1. No category

EG INDUSTRIES BERHAD (“EGIB” OR “COMPANY”)
(I)
PROPOSED PAR VALUE REDUCTION;
(II)
PROPOSED PRIVATE PLACEMENT;
(III)
PROPOSED RIGHTS ISSUE WITH WARRANTS;
(IV)
PROPOSED ESGS; AND
(V)
PROPOSED AMENDMENT
(COLLECTIVELY, REFERRED TO AS “PROPOSALS”)
1.
INTRODUCTION
On behalf of the Board of Directors of EGIB (“Board”), M&A Securities Sdn Bhd (“M&A
Securities”) is pleased to announce that the Company is proposing to undertake the
following:
(a)
Proposed reduction of its existing issued and paid-up share capital from
RM75,016,600 comprising 75,016,600 ordinary shares of RM1.00 each in EGIB to
RM37,508,300 comprising 75,016,600 ordinary shares of RM0.50 each in EGIB via
the cancellation of RM0.50 from the par value of each existing ordinary shares of
RM1.00 each in EGIB pursuant to Section 64 of the Companies Act, 1965 (“Act”)
(“Proposed Par Value Reduction”);
(b)
Proposed private placement of up to 9,168,700 new ordinary shares of RM0.50 each
in EGIB (“EGIB Shares” or “Shares”) upon completion of the Proposed Par Value
Reduction to independent third party investor(s) to be identified at a later date
(“Proposed Private Placement”);
(c)
Proposed
renounceable
rights
issue
of
up
to
151,283,482
new
EGIB Shares (“Rights Shares”) together with up to 75,641,741 free detachable
warrants (“Warrants”) at an indicative issue price of RM0.50 per Rights Share on the
basis of three (3) Rights Shares for every two (2) EGIB Shares held together with one
(1) free Warrant for every two (2) Rights Shares subscribed at an entitlement date to
be determined later (after the Proposed Par Value Reduction) (“Proposed Rights
Issue with Warrants”);
(d)
Proposed establishment of an employees’ share grant scheme (“ESGS”) of up to 15%
of the issued and paid-up share capital of EGIB (excluding treasury shares, if any) for
eligible Directors (including Non-Executive Directors) and employees of EGIB and its
subsidiaries which are not dormant (collectively, the “Eligible Persons”) (“Proposed
ESGS”); and
(e)
Proposed amendment to relevant clauses of the Memorandum and/or Articles of
Association of the Company to facilitate the Proposed Par Value Reduction
(“Proposed Amendment”).
1
2.
DETAILS OF THE PROPOSALS
2.1
Proposed Par Value Reduction
EGIB proposes to reduce its existing issued and paid-up share capital comprising ordinary
shares of RM1.00 each in EGIB credited as fully paid-up via the cancellation of RM0.50 from
the par value of each existing ordinary share of RM1.00 in EGIB pursuant to Section 64 of the
Act.
As at 27 November 2014 (being the latest practicable date for this announcement) (“LPD”),
the existing issued and paid-up share capital of EGIB is RM75,016,600 comprising 75,016,600
ordinary shares of RM1.00 each credited as fully paid-up which includes 279,000 ordinary
shares held as treasury shares. In addition, the Company also has 16,670,355 warrants
2005/2015 outstanding with an exercise price of RM1.00 (“Existing Warrants”).
Assuming that none of the Existing Warrants are exercised, upon completion of the Proposed
Par Value Reduction, the issued and paid-up share capital of EGIB will be reduced to
RM37,508,300 comprising 75,016,600 EGIB Shares.
The reduction of RM0.50 in par value will give rise to a credit of RM37,508,300 which will be
credited to the share premium reserve account of the Company and may be utilised in such
manner as the Board deems fit and as permitted by relevant and applicable laws.
The Proposed Par Value Reduction will not result in any adjustment to the share price of the
Company or the number of shares held by shareholders.
2.2
Proposed Private Placement
Upon completion of the Proposed Par Value Reduction, EGIB proposes to undertake the
Proposed Private Placement, which will involve the issuance of up to 9,168,700 new EGIB
Shares (“Placement Shares”). The 9,168,700 Placement Shares represent approximately 12%
of the issued and paid-up share capital of EGIB assuming that none of the Existing Warrants
are exercised into EGIB Shares; and 10.0% of the enlarged issued and paid-up share capital
of the Company assuming all Existing Warrants are exercised into EGIB Shares.
EGIB will make an application to Bursa Malaysia Securities Berhad (“Bursa Securities”) for the
listing of and quotation for the Placement Shares on the Main Market of Bursa Securities.
2.2.1
Basis of arriving at the issue price of the Placement Shares
The issue price of the Placement Shares will be determined and fixed by the Board at a later
date, after all relevant approvals have been obtained for the Proposed Private Placement.
The issue price shall not be at a discount of more than ten percent (10%) from the five (5)
day weighted average market price (“5D-WAMP”) of the EGIB Shares immediately preceding
the price-fixing date. In any case, the issue price of the Placement Shares will not be lower
than the par value of the EGIB Shares. The mechanism to determine the issue price of the
Placement Shares is in accordance with market based principles.
The 5D-WAMP of EGIB Shares up the LPD was RM0.5670.
2
2.2.2
Placement arrangement
The Placement Shares will be placed out to independent third party investor(s) to be
identified at a later date. In accordance with Bursa Securities’ Main Market Listing
Requirements (“Listing Requirements”), the Placement Shares will not be placed to the
following parties:
(a)
interested director, interested major shareholder, interested chief executive or
interested person connected with a director, major shareholder or chief executive;
and
(b)
nominee corporations, unless the names of the ultimate beneficiaries are disclosed.
The Proposed Private Placement is expected to be implemented in tranches (if required)
within six (6) months after the receipt of all relevant approvals for the Proposed Private
Placement and shall depend on investors’ interest at the point of implementation. As such,
there could potentially be several price fixing dates depending on the number of tranches and
timing of implementation.
2.2.3
Ranking of the Placement Shares
The Placement Shares shall, upon allotment and issuance, rank pari passu in all respects with
the existing EGIB Shares, save and except that the Placement Shares shall not be entitled to
any dividends, rights, allotments and/or other distributions that may be declared, made or
paid prior to the date of allotment of the Placement Shares. For avoidance of doubt, the
Placement Shares shall be entitled to the Proposed Rights Issue with Warrants insofar as it
relates to those Placement Shares which are alloted prior to the entitlement date of the
Proposed Rights Issue with Warrants.
2.3
Proposed Rights Issue with Warrants
EGIB proposes to undertake a renounceable rights issue of up to 151,283,482 Rights Shares
together with up to 75,641,741 Warrants, on the basis of three (3) Rights Shares for every
two (2) Shares held together with one (1) free Warrant for every two (2) Rights Shares
subscribed at an entitlement date to be determined later (after the Proposed Par Value
Reduction) (“Entitlement Date”).
The Rights Shares will be offered to the shareholders of EGIB whose names appear in the
Record of Depositors of the Company as at the close of business on the Entitlement Date
(“Entitled Shareholders”). The Entitlement Date will be determined by the Board after
obtaining the approvals for the Proposed Rights Issue with Warrants from all relevant
authorities and the shareholders of the Company.
Based on a maximum scenario, up to 151,283,482 Rights Shares together with up to
75,641,741 Warrants will be issued pursuant to the Proposed Rights Issue with Warrants,
assuming 9,168,000 Placement Shares have been issued pursuant to the Proposed Private
Placement, all Existing Warrants are exercised into EGIB Share, all treasury shares held have
been resold and all Entitled Shareholders subscribe for their entitlements under the Proposed
Rights Issue with Warrants in full (“Maximum Scenario”).
Nevertheless, the Proposed Rights Issue with Warrants will be implemented on a minimum
subscription level to raise minimum gross proceeds of at least RM50.0 (“Minimum Scenario”).
The Minimum Scenario is based on the required funding of RM50.0 million determined by the
Board after taking into consideration, the funding requirements of the EGIB and its
subsidiaries (“EGIB Group” or “Group”), as set out in Section 3 of this announcement. For
illustrative purposes, based on an indicative issue price of RM0.50 per Rights Share,
3
100,000,000 Rights Shares will be issued together with 50,000,000 Warrants under the
Minimum Scenario.
The Proposed Rights Issue with Warrants is renounceable in full or in part. Accordingly,
Entitled Shareholders can subscribe for and/or renounce their entitlements to the Rights
Shares in full or in part. Rights Shares which are not taken up or validly taken up shall be
made available for excess applications by the Entitled Shareholders and/or their
renouncee(s). It is the intention of the Board to allocate the excess Rights Shares in a fair
and equitable manner on a basis to be determined by the Board and announced later by the
Company.
An application will be made to Bursa Securities for the listing of and quotation for the Rights
Shares on the Main Market of Bursa Securities.
2.3.1
Basis of determining the issue price of the Rights Shares and exercise price of the
Warrants
The final issue price of the Rights Shares and exercise price of the Warrants shall be
determined by the Board using market based pricing principles after obtaining the
shareholders’ approval but before the Entitlement Date.
The final issue price of the Rights Shares shall take into account the 5D-WAMP of EGIB
Shares preceding the price fixing date to be determined by the Board but in any event, shall
not be lower than the par value of EGIB Shares of RM0.50 each (after the implementation of
the Proposed Par Value Reduction.
The 5D-WAMP of EGIB Shares up to the LPD is RM0.5670.
2.3.2
Entitlements to the Rights Shares
The Rights Shares will be provisionally allotted to the Entitled Shareholders. Fractional
entitlements pursuant to the Proposed Rights Issue with Warrants if any, will be disregarded
and dealt with in such manner as the Board in its absolute discretion deems fit and in the
best interest of the Company.
The Warrants are attached to the Rights Shares without any cost to the Entitled Shareholders
and renouncee(s). The Proposed Rights Issue with Warrants is renounceable in full or in part.
Accordingly, the Entitled Shareholders can subscribe for and/or renounce their entitlements to
the Rights Shares in full or in part. The renunciation of the Rights Shares by the Entitled
Shareholders will accordingly entail the renunciation of the Warrants to be issued together
with the Rights Shares. If the Entitled Shareholders decide to accept only part of their Rights
Shares entitlements, they shall be entitled to the number of Warrants in proportion to the
Rights Shares they have accepted. The Warrants will be immediately detached from the
Rights Shares upon issuance and will be separately traded.
The Rights Shares which are not taken up or validly taken up shall be made available for
excess applications by the Entitled Shareholders and/or their renouncee(s). It is the intention
of the Board to allocate the excess Rights Shares in a fair and equitable manner on a basis to
be determined by the Board and announced later by the Company.
2.3.3
Ranking of the Rights Shares and the new EGIB Shares to be issued arising from
the exercise of the Warrants
The Rights Shares shall, upon allotment and issue, rank pari passu in all respects with the
existing EGIB Shares save and except that they shall not be entitled to any dividends, rights,
allotments and/or other distributions that may be declared, made or paid prior to the date of
allotment of the Rights Shares.
4
The new EGIB Shares to be issued pursuant to the exercise of the Warrants shall, upon
allotment and issue, rank pari passu in all respects with the then existing EGIB Shares in
issue, save and except that they shall not be entitled to any dividends, rights, allotments
and/or other distributions that may be declared, made or paid prior to the date of allotment
of the new EGIB Shares to be issued arising from the exercise of the Warrants.
2.3.4
Undertakings and underwriting arrangement
The Company shall procure irrevocable written undertakings from certain Directors and
certain shareholders and/or make underwriting arrangements such that at least RM50.0
million is raised under the Minimum Scenario.
2.3.5
Indicative salient terms of the Warrants
The indicative salient terms of the Warrants are set out below:
Terms
Details
Number of Warrants
:
Up to 75,641,741 Warrants to subscribe for up to 75,641,741
new EGIB Shares, to be issued pursuant to the Proposed
Rights Issue with Warrants.
Detachability
:
Exercise Price
:
The Warrants are immediately detachable upon allotment and
issue of the Rights Shares. The Warrants will be traded
separately.
The exercise price of the Warrants shall be determined by the
Board at a later date after the receipt of all relevant approvals
and after taking into consideration the 5D-WAMP of EGIB
Shares immediately preceding the price fixing date.
The exercise price and the number of outstanding Warrants
shall however be subject to the adjustments in accordance
with the terms and provisions of the Deed Poll during the
Exercise Period.
Exercise Period
:
The Warrants may be exercised any time during the tenure of
five (5) years including and commencing from the issue date of
the Warrants. Warrants not exercised during the Exercise
Period will thereafter become lapse and void.
Exercise Rights
:
Each Warrant entitles the registered holder to subscribe for
one (1) new EGIB Share at the Exercise Price during the
Exercise Period and shall be subject to adjustments in
accordance with the Deed Poll.
Deed Poll
:
The Warrants will be constituted by a Deed Poll to be executed
by EGIB.
Board Lot
:
The Warrants are tradeable upon listing in board lots of 100
units carrying rights to subscribe for 100 new EGIB Shares at
any time during the Exercise Period or such other number of
units as may be prescribed by Bursa Securities.
Status of new EGIB
Shares to be issued
pursuant
to
the
exercise
of
the
Warrants
:
All the new EGIB Shares to be issued pursuant to the exercise
of the Warrants shall, upon allotment and issue, rank pari
passu in all respects with the then existing EGIB Shares except
that they will not be entitled to any dividends, rights,
allotments and/or other distributions, that may be declared,
made or paid prior to the date of allotment of the said new
EGIB Shares.
5
Terms
2.4
Details
Listing
:
An application will be made for the listing of and quotation for
the Warrants and new EGIB Shares to be issued pursuant to
their exercise on the Main Market of Bursa Securities.
Governing Law
:
Laws of Malaysia.
Proposed ESGS
The Proposed ESGS will be administered by a committee to be appointed by the Board
(“Scheme Committee”) and governed by a set of Proposed ESGS By-Laws (“By-Laws”).
The salient features of the Proposed ESGS are as follows:
2.4.1
Details of the Proposed ESGS
The Proposed ESGS is a scheme of award for the Eligible Persons of the Group to receive fully
paid EGIB Shares (“ESGS EGIB Shares”) or the equivalent cash value or combinations thereof
on a vesting date (“ESGS Award”), without any cash consideration payable by the Eligible
Person, upon the Eligible Person achieving pre-determined conditions or otherwise having
performed well and/or made a significant contribution to the Group.
As such, no proceeds would be raised by the Company pursuant to the Proposed ESGS.
Subject to the prevailing legislation and the Listing Requirements, the Company will have the
flexibility and discretion in determining the mode of settlement of the ESGS Award by way of:
(a)
(b)
(c)
(d)
an issue of new EGIB Shares;
the delivery of existing EGIB Shares;
payment of the equivalent cash value of such new and/or existing EGIB Shares; or
a combination of (a) and/or (b) and/or (c) stated above.
In determining the various modes of settlement, the Scheme Committee will take into
account factors such as (but not limited to) the amount of cash available, the number of
ESGS EGIB Shares to be delivered, the prevailing market price of the EGIB Shares and the
cost to the Company. The Company shall have the flexibility to approve the vesting of a ESGS
Award, wholly or partly, in the form of cash rather than ESGS EGIB Shares, in which event
the Eligible Person shall receive the aggregate value of the relevant number of ESGS EGIB
Shares in cash, whereby the value of each ESGS EGIB Share will be calculated, based on the
fair value of the EGIB Shares on or prior to the vesting date.
2.4.2
Trust arrangement
To facilitate the implementation of the Proposed ESGS, the Company will establish a trust to
be administered by a trustee (“Trustee”). The Trustee for the Proposed ESGS will administer
the trust in accordance with the trust deed. The Company shall have the power to appoint or
rescind the appointment of any trustee as it deems fit in accordance with the provision of the
trust deed. The Trustee shall, at such times as the Scheme Committee shall direct, subscribe
for and/or purchase necessary number of existing ESGS EGIB Shares to accommodate any
transfer of EGIB Shares to the Eligible Persons. For this purpose, the trustee will be entitled
from time to time to the extent permitted by law and as set out under the By-Laws to accept
funding and/or third assistance, financial or otherwise from the Company, its subsidiaries
and/or third parties.
2.4.3
Quantum
The maximum number of ESGS EGIB Shares which may be made available under the
Proposed ESGS shall not at any point in time in aggregate exceed 15% of the issued and
paid-up share capital of the Company or such other percentage (excluding treasury shares)
6
as may be permitted by Bursa Securities or any other relevant authorities from time to time
during the duration of the Proposed ESGS.
2.4.4
Eligibility
Eligible Persons will be eligible to participate in the Proposed ESGS provided they meet the
conditions for eligibility stipulated in the By-Laws as follows:
(a)
(b)
(c)
an employee or Director must be at least 18 years of age on the date on which a
ESGS Award is made by the Scheme Committee to an Eligible Person (“Date of
Offer”);
an employee must have his/her employment confirmed in writing on or before the
Date of Offer; and
any other criteria as may be determined by the Scheme Committee in its sole
discretion from time to time.
No ESGS Award shall be made to an Eligible Person who is also a Director, a major
shareholder or Chief Executive, or a person connected with such a Director, major
shareholder or Chief Executive, unless such ESGS Award shall have first been approved by
the shareholders of the Company in a general meeting.
The Scheme Committee may make an offer to a Director in respect of his directorship in only
one company within the Group, notwithstanding that he is a Director of more than one
company within the Group.
2.4.5
Maximum allowable allotment and basis of allocation
The basis of allocation of the number of ESGS EGIB Shares which may be comprised in a
ESGS Award and the maximum number of ESGS EGIB Shares which may be offered to an
Eligible Person shall be determined entirely at the discretion of the Scheme Committee
subject to the provisions in the By-Laws. An Eligible Person who is a member of the Scheme
Committee shall abstain from deliberations in respect of any ESGS Award related to him.
To the extent possible and subject always to the provisions in the By-Laws, the Scheme
Committee will ensure that there should be equitable allocation to the various grades of
Eligible Persons, such that not more than 10% (or such percentage as allowable by the
relevant authorities) of the ESGS EGIB Shares available under the Proposed ESGS shall be
allocated to any Eligible Person who, either singly or collectively through persons connected
with the Eligible Person (as defined in the Listing Requirements), holds 20% or more of the
issued and paid-up share capital of the Company.
2.4.6
Rights attaching to the ESGS EGIB Shares
The ESGS EGIB Shares to be allotted pursuant the Proposed ESGS shall upon allotment and
issue, rank pari passu in all respects with the existing issued EGIB Shares except that the
ESGS EGIB Shares so issued shall not be entitled for any dividend, rights, allotment and/or
other distribution declared, made or paid to shareholders unless the ESGS EGIB Shares so
allotted have been credited to the relevant securities accounts of the Eligible Persons
maintained by the Bursa Malaysia Depository Sdn Bhd before the entitlement date and will be
subjected to all provisions of the Articles of Association of the Company relating to the
transfer, transmission and otherwise.
7
2.4.7
Duration of the Proposed ESGS
The Proposed ESGS shall take effect on the date on which the last of the approvals and/or
conditions as stipulated in the By-Laws in accordance with the Listing Requirements shall
have been obtained and/or complied with ("Effective Date") and shall continue to be in force
for a maximum period of 10 years from the Effective Date. All ESGS EGIB Shares under the
ESGS Award which are not vested shall forthwith lapse upon the expiry of the Proposed ESGS.
2.4.9
Listing of new EGIB Shares pursuant to the vesting of the ESGS EGIB Shares
An application will be made to Bursa Securities for the listing of and quotation for the new
EGIB Shares to be issued and listed on the Main Market of Bursa Securities arising from the
vesting of the ESGS EGIB Shares.
2.5
Proposed Amendment
The Proposed Amendment entails the amendment to the relevant clauses of the Memorandum
and/or Articles of Association of EGIB to facilitate the reduction in the par value of the shares of
EGIB from RM1.00 per share to RM0.50 per share pursuant to the Proposed Par Value
Reduction.
3.
UTILISATION OF PROCEEDS
No proceeds will be raised from the Proposed ESGS as the ESGS EGIB Shares to be issued
and transferred to the Eligible Persons would not require any payment by the Eligible Persons.
For illustrative purposes, the Company is expected to raise the following gross proceeds
based on the indicative issue price of RM0.60 per Placement Share and RM0.50 per Rights
Share as well as a minimum amount of RM50.0 million to be raised under the Minimum
Scenario:
Proposal
Proposed Private Placement
Proposed Rights Issue with Warrants
Minimum
Scenario
RM
(‘000)
Maximum
Scenario
RM
(‘000)
5,501
50,000
55,501
5,501
75,642
81,143
For illustrative purposes, based on an indicative issue price of RM0.60 per Placement Share,
the Company is expected to raise gross proceeds from the Proposed Private Placement
amounting up to RM5,501,220.
Based on an indicative issue price of RM0.50 per Rights Share, the Proposed Rights Issue
with Warrants shall raise gross proceeds of RM50.0 million under the Minimum Scenario and
RM75,641,738 under the Maximum Scenario.
8
The details of the utilisation of the abovementioned gross proceeds are as follows:
Details
Repayment of bank borrowings
Purchase and upgrade of machinery*
Expansion and upgrade of factory#
Purchase of inventory such as electronic
component, printed circuit board and plastic
resin
Acquisition of new businesses or assets~
General working capital comprising mainly
general operating expenses and staff salaries
Expenses relating to the Proposals ^
Minimum
Scenario
RM
‘000
Maximum
Scenario
RM
‘000
8,000
12,000
19,000
4,000
12,000
16,000
20,000
8,000
Timeframe of
Utilisation
(from the listing of
the Rights Shares)
Within 6 months
Within 24 months
Within 24 months
Within 12 months
8,000
2,501
20,000
3,143
Within 24 months
Within 12 months
2,000
2,000
Immediately
55,501
81,143
Notes:
@
The Group’s outstanding borrowings as at the LPD is RM183 million. The repayment will save us
between RM0.4 million (under the Minimum Scenario) to RM0.6 million under the (Maximum
Scenario) in interest based on an average interest rate of 5% per annum.
*
The purchase and upgrade of machinery comprises amongst others the addition and/or
replacement of Surface Moulding Technology (“SMT”) assembly lines for its existing EMS
business, plastic injection moulding machines and equipments for research and development
such as 3D printer, digital oscilloscope and other design software.
#
The expansion and upgrade of factories consist of construction of new factory building and
warehouse, purchase of factory land and building, addition of tools and equipment, as well as
purchase of furniture and fittings and facilities such as computer equipments, software and air
conditioning.
~
Up to RM20.0 million is allocated for the acquisition of new businesses or assets within the
electronic manufacturing services (“EMS”) sector or other businesses complementary to the
Group’s existing EMS business. The relevant required information on the new businesses or
assets will be announced on Bursa Securities as and when they are identified and where
relevant, the relevant agreements are entered into. However, the proposed allocation of up to
RM20.0 million is intended to serve as a standby funding for our Group to embark on future
merger and acquisition transactions.
^
In the event that the actual expense is less than the allocated amount, the excess allocated
amount shall be utilised as working capital for the EGIB Group, and vice versa.
Assuming an exercise price of RM0.50 per Warrant, the Company will raise gross proceeds of
approximately RM25.0 million (under the Minimum Scenario) and RM37.8 million (under the
Maximum Scenario) from the full exercise of the Warrants. Any proceeds arising from the
exercise of the Warrants shall be utilised for capital expenditure, investment opportunities
and/or working capital of the EGIB Group. The exact details of the utilisation of such
proceeds, including the breakdown of the utilisation have not been determined.
Pending utilisation of the proceeds from the Proposed Rights Issue with Warrants for the
above purpose, the proceeds will be placed in deposits with financial institutions or shortterm money market instruments. The interest derived from the deposits with financial
institutions or any gains arising from the short-term money market instruments will be used
as additional working capital of our Group.
9
4.
RATIONALE FOR THE PROPOSALS
4.1
Proposed Par Value Reduction
As at the LPD, the closing price of EGIB Share was RM0.55, which is at a discount of 45% to
the existing par value of the shares RM1.00. The current market price of EGIB shares is
therefore not conducive for EGIB to embark on any fund raising exercise and/or corporate
exercises involving issuance of new shares. Accordingly, the Proposed Par Value Reduction
will provide the Company with greater flexibility to raise funds and to implement future
corporate proposals which entail the issuance of new shares.
4.2
Proposed Private Placement
The Proposed Private Placement will provide the EGIB Group with additional funds to finance
its requirements as detailed in Section 3 of this announcement without having to incur
interest costs as compared to traditional borrowings. In addition, there would be interest
savings since part of the proceeds will also be utilised to repay the Group’s borrowings. The
Board is of the view that the Proposed Private Placement is a more appropriate method of
fund raising at this juncture.
4.3
Proposed Rights Issue with Warrants
The rationale of the Proposed Rights Issue with Warrants is as follows:
(a)
To enable the Company to raise the necessary funds required for further growth
without incurring additional interest cost as compared to bank borrowings;
(b)
The Proposed Rights Issue with Warrants will involve the issuance of new EGIB
Shares without diluting the existing shareholders’ equity interest, assuming all
Entitled Shareholders fully subscribe for their respective entitlements;
(c)
The Proposed Rights Issue with Warrants provides an opportunity for the existing
shareholders to further participate in the equity of the Company and the future
prospects and growth of the Company;
(d)
The Warrants attached to the Rights Shares are expected to enhance the
attractiveness of the Rights Shares. It provides the shareholders with the option to
further participate in the equity of the Company at a pre-determined price and enable
them to benefit from the future growth of the Company and any potential capital
appreciation arising thereof;
(e)
The Proposed Rights Issue with Warrants will strengthen the Company’s financial
position with enhanced shareholders’ funds. These factors are expected to facilitate
the continuous business expansion plans of the Company; and
(f)
The Warrants will also provide the Company with additional capital when they are
exercised. The exercise of the Warrants will allow the Company to raise fresh
proceeds without incurring additional financing cost and minimise any potential cash
outflow in respect of interest servicing.
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4.4
Proposed ESGS
The Proposed ESGS is intended to achieve the following objectives:
4.5
(a)
To align the interests of the Eligible Persons with the interests of the shareholders of
the Company;
(b)
To retain key employees, whose contributions are essential to the long-term growth
and profitability of the Group, with more competitive compensation packages;
(c)
To attract potential employees with relevant skills and experience to contribute to the
Group via more competitive compensation packages; and
(d)
To encourage and motivate each Eligible Person towards a higher level of
productivity and efficiency.
Proposed Amendment
The Proposed Amendment is intended to facilitate the implementation of the Proposed Par
Value Reduction.
5.
FINANCIAL EFFECTS OF THE PROPOSALS
The financial effects of the Proposals are set out in the ensuing subsections. The Existing
Warrants have an exercise price of RM1.00.
5.1
Share Capital
The Proposed Amendment will not have any effect on the issued and paid-up share capital of
EGIB.
Save for the Proposed Amendment, for illustrative purposes, the effects of the Proposals on
the issued and paid-up share capital of EGIB are set out below, assuming the Proposals are
implemented in the following order:
Minimum Scenario
Par
Value
(RM)
As at the LPD*
Assuming full exercise of Existing
Warrants
Proposed Par Value Reduction
After Proposed Par Value
Reduction
Proposed Private Placement
After Proposed Private Placement
Proposed Rights Issue with
Warrants
After Proposed Rights Issue with
Warrants
Full exercise of Warrants
Full exercise of Existing Warrants#
Enlarged paid-up share capital
before the Proposed ESGS
RM
Maximum Scenario
No of
Shares
RM
No of
Shares
RM 1.00
75,016,600
75,016,600
75,016,600
75,016,600
(RM 0.50)
(37,508,300)
-
16,670,355
(45,843,478)
16,670,355
-
RM 0.50
RM 0.50
37,508,300
4,584,350
75,016,600
9,168,700
45,843,478
4,584,350
91,686,955
9,168,700
RM 0.50
42,092,650
84,185,300
50,427,828
100,855,655
RM 0.50
50,000,000
100,000,000
75,641,741
151,283,482
RM 0.50
RM 0.50
RM 0.50
92,092,650
25,000,000
8,335,178
184,185,300
50,000,000
16,670,355
126,069,569
37,820,871
-
252,139,137
75,641,741
-
RM 0.50
125,427,828
250,855,655
163,890,439
327,780,878
11
Notes:
*
Including 106,000 treasury shares.
#
Does not include the additional number of Existing Warrants to be issued to the warrantholders
arising from the Proposed Rights Issue with Warrants.
The maximum number of EGIB Shares available under the Proposed ESGS shall not at any
point in time in aggregate exceed 15% of the issued and paid-up share capital of the
Company (excluding treasury shares). As such, the issued and paid-up share capital of the
Company will increase progressively depending on the number of new EGIB Shares which
may need to be issued in connection with the Proposed ESGS.
For illustration, the maximum number of ESGS EGIB Shares available under the Proposed
ESGS based on the enlarged paid-up share capital as set out in the table above is as follows:
Minimum Scenario
Maximum number of ESGS EGIB
Shares
Maximum Scenario
Par
Value
(RM)
RM
No of
Shares
RM
No of
Shares
RM 0.50
18,814,174
37,628,348
24,583,566
49,167,131
12
5.2
Substantial Shareholders’ Shareholdings
The Proposed par Value Reduction and Proposed Amendment will not have any effects on the shareholdings of the substantial shareholders of EGIB.
The effect of the other components of the Proposals on the shareholdings of the substantial shareholders of EGIB is set out below:
Minimum Scenario (assuming that the substantial shareholders subscribe for their entitlements pursuant to the Proposed Rights
Issue with Warrants)
(I)
After the Proposed Private Placement
As at the LPD and assuming all treasury
shares are fully resold
-----Direct----
---Indirect--
No. of
No. of
Shares
Shares
Jubilee Industries Holdings Ltd
Tai Yeong Sheng
Giap Seng Auto Supply Sdn Bhd
Tai Chee Seong
Tai Lee Bee
Tai Lee See
Placees (collectively)
Jubilee Industries Holdings Ltd
Tai Yeong Sheng
Giap Seng Auto Supply Sdn Bhd
Tai Chee Seong
Tai Lee Bee
Tai Lee See
Placees (collectively)
---Direct----
No. of
Shares
19,504,316
1,211,887
3,812,714
587,322
168,126
-
26.00
1.62
*3,812,714
5.08
5.08
0.78
*3,812,714
5.08
0.22
*3,812,714
5.08
*3,812,714
5.08
(III)
After (II) and assuming full exercise of all
Warrants and Existing Warrants#
-----Direct----
---Indirect--
No. of
No. of
Shares
Shares
67,093,085
5,524,577
12,391,321
1,908,797
546,410
29,798,275
26.75
2.20
4.94
0.76
0.22
11.88
*12,391,321
*12,391,321
*12,391,321
*12,391,321
-
19,504,316
1,211,887
3,812,714
587,322
168,126
9,168,700
23.17
1.44
4.53
0.70
0.20
10.89
---Indirect---
No. of
Shares
*3,812,714
*3,812,714
*3,812,714
*3,812,714
-
4.53
4.53
4.53
4.53
-
(II)
After (I) and the Proposed Rights Issue
with Warrants
----Direct----
--Indirect---
No. of
No. of
Shares
Shares
48,760,790
3,029,718
9,531,785
1,468,305
420,315
22,921,750
26.47
1.64
5.18
0.80
0.23
12.44
*9,531,785
*9,531,785
*9,531,785
*9,531,785
4.94
4.94
4.94
4.94
-
Notes:
*
Deemed interested by virtue of their shareholdings in Giap Seng Auto Supply Sdn Bhd and Jupax Enterprise Sdn Bhd pursuant to Section 6A of the Act.
#
Does not include the additional number of Existing Warrants to be issued to the warrantholders arising from the Proposed Rights Issue with Warrants.
13
-
5.18
5.18
5.18
5.18
-
Maximum Scenario
(I)
Assuming full exercise of all Existing
Warrants
---Direct----
---Indirect---
No. of
No. of
Shares
Shares
As at the LPD, assuming all treasury
shares are fully resold
-----Direct----
---Indirect--
No. of
No. of
Shares
Shares
Jubilee Holdings Industries Ltd
Tai Yeong Sheng
Giap Seng Auto Supply Sdn Bhd
Tai Chee Seong
Tai Lee Bee
Tai Lee See
Placees (collectively)
Jubilee Holdings Industries Ltd
Tai Yeong Sheng
Giap Seng Auto Supply Sdn Bhd
Tai Chee Seong
Tai Lee Bee
Tai Lee See
Placees (collectively)
19,504,316
1,211,887
3,812,714
587,322
168,126
-
26.00
1.62
3,812,714
5.08
5.08
0.78
3,812,714
5.08
0.22
3,812,714
5.08
3,812,714
5.08
(II)
After (I) and the Proposed Rights Issue
with Warrants
-----Direct----
-----Direct----
No.
No.
of
of
No. of
No. of
Shar
Shar
Shares
Shares
es
es
23,208,374
2,797,831
3,812,714
587,322
168,126
-
25.31
3.05
*3,812,714
4.16
4.16
0.64
*3,812,714
4.16
0.18
*3,812,714
4.16
*3,812,714
4.16
(III)
After (II) and assuming full exercise of
all Warrants
-----Direct----
-----Direct----
No. of
Shares
(II)
After (I) and the Proposed Private
Placement
----Direct----
--Indirect---
No. of
No. of
Shares
Shares
23,208,374
2,797,831
3,812,714
587,322
168,126
9,168,696
23.01
2.77
3.78
0.58
0.17
9.09
*3,812,714
*3,812,714
*3,812,714
*3,812,714
-
No. of
Shares
58,020,935
6,994,578
23.01
2.77
*9,531,785
3.78
75,427,216
9,092,951
23.01
2.77
*3,812,714
3.78
9,531,785
1,468,305
420,315
22,921,739
3.78
0.58
0.17
0.00
9.09
*9,531,785
*9,531,785
*9,531,785
-
3.78
3.78
3.78
-
12,391,321
1,908,797
546,410
29,798,260
3.78
0.58
0.17
9.09
*3,812,714
*3,812,714
*3,812,714
-
3.78
3.78
3.78
-
Note:
*
Deemed interested by virtue of their shareholdings in Giap Seng Auto Supply Sdn Bhd and Jupax Enterprise Sdn Bhd pursuant to Section 6A of the Act.
14
3.78
3.78
3.78
3.78
-
The Proposed ESGS is not expected to have any immediate effect on the shareholdings of EGIB’s substantial shareholders until and unless new EGIB
Shares are issued pursuant to the ESGS Award. The dilution of the shareholdings of EGIB’s substantial shareholders will depend on the number of
new EGIB Shares to be issued pursuant to the ESGS Award for delivery to the Eligible Persons at the relevant point in time. If existing EGIB Shares
are purchased for delivery to the Eligible Persons or the Company pays the equivalent cash value instead of issuing new EGIB Shares to the Eligible
Persons, there will be no effect on the shareholdings of EGIB’s substantial shareholders.
5.3
Net Asset (“NA”) and Gearing
Based on the audited consolidated balance sheet of the EGIB Group as at 30 June 2014, assuming an issue price of RM0.60 per Placement Share,
RM0.50 per Rights Share and exercise price of RM0.50 per Warrant, the proforma effect of the Proposals on the NA and gearing of the EGIB Group
are set out below:
Minimum Scenario
(I)
(II)
After (I) and the
After (II) and the
Proposed Private Proposed Rights Issue
Placement
with Warrants
RM
RM
Audited as at
After the
30 June
Proposed Par
2014* Value Reduction
RM
RM
Share capital
Share premium
Warrants reserve
Discount on shares
Other non-distributable reserves
Retained earnings
Shareholders’ equity
No. of EGIB Shares (‘000)
NA per EGIB Share
Interest bearing borrowings (RM’000)
Gearing
(III)
(IV)
After (III) and
assuming full exercise
of all Warrants and
Existing Warrants(3)
RM
75,016,600
15,170,314
3,699,893
13,268,740
16,465,208
37,508,300
52,678,614
3,699,893
13,268,740
16,465,208
42,092,650
53,595,484
3,699,893
13,268,740
16,465,208
92,092,650
53,595,484
22,699,893
(19,000,000)(1)
13,268,740
15,565,208(2)
125,427,828
61,930,662
13,268,740
19,265,101
123,619,755
123,619,755
129,120,975
178,220,975
219,891,330
75,016,600
1.65
75,016,600
1.65
84,185,300
1.53
184,185,300
0.97
250,855,655
0.88
160,800,381
1.30
160,800,381
1.30
160,800,381
1.25
152,800,381
0.86
160,800,381
0.69
Notes:
*
(1)
(2)
(3)
Assuming all treasury shares are resold.
Based on the estimated fair value of the Warrants of RM0.38 each calculated via the Black-Scholes option valuation model.
After deducting estimated expenses in relation to the Proposals of RM900,000.
Does not include the additional number of Existing Warrants to be issued to the warrantholders nor adjustments to the exercise price of the Existing Warrants arising from the
Proposed Rights Issue with Warrants.
15
Maximum Scenario
Audited as at
30 June
2014*
RM
Share capital
Share premium
Warrants reserve
Discount on shares
Other non-distributable reserves
Retained earnings
Shareholders’ equity
No. of EGIB Shares (‘000)
NA per EGIB Share
Interest bearing borrowings (RM’000)
Gearing
(I)
(II)
Assuming full
exercise of the After (I) and the
Existing
Proposed Par
Warrants Value Reduction
RM
RM
(III)
After (II) and the
Proposed Private
Placement
RM
(V)
After (IV) and
After (III) and the assuming full exercise
Proposed Rights Issue
of all Warrants
with Warrants
RM
75,016,600
15,170,314
3,699,893
13,268,740
16,465,208
91,686,955
15,170,314
13,268,740
20,165,101
45,843,478
61,013,792
13,268,740
20,165,101
50,427,828
61,930,662
13,268,740
20,165,101
126,069,569
61,930,662
28,743,862
(28,743,862)(1)
13,268,740
19,265,101(2)
163,890,439
61,930,662
13,268,740
19,265,101
123,619,755
140,290,110
140,290,110
145,791,330
220,533,123
258,353,994
75,016,600
1.65
91,686,955
1.53
91,686,955
1.53
100,855,655
1.45
252,139,137
0.87
327,780,878
0.79
160,800,381
1.30
160,800,381
1.15
160,800,381
1.15
160,800,381
1.10
148,800,381
0.67
148,800,381
0.58
Notes:
*
(1)
(2)
(IV)
Assuming all treasury shares are resold.
Based on the estimated fair value of the Warrants of RM0.38 each calculated via the Black-Scholes option valuation model.
After deducting estimated expenses in relation to the Proposals of RM900,000.
16
The Proposed ESGS will not have any immediate effect on the NA, NA per EGIB Share and gearing of the EGIB Group. The NA per EGIB Share will
not be affected until such time as the new EGIB Shares are issued in connection with the vesting of the EGIB Shares. Any potential effect on the NA
and NA per EGIB Share will depend on the number of ESGS EGIB Shares vested at the point of vesting and the mode of settlement for the ESGS
Award at the vesting date. In case of settlement by cash, the Proposed ESGS will reduce the NA, NA per EGIB Share and increase the gearing of the
Group accordingly. However, such increase in gearing level, if any, during the implementation of the Proposed ESGS is not expected to be material to
the Group. The Scheme Committee will take into consideration the cash flow position of the Group upon the implementation of the Proposed ESGS.
The Proposed Amendment will not have any effect on the NA and gearing of the EGIB Group.
17
5.4
Earnings
The Proposed ESGS is not expected to have any immediate material effect on the earnings of
the EGIB Group. In accordance with FRS 2 “Share-Based Payment” as issued by the
Malaysian Accounting Standards Board (“FRS 2”), the granting of the ESGS Awards pursuant
to the Proposed ESGS requires the recognition of an expense which would offset future
earnings of the Group.
However, the potential effect of the Proposed ESGS on the earnings of the EGIB Group in the
future, as a consequence of the recognition of the expense at each date of the ESGS Award,
cannot be determined at this juncture as it would depend on various factors that affect the
fair value of the granted ESGS EGIB Shares and the number of new EGIB Shares to be issued
for delivery to Eligible Persons at the relevant point in time.
The Board has taken note of the potential effect of FRS 2 on the earnings of the EGIB Group
and will take proactive measures to manage the effect on the earnings of the Group in the
granting of the ESGS Awards.
Apart from the above, the Board is of the view that the Proposals, upon implementation as a
whole are expected to be earnings accretive and will contribute positively to the future
earnings of the EGIB Group and consequently its earnings per share when the benefits of the
utilisation of proceeds are realised.
5.5
Dividend
The Proposals are not expected to affect the dividend policy of the Company as future
dividend payable by the Company would be dependent on inter-alia, the future profitability
and cashflow position of the EGIB Group.
5.6
Convertible Securities
Any necessary adjustments to the Existing Warrants as a result of the Proposed Rights Issue
with Warrants will be made in accordance with the provisions of the deed poll for the Existing
Warrants dated 12 April 2005 (“Rights Adjustments”). Hence, any adjustments will only be
made on the Entitlement Date for the Proposed Rights Issue with Warrants and will be
effective on the next market day.
Save for the foregoing, the Proposals are not expect to affect the Existing Warrants.
6.
APPROVAL REQUIRED OF THE PROPOSALS
The Proposals are conditional upon the following approvals being obtained:
(a)
Bursa Securities for the listing of and quotation for the following:
(i) new EGIB Shares to be issued pursuant to the:
- Proposed Private Placement;
- Proposed Rights Issue with Warrants;
- Proposed ESGS;
- Exercise of the Warrants, Existing Warrants and additional Existing Warrants
to be issued pursuant to the Rights Adjustments, if any; and
(ii) New Warrants to be issued pursuant to the Proposed Rights issue with Warrants
and additional Existing Warrants to be issued pursuant to the Rights
Adjustments, if any.
18
on the Main Market of Bursa Securities;
(b)
the confirmation of the High Court of Malaya for the Proposed Par Value Reduction
pursuant to Section 64 of the Act;
(c)
the approval of the shareholders of EGIB for the Proposals at an extraordinary
general meeting (“EGM”) to be convened;
(d)
the approval, waiver and/or consent of any other relevant authorities and/or persons,
if required.
The Proposed Private Placement, Proposed Rights Issue with Warrants and Proposed ESGS
are conditional upon the completion of the Proposed Par Value Reduction and Proposed
Amendments. The Proposed Par Value Reduction and Proposed Amendment are interconditional. Save the foregoing, the Proposals are not conditional upon each other or upon
any other corporate proposal, if any.
7.
DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
All Directors of the Company are Eligible Persons. They are entitled to participate in the
Proposed ESGS and are therefore deemed interested in the Proposed ESGS insofar as it
relates their respective allocations under the Proposed ESGS.
Therefore, all Directors of the Company are deemed to be interested in the Proposed ESGS
by virtue of their eligibility for the ESGS Award. The Directors have deliberated and voted on
the Proposed ESGS on the whole at the Board meeting to recommend to put forth the
resolutions pertaining to the Proposed ESGS to be tabled at an EGM to be convened. The
Directors have abstained and will continue to abstain from all deliberations and voting at the
Board meeting on the specific allocation of the respective ESGS Award to themselves as well
as to persons connected with them.
The Directors will also abstain from voting in respect of their direct and indirect shareholdings
(if any) on the resolutions pertaining to the specific allocation of the respective ESGS Award
to them and/or persons connected with them. Further, the Directors have also undertaken
that they shall ensure that persons connected with them will abstain from voting in respect of
their direct and indirect shareholdings (if any) on the resolutions pertaining to the specific
allocation of the ESGS Award to themselves to be tabled at an EGM to be convened.
Save as disclosed above, none of the Directors and major shareholders of the Company as
well as persons connected with them have any interest, direct and/or indirect, in the
Proposals other than their respective entitlements under the Proposed Rights Issue with
Warrants for which all shareholders of EGIB are entitled to including the right to apply for
excess Rights Shares.
8.
DIRECTORS’ RECOMMENDATION
After having considered all aspects of the Proposals including the capital structure of the
Company, prospects of the EGIB Group and the funding requirements of the Group, the
Board (save for the Directors for the resolutions in respect of their respective specific
allocations pursuant to the ESGS Award for which they make no recommendations), is of the
opinion that the Proposals are in the best interest of EGIB.
19
9.
ADVISER
M&A Securities Sdn Bhd has been appointed as Adviser to EGIB for the Proposals.
10.
ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Proposals are expected to be completed in the
first half of 2015.
11.
APPLICATIONS TO THE RELEVANT AUTHORITIES
Applications to the relevant authorities in respect of the Proposals are expected to be
submitted within two (2) months from the date of this announcement.
This announcement is dated 28 November 2014.
20