is RM2,650,000.00 consisting of 2,650,000 ordinary shares.

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The composition of the Board of Directors and equity structure of the Vendor as represented by its management are as follows:Equity holding Name

Designation

No. of shares

%

Musfirah binti Mohd Syaifu

Director / Shareholder

802,875

30.30

Nomah binti Abd Rahman

Director

-

-

Mohd Murad bin Mohd Syaifu

Shareholder

862,750

32.56

Mohd Syaifu bin Abdullah

Shareholder

682,750

25.76

Azhar bin Mat @ Yusof

Shareholder

301,625

11.38

2,650,000

100.00

Total

2.3

Information on the Land The Land is a parcel of vacant leasehold commercial land held under PN 361197, Lot 54140, Mukim of Sitiawan, District of Manjung, State of Perak Darul Ridzuan. It is almost irregular in shape with a titular area measuring approximately 259,100 square metres (equivalent to approximately 2,788,927 square feet or about 64.0250 acres). The lease is expiring on 13 February 2107. The Land is presently charged by the Vendor to Malaysia Building Society Berhad (Company No. 9417-K) (“MBSB”) vide Persn. No. 5368/2016 (“Charge”).

Save and except for the caveat entered by MBSB vide Persn No. 18006/2015 (“MBSB’s Caveat”), the Land is not subject to any caveat or encumbrances as at the date of the SPA. The site is generally flat and lies about the same level as the frontage roads. The sites boundaries are presently not demarcated by any form of fencing. At the date of inspection, the site was vacant and having mild density of vegetation. The Land is sited along to the north-western side of Jalan Iskandar Shah and adjacent to the south-western side of the intersections of Lumut-Sitiawan-Pantai Remis main road, 32040 Seri Manjung, Perak Darul Ridzuan. It is sited within the prime area of Seri Manjung, approximately 6.5 and 5.0 kilometres to the south-east and south-west of Lumut and Sitiawan Town Centres respectively. The immediate surrounding is a vibrant western corridor of Manjung, which are rapidly converted to tourism use, commercial or housing developments. Prominent landmarks located in the vicinity include Toyota 3S Centre, Tesco Hypermarket, Giant Hypermarket, Pantai Hospital, Aeon Seri Manjung Shopping Centre, Econcave Hypermarket, Seri Manjung Specialist Centre, Petronas petrol station, Perodua Seri Manjung, Proton Seri Manjung, Pasaraya Rapid, Kamdar Seri Manjung and Billion Supermarket.

2.4

Proposed Development of the Land The Proposed Acquisition is part of Ivory’s business plans to strengthen its land banks and develop the same into either commercial or residential properties in the future, based on the plans to be drawn up by Sunlink as may be approved by the relevant authorities.

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2.5

Basis and Justification for the Purchase Consideration The Purchase Consideration of RM133,858,137.60 for the Proposed Acquisition was arrived at basing on the indicative market value of not less than RM48.00 per square foot, which is equivalent to not less than RM133,868,496. Ivory will appoint an independent property valuer registered with the Board of Valuers, Appraisers and Estate Agents, Malaysia to undertake a valuation of the Land for purposes of issuing the circular to shareholders of Ivory. The independent market value of the Land will be disclosed in the circular to shareholders of Ivory to be issued later.

2.6

Salient Terms of the SPA The salient terms of the SPA include, amongst others, the following:2.6.1

Manner of Purchase Consideration to be Satisfied The Purchase Consideration is to be paid to the Vendor’s solicitors as stakeholders in the following manner:Due Date

Payment

Upon execution of SPA

Deposit

Amount (RM) 13,385,813.75

Within 14 days from Unconditional Date (as defined in sub-paragraph 2.6.2 herein) or on the 1st day of the 13th month from the date of the SPA, whichever is the later, provided that if the Part of Balance Purchase Consideration is made after 9 months from the date of the SPA, Sunlink shall bear the MBSB loan interest to be incurred by the Vendor from the 1st day of the 10th month to the actual date the Part of Balance Purchase Consideration is paid by Sunlink to the Vendor’s Solicitors as stakeholders

Part of Balance Purchase Consideration (equivalent to 20% of Purchase Consideration)

26,771,627.52

Within 3 months from the payment of Part of Balance Purchase Consideration (“Completion Period”)

Balance Purchase Consideration

93,700,696.33

Total

133,858,137.60

In the event Sunlink fails to pay the Balance Purchase Consideration within the Completion Period, the Vendor shall grant an extension of 1 month or such other longer period as mutually agreed by Sunlink and the Vendor (“Extended Completion Period”) from the expiry of the Completion Period to Sunlink to complete the Proposed Acquisition subject to Sunlink paying the Vendor interest on the balance of the Purchase Consideration still outstanding at the rate of 7% per annum calculated on a daily basis from the 1st day of the Extended Completion Period until the date of full settlement. 2.6.2

Conditions Precedent The completion of the Proposed Acquisition is conditional upon and subject to the fulfillment of the following conditions precedent (“Conditions Precedent”) on or before 9 months from the date of the SPA (“Conditional Period”):-

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i)

The title deed to the Land has a restrictive condition thereon prohibiting any transfer, lease of the Land without the written approval of the state authority (“Consent to Transfer”). The Vendor shall upon the execution of the SPA, apply to obtain the Consent to Transfer the Land to Sunlink or its nominee(s);

ii)

the approval of the Perak State Authority for the charging of the Land to Sunlink’s financier by Sunlink (if applicable);

iii)

the approval of Ivory’s shareholders for the Proposed Acquisition and transfer of the Land from the Vendor to Sunlink; and

iv)

all encumbrances to be removed (save and except for the Charge, MBSB’s Caveat, Sunlink’s caveat or Sunlink’s financier caveat, where applicable).

The Charge and MBSB’s Caveat will be removed at the time the title deed to the Land is presented at the land office for transfer in favour of Sunlink and charged in favour of Sunlink’s financier (if applicable). In the event that any of the Conditions Precedent is not fulfilled or waived by the relevant party before the expiry of the Conditional Period, the SPA shall terminate upon Sunlink giving 7 days written notice to the Vendor and all monies paid by Sunlink including the Deposit together with interest accrued thereon shall be refunded to Sunlink. Thereafter, the SPA shall automatically terminate and neither Sunlink nor the Vendor shall have any claim against the other save in respect of antecedent breaches. The date when the last condition of the Conditions Precedent is fulfilled or waived by Sunlink or the Vendor (as the case may be) before the expiry of the Conditional Period is called the “Unconditional Date”. 2.6.3

Redemption of the Land The Part of Balance Purchase Consideration shall be utilised by the Vendor’s solicitors to redeem the Land from MBSB if the redemption sum is less than the Part of Balance Purchase Consideration, otherwise the Vendor’s solicitors shall retain the Part of Balance Purchase Consideration as stakeholders. In the event that the redemption sum is more than the Part of Balance Purchase Consideration, the Vendor’s solicitors shall upon receiving the Balance Purchase Consideration, utilise the Part of Balance Consideration and part of the Balance Purchase Consideration to redeem the Land from MBSB.

2.6.4

Power of Attorney Upon execution of the SPA, the Vendor shall execute a power of attorney in favour of Sunlink (“Power of Attorney”). For the avoidance of doubt, Sunlink shall in accordance with the Power of Attorney have full access to the Land upon payment of the Part of Balance Purchase Consideration.

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2.6.5

Possession Upon execution of the SPA, the Vendor shall allow Sunlink to carry out the following acts at its sole cost and expense and the Vendor shall render full assistance to Sunlink on the same:(a)

prepare, submit, execute the requisite approvals and/or amendments of infrastructure and approved layout plan or planning permission, building plans and specifications thereto, development order and such other plans as may be required by the appropriate authorities and to make application to the appropriate authorities for all and any licence, permission and consent required in connection with the development on the Land;

(b)

negotiate with all relevant authorities in respect of the abovesaid plans and/or development;

(c)

liaise with the relevant authorities on all matters in relation to the development on the Land, including all matters concerning development approvals as well as to clear the Land of any squatter or other occupants (if any) as Sunlink shall think fit;

the Vendor shall execute all plans, drawings and other relevant documents and to act and do all things which may be necessary or proper for carrying into effect the items stated in sub-paragraphs (a) to (c) above; (d)

upon obtainment of commencement of work order, Sunlink is allowed to enter the Land with men and material as may be required for the purpose of construction of sale gallery and office (including but not limited to any other structure for purposes of the sale gallery and office) in the manner Sunlink may think fit;

(e)

approach the concerned authorities for obtaining the permissions and other service connections including water and electricity for carrying out the work on the Land;

(f)

request the Vendor to make deposits with the concerned authorities for obtaining the permissions and other service connections including water and electricity for carrying out the work on the Land which Sunlink shall reimburse the Vendor on all such deposits made; and

(g)

obtain all relevant licences and approval to operate and manage the sale gallery and office.

Upon lawful termination of the SPA, no compensation howsoever shall be payable by the Vendor to Sunlink and whatsoever construction carried out shall accrue to the benefit of the Vendor absolutely. 2.6.6

Representations and warranties The SPA contains standard representations and warranties as typically found in agreements of this nature.

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2.7

Source of Funds The Purchase Consideration will be satisfied by a combination of the following means, the breakdown of which has yet been finalised at this point in time:internally generated funds; and/or bank borrowings.

2.8

Liabilities to be Assumed There are no other liabilities, including contingent liabilities and guarantees to be assumed by Ivory arising from the Proposed Acquisition.

3.

RATIONALE FOR THE PROPOSED ACQUISITION The Proposed Acquisition is part of Ivory’s continued initiative to create significant presence in major growing regions across the nation. It will (i) reinforce Ivory’s branding vision of becoming a leading innovative property developer in the country, as well as (ii) strengthen the future earning visibility for Ivory and its group of companies (“Group”). Therefore, the Group is looking for new land banks in strategic locations to develop the same into either commercial or residential properties. With the Proposed Acquisition, the Group will have earnings visibility for 7 years, thus providing greater clarity to shareholders on the earnings sustainability of the Group. The Group’s land bank will increase to approximately 123 acres from approximately 59 acres to date as a result of the Proposed Acquisition.

4.

PROSPECTS AND RISK FACTORS 4.1

Prospects of the Land Manjung has undergone rapid development in recent years, with a rising trend seen in economic activities in the sectors of tourism, industrial, business, agriculture and aquaculture. Manjung is well-known as a tourist destination in Malaysia. It offers a variety of tourism activities and products that would appeal to those interested in nature, infrastructure, heritage and history, agriculture, water sports and recreation. New residential developments or mixed residential/ commercial developments are also mushrooming in Manjung. In addition, the West-Coast Expressway (WCE) from Banting to Taiping is also expected to spur growth in this region. The Proposed Acquisition will leverage on the growth of Manjung and transform the district into a high income, competitive and socially inclusive economy. Furthermore, the Land is located in a strategic prime area namely, being the one and only prime land located within the heart of Bandar Seri Manjung. The strategic location coupled with the Land being held under commercial status, there will be demand for any proposed mixed commercial/residential/ tourism developments on the Land.

4.2

Risk Factors for the Proposed Acquisition The Proposed Acquisition would subject the Group to risks inherent in the property development business of which the Group is already involved in. Such risks may include sensitivity to economic and political conditions, financing risk, delays in commencement and completion, obtaining of required approvals, competition from other property developers, performance of contractors, dependence on key personnel and compulsory acquisition.

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Any adverse change in these conditions may have a material adverse effect on the Group. In addition, any material escalation in costs of cement and other building materials as well as petrol prices may also contribute to a higher overall development cost thereby impacting the profit margins of any development projects. These risks are addressed as part of the Group’s ordinary course of business and are not expected to represent new risks to the Group’s operations. Further, the Proposed Acquisition is conditional upon the Conditions Precedent being fulfilled. Therefore, the Proposed Acquisition may not be completed if any of the Conditions Precedent is not fulfilled.

5.

FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 5.1

Share Capital and Shareholdings of the Substantial Shareholders The Proposed Acquisition will not have any effect on the share capital of and substantial shareholders’ shareholdings in the Company as the Purchase Consideration will be satisfied wholly by cash and does not involve any issuance of new Ivory’s shares.

5.2

Net Assets (“NA”) and NA per Share The Proposed Acquisition is not expected to have any material effect on the NA and NA per share of the Group for the financial year ending 31 March 2018 as there is no development activity on the Land yet. However, the Proposed Acquisition is expected to enhance the NA of the Group in the future in view of the potential profit contribution arising from the eventual development of the Land.

5.3

Earnings and Earnings per Share The Proposed Acquisition is not expected to have a material impact on the earnings of the Group for the financial year ending 31 March 2018 as there is no development activity on the Land yet. The eventual development of the Land, however, is expected to enhance the earnings of the Group in future years. Nevertheless, the loss of interest from cash and/or interest cost from borrowings used to finance the Purchase Consideration is expected to have an impact on the earnings of the Group.

5.4

Gearing As the Purchase Consideration is to be satisfied by, amongst others as mentioned in subparagraph 2.7 above, internally generated funds and/or bank borrowings, the exact mix of which has yet been finalised, the effect of the Proposed Acquisition on the gearing of the Group therefore cannot be quantified at this juncture.

6.

APPROVALS REQUIRED The Proposed Acquisition is subject to the following approvals to be obtained:i) ii)

the Consent to Transfer; and the shareholders’ approval of Ivory at a general meeting to be convened.

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The Proposed Acquisition is not conditional upon any corporate exercise undertaken or to be undertaken by Ivory.

7.

ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances and subject to the Conditions Precedent being fulfilled, the Proposed Acquisition is expected to be completed by the 1st quarter of 2019.

8.

HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Proposed Acquisition pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 30.10% based on the Audited Financial Statements of Ivory as at 31 March 2017.

9.

INTERESTS OF DIRECTORS, CONNECTED TO THEM

MAJOR

SHAREHOLDERS

AND/OR

PERSONS

Insofar as the Directors are aware, none of the Directors, major shareholders of Ivory and/or persons connected to them has any interests, direct or indirect, in the Proposed Acquisition.

10.

DIRECTORS’ RECOMMENDATION The Board, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of the Group.

11.

DOCUMENTS AVAILABLE FOR INSPECTION The SPA dated 31 October 2017 is available for inspection at the registered office of Ivory at Suite 18.05, MWE Plaza, No. 8 Lebuh Farquhar, 10200 George Town, Pulau Pinang on Mondays to Fridays (except public holidays) during normal business hours for a period of 3 months from the date of this announcement.

This announcement is dated 31 October 2017.

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