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BOUSTEAD HOLDINGS BERHAD (“BHB” OR “COMPANY”) (I) PROPOSED
DISPOSAL OF 85,814,232 ORDINARY SHARES OF RM1.00 EACH IN BH
INSURANCE (M) BHD (“BHI”) REPRESENTING 80% EQUITY INTEREST TO
AXA AFFIN GENERAL INSURANCE BERHAD (“AXA AFFIN”) FOR A TOTAL CASH
CONSIDERATION OF RM362,580,164 COMPRISING THE PRINCIPAL AMOUNT OF
RM359,000,000 AND INTEREST ACCRUED ON THE PRINCIPAL AMOUNT
AMOUNTING TO RM3,580,164 (“PROPOSED DISPOSAL”); AND
(II) PROPOSED ACQUISITION OF A FREEHOLD LAND HELD UNDER TITLE
NO. GRN 34267, LOT
NO. 262, SECTION 63, TOWN OF KUALA LUMPUR, DISTRICT AND STATE OF
WILAYAH PERSEKUTUAN (“PROPERTY”) BY TITLE WINNER SDN BHD (“TWSB”),
AN 80%-OWNED SUBSIDIARY COMPANY OF BHB FROM BHI FOR A CASH
CONSIDERATION OF RM15,790,000 (“PROPOSED ASSET ACQUISITION”)
(THE PROPOSED DISPOSAL AND PROPOSED ASSET ACQUISITION ARE
COLLECTIVELY REFERRED TO AS “PROPOSALS”)
1. INTRODUCTION We refer to the announcements dated 22 February
2010 and 24 February 2010 in relation to the Proposals.
On behalf of the Board of Directors of BHB (“Board”), Affin
Investment Bank Berhad (“AFFIN Investment”) wishes to announce that
on 2 March 2010 -
(i) BHB had entered into a sale and purchase agreement with AXA
Affin in relation to the
Proposed Disposal (“BHB SPA”); and
(ii) TWSB, an 80%-owned subsidiary of BHB, had entered into
another share and purchase agreement with BHI, BHB and Felda
Marketing Services Sdn Bhd (“Felda”) in relation to the Proposed
Asset Acquisition (“Property SPA”),
the particulars of which are set out in the ensuing sections
below.
2. DETAILS OF THE PROPOSED DISPOSAL
2.1 Particulars Pursuant to the BHB SPA, BHB proposes to dispose
of 85,814,232 ordinary shares of RM1.00 each in BHI (“Sale Shares”)
representing 80% equity interest in BHI to AXA Affin for a total
cash disposal consideration of RM362,580,164 comprising the
principal amount of RM359,000,000 and interest accrued on the
principal amount amounting to RM3,580,164.
The Sale Shares will be disposed of free from all
encumbrances.
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2.2 Background information of BHI and AXA Affin
BHI BHI was incorporated in Malaysia under the Companies Act on
29 October 1976 under the name of Royal Insurance (Malaysia) Sdn.
Bhd and assumed its current name on 21 September 2007. BHI is
principally involved in the underwriting of all classes of general
insurance business. BHI markets its products wholly in Malaysia.
The authorised issued and paid up share capital of BHI is
RM250,000,000 comprising 250,000,000 ordinary shares of RM1.00
each. As at the date of this announcement, the issued and fully
paid-up share capital of BHI is RM107,267,790 comprising
107,267,790 ordinary shares of RM1.00 each. Based on the latest
audited financial statements of BHI for the financial year (“FY”)
ended 31 December 2009, the net assets were RM334.5 million and the
net profit after tax was RM39.6 million. The substantial
shareholders (holding 5% or more of the issued and paid-up share
capital of BHI) and their respective shareholdings in BHI as at 23
February 2010 (being the latest practicable date prior to the date
of this announcement) (“LPD”) are as follows:
Direct Indirect Shareholders No. of
shares % No. of shares %
BHB 85,814,232 80.00 - -
Felda Merketing Sdn Bhd 21,453,558 20.00 - -
Lembaga Tabung Angkatan Tentera (“LTAT”) - - 85,814,232*
80.00
Note: * Deemed interested by virtue of its shareholdings in BHB
pursuant to Section 6A of the Companies Act,
1965.
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The directors and their shareholdings in BHI as at LPD are as
follows:
Direct Indirect
Name Designation Nationality No. of shares
% No. of shares
%
Gen. (R) Tan Sri Ahmad Saruji bin Che Rose
Chairman, Independent Non-Executive Director
Malaysian - - - -
Dato’ Haji Nasir bin Yusoff Independent Non-Executive
Director
Malaysian - - - -
Dato’ (Dr.) Megat Abdul Rahman bin Megat Ahmad
Independent Non-Executive Director
Malaysian - - - -
Koo Hock Fee Non- Independent Non-Executive Director
Malaysian - - - -
Ramli bin Putih Non- Independent Non-Executive Director
Malaysian - - - -
Izzat bin Othman Non- Independent Non-Executive Director
Malaysian - - - -
AXA Affin AXA Affin was incorporated in Malaysia under the
Companies Act on 12 July 1975. AXA Affin is principally engaged in
the underwriting of all classes of general insurance business. As
at LPD, the authorised issued and paid up share capital of AXA
Affin is RM100,000,000 comprising 100,000,000 ordinary shares of
RM1.00 each. Based on the latest audited financial statements of
AXA Affin for the FY ended 31 December 2008, the net assets of AXA
Affin as at 31 December 2008 were RM299.3 million and the net
profit after tax was RM21.3 million.
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As at LPD, the directors and their respective shareholdings in
AXA Affin are as follows:
Ordinary shares of RM1.00 each in AXA Affin
Direct Indirect
Directors No. of shares % No. of shares %
Jahanath A/L Muthusamy - - - -
Admiral (R) Datuk Mohd Ramly bin Abu Bakar - - - -
Ngo Siew Pod - - - -
Oh Teik Tatt - - - -
Tan Sri Hashim Meon - - - -
Kang Beng Hoe - - - -
Jan Van Den Berg - - - - The substantial shareholders and their
respective shareholdings in AXA Affin as at LPD are as follows:
Ordinary shares of RM1.00 each in AXA Affin
Direct Indirect
Substantial shareholders No. of shares % No. of shares %
AXA Group 50,484,000 50.48 - -
Affin Holdings Berhad (“AHB”) 40,000,000 40.00 - -
BHB - - 40,000,000a 40.00
LTAT - - 40,000,000b 40.00 Notes: a Deemed interested by virtue
of its shareholdings in AHB pursuant to Section 6A of the Companies
Act,
1965. b Deemed interested by virtue of its shareholdings in BHB
and AHB pursuant to Section 6A of the
Companies Act, 1965. 2.3 Other salient terms of the BHB SPA for
the Proposed Disposal
The other salient terms of the BHB SPA for the Proposed Disposal
are as follows: (a) Clause 2: Agreement to sell the Sale Shares
BHB agrees to sell to AXA Affin, and AXA Affin (relying on the
warranties, undertakings and indemnities contained in the BHB SPA)
agrees to buy from BHB, the Sale Shares free from encumbrances. AXA
Affin shall not be obliged to complete the purchase of such Sale
Shares unless it purchases all of such Sale Shares and all of the
remaining shares held by Felda in BHI simultaneously.
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(b) Clause 4: Conditions Precedent
The Proposed Disposal is subject to the following conditions
precedent to be fulfilled on or before the expiry of 6 months from
the date of signing of the BHB SPA:
(i) the receipt by AXA Affin and BHB of the approval from Bank
Negara Malaysia (“BNM”) in a form satisfactory to AXA Affin (which
was obtained vide BNM’s letter dated 18 February 2010);
(ii) the receipt of a written confirmation from Felda in a form
satisfactory to AXA Affin
that it waives the exercise of its pre-emption rights in
relation to the Sale Shares under the Existing Shareholders’
Agreement (as defined in the BHB SPA), the Articles of Association
of BHI or otherwise;
(iii) the Existing Shareholders’ Agreement being terminated with
effect from the
Completion Date (as defined in the BHB SPA), without any
liability to BHI; (iv) the receipt of written consents (or
alternative letter of comfort) from each of the
following parties, in each case, in a form satisfactory to AXA
Affin:
(a) subject to clause 9.4, each of the reinsurers under the
Reinsurance Treaty Contract as defined in the BHB SPA;
(b) a third party, in relation to the Financial Link Agreement
as defined in the
BHB SPA; and (c) a financial institution, in relation to the
Merchant Agreement as defined in
the BHB SPA;
(v) the delivery by BHB to AXA Affin of the written consent
given by the landlord to the tenant under the Kuching Branch
Tenancy Agreement (as defined in the BHB SPA), to sublease the
property (if required under the principal tenancy agreement);
(vi) completion of the Property SPA in accordance with its terms
and confirmation or
evidence in a form satisfactory to AXA Affin that the full
consideration for such sale is held by BHI on the Completion
Date;
(vii) the passing of the relevant resolutions by the
shareholders of AXA Affin at a
general meeting to approve the purchase of the Sale Shares
pursuant to the terms of the BHB SPA;
(viii) the passing of the relevant resolutions by the
shareholders of BHB at a general
meeting to approve the sale of the Sale Shares pursuant to the
terms of the BHB SPA; and
(ix) completion of the sale and purchase agreement dated 2 March
2010 entered into
between Felda and AXA Affin in respect of the proposed disposal
of 21,453,558 ordinary shares of RM1.00 each representing 20%
equity interest in BHI by Felda to AXA Affin for a total
consideration of RM90,645,041 to be satisfied by the issuance of
19,047,619 ordinary shares of RM1.00 each in AXA Affin at an issue
price of approximately RM4.76 per share (“Felda SPA”) in accordance
with its terms, save for the satisfaction of any conditions
precedent in the Felda SPA relating to the Completion (as defined
in Clause 6) of the BHB SPA.
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(c) Clause 6: Completion
Completion of the Proposed Disposal shall take place on the date
which is 5 business days after the date on which all of the
conditions precedent set out in clause 4 of the BHB SPA have been
satisfied or waived by AXA Affin (or such later date as BHB and AXA
Affin may agree in writing) and shall take place at the registered
office of BHI or at such other place as BHB and AXA Affin may agree
in writing.
(d) Clause 7: BHB’s Warranties and indemnity
Under the BHB SPA, BHB shall give certain representations and
warranties to AXA Affin on the date of signing of the BHB SPA and
such representations and warranties shall be deemed to be repeated
immediately before Completion with reference to the facts and
circumstances then prevailing. The representations and warranties
are set out in Schedule 2 to the BHB SPA. In broad terms, these
relate to the BHI Shares held by BHB and the business and
operations of BHI. The representations and warranties are qualified
to the extent, but only to the extent, of matters which are fully
and fairly disclosed in the disclosure letter to be delivered by
BHB to AXA Affin at or prior to signing.
These include the warranty that the agency agreement between BHI
and the BHB Group shall remain in full force and effect and BHB
shall procure that Boustead Global Trade Network Sdn Bhd renews
such agreement, and does not take steps to terminate such
agreement, for a period of not less than 8 years from the date of
Completion (the “Minimum Period”). BHB undertakes to ensure that,
during the Minimum Period, it and its affiliates shall continue to
buy or renew general insurance policies from BHI with aggregate
gross written premiums of not less than RM10,000,000 per financial
year (the “Target Boustead Premiums”). If the actual gross written
premiums of BHI derived from BHB and its affiliates for any one
financial year (the “Actual Boustead Premiums”) are less than the
Target Boustead Premiums, BHB shall reimburse BHI or AXA Affin an
amount equal to 20% of the difference between the Target Boustead
Premiums and the Actual Boustead Premiums. This commitment by BHB
will fall away if and as soon as the aggregate of the Actual
Boustead Premiums paid during the Minimum Period is an amount in
excess of RM125,000,000.
(e) Clause 9: Pre-Completion matters
There will be a timing gap between the signing of the BHB SPA
and Completion, during which BHB and AXA Affin agree to establish a
pre-transfer committee within 14 Business Days of signing.
The purpose of such a committee is to provide a forum:
(i) to discuss issues relating to, and facilitating, the sale of
BHI by BHB to AXA Affin;
(ii) to consider communications to be made by AXA Affin and/or
BHB to BHI’s employees, agents and other third party distributors
as well as BNM and any other relevant regulatory authorities;
(iii) to seek any required consents from AXA Affin under the
terms of the BHB SPA; and
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(iv) to keep AXA Affin informed of all material matters relating
to BHI’s business and affairs. For the avoidance of doubt, AXA
Affin’s representatives on the pre-transfer committee shall not
have any executive or decision-making power in respect of the
day-to-day management of BHI prior to Completion.
2.4 Basis and justification for the disposal consideration
The total cash disposal consideration of RM362,580,164 (“Sale
Price”) comprises a principal amount of RM359,000,000 and interest
accrued on the principal amount amounting to RM3,580,164. The
principal amount of RM359,000,000 was arrived at on arms’ length
terms between a willing-buyer and a willing-seller, based on the
following: RM million Note Audited net assets of BHI as at 31
December 2007 288 1
Less : Audited net book value of the Property as at 31 December
2007 (14) 2
Less : Audited goodwill as at 31 December 2007 (48)
Adjusted net assets 226
Times: price multiple 1.79
Base price 405
Add : Audited goodwill as at 31 December 2007 48
Less: Dividend paid to shareholders in March 2009 (20)
Add: Audited net book value of the Property as at 31 December
2008 16
Adjusted base price (100%) 449
Disposal consideration (80%) 359
Notes: 1: The audited financial statements of BHI for FY ended
31 December 2007 form the basis for the price
negotiations which commenced subsequent to BNM’s approval in
principle on 4 December 2007 for BHB to commence preliminary
negotiations with the shareholders of AXA Affin on the proposed
rationalisation of BHB’s interest in BHI and AXA Affin.
2: Pursuant to the negotiations between BHI and AXA Affin on the
Proposed Disposal, it was agreed that the Property shall be
disposed of by BHI prior to the completion of the Proposed
Disposal.
The interest amount of RM3,580,164 is the interest accrued on
the principal amount of RM359,000,000 calculated from 25 November
2008 (being the date of the conditional acceptance by BHB of the
offer price made by AXA Affin) up to and including 25 May 2009
(being 6 months from the date of the conditional acceptance by BHB
of the offer price made by AXA Affin) at a rate of 2% per annum.
The Sale Price of approximately RM4.23 per Sale Share in total
represents a premium of approximately 100% over the adjusted net
assets per share of BHI as at 31 December 2007 of RM2.11 or a
price-to-book multiple of 2.00 times. The Sale Price will be
settled fully in cash upon completion of the sale and purchase of
all Sale Shares in accordance with the BHB SPA.
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The Sale Price is justified after taking into account, amongst
others, the audited net assets of BHI as at 31 December 2007, the
audited net book value of the Property as at 31 December 2008 and
the price multiple of 1.79 times which is comparable to the past
precedent transactions involving the acquisition/disposal of
shares, transfer of business or merger of general insurance
companies in Malaysia.
2.5 Historical financial information
The summary of financial information of BHI based on its audited
financial statements for the past 3 FYs ended 31 December 2007 to
2009 are as follows:
Audited FY ended 31 December
2007 2008 2009*
RM’000 RM’000 RM’000
Revenue 278,031 303,740 313,764
Profit before tax and minority interest 43,814 26,858 44,724
Taxation (11,273) (6,497) (5,131)
Pofit after tax and minority interest 32,541 20,361 39,593 Note:
* Subject to the shareholder’s approval at the forthcoming annual
general meeting scheduled to be held in
end-March 2010. Commentary: BHI recorded a lower profit in FY
ended 31 December 2007 as compared to FY ended 31 December 2006
which was mainly due to highly competitive and soft insurance
market and the inclusion of a non-renewable written premium booked
in the FY ended 31 December 2006. BHI registered lower profits in
the FY ended 31 December 2008 mainly due to allowances made for
diminution in value of the company’s investments as a result of the
poor market performance during the said financial year. BHI
recorded higher profits in FY ended 31 December 2009 as compared to
FY ended 31 December 2008. The improvement was attributable to
higher investment income as a result of better equity market
condition and an increase in underwriting profit.
2.6 Expected gains or losses to BHB and its subsidiaries (“BHB
Group”)
The BHB Group is expected to record a consolidated gain of RM75
million for the FY ending 31 December 2010 from the Proposed
Disposal assuming that the Proposed Disposal is completed in the
second quarter of the FY ending 31 December 2010.
2.7 Utilisation of disposal proceeds
The proceeds from the Proposed Disposal are intended to be
utilised by BHB for working capital and/or repayment of bank
borrowings and is expected to be utilised within 12 months from the
completion of the Proposed Disposal. The breakdown for the
utilisation of proceeds is not finalised at this juncture.
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2.8 Original cost and date of investment in BHI BHB’s original
dates and costs of investment in BHI are set out below:
Date of investment Cost of
investment (RM)
29.10.1976 2,027,900
08.09.1982 140,000
09.09.1982 350,000
24.09.1998 46,953,773
03.09.2007 156,020,872
Total 205,492,545 2.9 Assumption of liabilities
There are no liabilities, including contingent liabilities and
guarantees, to be assumed by AXA Affin pursuant to the Proposed
Disposal.
2.10 Cash or Practice Note 17 company
The Proposed Disposal is not expected to result in BHB becoming
a cash company or Practice Note 17 company, as defined in Main
Market Listing Requirements issued by Bursa Malaysia Securities
Berhad, as BHB has other major businesses which generate revenue
and profits to the consolidated results of BHB.
3. DETAILS OF THE PROPOSED ASSET ACQUISITION Pursuant to the
Property SPA, TWSB, an 80%-owned subsidiary of BHB, proposes to
acquire the Property from BHI for a cash consideration of
RM15,790,000. The Property shall be transferred out from the books
of BHI and cease to be part of the assets of BHI prior to the
completion of the BHB SPA. The Proposed Asset Acquisition is
inter-conditional with the Proposed Disposal. The Proposed Disposal
is also conditional upon the completion of the Felda SPA. The
Property shall be acquired free from all encumbrances and with
vacant possession.
3.1 Particulars of the Property
The Property, a parcel of freehold land with a land area of
3,340.591 square metres, was acquired by BHI on 29 October 1976.
The Property is held under title no. GRN 34267, Lot No. 262,
Section 63, Town of Kuala Lumpur, District and State of Wilayah
Persekutuan. The document title of the Property does not categorise
the land use of the Property. Situated on the Property is a
building, which is in a derelict state and is not occupied. The
approximate age of the building is more than 30 years. The Property
is not encumbered and there is no restriction-in-interest attached
to it. Currently, there is no approval for any development plan in
respect of the Property.
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The Property is situated along Jalan Eaton, off Jalan Tun Razak,
within the city centre of Kuala Lumpur. The Property is in the
vicinity of KLCC Petronas Twin Towers, the Suria KLCC Shopping
Centre, Menara Esso, Bangunan Tan & Tan, Menara Perbadanan
Nasional Berhad and Bangunan Lembaga Urusan Tabung Haji. The
immediate locality is considered an exclusive residential area of
Kuala Lumpur City which includes double storey detached houses,
Istana Hinggap Perlis, the Singapore High Commission and the
Japanese and United States of America embassies (Source: Valuation
report dated 28 November 2008 by JAZ International Malaysia Sdn
Bhd) The net book value of the Property based on the audited
financial statement of BHI for the FY ended 31 December 2008
amounted to RM15,790,000.
3.2 Basis of the Purchase Price
The purchase consideration of RM15,790,000 was arrived at on
arms’ length terms between a willing-buyer and a willing-seller
after taking into consideration the audited net book value of the
Property as at 31 December 2008 of RM15,790,000. The audited net
book value of the Property was based on the open market value of
RM15,790,000 as appraised by JAZ International Malaysia Sdn Bhd, an
independent firm of valuer registered with the Board of Valuers,
Appraisers & Estate Agents Malaysia, appointed by BHI. The
valuation exercise was conducted in November 2008. The valuation of
the Property was principally carried out using the comparison
method of valuation whereby transactions of similar properties in
the neighbourhood of the Property were analysed and compared with
the Property. (Source: Valuation report dated 28 November 2008 by
JAZ International Malaysia Sdn Bhd) The purchase consideration is
justified after taking into account the audited net book value of
the Property as at 31 December 2008 which was based on the
valuation exercise conducted by an independent firm of valuers in
November 2008 and the valuation method used in valuing the
Property.
3.3 Salient terms of the Property SPA
A summary of the salient terms of the Property SPA is as
follows. (a) Clause 1: Agreement and Purchase Price
BHI agrees to sell and TWSB agrees to buy from BHI the Property
free from encumbrances and with vacant possession at the purchase
price of RM15,790,000 (“Purchase Price”). As soon as practicable
after the execution of the Property SPA, BHB shall convene a
general meeting to obtain the approval of its shareholders (“BHB
Approval”). BHB shall use its best endeavours to obtain the BHB
Approval simultaneously with the approvals pursuant to the BHB SPA
(“the Cut Off Date”). If the BHB Approval is not obtained on or
before the Cut Off Date, the Property SPA shall automatically
terminate with no liability to TWSB, BHI and BHB. The date when the
BHB Approval is obtained is referred to as the Unconditional
Date.
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(b) Clause 2: Completion
Completion of the Property SPA shall take place not later than
ten (10) days from the Unconditional Date or such other date as BHI
and TWSB may mutually agree (“Completion Date”) provided that BHI
shall not be obliged to sell and TWSB shall not be obliged to
purchase the Property if on the Completion Date there exist
circumstances which may lead to the non completion of the BHB SPA
and/or the Felda SPA. In such an event the Property SPA shall
automatically terminate with no liability to either BHI or
TWSB.
On Completion Date, TWSB shall pay the Purchase Price by
electronic funds transfer for value to the nominated bank account
of the BHI, details of which BHI shall provide to TWSB in writing
no later than five (5) working days prior to the Completion
Date.
(c) Clause 5: Delivery of Property
Vacant possession of the Property shall be delivered on an “as
is where is” basis to TWSB on date of payment of the Purchase
Price.
(d) Clause 7: Refusal to complete by Vendor
In the event BHI shall fail to complete the sale as provided in
the Property SPA other than as otherwise contemplated under clause
9.2 of the Property SPA, TWSB shall be entitled to specific
performance of the Property SPA and the usual remedies for other
consequential loss and damages.
3.4 Original cost and date of investment in Property The
original cost of the Property to BHI is RM480,000 and the date of
investment is 29 October 1976.
3.5 Source of funding
TWSB is a special purpose vehicle created for the purpose of the
Proposed Asset Acquisition. Both shareholders of TWSB, i.e. BHB
(which holds 80% equity interest in TWSB) and Felda (which holds
the remaining 20% equity interest in TWSB), will inject the
necessary funds based on their proportionate shareholdings to
facilitate the Proposed Asset Acquisition. BHB is expected to
finance the Proposed Asset Acquisition of RM12,632,000 via its
internally generated funds.
3.6 Liabilities to be assumed There are no liabilities,
including contingent liabilities and guarantees, to be assumed by
TWSB and BHB as a result of the Proposed Asset Acquisition.
3.7 Estimated additional financial commitment There is no
estimated additional financial commitment required of TWSB and BHB
in putting the Property acquired on-stream, at this juncture.
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4. RATIONALE FOR THE PROPOSALS 4.1 PROPOSED DISPOSAL
The Proposed Disposal is undertaken pursuant to the requirement
imposed by BNM vide its letter dated 7 June 2007 which required BHB
and its holding company, LTAT to rationalise their cross
shareholdings in BHI and AXA Affin within a period of 18 months
from the completion of the acquisition of 45% interest in BHI by
BHB. The acquisition of 45% equity interest in BHI by BHB was
completed on 3 September 2007. BNM had, vide its letter dated 3
March 2009, stated that it had no objection to allow an extension
of time until end December 2009 for BHB and LTAT to rationalise the
cross shareholdings in BHI and AXA Affin. On 29 December 2009, BHB
and LTAT were given an extension up to 31 December 2010 by BNM to
rationalise the aforesaid shareholdings. The Proposed Disposal will
facilitate the LTAT group of companies to no longer hold interests
in 2 licensed insurers carrying on the same class of insurance
business i.e. general insurance, and to be in compliance with
Section 69(1)(b) of the Insurance Act 1996. With the Proposed
Disposal, the LTAT group of companies will hold interests in 2
different classes of insurance business, i.e. through AXA Affin
(general insurance) and AXA Affin Life Insurance Berhad (life
insurance). Further, the Proposed Disposal provides an avenue for
BHB to realise its investment in BHI and raise funds for working
capital and/or repayment of the BHB Group’s borrowings which will
result in reduction of gearing of the BHB Group and an annual
interest saving of approximately RM18 million.
4.2 PROPOSED ASSET ACQUISITION
During the negotiations between BHB and AXA Affin pertaining to
the Proposed Disposal, both parties agreed that the Property will
be transferred out of BHI to the BHB Group prior to the completion
of the Proposed Disposal. The Proposed Asset Acquisition forms part
of the terms of the BHB SPA. The Proposed Asset Acquisition would
also provide an opportunity to the BHB Group to invest in the
Property which is strategically located in the city centre of Kuala
Lumpur as part of its land bank expansion for investment and future
development purposes.
5. PROSPECTS
Outlook of the Malaysian Economy The Malaysian economy
registered a positive growth of 4.5% in the fourth quarter (3Q 09:
-1.2%), amid strengthened domestic and external demand. Sustained
growth in private consumption and increased public sector spending
contributed to higher domestic demand. The implementation of the
fiscal stimulus measures had gained further momentum during the
quarter, providing an additional impetus to growth. Meanwhile,
Malaysia’s export performance benefited from improvements in
external demand, particularly from the regional economies, and from
stronger commodity prices. On the supply side, all economic sectors
recorded positive growth, with the exception of the mining sector.
For the year as a whole, the Malaysian economy contracted by 1.7%
(2008: 4.6%).
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The recovery in the global economy had improved further in the
fourth quarter of 2009. The advanced economies experienced a
gradual pick-up in growth benefiting from the policy support, while
the regional economies recorded a stronger recovery supported by
favourable domestic demand and an increase in intra-regional trade.
This positive trend is expected to continue in 2010, although the
pace of the global recovery is expected to be gradual and uneven.
The prospect for sustained global growth will depend importantly on
the recovery in private sector demand, particularly when the
effects of policy measures begin to diminish. The Malaysian economy
has recovered from the global crisis and turned around to record a
positive growth in the fourth quarter. Going forward, the
improvement experienced in the second half of 2009 is expected to
strengthen in 2010. Higher domestic demand, particularly private
consumption spending, is expected given the stable labour market
conditions, improved consumer and business confidence, and
continued access to financing. Further improvements in external
demand, following the gradual recovery in the global economy, is
also expected to provide further impetus to the domestic economy.
(Source: Bank Negara Malaysia’s Economic and Financial Developments
in Malaysia in the Fourth Quarter of 2009, dated 24 February 2010.)
The economy is expected to benefit from stabilizing global economic
conditions, augmented by fiscal measures and accommodative monetary
policy. GDP growth is forecast to turn around to 2.0% - 3.0% in
2010 (2009: -3.0%) driven by domestic demand, particularly the
private expenditure and supported by expected recovery in external
demand. The broad-based recovery with positive contribution from
all sectors in the economy is expected to raise nominal per capita
GNP by 2.5% to RM24,661 (2009: -6.7%; RM24,055). In terms of
purchasing power parity, per capita income is expected to increase
2.7% to USD13,177 (2009: -14.7%; USD12,826). (Source: Economic
Report 2009/2010, Ministry of Finance)
Outlook of the Property Market
The real estate and business services sub-sector is expected to
grow 1.0% in 2009 (2008: 1.5%), due to higher stock broking, shared
services and outsourcing activities as well as information
technology related services. The FTSE Bursa Malaysia Kuala Lumpur
Composite Index closed at a record of 1,246.84 points as at 14
October 2009 with market capitalisation of RM940.23 billion
(end-2008: 876.75 points; RM663.8 million). The improved
performance was attributed to better investor sentiment. In
addition, the stock market responded positively to several
liberalisation measures announced in the second quarter of 2009. In
addition, the government has also rebranded the Malaysia My Second
Home (“MM2H”) programme with the aim of making it more appealing
and effective, particularly in attracting high net-worth
individuals to invest in Malaysia by setting up their business or
partnering with local entrepreneurs. This includes the relaxation
of the MM2H criteria, whereby participants are now allowed to work
for not more than 20 hours per week as well as invest and
participate in business actively. As a result, the number of MM2H
participants increased 1.2% to 1,055 in the first eight (8) months
of 2009 (January – August 2008: -1.8%; 1,042). As at end August
2009, the total number of MM2H participants stood at 12,794 and
were mainly from China (17.6%), Bangladesh (13.4%), the United
Kingdom (10.4%) and Japan (7.5%).
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14
The residential sub-sector grew 3.6% (January – June 2008: 3.5%)
during the first half of 2009. Despite the sluggish housing
activity, the high-end property performed better, with newly
launched condominiums and apartments registering higher take-up
rate of 32.0% to 1,178 units during the first half of 2009 (January
– June 2008: 16.0%; 1,029 units). With developers being cautious,
new launches of residential units were lower at 16,069 units
(January – June 2008: 36,033 units). During the period, 55,682
units were completed, resulting in an increase of total stock by
3.2% to 4,264,649 units. Given the lower supply and increased sales
of high-end properties, the property overhang improved to 21,467
units as at end-June 2009 (end-December 2008: 26,029 units). The
low interest rate and attractive packages offered by developers
helped to renew buying interest, especially in high-end properties
and preferred locations. The Foreign Investment Committee
guidelines for property transactions were substantially relaxed to
stimulate foreign investment in the property market. Approval will
only be required where it involves a dilution of Bumiputera and
government interest for properties valued at RM20 million and
above. The lifting of the Bumiputera ownership in the acquisition
of equity stakes, mergers and takeovers as well as relaxing the
guidelines on property transactions augur well for Malaysia as an
attractive investment destination. (Source: Economic Report 2009 /
2010, Ministry of Finance) Future plans and prospects of the
Property The Property is accessible from Kuala Lumpur City Centre
via Jalan Tun Razak then off to Jalan Eaton. The Property is
surrounded by Istana Hinggap Perlis, Singapore High Commission, and
the embassies of Japan and the United States of America. The
vicinity of the Property has been transformed into an upmarket
service apartments, for example, The Binjai, 2 Residency, Stonor
Park, Avare, Oval, Troika and Ampersand. (Source: Valuation report
dated 28 November 2008 by JAZ International Malaysia Sdn Bhd) With
the Proposed Asset Acquisition, the Board is of the opinion that it
is now presented with an opportunity to acquire a strategically
located land for investment and future development purposes. At
this juncture, BHB has no definitive plan to develop the Property
apart from keeping it for investment and future development
purposes.
6. RISK FACTORS
The following are the risk factors in relation to the
Proposals:
6.1 Investment risk
The Property is currently vacant and not in use. There is no
development plan in respect of the Property at this juncture. The
investment return on the Proposed Asset Acquisition will be
dependent upon, amongst others, the development plans in respect of
the Property and the ability of TWSB to attract potential tenant or
buyers at a rate competitive with the immediate locality adjacent
to the Property. Further, there is no assurance that the Property
would appreciate in value in the future. Hence, there is a
potential risk that the anticipated benefits from the Proposed
Asset Acquisition may not be realised or returns from the Proposed
Asset Acquisition may have a longer payback period than expected or
that the Property will be able to generate sufficient returns to
offset the associated investment cost. The Board however believes
that the Property which is strategically located in the heart of
the Kuala Lumpur city centre may have an upside potential for
future residential or/and commercial development. In addition, BHB
had mitigated its investment risks by exercising due care in the
evaluation of its investment.
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6.2 Completion of the BHB SPA and Property SPA
The Proposed Disposal and Proposed Asset Acquisition are
inter-conditional to each other. The completion of the BHB SPA and
Property SPA are conditional upon the fulfilment of all the
conditions precedent as stated in the BHB SPA and Property SPA.
There can also be no assurance that the completion dates relating
to the BHB SPA and Property SPA can be achieved subsequent to the
unconditional dates being achieved pursuant to the BHB SPA and
Property SPA, respectively. Nevertheless, prior to the achievement
of the unconditional dates, BHB will endeavour to minimise the risk
by obtaining all the necessary approvals and documents required for
the completion of the BHB SPA and Property SPA.
6.3 Business and operational risk
The Proposed Asset Acquisition will not result in BHB being
exposed to any additional business and operational risks in the
property industry since one of the principal activities of the BHB
Group is property investment and property development.
7. HIGHEST PERCENTAGE RATIO
The highest percentage ratio applicable for the Proposals
pursuant to paragraph 10.02(g) of the Main Market Listing
Requirements of Bursa Malaysia Securities Berhad and principles of
aggregation is 13.00% which is derived based on the total purchase
and disposal consideration amounting to a total of RM378.370
million compared with BHB’s audited consolidated net assets of
RM2.911 billion as at 31 December 2008 whereby:
(i) The highest percentage ratio applicable for the Proposed
Disposal pursuant to paragraph
10.02(g) of the Main Market Listing Requirements of Bursa
Malaysia Securities Berhad is 12.46%, which is derived based on the
total disposal consideration of RM362.580 million compared with
BHB’s audited consolidated net assets of RM2.911 billion as at 31
December 2008; and
(ii) The highest percentage ratio applicable for the Proposed
Asset Acquisition pursuant to
paragraph 10.02(g) of the Main Market Listing Requirements of
Bursa Malaysia Securities Berhad is 0.54%, which is derived based
on the total purchase consideration of RM15.790 million compared
with BHB’s audited consolidated net assets of RM2.911 billion as at
31 December 2008.
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8. EFFECTS OF THE PROPOSALS The effects of the Proposals on the
group structure, issued and paid-up share capital, substantial
shareholders’ shareholdings, earnings per share (“EPS”), net assets
and gearing and are as follows:
8.1 Group structure Before Proposals (as at LPD)
Note : Being principally involved in the general insurance
business After Proposals
Note : Being principally involved in the general insurance
business
AXA Affin Life Insurance Berhad
LTAT
AXA Affin BHI
58.7%
AHB
35.7%
80% 40% 51%
20.7%
BHB
LTAT
58.7%
AHB
35.7% 20.7%
BHB
AXA Affin AXA Affin Life Insurance Berhad
BHI
33.6% 51%
100%
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8.2 Share capital and substantial shareholders’ shareholdings
The Proposals will not have any effect on the issued and paid-up
share capital of BHB as well as its substantial shareholders’
shareholdings as the Proposals do not involve any issuance of new
shares.
8.3 Net assets and gearing
The proforma effects of the Proposals on the net assets per
share and gearing of the BHB Group based on the audited
consolidated financial statements of the BHB Group as at 31
December 2008 assuming the entire proceeds of RM362,580,164 will be
utilised to repay the bank borrowings of the BHB Group are as
follows.
I II III Audited
consolidated as at
31 December 2008
After I and adjustment for
rights issue exercise*
After II and Proposed Disposal
After III and Proposed
Asset Acquisition
RM’000 RM’000 RM’000 RM’000 Share capital 325,516 455,722
455,722 455,722 Share premium 565,509 1,163,459 1,163,459 1,163,459
Non-distributable
reserves 288,313 288,313 288,313 288,313
Retained earnings 1,731,433 1,731,433 1,806,433** 1,805,933##
Net assets/
Shareholders’ funds 2,910,771 3,638,927 3,713,927 3,713,427
Net assets per share
(RM) 4.47 3.99 4.07 4.07
Borrowings 3,503,380 3,103,380# 2,740,800@ 2,740,800 Gearing
(times) 1.20 0.85 0.74 0.74
Notes: * The renounceable rights issue of 260,412,729 ordinary
shares of RM0.50 each in BHB at an issue price
of RM2.80 per rights share was completed on 23 September 2009.
The proforma effects had been extracted from BHB’s Abridged
Prospectus dated 17 August 2009.
# Assuming that the bank borrowings of the BHB Group will be
repaid subject to the maximum of RM400 million, from the rights
issue proceeds, as stated in the Abridged Prospectus dated 17
August 2009.
** Includes gain on disposal amounting to RM75 million. @
Assuming that the entire proceeds from the Proposed Disposal will
be used to repay the bank
borrowings of the BHB Group. ## Includes estimated expenses of
RM500,000.
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8.4 Earnings and earnings per share
Upon completion of the Proposed Disposal, the BHB Group is
expected to realise a gain of RM75 million, which is expected to be
recorded in FY ending 31 December 2010. After the completion of the
Proposed Disposal, BHB would not be able to consolidate the results
of BHI into its group results. The results of BHI will instead be
equity accounted for vide BHB’s 20.7% equity interest in AHB and
AHB’s 33.6% equity in interest in AXA Affin. Nonetheless, the
Proposed Disposal is not expected to have a material effect on
BHB’s consolidated results in the long term. The Proposed Asset
Acquisition is not expected to have a material effect on the
earnings and EPS for the FY ending 31 December 2010. For
illustration purposes only, based on the audited consolidated
financial statements of the BHB Group for the FY ended 31 December
2008, the proforma effects of the Proposals on the earnings and EPS
of the BHB Group assuming that the Proposals had been effected on 1
January 2008 (being the commencement date for the FY ended 31
December 2008) are as follows:
I II III Audited
consolidated for the FY
ended 31 December
2008
After I and adjustment for rights
issue exercise*
After II and Proposed Disposal
After III and Proposed
Asset Acquisition
Profit for the period
attributable to shareholders of BHB (RM’000)
578,786 578,786 637,497** 636,997##
Weighted average number of ordinary shares of RM0.50 each in
issue (‘000)
638,202# 638,202^ 638,202 638,202
Earnings per share (sen) 92.69 90.69 99.98 99.81
Notes: * The renounceable rights issue of 260,412,729 ordinary
shares of RM0.50 each in BHB at an issue
price of RM2.80 per rights share, was completed on 23 September
2009. Based on BHB’s Abridged Prospectus dated 17 August 2009, the
rights issue is not expected to have any material effect on the
consolidated earnings of the BHB Group for the FY ended 31 December
2008 as it was completed on 23 September 2009.
# Being the weighted average number of ordinary shares in issue
during the FY ended 31 December 2008, as extracted from the audited
consolidated financial statements of BHB for the FY ended 31
December 2008.
^ Based on the assumption that weighted average number of
ordinary shares remain unchanged as the rights issue was completed
on 23 September 2009.
** Excludes BHB’s share of BHI’s audited net profit after tax
for the FY ended 31 December 2008 and includes gain on disposal
amounting to RM75 million.
## Includes estimated expenses of RM500,000.
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19
9. APPROVALS OBTAINED AND REQUIRED The Proposed Disposal is
conditional upon the approvals being obtained from the following,
all of which are still pending except from BNM:
(i) BNM, obtained on 18 February 2010; (ii) Felda for a waiver
from exercising its pre-emption rights in relation to the Sale
Shares; (iii) Each of the reinsurers under the Reinsurance Treaty
Contracts (as defined in the BHB
SPA), a third party in relation to the Financial Link Agreement
(as defined in the BHB SPA) and a financial institution in relation
to the Merchant Agreement (as defined in the BHB SPA);
(iv) Shareholders of BHB at the extraordinary general meeting
(“EGM”) to be convened
which is pending at this juncture; (v) Shareholders of AXA Affin
at an EGM to be convened; and (vi) Any other approvals required.
The Proposed Asset Acquisition is conditional upon the receipt of
the following approvals:
(a) BNM, obtained on 23 February 2010; (b) Shareholders of BHB
at an EGM to be convened which is pending at this juncture; and (c)
Any other approvals required. The Proposed Disposal and Proposed
Asset Acquisition are inter-conditional to each other. The Proposed
Disposal is conditional upon the completion of the Felda SPA. The
Proposals are not conditional upon any other proposal of BHB.
10. MAJOR SHAREHOLDER’S AND DIRECTORS’ INTERESTS
Save as disclosed below, none of the major shareholders or
directors of BHB and persons connected to them, have any interest,
directly or indirectly in the Proposals.
Interested Major Sharehoreholder
The interests of LTAT, the major shareholder of BHB, in BHB, BHI
and AXA Affin as at LPD are as follows: BHB
Direct Indirect No. of ordinary shares of
RM0.50 each % No. of ordinary shares of
RM0.50 each %
LTAT 547,113,090 58.71 - -
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20
BHI
Direct Indirect No. of BHI Shares % No. of BHI Shares %
BHB 85,814,232 80.00 - - LTAT - - 85,814,232* 80.00
AXA Affin
Direct Indirect No. of ordinary shares of
RM1.00 each % No. of ordinary shares
of RM1.00 each %
AHB 40,000,000 40.00 - - BHB - - 40,000,000^ 40.00 LTAT - -
40,000,000# 40.00
Notes: * Deemed interested by virtue of its shareholdings in BHB
pursuant to Section 6A of the Companies Act
1965. ^ Deemed interested by virtue of its shareholdings in AHB
pursuant to Section 6A of the Companies Act,
1965. # Deemed interested by virtue of its shareholdings in BHB
and AHB pursuant to Section 6A of the
Companies Act, 1965. Accordingly, LTAT, the common major
shareholder (“Interested Major Shareholder”) of BHB, BHI and AXA
Affin, will abstain from voting in respect of its direct and/or
indirect shareholdings in BHB at the EGM to be convened to consider
the Proposals and have undertaken to ensure that the persons
connected to it will abstain from voting in respect of their direct
and/or indirect shareholdings at the said EGM.
Interested Directors
Y. Bhg. Tan Sri Dato’ Lodin Wok Kamaruddin is the Chief
Executive of LTAT, Group Managing Director of BHB and Deputy
Chairman of AHB. Y. Bhg. Datuk Azzat Kamaludin is a Non-Independent
Non-Executive Director of BHB and Non-Independent Non-Executive
Director of AHB.
The shareholdings of Y. Bhg. Tan Sri Dato’ Lodin Wok Kamaruddin
and Y. Bhg. Datuk Azzat Kamaludin in BHB as at LPD are as set out
below.
Direct Indirect
No. of ordinary shares
% No. of ordinary shares
%
Y. Bhg. Tan Sri Dato’ Lodin Wok Kamaruddin
26,122,599 2.87 - -
Y. Bhg. Datuk Azzat Kamaludin 40,000 * - - Note: ∗ Negligible In
view of the above, both Y. Bhg. Tan Sri Dato’ Lodin Wok Kamaruddin
and Y. Bhg. Datuk Azzat are deemed interested in the Proposals
(“Interested Directors”).
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Accordingly, the Interested Directors have abstained and will
continue to abstain from all Board deliberations and voting at the
Board meeting pertaining to the Proposals. They will also abstain
from voting in respect of their direct and/or indirect
shareholdings in BHB at the Company's EGM to be convened to
consider the Proposals and have undertaken to ensure that the
persons connected to them will also abstain from voting in respect
of their direct and/or indirect shareholdings at the said EGM.
11. DIRECTORS’ STATEMENT
The Board (save for the Interested Directors), having considered
all aspects of the Proposals is of the opinion that the Proposals
(including but not limited to the rationale, financial effects and
valuation) are in the best interest of the Company.
12. AUDIT COMMITTEE’S STATEMENT The audit committee of BHB (save
for the Interested Directors) after having considered all aspects
of the Proposals (including but not limited to the rationale,
financial effects and valuation) and the evaluation by the
Independent Adviser, is of the opinion that the Proposals are in
the best interest of the Company, the terms of the Proposals are
fair, reasonable and on normal commercial terms and are not
detrimental to the interest of the non-interested shareholders of
BHB.
13. ESTIMATED TIMEFRAME FOR COMPLETION
Barring unforeseen circumstances and subject to the approvals of
the relevant authorities, the Proposals are expected to be
completed within the second quarter of financial year 31 December
2010.
14. ADVISERS
Affin Investment has been appointed as the Adviser to BHB for
the Proposals.
In view of the interests of the Interested Major Shareholder and
Interested Directors as mentioned in Section 10 of this
announcement and in compliance with Chapter 10 of Main Market
Listing Requirements issued by Bursa Malaysia Securities Berhad,
Mainstreet Advisers Sdn Bhd has been appointed to act as the
Independent Adviser to the non-interested directors and
non-interested shareholders of BHB in respect of the Proposals. The
Independent Adviser is to comment whether the Proposals are fair
and reasonable and whether they are detrimental to the
non-interested shareholders of BHB and to advise them on the voting
action in respect of the resolutions pertaining to the Proposals at
the EGM to be convened.
15. SUBMISSION TO RELEVANT AUTHORITIES
The circular to shareholders detailing the Proposals and Notice
of EGM will be submitted to Bursa Malaysia Securities Berhad within
2 months from the date of this announcement.
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22
16. TOTAL AMOUNT TRANSACTED WITH SAME RELATED PARTY FOR THE
PRECEDING 12 MONTHS Interested Major Shareholder
The total amount transacted with the Interested Major
Shareholder for the preceding twelve (12) months up to LPD was
RM8.6 million.
Interested Directors
There was no transaction between BHB and Y. Bhg. Tan Sri Dato’
Lodin Wok Kamaruddin for the preceding twelve (12) months up to
LPD. The total amount transacted between BHB and Y. Bhg. Datuk
Azzat Kamaludin for the preceding twelve (12) months up to LPD
amounted to RM1.4 million.
17. DOCUMENTS AVAILABLE FOR INSPECTION The BHB SPA and the
Property SPA in respect of the Proposals and the valuation report
dated 28 November 2008 in respect of the Property are available for
inspection at the registered office of BHB at 28th Floor, Menara
Boustead, No. 69 Jalan Raja Chulan, 50200 Kuala Lumpur during
office hours from Mondays to Fridays (except for public holidays)
for a period of 3 months from the date of this announcement.
This announcement is dated 2 March 2010.