1.0 INTRODUCTIONThe Board of Directors of DIB (“Board”) wishes to announce that Dolphin Applications Sdn Bhd (“DASB” or “the Purchaser”), a wholly-owned subsidiary of DIB, had on 19 November 2015 entered into a sale and purchase agreement (“SPA”) with Nicron Industries Sdn Bhd (“NISB” or “the Vendor”) for the acquisition of a factory cum office building held under the freehold individual title HS(D) 121082 PT 39502 Mukim Petaling, Daerah Petaling, Negeri Selangor Darul Ehsan bearing postal address of No. 20, Jalan Industri PBP 9, Taman Industri Pusat Bandar Puchong, 47100 Puchong, Selangor Darul Ehsan measuring approximately 2,462.77 square meters in area (“the said Property”) for a total purchase consideration of RM12,900,000.00 (“Purchase Consideration”).
2.0 THE PROPOSED ACQUISITION2.1 Details of the Proposed Acquisition
Subject to the terms and conditions of the SPA, the Vendor shall sell and DASB, in full reliance on the representations and warranties by the Vendor as set out in the SPA, shall purchase the said Property on an “as is where is” basis, free from all encumbrances, in its present state and condition and upon the terms and conditions as contained in the SPA.
A summary of the salient information on the said Property, being the subject matter of the Proposed Acquisition, is as follows:
| Description of Property | Freehold land held under HS(D) 121082 PT 39502 Mukim Petaling, Daerah Petaling, Negeri Selangor Darul Ehsan together with a 2 storey factory and a 3 storey office building erected thereon |
| Address | No. 20, Jalan Industri PBP 9, Taman Industri Pusat Bandar Puchong, 47100 Puchong, Selangor Darul Ehsan |
| Land area | 2,462.77 square meters |
| Floor area of the factory cum office building | 29,150 square foot (Inclusive of; 2-storey Detached Factory, 3-storey Office Building, a Guard House & a Refuse Chamber) |
| Net lettable area | 29,150 square foot |
| Tenure | Freehold land |
| Category of land use | Industrial |
| Express condition | Nil |
| Restriction-in-interest | Nil |
| Encumbrances | Free from all encumbrances |
| Description and existing use | Vacant |
| Proposed use | Factory and office |
| Age of building | Approximately 13 years |
| Audited net carrying value as at 31 October 2014 | Approximately RM1.88 million |
2.2 Basis and justification for arriving at the Purchase Consideration
The Purchase Consideration for the Proposed Acquisition was arrived at on a "willing-buyer willing-seller" basis after taking into consideration the market value of RM13.0 million for the Property as ascribed by Savills (Malaysia) Sdn Bhd , an independent firm of registered valuers, after adopting the comparison approach of valuation method.
2.3 Mode of settlement of the Purchase Consideration
The Purchase Consideration is to be satisfied in accordance with the terms of the SPA, as set out below:
| Breakdown of payment | Terms of payment | RM'000 |
| Earnest deposit | Paid on 18 September 2015 | 258 |
| Settlement of Real Property Gains Tax payable | Paid to the Purchaser’s solicitors as stakeholders for the settlement of tax payable upon the execution of the SPA | 387 |
| Balance deposit | Upon the execution of the SPA | 645 |
| Balance payment | Within 90 days from the execution of the SPA | 11,610 |
2.4 Information on the Vendor
The Vendor is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 10 October 1990. The principal activities of NISB is lighting manufacturer.
As at 19 November 2015, the authorised share capital of NISB is RM500,000 divided into 500,000 ordinary shares of RM1 each while the issued and paid-up share capital is RM250,000 comprising 250,000 ordinary shares of RM1 each.
NISB is a wholly-owned subsidiary company of Weng Sang Electrical (M) Sdn Bhd and the directors of NISB as at 19 November 2015 are Phang Wing and Tham Beng San.
2.5 Salient Terms of the SPA
The salient terms of and conditions of the SPA include, amongst others, the following:-
(a) On execution of the SPA, DASB paid a deposit of 2% of the Purchase Consideration amounting to RM258,000-00 (“Earnest Deposit”) to the Vendor.
(b) In further consideration of the sum of RM1,032,000-00 (“Balance Deposit”) is to be paid by DASB to the Vendor by way of deposit and part payment towards the Purchase Consideration in the following manner:-
(i) Sum of RM387,000-00, being amount equivalent to 3% of the Purchase Consideration to be paid to the solicitors of DASB as stakeholders for the purpose of compliance with the Real Property Gains Tax Act, 1976 pursuant to Clause 8 of the SPA; and
(ii) Sum of RM645,000-00, being amount equivalent to 5% of the Purchase Consideration to be paid to the Vendor upon execution of the SPA.
(c) DASB shall pay the balance of the Purchase Consideration amounting to RM11,610,000-00 (“Balance Sum”) to the Vendor within the period of 90 days from the date of the SPA (“Completion Period”).
(d) In the event DASB fails to pay the Balance Sum or any part thereof to the Vendor within the Completion Period, the Vendor shall automatically allow an extension of time of 30 days from the date of expiry of the Completion Period to pay the outstanding Balance Sum or any part thereof (“Extended Completion Period”), provided that DASB shall pay to the Vendor interest on the remaining unpaid Balance Sum or any part thereof calculated at the rate of 8% per annum on daily rest basis until full payment of the unpaid Balance Sum, and provided further that all reference of Completion Period shall include Extended Completion Period for payment of the Balance Sum or any part thereof in the event an extension of time is granted therein.
(e) The Vendor shall execute a valid and registrable Memorandum of Transfer in Form 14A of the National Land Code 1965 in respect of the said Property in favour of DASB (“the Transfer”) and shall deliver and deposit the same with DASB’s solicitors as stakeholder who are hereby irrevocably authorized to submit the Transfer to the relevant Stamp Duty Office for the sole purpose of the adjudication of the ad valorem stamp duty payable thereon at any time after payment of the Deposit and arrange for payment of stamp duty as adjudicated.
(f) In the event that the SPA shall determine in accordance with the terms herein and become null and void, DASB’s solicitors shall forthwith deliver the Transfer and the related stamping proforma to the Vendor’s solicitors for cancellation and destruction but in the event that the Transfer has been stamped with the full ad valorem stamp duty, DASB shall be entitled to authorize DASB’s solicitors to forward the stamped Transfer to the relevant Collector of Stamp Duties to make an application for cancellation and refund of the ad valorem stamp duty paid by DASB.
2.6 Source of funding
DASB intends to fund the Proposed Acquisition through internally generated funds and/or bank borrowings. The exact manner and quantum in which the Purchase Consideration will be satisfied has not been finalized at this juncture as DASB is in the midst of negotiating with financial institutions to satisfy funding requirements and also to take into consideration the gearing level, interest cost and internal cash requirement for its business operations.
2.7 Encumbrances and liabilities to be assumed
DASB will not be assuming any liability, including contingent liabilities and guarantees arising from the Proposed Acquisition.
2.8 Additional financial commitment required
Save for the costs in relation to the renovation and refurbishment works on the Property, which is estimated at RM7.0 million, there are no other additional financial commitments required by Dolphin to put the Property on-stream. Renovation and refurbishment works on the Property is expected to commence within 3 months after the completion of the Proposed Acquisition and will take approximately 9 months thereafter to complete.
3.0 RATIONALE AND JUSTIFICATION FOR THE PROPOSED ACQUISITIONThe Proposed Acquisition of the Property is a long term investment for DIB and its subsidiaries (“DIB Group” or “the Group”) and will cater for the Group’s expansion. The purpose for the Proposed Acquisition is to consolidate all of the DIB Group’s subsidiaries and related companies in one location. DIB proposes to utilise the factory of the said Property as a workshop for the production and assembly of products for the DIB Group. The annexed office block will be used as the Corporate Headquarter of DIB.
The Proposed Acquisition is expected to accrue the following benefits to the DIB Group:-
- Provide potential capital gain for the Group arising from the expected appreciation in value of the Property as the Property is located in a strategic area;
- Secure sufficient office and factory space to consolidate its operations under one roof and cater for future expansion of the DIB Group; and
- Enhance managerial control as well as to provide a more effective and better control over the usage of its resources.
4.0 RISK FACTORSBelow are the risk factors relating to the Proposed Acquisition, which may not be exhaustive:
(a) Contractual risk
The terms of the SPA are the common terms found in similar sale and purchase agreements. In the event of any default by DASB, the Deposit paid to the Vendor will be forfeited. In the event any of the Vendor’s obligations as set out in the SPA are not fulfilled within the stipulated time frame, the Vendor will refund all monies paid by DASB, including the Deposit to DASB.
Notwithstanding the above, DASB shall endeavour to ensure that the Proposed Acquisition is completed in accordance with the terms and conditions of the SPA.
(b) Financing risk
DASB intends to finance the Proposed Acquisition vide a combination of internally generated funds and borrowings. The ability of DASB to meet its obligation on the repayment of borrowings, to a certain extent, will be dependent upon DASB’s cash flows, which in turn is dependent upon the performance of DASB.
The Board takes cognisance of this and will take into consideration the gearing level, interest costs as well as internal cash requirements for the business in determining the optimal combination of internally generated funds and borrowings to finance the Proposed Acquisition.
5.0 FINANCIAL EFFECT OF THE PROPOSED ACQUISITION5.1 Share capital and substantial shareholders’ shareholdings
The Proposed Acquisition will not have any effect on the issued and paid-up share capital and the substantial shareholders’ shareholdings of DIB as the Proposed Acquisition will be fully satisfied in cash and it does not involve the issuance of new securities in DIB.
5.2 Net assets and earnings per share
The Proposed Acquisition will not have any material effect on the net assets or earnings per share of DIB Group for the financial year ending 31 December 2015.
5.3 Gearing
Notwithstanding that the Purchase Consideration may be funded by bank borrowings, the Proposed Acquisition is not expected to have any material effect on the gearing of the DIB Group for the financial year ending 31 December 2015.
For illustrative purposes only, assuming the entire Purchase Consideration of RM12.9 million will be financed by bank borrowings, the gearing ratio of the DIB Group based on the unaudited quarter report ended 30 June 2015 will be increased from 0.48 times to 0.64 times.
6.0 APPROVALS REQUIREDThe Proposed Acquisition is not subject to shareholder’s approval or any regulatory approval.
7.0 HIGHEST PERCENTAGE RATIOThe highest percentage ratio applicable for the Proposed Acquisition pursuant to Paragraph 10.02 (g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 16%.
8.0 DIRECTORS’AND MAJOR SHAREHOLDERS’ INTERESTNone of the Directors and/or major shareholders and/or persons connected to the Directors or major shareholders of the Company have any interest, direct or indirect, in the Proposed Acquisition.
9.0 DIRECTORS’ STATEMENTThe Board after having considered all aspects of the Proposed Acquisition (including but not limited to the salient terms of the SPA, the basis of the Purchase Consideration, the rationale and financial effects of the Proposed Acquisition) is of the opinion that the terms of the Proposed Acquisition are fair, reasonable and on normal commercial terms and are not detrimental to the interest of the shareholders.
10.0 ESTIMATED COMPLETIONBarring unforeseen circumstances, the Proposed Acquisition is expected to be completed in the first quarter of 2016.
11.0 DOCUMENTS FOR INSPECTIONThe SPA and the valuation report shall be available for inspection at the registered office of the Company at Level 2, Tower 1, Avenue 5, Bangsar South City, 59200 Kuala Lumpur, Wilayah Persekutuan during normal office hours on any weekday (except public holiday) for a period of three (3) months from the date of this announcement.
This announcement is dated 19 November 2015.
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