ANNOUNCEMENT DATED 28 JUNE 2007
TAMADAM BONDED WAREHOUSE BERHAD (“TAMADAM” OR “COMPANY”)
I. PROPOSED ACQUISITION OF 51% EQUITY INTEREST IN BRAHIM’S-LSG SKY CHEFS HOLDINGS SDN BHD (“BLH”) COMPRISING 510,000 ORDINARY SHARES OF RM1.00 EACH (“SHARES”) FOR AN INDICATIVE PURCHASE CONSIDERATION OF RM130.0 MILLION FROM BRAHIM’S INTERNATIONAL FRANCHISES SDN BHD (“BIF”) TO BE SATISFIED BY THE ISSUANCE OF 152,941,177 NEW SHARES IN TAMADAM VALUED AT RM0.85 PER SHARE (“PROPOSED BLH ACQUISITION”);
II. PROPOSED ACQUISITION OF 51% EQUITY INTEREST IN DEWINA HOST SDN BHD (“DHOST”) COMPRISING 127,500 SHARES FOR A PURCHASE CONSIDERATION OF RM6.12 MILLION FROM DEWINA HOLDINGS SDN BHD (“DHSB”) TO BE SATISFIED BY THE ISSUANCE OF 7,200,000 NEW SHARES IN TAMADAM VALUED AT RM0.85 PER SHARE (“PROPOSED DHOST ACQUISITION”);
(ITEMS (I) AND (II) ARE TO BE COLLECTIVELY REFERRED TO AS “PROPOSED ACQUISITIONS”)
III. PROPOSED WAIVER TO BIF AND PARTIES ACTING IN CONCERT WITH IT FROM THE OBLIGATION TO EXTEND A MANDATORY GENERAL OFFER (“GO”) FOR ALL THE REMAINING SHARES NOT ALREADY OWNED BY THEM IN TAMADAM AND ALL NEW SHARES THAT MAY BE ALLOTED AND ISSUED PURSUANT TO THE EXERCISE OF THE COMPANY’S 2000/2010 WARRANTS (“WARRANTS”) AFTER THE PROPOSED ACQUISITIONS (“PROPOSED BIF WAIVER”);
IV. PROPOSED WAIVER TO TAMADAM AND PARTIES ACTING IN CONCERT WITH IT FROM THE OBLIGATION TO EXTEND A MANDATORY GO FOR ALL THE REMAINING SHARES NOT ALREADY OWNED BY THEM IN BLH AND LSG SKY CHEFS-BRAHIM’S SDN BHD (“LSGB”), A 70%-OWNED SUBSIDIARY OF BLH, PURSUANT TO THE PROPOSED BLH ACQUISITION (“PROPOSED TAMADAM WAIVER”);
(ITEMS (III) AND (IV) ARE TO BE COLLECTIVELY REFERRED TO AS “PROPOSED WAIVERS”)
V. PROPOSED OFFER FOR SALE AND/OR PLACEMENT OF SHARES IN TAMADAM HELD BY BIF TO THE MALAYSIAN PUBLIC (“PROPOSED OFFER FOR SALE AND/OR PLACEMENT”); AND
VI. PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL OF TAMADAM FROM RM100,000,000 COMPRISING 100,000,000 SHARES TO RM500,000,000 COMPRISING 500,000,000 SHARES (“PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL”)
(ITEMS (I) TO (VI) TO BE COLLECTIVELY REFERRED TO AS “PROPOSALS”)
1. INTRODUCTION
Further to the Company’s announcements dated 11 May 2007 and 8 June 2007 on the Proposed Acquisitions, on behalf of the Company, AmInvestment Bank Berhad (formerly known as AmMerchant Bank Berhad) (a member of AmInvestment Bank Group) (“AmInvestment Bank”) would like to announce that on 28 June 2007, the Company has entered into the following agreements for purposes of the Proposed Acquisitions :-
(a). A share sale agreement between Tamadam and BIF for the acquisition of 510,000 Shares in BLH (“BLH Sale Shares”) by Tamadam from BIF for an indicative purchase consideration of RM130.0 million to be satisfied by the issuance of 152,941,177new Shares in Tamadam valued at RM0.85 per Share (“BLH Agreement”); and
(b). A share sale agreement between Tamadam and DHSB for the acquisition of 127,500 Shares in DHost (“DHost Sale Shares”) by Tamadam from DHSB for a purchase consideration of RM6.12 million to be satisfied by the issuance of 7,200,000 new Shares in Tamadam valued at RM0.85 per Share (“DHost Agreement”).
(The BLH Agreement and DHost Agreement are to be collectively referred to as “Agreements”)
2. PROPOSED BLH ACQUISITION
2.1 Background Information On The Proposed BLH Acquisition
Pursuant to the terms of the BLH Agreement, the Company shall purchase 510,000 Shares in BLH, representing 51% of its issued and paid-up share capital, for an indicative purchase consideration of RM130.0 million to be satisfied by the issuance of 152,941,177new Shares in Tamadam valued at RM0.85 per Share.
The final purchase consideration for the Proposed BLH Acquisition shall be subject to a valuation to be conducted on the BLH Sale Shares by an independent valuer to be appointed by Tamadam (“Valuation”).
2.2 Salient Terms Of The BLH Agreement
The salient terms of the BLH Agreement are as follows :-
(a) Acquisition of the BLH Sale Shares
Subject to the terms and conditions of the BLH Agreement, BIF shall sell and Tamadam shall purchase all, and not some only, of the BLH Sale Shares in consideration of the 152,941,177new Shares in Tamadam valued at RM0.85 per Share and on the terms and conditions set out in the BLH Agreement free from all liens, claims, charges, mortgages, equities and other encumbrances whatsoever, but with all rights and advantages attaching thereto or accruing thereon together with all dividends (including dividends declared and but not paid) as at a date to be mutually agreed between BIF and Tamadam falling within fourteen (14) days from the date that the last of the conditions precedent set out in Section 2.2(c) of this Announcement have been fulfilled or waived (“BLH Completion Date”).
The parties acknowledge that BIF and Tamadam have agreed to sell and to purchase the BLH Sale Shares respectively, on the express basis that Tamadam shall execute a deed of accession to the Shareholders’ Agreement dated 25 September 2003 entered into between BIF, BLH and LSG Asia GmbH (“LSG Asia”) (“Shareholders’ Agreement”), wherein Tamadam agrees to be bound by the Shareholders’ Agreement as if it was the original party to the Shareholders’ Agreement, and for such deed to take effect at the BLH Completion Date.
(b) Purchase Consideration
(i). The indicative purchase consideration for the BLH Sale Shares shall be RM130.0 million to be satisfied by the issuance of 152,941,177 new Shares in Tamadam valued at RM0.85 per Share subject to the Valuation (“BLH Indicative Purchase Consideration”).
(ii). The BLH Indicative Purchase Consideration shall be subject to the Valuation and subject to the approval of the Securities Commission (“SC”). In the event that the BLH Indicative Purchase Consideration does not fall within the range of valuation on the BLH Sale Shares as specified by the independent valuer in its valuation report, the parties agree to first confer in good faith (on an urgent and immediate basis) whether to accept such valuation for the BLH Sale Shares and whether to agree on an increase or reduction in the BLH Indicative Purchase Consideration. If the parties agree to accept the increased or reduced BLH Indicative Purchase Consideration, such amount shall be treated for all intents and purposes as the BLH Indicative Purchase Consideration for purposes of submissions to the SC and the number of the Tamadam Shares to be issued and allotted to BIF shall be adjusted accordingly.
(iii). In the event that the SC imposes conditions such that the valuation of the BLH Sale Shares would affect the number of the new Tamadam Shares to be issued or the BLH Indicative Purchase Consideration, as the case may be, by less than five percent (5%) (“Revised Consideration”), the Revised Consideration for the BLH Sale Shares shall be deemed to have been accepted by both BIF and Tamadam and the number of the Tamadam Shares to be issued and allotted to BIF shall be adjusted accordingly.
(iv). The BLH Indicative Purchase Consideration shall be the final purchase consideration if the SC’s approved valuation of the BLH Sale Shares, subject always to item 2.2(b)(iii) above :-
(aa). falls within the range of valuation on the BLH Sale Shares as specified by the independent valuer in the valuation report; and
(bb). there has been no change in the number of the Tamadam Shares to be issued required by the SC.
(v) In the event that item 2.2(b)(iii) above cannot be fulfilled or the SC imposes conditions that may affect the BLH Indicative Purchase Consideration or the RM0.85 value of the new Tamadam Shares to be issued by more than five percent (5%) :-
(aa) the parties agree to first confer in good faith (on an urgent and immediate basis) whether to accept or not such revised purchase consideration for the BLH Sale Shares or such revised number of the Tamadam Shares to be issued and allotted to BIF; and
(bb) if any party does not so accept, then the provisions of Clauses 4.2(b), 4.2(c), 4.5 and 4.6 of the BLH Agreement shall, mutatis mutandis, take effect.
(c) Conditions Precedent
The completion of the BLH Agreement is conditional upon the following conditions being satisfied on or before the day falling eight (8) months after the execution of the BLH Agreement, or such extended date as the parties may agree to in writing :-
(i) the conditions as set out in Section 12 of this Announcement;
(ii) Tamadam being reasonably satisfied, in accordance with Clause 3.2 of the BLH Agreement, with the results of the due diligence review of BLH, LSGB and their respective assets and businesses;
(iii) a valuation on the BLH Sale Shares has been conducted by an independent valuer to be appointed by Tamadam;
(iv) receipt of the formal consent of LSG Asia under the Shareholders’ Agreement to the sale and purchase transaction contemplated under the BLH Agreement including a waiver to the right granted to LSG Asia under the Shareholders’ Agreement to receive an offer in writing to purchase the BLH Sale Shares and a written affirmation that it would not be accepting a take-over offer, if such a take-over offer is made;
(v) receipt of the formal consent of Malaysian Airline System Berhad (“MAS”) under the Shareholders’ Agreement dated 25 September 2003 entered into between BLH, LSGB and MAS (“Subsidiary’s Shareholders’ Agreement”) to the sale and purchase transaction contemplated under the BLH Agreement including a confirmation from MAS that such sale and purchase transaction does not constitute a breach under the Subsidiary’s Shareholders’ Agreement and that the Subsidiary’s Shareholders’ Agreement shall be deemed amended with effect from the BLH Completion Date and a written affirmation that MAS would not be accepting a take-over offer, if such a take-over offer is made;
(vi) any other consents or approvals required in respect of the business and operations of BLH and/or LSGB from relevant Malaysian or international regulatory authorities or statutory bodies or which are otherwise found to be required during the course of the due diligence review;
(vii) where any party to the BLH Agreement by any law or regulation requires the approval of its shareholders for the sale and purchase transaction contemplated under the BLH Agreement, such shareholders’ approval;
(viii) the approval of the shareholders of BIF for the sale and purchase transaction contemplated under the BLH Agreement;
(ix) the approval of the Board of Directors (“Board”) of Tamadam for an increase in the authorised share capital of Tamadam and the sale and purchase transaction contemplated under the BLH Agreement; and
(x) the approval of the Board of BIF for the sale and purchase transaction contemplated under the BLH Agreement.
2.3 Background Information On BLH
BLH was incorporated in Malaysia under the Companies Act, 1965 (“Act”) as a private limited company on 18 June 2002. As at 31 May 2007, the authorised share capital of BLH is RM5,000,000 comprising 4,990,000 Shares and 1,000,000 redeemable preference shares of RM0.01 each (“RPS”), of which 1,000,000 Shares have been issued and are fully paid-up. As at 31 May 2007, the shareholders of BLH are BIF and LSG Asia holding 51% and 49% of the equity interest in BLH respectively.
BLH is principally an investment holding company. It commenced operations in December 2003 when it acquired its sole 70%-owned subsidiary, LSGB which is principally involved in the provision of in-flight catering and its related services such as cabin handling and is the principal in-flight catering service provider at both the Kuala Lumpur International Airport (“KLIA”) and Penang airport. As a global airline catering company, LSGB serves more than thirty (30) international airlines. It operates 24 hours daily with an output of 40,000 meals per day. BLH prides on the preparation of 100% guaranteed halal meals and a fully integrated food logistics supply chain which includes coldrooms, warehouses and distribution support.
LSGB has a catering agreement with MAS which was entered into on 25 September 2003 giving LSGB the exclusive right to supply and provide in-flight catering and cabin handling services to MAS at both the KLIA and Penang airport for a period of twenty-five (25) years until 2028. Some of LSGB’s other major clients are Japan Airlines, Cathay Pacific, Korean Air, Air Asia and Thai Airways.
In addition, LSGB also has a technical assistance agreement with LSG Asia which was entered into on 25 September 2003 and basically entails the provision of various technical assistance by LSG Asia for the operations of LSGB for a period of twenty-five (25) years until 2028. MAS holds the remaining 30% equity interest in LSGB.
Based on the audited consolidated financial statements of BLH for the financial year ended (“FYE”) 31 December 2006, the net profits and net assets of the BLH group of companies (“BLH Group”) are approximately RM7.199 million and RM23.688 million respectively.
The historical financial information of the BLH Group is set out in Table 1(A) of the Appendix of this Announcement.
2.4 Background Information On BIF
BIF was incorporated in Malaysia under the Act as a private limited company on 19 April 1994.
The principal activity of BIF is investment holding.
As at 31 May 2007, the directors of BIF are Datuk Ibrahim bin Haji Ahmad, Tan Sri Dato’ Mohd Ibrahim bin Mohd Zain and Datin Aminah binti Haji Ahmad. The substantial shareholders of BIF and their shareholdings in BIF are set out in Table 2 of the Appendix of this Announcement.
2.5 Basis Of Arriving At The Indicative Purchase Consideration
The indicative purchase consideration for the Proposed BLH Acquisition of RM130.0 million was arrived at on a “willing-buyer willing-seller” basis after taking into consideration the adjusted net asset value of BLH after adjusting for the indicative valuation of its 70% equity interest in LSGB using the discounted cashflow methodology.
The final purchase consideration for the Proposed BLH Acquisition will be subject to the Valuation.
2.6 Basis Of Determining The Issue Price For The New Tamadam Shares
The issue price for the new Tamadam Shares of RM1.00 per Share was arrived at based on the par value of Tamadam Shares.
2.7 Basis Of Determining The Value Of The New Tamadam Shares
The new Tamadam Shares has been valued at RM0.85 per Share which was arrived at after taking into consideration the following :-
(i) the 5-day, 1-month and 3-month weighted average market price (“WAP”) of Tamadam Shares up to and including 10 May 2007, being the last market day prior to the announcement on the Proposed Acquisitions on 11 May 2007, of RM0.74, RM0.71 and RM0.74 respectively; and
(ii) the audited consolidated net assets per Share of Tamadam as at 31 December 2006 of RM0.55.
The 5-day WAP of Tamadam Shares up to and including 27 June 2007, being the last market day prior to this Announcement was RM1.25.
2.8 Ranking Of The New Tamadam Shares
The new Tamadam Shares to be issued pursuant to the Proposed BLH Acquisition shall, upon allotment and issue, rank pari passu in all respects with the existing issued Shares of Tamadam.
2.9 Shares Acquired Free From Encumbrances
The BLH Sale Shares shall be acquired free from all liens, claims, charges, mortgages, equities and other encumbrances whatsoever, but with all rights and advantages attaching thereto or accruing thereon together with all dividends (including dividends declared and but not paid) as at the BLH Completion Date.
2.10 Liabilities To Be Assumed
There are no liabilities, including contingent liabilities and guarantees, to be assumed by Tamadam pursuant to the Proposed BLH Acquisition.
2.11 Original Cost Of Investment
BIF’s original cost of investment in the BLH Sale Shares is RM0.51 million which was incurred in December 2003. In addition, BIF had advanced funds to BLH and BLH had also incurred external borrowings to finance its equity investment in LSGB.
3. PROPOSED DHOST ACQUISITION
3.1 Background Information On The Proposed DHost Acquisition
Pursuant to the terms of the DHost Agreement, the Company shall purchase 127,500 Shares in DHost, representing 51% of its issued and paid-up share capital, for a purchase consideration of RM6.12 million to be satisfied by the issuance of 7,200,000 new Tamadam Shares valued at RM0.85 per Share.
3.2 Salient Terms Of The DHost Agreement
The salient terms of the DHostAgreement are as follows :-
(a) Acquisition of the DHost Sale Shares
Subject to the terms and conditions of the DHost Agreement, DHSB shall sell and Tamadam shall purchase all, and not some only, of the DHost Sale Shares in consideration of the 7,200,000new Shares in Tamadam valued at RM0.85 per Share and on the terms and conditions set out in the DHost Agreement free from all liens, claims, charges, mortgages, equities and other encumbrances whatsoever, but with all rights and advantages attaching thereto or accruing thereon together with all dividends (including dividends declared and but not paid) as at a date to be mutually agreed between DHSB and Tamadam falling within fourteen (14) days from the date that the last of the conditions precedent set out in Section 3.2(c) of this Announcement have been fulfilled or waived (“DHostCompletion Date”).
The parties acknowledge that DHSB and Tamadam have agreed to sell and to purchase the DHost Sale Shares respectively, on the express basis that Tamadam shall execute a deed of accession to the Shareholders’ Agreement dated 3 December 1997 entered into between DHSB, DHost and Host International Inc. (“Host International”) (“DHost Shareholders’ Agreement”), wherein Tamadam agrees to be bound by the DHost Shareholders’ Agreement as if it was the original party to the DHost Shareholders’ Agreement, and for such deed to take effect at the DHost Completion Date.
(b) Purchase Consideration
(i) The indicative purchase consideration for the DHost Sale Shares shall be RM6.12 million to be satisfied by the issuance 7,200,000new Shares in Tamadam valued at RM0.85 per Share (“DHost Indicative Purchase Consideration”).
(ii) In the event that the SC imposes conditions that would affect the RM0.85 value of the new Tamadam Shares to be issued by less than five percent (5%), the revised value of the new Tamadam Shares shall be deemed to have been accepted by both DHSB and Tamadam.
(iii) In the event that the SC imposes conditions that would affect the DHost Indicative Purchase Consideration or the RM0.85 value of the new Tamadam Shares to be issued by more than five percent (5%) :-
(aa) the parties agree to first confer in good faith (on an urgent and immediate basis) whether to accept or not such revised value of the new Tamadam Shares; and
(bb) if any party does not so accept, then the provisions of Clauses 4.2(b), 4.2(c), 4.5 and 4.6 of the DHost Agreement shall, mutatis mutandis, take effect.
(c) Conditions Precedent
The completion of the DHost Agreement is conditional upon the following conditions being satisfied on or before the day falling eight (8) months after the execution of the DHost Agreement, or such extended date as the parties may agree to in writing :-
(i) the conditions as set out in Section 12 of this Announcement;
(ii) Tamadam being reasonably satisfied, in accordance with Clause 3.2 of the DHost Agreement, with the results of the due diligence review of DHost, its assets and businesses;
(iii) the BLH Agreement becoming unconditional;
(iv) receipt of the formal consent of Host International under the DHost Shareholders’ Agreement to the sale and purchase contemplated under the DHost Agreement including a waiver to the right granted to Host International under the DHost Shareholders’ Agreement to receive an offer in writing to purchase the DHost Sale Shares;
(v) any other consents or approvals required in respect of the business and operations of DHost from relevant Malaysian or international regulatory authorities or statutory bodies or which are otherwise found to be required during the course of the due diligence review;
(vi) where any party to the DHost Agreement by any law or regulation requires the approval of its shareholders for the sale and purchase transaction contemplated under the DHost Agreement, such shareholders’ approval;
(vii) the approval of the shareholders of DHSB for the sale and purchase transaction contemplated under the DHost Agreement;
(viii) the approval of the Board of Tamadam for an increase in the authorised share capital of Tamadam and the sale and purchase transaction contemplated under the DHost Agreement; and
(ix) the approval of the Board of DHSB for the sale and purchase transaction contemplated under the DHost Agreement.
3.3 Background Information On DHost
DHost was incorporated in Malaysia under the Act as a private limited company on 9 June 1997. As at 31 May 2007, the authorised share capital of DHost is RM250,000 comprising 250,000 Shares, of which 250,000 Shares have been issued and are fully paid-up. As at 31 May 2007, the shareholders of DHost are DHSB and Host International holding 51% and 49% of the equity interest in DHost respectively.
DHost is principally involved in the food catering business where it currently owns and operates a total of eleven (11) restaurants and cafes that are located at the KLIA and the Low Cost Carrier Terminal (“LCCT”) including Burger King, Asian Kitchen, Café Marche and Suria Café.
Based on the audited financial statements of DHost for the FYE 31 December 2006, the net profits and net deficit in shareholders’ funds of DHost are approximately RM1.535 million and RM0.645 million respectively.
The historical financial information of DHost is set out in Table 1(B) of the Appendix of this Announcement.
3.4 Background Information On DHSB
DHSB was incorporated in Malaysia under the Act as a private limited company on 21 June 2001.
The principal activity of DHSB is investment holding.
As at 31 May 2007, the directors of DHSB are Datuk Ibrahim bin Haji Ahmad, Datin Aminah binti Haji Ahmad, Datin Dr. Hiryati binti Abdullah and Nur Fatin binti Ibrahim, and the sole shareholder of DHSB is Datuk Ibrahim bin Haji Ahmad.
3.5 Basis Of Arriving At The Purchase Consideration
The purchase consideration for the Proposed DHost Acquisition of RM6.12 million was arrived at on a “willing-buyer willing-seller” basis after taking into consideration the earnings potential of DHost.
3.6 Basis Of Determining The Issue Price For The New Tamadam Shares
The issue price for the new Tamadam Shares of RM1.00 per Share was arrived at based on the par value of Tamadam Shares.
3.7 Basis Of Determining The Value Of The New Tamadam Shares
The new Tamadam Shares has been valued at RM0.85 per Share which was arrived at after taking into consideration the following :-
(i) the 5-day, 1-month and 3-month WAP of Tamadam Shares up to and including 10 May 2007, being the last market day prior to the announcement on the Proposed Acquisitions on 11 May 2007, of RM0.74, RM0.71 and RM0.74 respectively; and
(ii) the audited consolidated net assets per Share of Tamadam as at 31 December 2006 of RM0.55.
The 5-day WAP of Tamadam Shares up to and including 27 June 2007, being the last market day prior to this Announcement was RM1.25.
3.8 Ranking Of The New Tamadam Shares
The new Tamadam Shares to be issued pursuant to the Proposed DHost Acquisition shall, upon allotment and issue, rank pari passu in all respects with the existing issued Shares of Tamadam.
3.9 Shares Acquired Free From Encumbrances
The DHost Sale Shares shall be acquired free from all liens, claims, charges, mortgages, equities and other encumbrances whatsoever, but with all rights and advantages attaching thereto or accruing thereon together with all dividends (including dividends declared and but not paid) as at the DHost Completion Date.
3.10 Liabilities To Be Assumed
There are no liabilities, including contingent liabilities and guarantees, to be assumed by Tamadam pursuant to the Proposed DHost Acquisition.
3.11 Original Cost Of Investment
DHSB’s original cost of investment in DHost is approximately RM0.128 million which was incurred in 1998.
4. PROPOSED BIF WAIVER
Upon completion of the Proposed Acquisitions, BIF will hold 152,941,177 Shares in Tamadam, representing approximately 73.1% of its enlarged issued and paid-up share capital.
Pursuant to Part II Section 6 of the Malaysian Code On Take-Overs And Mergers, 1998 (“Code”), BIF and parties acting in concert with it will be required to extend a mandatory GO for all the remaining Shares not already owned by them in Tamadam and all new Shares that may be allotted and issued pursuant to the exercise of the Warrants, after the Proposed Acquisitions.
BIF and parties acting in concert with it will seek a waiver from the obligation to extend a mandatory GO under Practice Note 2.9.1 of the Code (exemption if transactions involve issue of new securities).
5. PROPOSED TAMADAM WAIVER
Upon completion of the Proposed BLH Acquisition, Tamadam will hold 51.0% of the issued and paid-up share capital of BLH. Accordingly, pursuant to Part II Section 6 of the Code, Tamadam and parties acting in concert with it will be required to extend a mandatory GO for all the remaining Shares not already owned by them in BLH after the Proposed BLH Acquisition.
In addition, pursuant to Practice Note 2.2 and Part II Section 6 of the Code, Tamadam and parties acting in concert with it will also be required to extend a mandatory GO for all the remaining Shares not already owned by them in LSGB after the Proposed BLH Acquisition.
Tamadam and parties acting in concert with it will seek a waiver from the obligation to extend a mandatory GO under Practice Note 2.9.6 of the Code (exemption on the basis that the remaining holders of voting shares in BLH and LSGB respectively have given written undertakings not to accept the offer by Tamadam).
6. PROPOSED OFFER FOR SALE AND/OR PLACEMENT
Paragraph 8.15 of the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) stipulates that a listed issuer must ensure that at least 25% of its total listed shares are in the hands of a minimum of 1,000 public shareholders holding not less than 100 shares each.
In order to comply with the public shareholding spread requirement upon completion of the Proposed Acquisitions, BIF is proposing to undertake an offer for sale and/or placement of such number of Shares held by it in Tamadam to the Malaysian public to address the shortfall in Tamadam’s public shareholding spread. In such event, the proceeds arising from the Proposed Offer For Sale And/Or Placement will accrue to BIF. No part of the proceeds will be received by Tamadam.
7. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL
The present authorised share capital of the Company is RM100,000,000 comprising 100,000,000 Shares, of which 49,005,000 Shares have been issued and are fully paid-up as at 31 May 2007.
In order to facilitate the implementation of the Proposed BLH Acquisition, the Company proposes to increase the authorised share capital from RM100,000,000 comprising 100,000,000 Shares to RM500,000,000 comprising 500,000,000 Shares.
8. INTER-CONDITIONALITY OF THE COMPONENTS OF THE PROPOSALS
The Proposed DHost Acquisition and the Proposed Offer For Sale And/Or Placement are conditional upon the Proposed BLH Acquisition. The Proposed BLH Acquisition is conditional upon the Proposed Tamadam Waiver. The Proposed Acquisitions are conditional upon the Proposed BIF Waiver.
The Proposed Increase In Authorised Share Capital is conditional upon the Proposed BLH Acquisition.
9. RATIONALE FOR THE PROPOSALS
The Tamadam group of companies (”Tamadam Group”) has been principally involved in the business of bonded warehousing, freight forwarding and transportation services. However, in recent times, the business environment in which the Tamadam Group operates has proven to be competitive. Therefore, the Proposed Acquisitions represent an opportunity for Tamadam to diversify its business. With the Proposed Acquisitions, the Tamadam Group will be able to expand into the food catering and related businesses and will immediately benefit in terms of steady income stream from the BLH Group and DHost respectively. Going forward, the Proposed Acquisitions will provide a new source of growth and contribute positively to the future earnings of the Tamadam Group.
On the other hand, the Proposed Offer For Sale And/Or Placement will enable Tamadam to comply with the public shareholding spread requirement stipulated by Bursa Securities.
10. RISK FACTORS AND PROSPECTS
10.1 Risk Factors
(a) Business Risks
The Proposed Acquisitions will expand the business activities of the Tamadam Group to include those of food catering and related businesses, and therefore will subject the Tamadam Group to inherent risks associated with these businesses, including but not limited to, increase in operating costs, changes in general outlook and operating environment of the sector, demand and supply conditions, seasonality and unforeseen outbreak of disease. There can be no assurance that any adverse change to these factors will not have a material and/or adverse effect on the operations and financial performance of the Tamadam Group.
(b) Dependence On Catering Agreement with MAS
Presently, MAS is the single largest customer of LSGB. In addition, LSGB has a catering agreement with MAS which gives LSGB the exclusive right to supply and provide in-flight catering and cabin handling services to MAS at both the KLIA and Penang airport for a period of twenty-five (25) years until 2028. There can be no assurance that any adverse change in the business relationship between MAS and LSGB or any unilateral termination of the catering agreement will not have a material and/or adverse effect on the business prospect of LSGB and consequently, BLH.
Notwithstanding this, currently, LSGB has a good working relationship with MAS and this relationship is being regulated by the Subsidiary’s Shareholders’ Agreement entered into in September 2003. In addition, MAS also holds the remaining 30% equity interest in LSGB. Thus, any disruption in the operations or material and/or adverse effect on the business prospect of LSGB will not be in the best interest of the parties.
(c) Dependence On Technical Assistance Agreement with LSGB Asia
LSGB has a technical assistance agreement with LSG Asia which basically entails the provision of various technical assistance for a period of twenty-five (25) years until 2028. There can be no assurance that any adverse change in the business relationship between LSG Asia and LSGB or any unilateral termination of the technical assistance agreement will not have a material and/or adverse effect on the business operations of LSGB and consequently, BLH.
Notwithstanding this, currently, LSGB has a good working relationship with LSG Asia and this relationship is being regulated by the Shareholders’ Agreement entered into in September 2003. In addition, LSG Asia also holds the remaining 49% equity interest in BLH.
(d) Dependence On Key Personnel
The continued performance and future success of the BLH Group and DHost hinges on the ability and continued effort of the respective key management team of the said companies. Any sudden departure of members of the key management team may affect the performance of the BLH Group and/or DHost.
It is expected that there should not be any disruptions in the business operations of these companies after the completion of the Proposed Acquisitions as the Proposed Acquisitions do not entail any change in the employment of these companies. This in turn will ensure the continued performance and success of the BLH Group and DHost into the future.
(e) Dependence On Franchise Arrangement
DHost operates all the Burger King outlets at KLIA under a franchise agreement entered into by DHost. An event of default and/or breach under the franchise agreement, if not capable of being remedied, may lead to termination of the franchise agreement or jeopardise the ability of DHost to renew the franchise in the future.
To-date, DHost has ensured compliance with the terms and conditions of the franchise agreement and will strive to seek renewal of the said franchise in the future. However, there can be no assurance that the termination and/or non-renewal of the franchise agreement will not have a material and/or adverse effect on the future financial performance of DHost.
(f) Borrowing Risk
As at 31 May 2007, the BLH Group has a total borrowings of approximately RM123.47 million.
Accordingly, the BLH Group is subject to risks associated with debt financing, including changes in the level of interest rates and liquidity risk. However, the BLH Group has not had any difficulty in servicing and/or settling any of its borrowings. Notwithstanding this, there can be no assurance that the fluctuations in interest rates will not have a material and/or adverse effect on the profitability and cash flow position of the BLH Group.
(g) Introduction Of New Controlling Shareholder
Upon completion of the Proposed Acquisitions, BIF will be the new controlling shareholder of Tamadam. As such, it is likely that BIF will be able to effectively control the business direction and management of Tamadam by virtue of its eventual controlling shareholding in Tamadam as well as through its nominee directors who will sit on the board of Tamadam, unless BIF and/or its nominee directors are required to abstain from voting by law and/or by relevant authorities.
(h) Political And Economic Considerations
Like any other business entities, changes in political and economic conditions in Malaysia could materially and/or adversely affect the profitability and business prospects of the BLH Group and DHost. These political and economic uncertainties include, but not limited to, the changes in political leadership, expropriation, nationalisation and methods of taxation.
10.2 Prospects Of The BLH Group, DHost And The Enlarged Tamadam Group
With LSGB being the principal provider of in-flight catering at both the KLIA and Penang airport, it can be said that LSGB and consequently, BLH is well-poised to reap the benefits of further growth in passenger traffic at both airports, particularly at KLIA, being the main international gateway to Malaysia. The growth in passenger traffic will also augur well for the food catering business of DHost as its restaurants and cafes are located at the KLIA and the LCCT. This in turn will bode well for Tamadam as it may result in higher income and cashflow contribution from BLH and DHost respectively.
11. EFFECTS OF THE PROPOSALS
11.1 Share Capital
The effects of the Proposed Acquisitions on the share capital of Tamadam is set out in Table 3 of the Appendix of this Announcement.
The Proposed Waivers, the Proposed Offer For Sale And/Or Placement and the Proposed Increase In Authorised Share Capital do not have any effect on the issued and paid-up share capital of Tamadam.
11.2 Net Assets And Gearing
Based on the audited financial statements of the Tamadam Group as at 31 December 2006 and on the assumption that the Proposed Acquisitions had been effected on that date, the proforma effects of the Proposed Acquisitions on the net assets and gearing of the Tamadam Group are set out in Table 4 of the Appendix of this Announcement.
The proforma effects of the Proposed Acquisitions on the net assets and gearing of the Tamadam Group are subject to review by the Reporting Accountants of Tamadam.
The Proposed Waivers, the Proposed Offer For Sale And/Or Placement and the Proposed Increase In Authorised Share Capital do not have any effect on the net assets and gearing of the Tamadam Group.
11.3 Earnings
The Proposed Acquisitions are not expected to have any material effect on the earnings of the Tamadam Group for the financial year ending 31 December 2007 as the Proposed Acquisitions are only expected to be completed in the last quarter of 2007. Barring unforeseen circumstances, the Proposed Acquisitions are expected to contribute positively to the future earnings of the Tamadam Group.
The Proposed Waivers, the Proposed Offer For Sale And/Or Placement and the Proposed Increase In Authorised Share Capital do not have any effect on the earnings of the Tamadam Group.
11.4 Substantial Shareholders’ Shareholdings
The effects of the Proposed Acquisitions and the Proposed Offer For Sale And/Or Placement on the substantial shareholders and their shareholdings in Tamadam are set out in Table 5 of the Appendix of this Announcement.
The Proposed Waivers and the Proposed Increase In Authorised Share Capital do not have any effect on the shareholdings of the substantial shareholders in Tamadam.
The Proposed Acquisitions will result in the introduction of a new controlling shareholder for Tamadam.
12. CONDITIONS TO THE PROPOSALS
The Proposals are conditional upon the following :-
(a) the approval of the SC for the following :-
(i) Proposed Acquisitions;
(ii) Proposed Waivers; and
(iii) the listing of and quotation for the new Shares to be issued pursuant to the Proposed Acquisitions;
(b) the approval of the Equity Compliance Unit of the SC for the Proposed Acquisitions;
(c) the approval of the shareholders of Tamadam at an extraordinary general meeting to be convened for the Proposed Acquisitions, the Proposed BIF Waiver and the Proposed Increase In Authorised Share Capital;
(d) the approval of Bursa Securities for the listing of and quotation for the new Shares to be issued pursuant to the Proposed Acquisitions; and
(e) the approvals, waivers and/or consents from any other relevant authorities and/or persons, if required.
13. DEPARTURE FROM THE POLICIES AND GUIDELINES ON ISSUE / OFFER OF SECURITIES OF THE SC (“SC GUIDELINES”)
To the best of the knowledge of the Board of Tamadam, the Proposed Acquisitions do not depart from the SC Guidelines.
14. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the directors and major shareholders of the Company as well as persons connected with them have any interest, direct and/or indirect, in the Proposals.
15. DIRECTORS’ STATEMENT
Having considered the rationale and effects of the Proposals, after due deliberation, the Board of Tamadam is of the opinion that the Proposals are in the best interest of the Company and its shareholders.
16. ADVISERS
AmInvestment Bank has been appointed as Adviser to the Company for the Proposals.
An independent adviser will be appointed by the Company for the Proposed BIF Waiver and the appointment will be subject to the approval of the SC.
17. ESTIMATED TIMEFRAME FOR COMPLETION
Barring unforeseen circumstances, the Board of Tamadam expects the Proposals to be completed in the last quarter of 2007.
18. APPLICATIONS TO THE RELEVANT AUTHORITIES
Applications to the relevant authorities for the Proposed Acquisitions and the Proposed Waivers are expected to be submitted within two (2) months from the date of this Announcement.
19. DOCUMENTS AVAILABLE FOR INSPECTION
The Agreements will be made available for inspection at the registered office of Tamadam at Mezzanine Floor, 8A Jalan Sri Semantan Satu, Damansara Heights, 50490 Kuala Lumpur during normal business hours from Monday to Fridays (except public holidays) for a period of three (3) months from the date of this Announcement.
Download Appendix Tables (.doc format)
This announcement is dated 28 June 2007.
