1. INTRODUCTION
The Board of Directors of Kossan Rubber Industries Bhd (“Kossan” or “the Company”) wishes to announce that Ideal Quality Sdn. Bhd. (“IQ” or “the Purchaser”), a wholly-owned subsidiary of the Company, has on even date entered into a Sale and Purchase Agreement (“the Agreement”) with Himpun Menang Sdn. Bhd (“HM” or the “Vendor”) for the acquisition of a piece of vacant freehold industrial land measuring in area approximately 5.3292 hectares held under Geran 52935 Lot 6103, Mukim Kapar, Daerah Klang, Selangor (the Property) for a total cash consideration of Ringgit Malaysia 39,007,631.00 only on the terms and conditions as contained in the Agreement. (“the Proposed Acquisition”)
2. INFORMATION ON THE VENDOR
HM, a private company limited by shares, is incorporated in Malaysia on 15 May 2006 under the Companies Act, 1965 and has its registered address at Level 18, The Gardens, North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur. The authorised share capital of HM is RM1,000,000.00 comprising 1,000,000 ordinary shares of RM1.00 each, of which, 600,000 ordinary shares of RM1.00 each have been issued and fully paid-up. HM’s principal activity is property development.
2.1 The directors and shareholders of HM are as follows:-
Number of shares
Kua Hock Lai -
Kua Swee Leong 150,000
Kua Swee Kiat 150,000
Kua Siu Hui 150,000
Kua Swee Keong 150,000
______
600,000
3. DETAILS OF THE PROPERTY
3.1 The Property is held under Geran 52935 Lot 6103, Mukim Kapar, Daerah Klang, Selangor.
3.2 Kossan is unable to provide information on the net book value of the Property as Kossan is not privy to this information.
3.3 The Sale Property shall be acquired from the Vendor on an “as is where is” basis but with vacant possession and free from all encumbrances, caveats, liens , equities and claims.
4. BASIS ON ARRIVING AT THE PURCHASE PRICE
The Purchase Price of RM39,007,631 was arrived at on a willing-buyer willing-seller basis, after the Board had made enquiries and comparing recent land transactions around the Property area. No valuation was carried out on the Sale Property. The Property is situated in the vicinity where the Kossan Group has several pieces of properties of similar sizes and usage.
5. SALIENT TERMS OF THE SPA
The Purchase Price of the Property shall be paid in the following manner:
5.1 Upon execution of the Agreement, a deposit of RM3,900,763.10 or 10% of the Purchase Price was paid by IQ to the Vendor .
5.2 The balance 90% of the Purchase Price amounting to RM 35,106,867.90, shall be paid by IQ to the Vendor’s Solicitors as stakeholder on or before the expiry of the Completion Date or Extended Completion Date, (additional 30 days) if applicable.
5.3 The Completion Date is defined as 24 February 2015.
6. RATIONALE FOR THE ACQUISITION
The Kossan Group is principally involved in the manufacturing of rubber products and gloves. The acquisition is in line with the Group’s strategy to replenish its land bank to generate long term sustainable income and viability.
7. RISK FACTORS
Inherent in all businesses are risks associated with the business environment and we are no exception and will be subjected to movement in raw material prices and cost of labour, availability of manpower, availability and costs of financing, changes of preference by consumers, competition and changes in government legislation and priorities. The Group seeks to limit these risks by undertaking various market studies, implementing prudent business strategies and measures, and improving efficiency.
8. FUNDING OF THE PROPOSED ACQUISITION
The Proposed Acquisition will be funded through internally generated funds and/or bank borrowings.
9. LIABILITIES TO BE ASSUMED
There are no contingent liabilities and guarantees to be assumed by Kossan arising from the Proposed Acquisition.
10. EFFECTS OF THE PROPOSED ACQUISITION
10.1 Earnings
The Proposed Acquisition is not expected to have any material effect on the earnings per share of the Group for the financial year ending 31 December 2014.
10.2 Net Assets
Based on the audited consolidated balance sheet as at 31 December 2013, the Proposed Acquisition is not expected to have any material effect on the net assets per share of the Group.
10.3 Gearing
As set out in item 8 herein, the Purchase Price is expected to be funded via the Group’s internally generated funds and/or bank borrowings. The exact mix of internally generated funds and bank borrowings will be decided by management at a later date.
10.4 Share Capital and Substantial Shareholding structure
The Proposed Acquisition will not have any effect on the issued and paid-up share capital and substantial shareholding structure of Kossan as the Purchase Price is to be satisfied wholly by cash and does not involve any issuance of new shares in Kossan.
11. APPROVAL
The Proposed Acquisition is not subject to the approval of any relevant authorities.
The highest percentage ratio applicable to the transaction pursuant to paragraph 10.02(g) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements is 4.95%. As such, shareholders’ approval is not required.
12. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS
To the best knowledge of the Board, none of the Directors and/ or substantial shareholders of Kossan and/or persons connected with them have any interest, direct or indirect, in the Proposed Acquisition.
13. DIRECTORS’ RECOMMENDATION
The Board of Kossan, having taken into consideration all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is fair and reasonable, and is in the best interest of the Group.
14. EXPECTED TIME FRAME FOR COMPLETION OF THE ACQUISITION
Barring any unforeseen circumstances, the Proposed Acquisition of the Property is expected to be completed by the 1st quarter of financial year 2015
15. DOCUMENTS FOR INSPECTION
The Agreement may be inspected at the registered address of the Company at Wisma Kossan, Lot 782 Jalan Sungai Putus, Off Batu 3 ¾ Jalan Kapar, 42100 Klang, during normal office hours from Monday to Friday (except public holidays) for a period of three months from the date of this Announcement.
This announcement is dated 12 December 2014.
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