BOUSTEAD HOLDINGS BERHAD (“BHB” or the “COMPANY”)
-PROPOSED DISPOSAL OF SUTERA ESTATE AND TAIPING RUBBER PLANTATION (“TRP”) (INCLUDING TRONG OIL MILL) (COLLECTIVELY REFERRED TO AS “PLANTATION ASSETS”) BY BHB AND BOUSTEAD SUTERA SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF BHB (COLLECTIVELY “BOUSTEAD COMPANIES”) TO AL-HADHARAH BOUSTEAD REIT (THE “FUND”) FOR AN AGGREGATE DISPOSAL CONSIDERATION OF RM189,233,000 TO BE SATISFIED BY CASH AND THE SUBSEQUENT LEASE OF THE PLANTATION ASSETS FROM THE FUND BACK TO BHB OR ANY OF ITS WHOLLY-OWNED SUBSIDIARIES (“LESSEE”) (“PROPOSED DISPOSAL AND LEASEBACK”)
Announcement details:
1.INTRODUCTION
The Board of Directors of BHB (“Board”) wishes to announce that the Board intends to undertake the Proposed Disposal and Leaseback.
2. DETAILS OF THE PROPOSED DISPOSAL
2.1Particulars
The Proposed Disposal and Leaseback entails the disposal of the Plantation Assets by the Boustead Companies to the Fund for an aggregate disposal consideration of RM189,233,000 (“Disposal Consideration”) and the lease of the Plantation Assets by the Fund back to the Lessee at lease payments and periods to be determined later.
The Disposal Consideration comprises:-
(i)RM100,500,000 for Sutera Estate;
(ii) RM64,500,000 for TRP; and
(iii) RM24,233,000 for Trong Oil Mill.
The Disposal Consideration for the Plantation Assets shall be settled in cash.
2.2 Salient terms of the Sale and Purchase Agreement (“SPA”) and Ijarah Agreement
The SPA and the Ijarah Agreement are currently being finalised at the date of this announcement and shall be entered into in due course. Further details on the salient terms of the SPA and the Ijarah Agreement shall be announced once the SPA and the Ijarah Agreement have been executed.
2.3Basis of arriving at the Disposal Consideration
The aggregate Disposal Consideration on the Plantation Assets was arrived at on a willing-buyer willing-seller basis after taking into consideration the aggregate valuation of the Plantation Assets by C H Williams Talhar & Wong (“C H Williams”), an independent registered firm of professional valuers, as set out below:
Plantation Assets / Material date of valuation / Valuation (RM)1) Sutera Estate / 1 September 2010 / 100,500,000
2) TRP / 1 September 2010 / 64,500,000
3) Trong Oil Mill / 1 September 2010 / 24,233,000
189,233,000
2.4Information on the Plantation Assets
Information on Sutera Estate, TRP and Trong Oil Mill are set out as below:
Sutera Estate
Size (hectares) / : / 2,200.72Location / : / Segaliud, KM60, Sandakan-Lahad Datu Highway
Tenure / : / (1)CL 075109465 : Leasehold – 999 years
Unexpired – 877 years
(2)CL 075112720 :Leasehold – 999 years
Unexpired – 878 years
Present usage / : / Plantation
Future usage / : / Plantation
Type of cultivation / : / Oil palm
Audited net book value as at 30 June 2010 / : / RM36,709,075.49
Valuation by C H Williams / : / RM100,500,000
Method of valuation by C H Williams / : / Investment (Discounted Cash Flow “DCF”) Method and Comparison Method, as a check
Encumbrance / : / Nil
Restrictions in interest / : / Subject to the provisions and conditions contained in the Land Regulations 1894, with Amendments 1897.
TRP
Size (hectares) / : / 1,355.56Location / : / Along Changkat Jering – Beruas main road, Trong, Perak
Tenure / : / Term in perpetuity (Freehold)
Present usage / : / Plantation
Future usage / : / Plantation
Type of cultivation / : / Oil palm
Audited net book value as at 30 June 2010 / : / RM35,459,881.85
Valuation by C H Williams / : / RM64,500,000
Method of valuation by C H Williams / : / Investment (Discounted Cash Flow “DCF”) Method and Comparison Method, as a check
Encumbrance / : / Nil
Restrictions in interest / : / Nil
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Trong Oil Mill
Size (hectares) / : / 23.67Location / : / Along Changkat Jering – Beruas main road, Trong, Perak
Tenure / : / Term in perpetuity (Freehold)
Present usage / : / Palm oil mill
Future usage / : / Palm oil mill
Type of cultivation / : / N/A
Audited net book value as at 30 June 2010 / : / RM10,478,644.13
Valuation by C H Williams / : / RM24,233,000
Method of valuation by C H Williams / : / Cost Method and Depreciated Replacement Cost Method
Encumbrance / : / Nil
Restrictions in interest / : / Nil
2.5Liabilities to be assumed by the Fund
The Plantation Assets shall be disposed to the Fund free from all claims, charges, liens, contingent liabilities, guarantees or other encumbrances and with all rights, interests and benefits attaching thereto.
2.6Original cost of Investment
The original cost of investment in the Sutera Estate and TRP (inclusive Trong Oil Mill) as at 8 July 2010 (being the date of respective sales and purchase agreements entered into between the Boustead Companies and Golden Crop Returns Berhad to acquire the Plantation Assets) to the Boustead Companies were RM38,000,000 and RM53,500,000 respectively.
2.7Intended utilisation of Disposal Consideration
The Disposal Consideration shall be utilised to pare down the borrowings of the BHB Group.
2.8 Details on the Fund
The Fund was constituted pursuant to the execution of a trust deed dated 11 December 2006 by Boustead REIT Managers Sdn Bhd (“Boustead REIT Managers”) and the trustee for the Fund, CIMB Trustee Berhad.
The Fund was listed on the Main Board of Bursa of Bursa Malaysia Securities Berhad on 8 February 2007. As at 30 September 2010, the number of the Fund’s units in circulation is 557,001,000 units.
The principal activities of the Fund is to own and invest primarily in plantation assets comprising oil palm estates and palm oil mills with the objective of providing stable distribution of income or yield and long term growth in net asset value per unit.
As at 30 September 2010, the substantial unitholders of the Fund are as follows:
Boustead Plantations Berhad, a wholly-owned subsidiary of BHB, Lembaga Tabung Angkatan Tentera (“LTAT”) and Lembaga Tabung Haji.
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The Fund is managed by Boustead REIT Managers which was incorporated on 7 October 1982 in Malaysia as a private limited company, under the name Emas Jeep Sdn Bhd. On 16 August 2006, Boustead REIT Managers assumed its present name.
As at 30 September 2010, the Directors of Boustead REIT Managers are:-
Tan Sri Dato’ Lodin Wok Kamaruddin (Chairman)
Mr. Daniel Ebinesan (Non-Independent Director)
Datuk Haji Abdul Aziz Ismail (Non-Independent Director)
- Major Gen Dato’ Haji Khairuddin Haji Abu Bakar (R) (Independent Director)
Tuan Haji Kamaludin Abdul Kadir (Independent Director)
Mr. David Loo Kean Beng (Independent Director)
As at 30 September 2010, the shareholders of Boustead REIT Managers are LTAT, BHB, Irat Properties Sdn Bhd and Yayasan Warisan Perajurit.
3.RATIONALE FOR THE PROPOSED DISPOSAL AND LEASEBACK
The Proposed Disposal and Leaseback will enable BHB to realize the underlying value of the Plantation Assets whilst retaining productive use of the Plantation Assets. It will result in a cash inflow of RM189,233,000 for BHB and its subsidiaries (“BHB Group”) which is proposed to be utilized to pare down the bank borrowings of the BHB Group and potentially saving RM9.5 million interest expense per annum for the BHB Group.
Further, the Proposed Disposal and Leaseback will expand the Fund’s Plantation Assets by approximately 3,580 hectares to approximately 19,984 hectares with gross asset value of more than RM1 billion. The enhancement in the Fund’s asset value will position the Fund competitively amongst growing REITs in Malaysia and benefit BHB Group through its holding of 335,914,500 units in the Fund, which represents an interest of 53.15% after the Proposed Disposal and Leaseback exercise.
- EFFECTS OF THE PROPOSED DISPOSAL AND LEASEBACK
4.1Share Capital and Substantial Shareholder’s Shareholding in BHB
The Proposed Disposal and Leaseback would not have any effect on the share capital and substantial shareholder’s shareholding in BHB as it does not involve any issuance of new ordinary shares in BHB (“BHB Shares”).
4.2Net Assets (“NA”)
The proforma effects of the Proposed Disposal and Leaseback on the NA of the BHB Group based on the audited financial statements as at 31 December 2009 is as below:
Audited as at31 Dec 09 / After Exercise Of Second Call Option on 22 October 2010 / After Proposed Disposal and Leaseback
RM’000 / RM’000 / RM’000
Share capital / 455,700 / 455,700 / 455,700
Share premium / 1,163,600 / 1,163,600 / 1,163,600
Revaluation reserves / 41,600 / 41,600 / 41,600
Non distributable reserves / 292,900 / 292,900 / 292,900
Retained profits / 1,874,500 / 1,874,500 / 1,972,233
Net assets/shareholders’ equity / 3,828,300 / 3,828,300 / 3,926,033
NA per Share (RM) / 4.20 / 4.20 / 4.31
4.3Earnings
The Proposed Disposal and Leaseback is not expected to have any effect on the earnings and earning per Share of BHB Group for financial year ending 31 December 2010 as the Proposed Disposal and Leaseback is targeted for completion in the first quarter of financial year ending 31 December 2011.
Upon completion, the Proposed Disposal and Leaseback is expected to result in a gain on disposal of RM97,733,000 or approximately RM0.10 per Share (computed based on BHB Shares in issue as at 30 September 2010) for the BHB Group for financial year ending 31 December 2011.
Further, the Proposed Disposal and Leaseback is also expected to contribute positively to the earning per Share of BHB Group for the financial year ending 2011 due to net interest saving of approximately RM9.5 million per annum.
4.4Gearing
The proforma effects of the Proposed Disposal and Leaseback on the BHB Group’s gearing is set out below:
Audited as at31 Dec 09 / After Exercise Of Second Call Option on 22 October 2010 / After Proposed Sale and Leaseback
RM’000 / RM’000 / RM’000
Shareholders’ equity / 3,828,300 / 3,828,300 / 3,926,033
Borrowings - Long term / 310,600 / 310,600 / 310,600
- Current / 2,633,800 / 2,725,300 / 2,536,067*
2,944,400 / 3,035,900 / 2,846,667
Gearing(Times) / 0.77 / 0.79 / 0.72
Note:
*Assuming the proceeds from the Proposed Disposal and Leaseback amounting to RM189,233,000 is utilised to pare down borrowings
5.APPROVALS REQUIRED
The Proposed Disposal and Leaseback is not subject to any approvals to be procured by BHB.
6.INTERESTS OF DIRECTORS, SUBSTANTIAL SHAREHOLDERS AND CONNECTED PERSONS
Save as disclosed below, none of the Directors of BHB, substantial shareholders of BHB, or persons connected with them have any interest, direct and/or indirect, in the Proposed Disposal and Leaseback:-
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6.1Interests of Directors of BHB
Tan Sri Dato’ Lodin Wok Kamaruddin is the Chief Executive of LTAT, the Deputy Chairman/ Group Managing Director of BHB and the Chairman of Boustead REIT Managers. As at 30 September 2010, he is also a unitholder of Boustead REIT with a 0.05% direct unitholding in Boustead REIT. In view of this, Tan Sri Dato’ Lodin Wok Kamaruddin is an interested Director and unitholder in the Proposed Disposal and Leaseback.
Accordingly, Tan Sri Dato’ Lodin Wok Kamaruddin has and will continue to abstain from all Board deliberations and voting on the resolution pertaining to the Proposed Disposal and Leaseback.
6.2 Interests of substantial shareholders of BHB
As at 30 September 2010, LTAT is a 59.28% shareholder of BHB, a 13.82% unitholder of the Fund and a 30% shareholder of Boustead REIT Managers.
In view of the above, LTAT is deemed interested in the Proposed Disposal and Leaseback.
7.BOARD OF BHB’S STATEMENT
The Board (save for Tan Sri Dato' Lodin Wok Kamaruddin who is deemed interested in the Proposed Disposal and Leaseback and has accordingly abstained from making a recommendation), having considered all aspects of the Proposed Disposal and Leaseback and after careful deliberation, is of the opinion that the Proposed Disposal and Leaseback is in the best interest of BHB.
8. BHB’S AUDIT COMMITTEE ‘S STATEMENT
The Audit Committee, having considered all aspects of the Proposed Disposal and Leaseback and after careful deliberation, is of the opinion that the Proposed Disposal and Leaseback is in the best interest of BHB. The Audit Committee agrees that the Proposed Disposal and Leaseback is fair, reasonable and on normal commercial terms and are not detrimental to the interest of the minority shareholders of BHB.
9. TOTAL AMOUNT TRANSACTED WITH THE RELATED PARTY
In addition to this Proposed Disposal and Leaseback, the total amount transacted for the preceding 12 months with the Fund up to 30 June 2010 (being the latest financial statements available) was approximately RM73 million.
10.DEPARTURE FROM REIT GUIDELINES
To the best knowledge of the Board, the Proposed Disposal and Leaseback do not depart from the SC’s REIT Guidelines and the Islamic REIT Guidelines.
11. ESTIMATED TIME FRAME FOR COMPLETION
Barring unforeseen circumstances and subject to the receipt of all the approvals of the relevant authorities, the Proposed Disposal and Leaseback is expected to be completed in the first quarter of 2011.
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12. HIGHEST PERCENTAGE RATIO
Based on BHB’s latest audited consolidated financial statement for the financial year ended 31 December 2009, the highest percentage ratio under Paragraph 10.02(g) of Chapter 10 of the MMLR is 4.94%, calculated based on the aggregate disposal consideration of RM189.23 million compared with the latest audited consolidated net assets of BHB as at 31 December 2009 amounting to RM3.82 billion.
13. DOCUMENTS AVAILABLE FOR INSPECTION
The valuation reports are available for inspection at the registered office of BHB during the office hours from Mondays to Fridays (except for public holidays) at 28th Floor, Menara Boustead, No. 69, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia for the period of three (3) months from the date of this announcement.
This announcement is dated 11 November 2010.
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