HUP SENG INDUSTRIES BERHAD ("HUP SENG" or "the Company") Proposed Acquisition Of 2,313,000 Ordinary Shares of RM1.00 Each Representing 100% Equity Interest in In-Comix Food Industries Sdn Bhd ("In-Comix") For A Cash Consideration Of RM22,000,000 ("Proposed Acquisition")
|HUP SENG INDUSTRIES BERHAD|
|Subject||HUP SENG INDUSTRIES BERHAD ("HUP SENG" or "the Company")|
Proposed Acquisition Of 2,313,000 Ordinary Shares of RM1.00 Each Representing 100% Equity Interest in In-Comix Food Industries Sdn Bhd ("In-Comix") For A Cash Consideration Of RM22,000,000 ("Proposed Acquisition")
Contents :1. INTRODUCTION
The Proposed Acquisition entails the acquisition by Hup Seng of 2,313,000 ordinary shares of RM1.00 each representing 100% equity interest in In-Comix for a cash consideration of RM22,000,000. In-Comix is principally involved in the manufacturing and wholesaling of food products.
The purchase consideration for the Proposed Acquisition amounting to RM22,000,000 was determined on a willing buyer-willing seller basis after taking into consideration the prospective business potential of In-Comix.
2.2 Liabilities to be Assumed
Hup Seng will not assume any additional liabilities arising from the Proposed Acquisition.
- The cash consideration amounting to RM22,000,000 will be fully financed by internally generated funds.
- The salient terms of the SPA are as follows :
- (i) The In-Comix shares which are the subject of the Proposed Acquisition shall be acquired by the Company free from all liens, charges, mortgages, claims and other encumbrances whatsoever together with all rights attached thereto including all dividends and distributions to be declared thereafter.
(ii) The Proposed Acquisition is conditional upon the following conditions:-
- a) the approval from the Ministry of International Trade and Industry (“MITI”); and
b) the approval of any other relevant government authorities and statutory bodies, if necessary.
- (iii) The Company is to seek the approval of the MITI and other relevant authorities and obtain the said approvals within ninety (90) days from the date of the agreement (or such period as may be mutually agreed by the parties in writing). Failure to obtain the necessary approvals shall entitle the Vendors to rescind the agreement and all monies paid under the agreement, if any, shall be refunded free of interest to the relevant parties.
- (iv) The terms of payment of the purchase consideration for the Proposed Acquisition are further subject to the satisfactory results of the due diligence carried out on In-Comix by the agents and/or advisers of the Company and the repayment of debts amounting to RM2,717,548.30 owed to In-Comix by certain debtors (“Said Debtors”).
(v) Completion of the Proposed Acquisition is upon the completion of the following events or 30 days from the date of the payment of 50% of the total consideration, whichever the later:-
- a) the 2,313,000 ordinary shares of RM1.00 each in In-Comix having been transferred in favour of the Company and/or its nominee;
b) the Vendors having delivered or caused to be delivered to the Company all legal documentations, including but not limited to that in relation to the assets, properties, documents, records, minutes, charges, motor vehicles registration cards of In-Comix pursuant to the audited accounts of In-Comix dated 31 March 2004 and the latest management account;
c) the Vendors having delivered or caused to be delivered to the Company all records, notes and/or documentation in relation to the recipe, formula, method and the manufacturing and production process of In-Comix’s foodstuff which are vital to the Company to continue carrying on the business; and
d) the Vendors having ensured payment to the Company of the monies owed by the Said Debtors.
- The principal activities of In-Comix are manufacturing, wholesaling and distribution of food products such as instant beverage mix and convenient food products. The beverage mix range includes coffee, tea, herbal tea, fruit flavoured tea, chocolate and cereal drinks. The convenient food range includes cup noodle of different flavours. These products are marketed under the brand names of In-Comix, Jazz, Eagle Express and Red Eagle throughout Malaysia and also exported to over 20 countries.
The substantial shareholders of In-Comix are Lim Hun Swee and Tan Ah Lick holding equity interest of 28% and 72% respectively. The directors of In-Comix are Lim Hun Swee, Tan Ah Lick and Tan Moy Hong. Based on the audited accounts for financial year ended 31 March 2004, the audited net tangible assets (“NTA”) of In-Comix was RM8,190,649. A summary of the financial results of In-Comix is shown in Table 1.
The Proposed Acquisition aims at strengthening Hup Seng’s competitive advantage in the food industry by expanding its existing product range from biscuits, confectionery and foodstuff to instant beverage mix. In addition to capitalizing on In-Comix’ established product range and distribution network, Hup Seng will also be able to utilise its existing established domestic and international distribution network to further propel the future growth of In-Comix. The Proposed Acquisition is expected to enable Hup Seng to explore wider business opportunities within the food industry and thus to pursue higher potential growth in business.
(Source: Economic Report 2004/2005)
The business activities of In-Comix are the manufacturing, wholesaling and distribution of food products such as instant beverage mix and convenient food products. In-Comix's future revenue is dependent on the continued product acceptance of its instant beverage mix and convenient food products. In addition, In-Comix is also subject to inherent risks of the industry such as raw material and labour shortages, increases in the costs of raw material and labour, labour disputes, changes in government legislation, rising cost of financing as well as changes in general economic, business and credit conditions within and outside Malaysia.
No assurance can be given that changes to any of these factors will not have a material effect on In-Comix's business. However, In-Comix seeks to limit these risks through, inter-alia, developing and maintaining a diversified market network.
- In-Comix competes with a number of instant beverage mix manufacturing companies in both domestic and foreign markets. In-Comix is able to compete with these players based on its competitive strengths including, its long standing relationships with its suppliers, commitment to quality and constant effort to establish a variety of products to cater for various market segments. However, no assurance is given that In-Comix will be able to maintain its existing market share/competitive advantage.
- The effects of the Proposed Acquisition are as follows: -
- 5.1 Share Capital and Substantial Shareholdings
- Barring any unforeseen circumstances, the Board of Directors of Hup Seng ("Board") is of the opinion that the Proposed Acquisition is expected to contribute positively to the future earnings of the Hup Seng and its subsidiary companies ("Hup Seng Group").
- The proforma effects of the Proposed Acquisition on the consolidated NTA of the Hup Seng Group as at 31 December 2003 are as shown in Table 2.
- The Proposed Acquisition is subject to the following approvals being obtained:-
(i) the MITI; and
(ii) other relevant authorities, if any.
Barring unforeseen circumstances, the Proposed Acquisition is expected to be completed by 31 December 2005.
10. DOCUMENTS FOR INSPECTION
|Company Name||HUP SENG INDUSTRIES BERHAD|
|Date Announced||3 Mar 2005|