News
Advance Synergy Berhad (ASB Or The Company) Proposed Disposal To United Merchant Group Berhad Of ASB's Entire 49% Equity Interest Comprising 49,000,000 Ordinary Shares Of RM1.00 Each In Ace Synergy Insurance Berhad (Proposed Disposal)
BackJul 13, 2001
| General Announcement Reference No MM-010712-69905 |
| Submitting Merchant Bank | : | PERDANA MERCHANT BANKERS BERHAD |
| Company Name | : | ADVANCE SYNERGY BERHAD |
| Stock Name | : | ASB |
| Date Announced | : | 13/07/2001 |
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| Type | : | Announcement |
| Subject | : | ADVANCE SYNERGY BERHAD (ASB or the Company) Proposed disposal to United Merchant Group Berhad of ASB's entire 49% equity interest comprising 49,000,000 ordinary shares of RM1.00 each in ACE Synergy Insurance Berhad (Proposed Disposal) |
Contents :
1. INTRODUCTION
On behalf of the Board of Directors of ASB, Perdana Merchant Bankers Berhad (PMBB) is pleased to announce that the Company has on 13 July 2001 entered into a Sale and Purchase Agreement (the SPA) with United Merchant Group Berhad (UMG) to dispose its entire 49% equity interest comprising 36,750,000 existing ordinary shares of RM1.00 each, together with 12,250,000 ordinary shares of RM1.00 each pursuant to a proposed rights issue, in ACE Synergy Insurance Berhad (ACE) to UMG for a cash consideration of RM71.0 million.
ACE was incorporated on 26 October 1995 under the Companies' Act, 1965 and is primarily involved in the underwriting of general insurance comprising fire, marine, aviation and transit, motor and miscellaneous insurance. ACE is 51% owned by ACE INA International Holdings Ltd, a subsidiary of ACE Limited, a company incorporated in the Cayman Islands and quoted on the New York Stock Exchange.
ASB is currently the registered and beneficial owner of a 49% interest in ACE comprising 36,750,000 ordinary shares of RM1.00 each (Sale Shares). ACE currently has an issued and paid-up share capital of RM75,000,000 comprising 75,000,000 ordinary shares of RM1.00 each. In accordance with the requirements of Bank Negara Malaysia, where direct insurers are to attain a minimum paid-up capital of RM100 million, the share capital of ACE is proposed to be increased to RM100,000,000 pursuant to a rights issue exercise involving the issuance of 25,000,000 new ordinary shares of RM1.00 each to be undertaken by ACE. ASB is to subscribe for its entitlement of 12,250,000 ordinary shares of RM1.00 each (Rights Issue Shares) at par amounting to RM12.25 million. The aforementioned proposed rights issue is expected to be completed prior to the completion of the Proposed Disposal.
ACE achieved a profit after taxation of RM12.3 million, RM19.9 million and RM8.2 million for the three financial years ended 31 December 1998, 1999 and 2000 respectively. The net tangible assets of ACE as at 31 December 2000 amounted to RM75.4 million or RM1.50 per share.
ASB's cost of investment in ACE, based on the audited accounts for the financial year ended 31 December 2000, amounts to a total of RM16.8 million. Pursuant to the aforementioned proposed rights issue, the cost of investment will increase to RM29.05 million.
ASB proposes to dispose its entire 49% equity interest in ACE, including the shares to be subscribed for under the rights issue exercise, to UMG for a cash consideration of RM71.0 million.
ASB has agreed to sell and UMG has agreed to purchase the shares in ACE free from all charges, liens, pledges, trust and other encumbrances and with all rights, benefits and entitlements now or thereafter attaching thereto, including without limitation all bonuses, dividends and other distributions declared, paid or made in respect of the Sale Shares.
Under the terms of the SPA, the consideration shall be satisfied by UMG to ASB by way of cash in the following manner:
(i) the sum of RM14,200,000 being 20% of the consideration is to be paid to ASB upon the execution of the SPA;
(ii) the sum of RM21,300,000 being a further 30% is to be paid within 7 days from the date of the fulfillment of the last of the conditions precedent; and
(iii) the sum of RM35,500,000, together with any adjustments as may be necessary, being the balance of the consideration is to be paid to ASB on the completion date.
In the event that the rights issue is subscribed by ASB before the completion date, UMG is to pay ASB the rights issue amount of RM12.25 million upon notification by ASB, and the amount paid shall be deducted from the final balance sum of the consideration in (iii) above.
The Proposed Disposal is conditional upon the conduct of a due diligence investigation by UMG into ACE and its affairs, the results of which shall be satisfactory to UMG at UMG's absolute discretion.
ASB shall refund to UMG all moneys paid together with interest at the prevailing 3-month fixed deposit rate of Malayan Banking Berhad if the results of the due diligence exercise are not to UMG's satisfaction or if the conditions precedent are not met within 9 months, or some other date as may be agreed in writing, from the date of the signing of the SPA.
The proposed consideration of RM71.0 million has been arrived at on a willing buyer-willing seller basis after taking into account the earnings potential of ACE.
Under the terms of the SPA, UMG shall appoint an independent firm of actuaries, to prepare a valuation report on ACE whereby the purchase consideration may be adjusted by mutual agreement based on the results of the actuarial report and any such adjustment shall be made to the final balance sum of the purchase consideration in 2.2 (iii) above.
ASB
ASB was incorporated as a public limited company in Malaysia under the Companies Ordinance 1915 on 5 June 1920 under the name Batu Lintang Rubber Company Berhad, and assumed its present name on 14 May 1992. ASB, a company listed on the Main Board of the KLSE, has subsidiary and associated companies which are principally involved in banking and financial services, general insurance, property investment and development, card and payment services, manufacturing, travel and tours, hotels and resorts, and information technology.
UMG
UMG, a company listed on the Main Board of the KLSE, was incorporated in Malaysia under the Companies Act, 1965 on 10 January 1994. Prior to the on-going consolidation of the domestic banking sector, UMG's principal activities were that of banking and financial services businesses. Following the completion of the disposal of its commercial bank, finance company and merchant bank to Southern Bank Berhad, UMG was left with cash proceeds of approximately RM520 million generated from the disposals and a 20% equity interest in PMBB. As announced on 19 June 2001, UMG is considered to have an insufficient level of operations to justify its continued listing status and hence will be required to comply with Practice Note No. 10/2001 of the KLSE's Listing Requirements. In its letter dated 23 September 2000, the Kuala Lumpur Stock Exchange (KLSE) has given UMG until 18 June 2001 to look for new businesses/assets and for non-suspension of UMG's listing status. This was extended vide the KLSE's letter dated 8 June 2001 subject to the conditions as announced by UMG on 19 June 2001.
4. RATIONALE FOR THE PROPOSED DISPOSAL
The Proposed Disposal is part of the corporate exercise undertaken by the ASB Group which includes streamlining of the Group's operations, in which the companies involved in the provision of financial services are proposed to be structured under the umbrella of UMG. The proceeds from the Proposed Disposal is expected to form part of ASB Group's funding and working capital requirements.
5.1 Share Capital
The Proposed Disposal will have no effect on the issued and paid-up share capital of the Company.
Based on the assumption that the Proposed Disposal is completed in the first quarter of 2002, the Proposed Disposal will not have any effect on the earnings of the ASB Group for the financial year ending 31 December 2001. The ASB Group is expected to realise an estimated exceptional gain of RM4.1 million from the Proposed Disposal during the financial year ending 31 December 2002.
For illustration purposes only, the proforma effects of the Proposed Disposal on the audited consolidated balance sheet of ASB as at 31 December 2000 are as set out in Table 1.
As the Proposed Disposal will be satisfied entirely by cash, there will be no effects on the substantial stockholding of ASB.
The Proposed Disposal is conditional upon the following approvals being obtained:
? the approval of the Securities Commission, in respect of UMG's utilisation of its cash reserves arising from the disposal of United Merchant Finance Berhad and PMBB;
? the approval of the Foreign Investment Committee to be obtained by UMG;
? the approval of the stockholders of ASB;
? the approval of the shareholders of UMG; and
? any other relevant approvals.
7. DIRECTORS' AND SUBSTANTIAL STOCKHOLDERS' INTERESTS
The following directors of ASB are interested in the Proposed Disposal:
Dato' Ahmad Sebi Bakar has abstained and will continue to abstain from all Board deliberations pertaining to the Proposed Disposal.
None of the substantial stockholders of ASB have any direct or indirect interest in the Proposed Disposal, apart from any beneficial interest in UMG arising via their stockholdings in ASB. Dato' Ahmad Sebi Bakar and any persons connected to him will abstain from voting on the Proposed Disposal in respect of their direct and indirect interests in ASB.
The Directors of ASB (apart from Dato' Ahmad Sebi Bakar who is executive chairman of ASB and chairman of UMG), after having considered the proposed terms of the Proposed Disposal, are of the opinion that the Proposed Disposal is fair and reasonable and will be in the best interest of the Company.
PMBB has been appointed as the advising merchant bank for the Proposed Disposal. UMG is a 50.75%-owned subsidiary of ASB, and as such the Proposed Disposal is deemed a related-party transaction. Consequently, Malaysian International Merchant Bankers Berhad has been appointed as Independent Adviser to ASB for the Proposed Disposal.
Dato' Nik Ibrahim Kamil bin Tan Sri Nik Ahmad Kamil, a director of ASB, is also the Chairman of PMBB. Tuan Haji Mansor bin Salleh, a director of UMG, is also a director of PMBB. UMG also holds a 20% equity interest in PMBB.
Stockholders who wish to inspect the SPA may do so at the registered office of ASB at Level 29, Menara Shahzan Insas, 30 Jalan Sultan Ismail, 50250 Kuala Lumpur between 9.00 a.m. and 5.00 p.m. from Mondays to Fridays (except for public holidays) for a period of one (1) month from the date of this announcement.
This announcement is dated 13 July 2001.
Table 1 - Effects on NTA
|
Audited as at
31 December 2000 RM'000 |
After Proposed Disposal
RM'000 |
| Share capital |
337,794
|
337,794
|
| Share premium |
430,451
|
430,451
|
| Reserves |
(310,967)
|
(306,861)
|
| Stockholders' funds |
457,278
|
461,384
|
|
|
|
| Goodwill on consolidation |
(94,535)
|
(94,535)
|
| Purchased goodwill |
(1,459)
|
(1,459)
|
| Intangible Assets |
(1,497)
|
(1,497)
|
| NTA |
359,787
|
363,893
|
| NTA per stock unit |
1.07
|
1.08
|