(ITEMS (A) AND (B) TO BE COLLECTIVELY REFERRED TO AS THE PROPOSED ACQUISITIONS )

Transcription

1 POS MALAYSIA BERHAD ( POS MALAYSIA OR THE COMPANY ) (I) PROPOSED ACQUISITIONS OF THE FOLLOWING: (A) (B) THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF KL AIRPORT SERVICES SDN BHD ( KLAS ) HELD BY HICOM HOLDINGS BERHAD ( HICOM HOLDINGS ), A WHOLLY-OWNED SUBSIDIARY OF DRB-HICOM BERHAD ( DRB-HICOM ), FOR A PURCHASE CONSIDERATION OF RM MILLION ( PROPOSED KLAS ACQUISITION ); AND PART OF A PARCEL OF FREEHOLD INDUSTRIAL LAND SITUATED IN SECTION 28, SHAH ALAM, SELANGOR DARUL EHSAN BENEFICIALLY HELD BY HICOM INDUNGAN SDN BHD ( HICOM INDUNGAN ), AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DRB-HICOM, FOR A PURCHASE CONSIDERATION OF RM69.0 MILLION ( PROPOSED LAND ACQUISITION ), (ITEMS (A) AND (B) TO BE COLLECTIVELY REFERRED TO AS THE PROPOSED ACQUISITIONS ) (II) PROPOSED EXEMPTION UNDER PARAGRAPH 16.1(A) OF PRACTICE NOTE 9 OF THE MALAYSIAN CODE ON TAKE-OVERS AND MERGERS 2010 ( CODE ) FOR DRB-HICOM AND PERSONS ACTING IN CONCERT WITH IT UNDER THE CODE ( PACS ), FROM THE OBLIGATION TO UNDERTAKE A MANDATORY TAKE-OVER OFFER TO ACQUIRE THE REMAINING ORDINARY SHARES OF RM0.50 EACH IN POS MALAYSIA ( POS MALAYSIA SHARES ) NOT ALREADY OWNED BY THEM UPON COMPLETION OF THE PROPOSED ACQUISITIONS ( PROPOSED EXEMPTION ) (ITEMS (I) AND (II) TO BE COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION We refer to the announcements dated 10 December 2015 and 16 December 2015 in relation to DRB-HICOM s conditional offer to POS Malaysia in relation to the Proposed Acquisitions ( Offer ) and POS Malaysia s acceptance of the Offer respectively. On behalf of the Board of Directors of POS Malaysia ( Board ), CIMB Investment Bank Berhad ( CIMB IB ) wishes to announce that POS Malaysia, has today entered into: (i) (ii) a conditional sale agreement with HICOM Holdings for the proposed acquisition of the entire issued and paid-up share capital of KLAS, comprising 88,328,527 ordinary of RM1.00 each in KLAS ( KLAS Shares ), 35,300,000 redeemable convertible preference of RM1.00 each in KLAS ( KLAS RCPS ) and such number of New KLAS Shares (as defined in Section of this Announcement) to be issued on a later date, for a total purchase consideration of RM million ( KLAS SSA ); and a conditional sale and purchase agreement with HICOM Indungan and HICOM Engineering Sdn Bhd ( HICOM Engineering ), an indirect wholly-owned subsidiary of DRB-HICOM, for the proposed acquisition of part of a parcel of freehold industrial land held under GRN Lot 62010, Pekan HICOM, District of Petaling, State of Selangor Darul Ehsan located along Jalan Jijan 28/35, Section 28, Shah Alam ( Section 28 Land ) measuring acres for a purchase consideration of RM69.00 million ( Land SPA ). HICOM Engineering is the registered owner of the Section 28 Land while HICOM Indungan is the beneficial owner of the Section 28 Land. (The KLAS SSA and Land SPA are collectively referred to as the Definitive Agreements ). 1

2 The total purchase consideration of RM million in respect of the Proposed Acquisitions shall be satisfied via the issuance of 245,750,751 new POS Malaysia Shares to HICOM Holdings at an issue price of RM3.33 per POS Malaysia Share ( Issue Price ) ( Consideration Shares ). For the avoidance of doubt, the Consideration Shares to be issued by POS Malaysia in respect of the Proposed Land Acquisition are to be issued directly to HICOM Holdings at the nomination of HICOM Indungan. The Proposed Acquisitions are deemed as related party transactions pursuant to Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( MMLR ). Please refer to Section 13 of this Announcement for the details on the interests of directors, major shareholders and/or persons connected to them. In conjunction with the Proposed Acquisitions, DRB-HICOM and the PACs intend to seek an exemption from the Securities Commission Malaysia ( SC ) under Paragraph 16.1(a) of Practice Note 9 of the Code from the obligation to undertake a mandatory take-over offer to acquire the remaining POS Malaysia Shares not already owned by them ( Mandatory Offer ) upon the Definitive Agreements becoming unconditional. 2. DETAILS OF THE PROPOSED ACQUISITIONS 2.1 Proposed KLAS Acquisition The Proposed KLAS Acquisition involves the acquisition by POS Malaysia of 100% equity interest in KLAS comprising 88,328,527 KLAS Shares, 35,300,000 KLAS RCPS and such number of New KLAS Shares (as defined in Section of this Announcement) to be issued at par value on a later date (collectively, Sale Shares ), from HICOM Holdings for a total purchase consideration of RM million ( KLAS Consideration ), to be satisfied via the issuance of 225,030,030 new POS Malaysia Shares to HICOM Holdings at the Issue Price The Proposed KLAS Acquisition shall be subject to the following: (i) (ii) the capitalisation of an existing loan facility obtained by KLAS of up to RM370.0 million ( KLAS Loan Facility ) via the issuance of new KLAS Shares at par value directly to HICOM Holdings ( Capitalisation of KLAS Loan Facility ). As at 29 February 2016, being the latest practicable date prior to this Announcement ( LPD ), the outstanding amount of the KLAS Loan Facility stood at approximately RM million; and the capitalisation of non-current inter-company amount owing by KLAS to DRB-HICOM ( Amount Owing to DRB-HICOM ) via the issuance of new KLAS Shares at par value directly to HICOM Holdings at the nomination of DRB-HICOM ( Capitalisation of Amount Owing to DRB- HICOM ). As at the LPD, the Amount Owing to DRB-HICOM stood at approximately RM million. The new KLAS Shares to be issued by KLAS to HICOM Holdings pursuant to the Capitalisation of KLAS Loan Facility and Capitalisation of Amount Owing to DRB-HICOM (collectively referred to as New KLAS Shares ) shall form part of the KLAS Shares to be disposed by HICOM Holdings to POS Malaysia pursuant to the Proposed KLAS Acquisition. For the avoidance of doubt, the New KLAS Shares to be issued will not affect the KLAS Consideration. 2

3 The Capitalisation of KLAS Loan Facility and Capitalisation of Amount Owing to DRB-HICOM shall be based on the latest available outstanding balances on a cut-off date to be mutually agreed between HICOM Holdings and POS Malaysia at a later stage prior to the completion of the Proposed KLAS Acquisition. The Capitalisation of the KLAS Loan Facility and Capitalisation of Amount Owing to DRB-HICOM will be completed after the KLAS SSA becomes unconditional and prior to the completion of the Proposed KLAS Acquisition HICOM Holdings is a wholly-owned subsidiary of DRB-HICOM The Proposed KLAS Acquisition is subject to the terms and conditions of the KLAS SSA, details of which are set out in Section of this Announcement. 2.2 Proposed Land Acquisition The Proposed Land Acquisition involves the acquisition by POS Malaysia of the Section 28 Land, free from encumbrances from HICOM Indungan, the beneficial owner of the Section 28 Land, for a purchase consideration of RM69.00 million ( Land Consideration ) to be satisfied via the issuance of 20,720,721 new POS Malaysia Shares to HICOM Holdings, at the nomination of HICOM Indungan, at the Issue Price HICOM Indungan is a wholly-owned subsidiary of Glenmarie Properties Sdn Bhd, which in turn is a wholly-owned subsidiary of HICOM Berhad. HICOM Berhad is a wholly-owned subsidiary of HICOM Holdings The Proposed Land Acquisition is subject to the terms and conditions of the Land SPA, details of which are set out in Section of this Announcement. 2.3 Salient terms of the Definitive Agreements KLAS SSA The other salient terms of the KLAS SSA are as follows: (i) (ii) Subject to Section of this Announcement, the fulfilment of the KLAS SSA Conditions Precedent (as defined in Section 2.3.1(ii) of this Announcement) and the terms and conditions of the KLAS SSA, HICOM Holdings agrees to sell to POS Malaysia and POS Malaysia agrees to purchase from HICOM Holdings the Sale Shares at the KLAS Consideration free from all encumbrances and with all rights, benefits and entitlements attaching to the Sale Shares including without limitation all rights, dividends and/or other distributions which may be declared, made or paid in respect of the Sale Shares, where the date on which the shareholders of KLAS must be registered in order to participate in the relevant distribution is on or subsequent to the Completion Date (as defined in Section 2.3.1(iv) of this Announcement). The Proposed KLAS Acquisition is conditional upon the following conditions precedent being fulfilled by the date falling on the expiry of six (6) months from the date of the KLAS SSA, or such later date as HICOM Holdings and POS Malaysia may mutually agree in writing ( Cut-Off Date ): (a) the approvals as set out in Section 11 of this Announcement being obtained; 3

4 (b) (c) the parties agreeing to the contents of the letter from HICOM Holdings to POS Malaysia to be delivered after the date of the KLAS SSA disclosing certain matters in relation to the warranties by HICOM Holdings, being acceptable to both HICOM Holdings and POS Malaysia; and the Land SPA becoming unconditional in accordance with its terms. (collectively referred to as KLAS SSA Conditions Precedent ) (iii) (iv) Subject to the completion of the Capitalisation of KLAS Loan Facility, HICOM Holdings and POS Malaysia agree that the amount retained in the escrow account pursuant to the KLAS Loan Facility, being a fixed amount of RM8 million, shall be paid to HICOM Holdings within seven (7) days after the release of such amount into the operating account under the KLAS Loan Facility. Notwithstanding anything to the contrary in the KLAS SSA, the obligation under this Section 2.3.1(iii) of this Announcement shall continue to subsist and shall not be affected by the completion of the sale and purchase of the Sale Shares and POS Malaysia shall ensure and procure that KLAS gives effect to the terms of the KLAS SSA. Subject to the KLAS SSA Conditions Precedent being fulfilled or waived and evidence of the completion of the events in Section 2.1.2(i) and (ii) of this Announcement being delivered to POS Malaysia, completion of the sale and purchase of the Sale Shares shall take place on any business day to be mutually agreed in writing between HICOM Holdings and POS Malaysia but falling no later than ten (10) business days from the date on which all the KLAS SSA Conditions Precedent shall have been fulfilled, or waived in accordance with the terms of the KLAS SSA or such later date as HICOM Holdings and POS Malaysia may mutually agree in writing simultaneously with the completion of the sale and purchase of the Section 28 Land pursuant to the Land SPA in accordance with its terms ( Completion Date ) Land SPA The other salient terms of the Land SPA are as follows: (i) (ii) Subject to the terms and conditions contained in the Land SPA, HICOM Indungan shall sell and POS Malaysia shall purchase the Section 28 Land at the Land Consideration free from all encumbrances, with vacant possession, improvements, and all rights and benefits whatsoever attaching to the Section 28 Land, subject to any category of land use, express conditions of title and restrictions in interest endorsed on the Title (as defined in Section 2.3.2(ii)(b) of this Announcement), and subject to the terms and conditions contained in the KLAS SSA. The Proposed Land Acquisition is conditional upon the conditions precedent being fulfilled by the Cut-Off Date in accordance with the terms of the Land SPA: (a) the conditions as set out in Section 2.3.1(ii)(a) and (b) of this Announcement having been fulfilled in accordance with the terms of the KLAS SSA; and 4

5 (b) (c) the submission of the application of sub-division or surrender and alienation or re-alienation (as the case may be) and the surrender of the Section 28 Land together with the original issue document of title forming the parcel of land which includes the Section 28 Land ( Title ) for the purposes of the application of sub-division or surrender and alienation or re-alienation (as the case may be) by HICOM Engineering and/or HICOM Indungan to the relevant governmental authority, at HICOM Indungan s costs and expenses; and Majlis Bandaraya Shah Alam ( MBSA ) s acknowledgement or confirmation that the Kebenaran Merancang (Planning Permission) dated 29 January 2014 issued by MBSA to HICOM Indungan has lapsed/no longer valid, to be obtained at HICOM Indungan s costs and expenses. (collectively referred to as Land SPA Conditions Precedent ) (iii) (iv) (v) (vi) (vii) Subject to the KLAS SSA Conditions Precedent and Land SPA Conditions Precedent (collectively referred to as Conditions Precedent ) being fulfilled or waived, completion of the sale and purchase of the Section 28 Land shall take place on the same day as the Completion Date simultaneously with the completion of the sale and purchase of the Sale Shares in accordance with the terms of the KLAS SSA. HICOM Engineering or HICOM Indungan, as the case may be, shall execute the memorandum of transfer ( Transfer ) of the extracted document of title of the Section 28 Land issued by the land registry after the Section 28 Land has been alienated or re-alienated (as the case may be) by the relevant governmental authority ( New Title ) in favour of POS Malaysia and deposit the duly executed Transfer to POS Malaysia s solicitors within 14 days from the issuance of the New Title. Pending the transfer of the New Title in favour of POS Malaysia and subject to the payment of the Land Consideration by POS Malaysia, POS Malaysia shall have the beneficial ownership over the Section 28 Land. If the Section 28 Land details and/or acreage as given in the Land SPA are different from the details of the Section 28 Land in the New Title, no such discrepancy shall be the subject of any claim for loss, damages, compensation or otherwise, save that the Land Consideration shall be adjusted accordingly at RM per square foot calculated on the difference between the acreage provided in the Land SPA and the aggregate area stated in the New Title. Such sum shall be paid in cash by the relevant party within fourteen (14) days from the issuance by the relevant land registry of the New Title. The Land Consideration is exclusive of Goods and Services Tax ( GST ), if any, chargeable and levied thereon, which shall be borne and payable by POS Malaysia. Accordingly, POS Malaysia shall pay to HICOM Indungan the relevant GST amount, if any, chargeable on the Land Consideration upon POS Malaysia s receipt of the relevant tax invoice from HICOM Indungan. The KLAS Consideration and Land Consideration shall be satisfied via the issuance of the Consideration Shares to HICOM Holdings on the Completion Date. 5

6 2.4 Basis of arriving at and justification for the purchase consideration for the Proposed Acquisitions Proposed KLAS Acquisition The KLAS Consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration, among others, the estimated indicative range of investment values ( Indicative Valuation ) of the entire equity interest in the KLAS and its group of companies ( KLAS Group ) of between RM614.2 million and RM760.1 million as at 31 October 2015, as appraised by Deloitte Corporate Advisory Services Sdn Bhd ( Deloitte ), being the independent valuer appointed by POS Malaysia for the valuation of the equity interest of the KLAS Group in its valuation letter dated 10 March The Indicative Valuation in relation to the entire equity interest in the KLAS Group assumes a sum-of-the-parts approach ( SOTP ) whereby each of the entities within KLAS Group was valued separately. The estimate of the indicative range of investment of the entire equity interest in the KLAS Group was arrived based on the following valuation approaches and methodologies: (a) Income approach, using the discounted cash flow ( DCF ) method The DCF method bases value on the estimated future cash flows which the assets generate over their remaining useful life. DCF is more appropriate in illiquid markets, where the assets are heterogeneous and there is little information on completed transactions. (b) Market approach, using the guideline public company ( GPCM ) method The GPCM method approach estimates value based on market prices in actual transactions adjusted for differences between the subject assets and comparable assets. This approach is appropriate in liquid market, with homogenous assets and where substantial information is available. (c) Cost-based approach, using the adjusted book value ( ABV ) method The ABV method based value using the value of its individual assets net of its liabilities. This approach may not reflect the earning potential of the company. The Indicative Valuation of the entire equity interest in the KLAS Group was arrived at by Deloitte after making the relevant adjustments for the following: (i) (ii) (iii) the transfer of the beneficial ownership of two (2) parcels of agriculture land measuring a total of acres comprising acres held under HSD PT 9 and acres held under HSD PT10 located in Bandar Kota Perdana, Mukim Sungai Laka, Daerah Kubang Pasu, Kedah Darul Aman ( Kota Perdana Land ) from Konsortium Logistik Berhad ( KLB ), to HICOM Vertex Sdn Bhd ( HICOM Vertex ), an indirect wholly-owned subsidiary of DRB-HICOM*; the Capitalisation of KLAS Loan Facility of RM268.8 million and the Capitalisation of Amount Owing to DRB-HICOM of RM157.9 million as at 31 October 2015; the net debt, surplus assets, non-operating assets and non-operating liabilities as at 31 October 2015, based on the financial information of the KLAS Group; and 6

7 (iv) after taking into consideration the market value as at 1 February 2016 of seven (7) plots of freehold land under Title Deeds No to 26828, Lot/Survey Nos. 104/1976, 24/1977, 25/1978, 62/1979, 61/1980, 60/1981 and 59/1982 respectively, in Samnak Kham Sub-District, Sadao District, Songkhla Province, Thailand measuring acres ( Sadao Land ) of THB million (RM40.35 million based on the exchange rate of RM1.00: THB as at 1 February 2016). The market value of the Sadao Land, which comprises unused warehouses and related buildings erected on the developed portion and the undeveloped adjacent land at the rear, was appraised by Rahim & Co International Sdn Bhd ( Rahim & Co ) (being the independent registered valuer appointed by POS Malaysia)** in its valuation report dated 10 March The market value of the Sadao Land was arrived at using the cost method for the developed portion and comparison method for the undeveloped portion. Details of the Sadao Land are set out in Appendix III of this Announcement. Notes: * On 3 February 2016, KLB, HICOM Vertex and Northern Gateway Free Zone Sdn Bhd ( NGFZ ) entered into a novation agreement for KLB to novate all rights, title, benefits, interests and obligations under the sale and purchase agreement dated 30 March 2015 entered into between KLB and NGFZ in relation to the sale by NGFZ and the purchase by KLB of the Kota Perdana Land, for a total consideration of approximately RM66.95 million, with effect from 3 February ** In carrying out its valuation exercise, Rahim & Co has engaged Agency for Real Estate Affairs (AREA), Thailand to jointly carry out the valuation of the Sadao Land. In summary, the breakdown of the equity values of KLAS, the KLB and its group of companies ( KLB Group ), DRB-HICOM ASIA Cargo Express Sdn Bhd ( DHACE ) and KLAS Engineering Services Sdn Bhd ( KESSB ) as at 31 October 2015, as appraised by Deloitte, and after taking into consideration the market value of Sadao Land as appraised by Rahim & Co, are as follows: As at 31 October 2015 Lower range of valuation RM million Higher range of valuation RM million Equity value of KLAS Equity value of KLB Group Equity value of DHACE Equity value of KESSB Add: Market value of the Sadao Land Equity value of the KLAS Group Please refer to the valuation letter from Deloitte dated 10 March 2016, which will be made available for inspection as referred to in Section 18 of this Announcement, for further details. 7

8 The KLAS Consideration has been revised downwards from RM million (being the acquisition consideration stated in the Offer) by RM16.81 million (which represents the difference between the market value of the Sadao Land as appraised by Rahim & Co and C.I.T. Appraisal Co., Ltd* ( CIT )) to RM million subsequent to negotiations between HICOM Holdings and POS Malaysia having taken into consideration the market values of the Sadao Land by both independent registered valuers and the paucity of recent, directly comparable market transactions in the vicinity of the Sadao Land. Note: * CIT, being the independent registered valuer appointed by DRB-HICOM, appraised the market value of the Sadao Land at RM57.16 million in its valuation report dated 7 December The KLAS Consideration represents a discount of approximately 1.41% to the high end of the indicative value of the entire equity interest in the KLAS Group of RM760.1 million as at 31 October 2015, as appraised by Deloitte Proposed Land Acquisition The purchase consideration for the Proposed Land Acquisition of RM69.00 million was arrived at on a willing buyer willing seller basis based on the market value of the Section 28 Land of RM69.00 million as at 22 January 2016, as appraised by Rahim & Co in its valuation report dated 10 March The market value of the Section 28 Land was arrived at using the comparison method as the main method of valuation and the residual method was used to cross-check the comparison method of valuation. 2.5 Basis of arriving at the Issue Price of the Consideration Shares Since the Offer was made on 10 December 2015, the market price of POS Malaysia Shares has decreased by more than 10%. However, the Board of DRB-HICOM has maintained its Offer with the issue price of the Consideration Shares at RM3.33 per POS Malaysia Share which is equivalent to the one (1)-month volume weighted average market price ( VWAMP ) of POS Malaysia Shares up to and including 9 December 2015, being the last full trading day prior to the Offer ( Last Trading Day Prior to the Offer ). In acceptance of the Offer with the issue price of RM3.33 per POS Malaysia Share, the Board (excluding the Interested Directors (as defined in Section 13 of this Announcement)) has taken into consideration, among others, the five (5)-day, one (1)- month and three (3)-month VWAMP of POS Malaysia Shares up to and including 11 March 2016, being the last full trading day prior this Announcement ( Last Trading Day ), of RM2.14, RM2.18 and RM2.34, per POS Malaysia Share respectively. The Board (excluding the Interested Directors) is of the view that the Issue Price of RM3.33 per Consideration Share is reasonable after taking into consideration that the Issue Price is at a premium to the five (5)-day, one (1)-month and three (3)-month VWAMP of POS Malaysia Shares up to and including the Last Trading Day of 55.61%, 52.75% and 42.31% respectively. 8

9 The Issue Price for the Consideration Shares represents a premium/(discount) to the following market prices of POS Malaysia Shares: Before the date of the Offer: Share price Premium/(Discount) RM RM % (i) (ii) (iii) (iv) (v) Five (5)-day VWAMP up to and including the Last Trading Day Prior to the Offer One (1)-month VWAMP up to and including the Last Trading Day Prior to the Offer Three (3)-month VWAMP up to and including the Last Trading Day Prior to the Offer Highest closing market price for the past one (1) year up to the Last Trading Day Prior to the Offer Lowest closing market price for the past one (1) year up to the Last Trading Day Prior to the Offer (0.23) (6.46) 5.30 (1.97) (37.17) Before the date of this Announcement: (i) (ii) (iii) (iv) (v) Five (5)-day VWAMP up to and including the Last Trading Day One (1)-month VWAMP up to and including the Last Trading Day Three (3)-month VWAMP up to and including the Last Trading Day Highest closing market price for the past one (1) year up to the Last Trading Day Lowest closing market price for the past one (1) year up to the Last Trading Day (1.97) (37.17) Ranking and listing of the Consideration Shares The Consideration Shares shall rank equally (save and except that the Consideration Shares will not be entitled to any dividends, rights, allotment and/or other distributions that may be declared, made or paid prior to the allotment and issuance of the Consideration Shares) with the existing POS Malaysia Shares and shall be free from all encumbrances. The Consideration Shares will be listed and quoted on the Main Market of Bursa Securities. The Board (excluding the Interested Directors) is of the opinion that the issuance of the Consideration Shares is the most appropriate means of satisfaction of the purchase consideration of the Proposed Acquisitions given the capital structure of POS Malaysia. 2.7 Liabilities to be assumed There are no liabilities, including contingent liabilities or guarantees to be assumed by POS Malaysia pursuant to the Proposed Acquisitions. The existing liabilities of the KLAS Group will be settled by KLAS Group in their ordinary course of business. 9

10 2.8 Additional financial commitment Save for the total purchase consideration in respect of the Proposed Acquisitions, POS Malaysia is not expected to assume any additional financial commitment for the purposes of putting the assets acquired pursuant to the Proposed Acquisitions on-stream. 2.9 Original dates and costs of investment Details of the original costs of investment of the respective companies in KLAS and the Section 28 Land are as follows: Company Company/Land Date of investment (1) investment Original cost of RM million HICOM Holdings KLAS Between 23 February 1995 and 28 August 2007 KLAS KLB Between 16 December 2013 and 9 April (2) (3) DHACE 29 January (4) KESSB Between 8 May 1998 and 30 November (5) HICOM Indungan Section 28 Land 31 October (6) Notes: (1) (2) (3) (4) (5) (6) Dates represent the first and last investments made and/or completion of the relevant acquisitions by HICOM Holdings, KLAS or HICOM Indungan, where relevant. Pursuant to the acquisition by HICOM Holdings of 719,998 KLAS Shares which was completed on 23 February 1995, subsequent subscriptions of additional KLAS Shares and KLAS RCPS, and the capitalisation of incidental costs relating to the said subscriptions. Pursuant to the acquisition by KLAS of 61.61% equity interest in KLB and the subsequent mandatory take-over offer by KLAS to acquire all the remaining ordinary of RM1.00 each in KLB not already held by KLAS and persons acting in concert with it, which were completed on 16 December 2013 and 9 April 2014 respectively. Pursuant to the acquisition by KLAS of 100% equity interest in DHACE, which was completed on 29 January Pursuant to the acquisition by KLAS of two (2) ordinary of RM1.00 each in KESSB ( KESSB Shares ), which was completed on 8 May 1998 and the subsequent subscription of an additional 15,999,998 KESSB Shares on 30 November On 25 March 2008, HICOM Indungan entered into a sale and purchase agreement to acquire the Section 28 Land from HICOM Engineering for a purchase consideration of approximately RM19.0 million. The said acquisition was completed on 31 October (The rest of this page has been intentionally left blank) 10

11 3. DETAILS OF THE PROPOSED EXEMPTION Upon completion of the Proposed Acquisitions, the collective shareholdings of DRB-HICOM and the PACs in POS Malaysia will increase from approximately 32.21% to approximately 53.49%. Accordingly, as DRB-HICOM and the PACs holdings of the voting of POS Malaysia will exceed 33% as a consequence of the Consideration Shares that DRB-HICOM will receive pursuant to the Proposed Acquisitions, in accordance with Section 218(2) of the Capital Markets and Services Act, 2007 ( CMSA ) and Section 9(1)(a), Part III of the Code, DRB-HICOM and the PACs will be obliged to undertake the Mandatory Offer upon the Definitive Agreements becoming unconditional. The PACs with DRB-HICOM in respect of the Mandatory Offer, pursuant to Section 216 of the CMSA, are HICOM Holdings, Brigadier General (K) Tan Sri Dato Sri (Dr) Haji Mohd Khamil bin Jamil ( TSK ), Etika Strategi Sdn Bhd ( Etika ) and Tan Sri Dato Seri Syed Mokhtar bin Syed Nor ( TSSM ). The shareholdings of DRB-HICOM and the PACs in POS Malaysia and the shareholdings of the PACs in DRB-HICOM as at the LPD are as follows: Name Relationship with DRB-HICOM Interests in DRB-HICOM Interests in POS Malaysia Direct Indirect Direct Indirect No. of ordinary of No. of POS RM1.00 each in Malaysia DRB-HICOM % Shares % No. of ordinary of RM1.00 each in DRB-HICOM % No. of POS Malaysia Shares % DRB-HICOM ,997, PACs HICOM Holdings Wholly-owned subsidiary of DRB- HICOM TSK Non-Executive Chairman of DRB-HICOM Substantial shareholder of Etika * - - Etika Major shareholder of DRB-HICOM 1,081,061, ,997,399 (1) TSSM Major shareholder of Etika Major shareholder of DRB- HICOM through his interest in Etika Notes: - - 1,081,061,741 (2) ,997,399 (2) * Negligible. (1) (2) Deemed interest pursuant to Section 6A of the Companies Act 1965 ( Act ) by virtue of its interest in DRB-HICOM. Deemed interest pursuant to Section 6A of the Act by virtue of his interest in Etika. 11

12 The shareholdings of DRB-HICOM and the PACs in POS Malaysia and the shareholdings of the PACs in DRB-HICOM upon completion of the Proposed Acquisitions are as follows: Name Interests in DRB-HICOM Interests in POS Malaysia Direct Indirect Direct Indirect No. of ordinary of RM1.00 each in DRB- No. of POS HICOM % Malaysia Shares % No. of ordinary of RM1.00 each in DRB- HICOM % No. of POS Malaysia Shares % DRB-HICOM ,997, ,750,751 (1) PACs HICOM Holdings ,750, TSK * - - Etika 1,081,061, ,748,150 (2) TSSM - - 1,081,061,741 (3) ,748,150 (3) Notes: * Negligible. (1) (2) (3) Deemed interest pursuant to Section 6A of the Act by virtue of its interest in HICOM Holdings. Deemed interest pursuant to Section 6A of the Act by virtue of its interest in DRB-HICOM. Deemed interest pursuant to Section 6A of the Act by virtue of his interest in Etika. As DRB-HICOM and the PACs have no intention of undertaking the Mandatory Offer, DRB-HICOM and the PACs intend to seek an exemption from the SC pursuant to Paragraph 16.1(a) of Practice Note 9 of the Code from the obligation to undertake the Mandatory Offer. Pursuant to the Code, the SC may consider granting the Proposed Exemption if the approval of the non-interested shareholders of POS Malaysia for the Proposed Exemption is obtained at an extraordinary general meeting ( EGM ) of POS Malaysia to be convened. 12

13 4. RATIONALE FOR THE PROPOSALS 4.1 Proposed KLAS Acquisition The Proposed KLAS Acquisition will principally allow the POS Malaysia and its subsidiaries ( POS Group ) to expand its services beyond last mile delivery. Amid a structural mail volume decline as well as in order to remain relevant to their customers, many postal operators around the world, such as Singapore Post and Royal Mail, have been undergoing transformation process. Postal operators have had to expand their services beyond their core business operations i.e. providing point-topoint delivery of mails, small packets and parcels. The Proposed KLAS Acquisition will allow the POS Group to tap into KLAS Group s air-sea-land transportation solutions that include linking up warehousing, logistics and order fulfilment operations which would enable the POS Group to transform itself into an integrated logistics services ( ILS ) provider that can offer end-to-end services within Malaysia. As an ILS provider, the POS Group can better serve the traditional and e-commerce markets (i.e. online/electronic transactions) through the seamless purchase, order fulfilment and delivery of merchandise to the end customers. Currently, POS s presence within the e-commerce value chain is largely confined to the last mile delivery in the context of an ILS value chain; and as an ILS provider, POS Group would be able to capture the tremendous value created by the growth of e- commerce. The Proposed KLAS Acquisition is expected to enable POS Group to transform into an ILS provider that can tap into the expected higher trade volumes within ASEAN as well as through the implementation of the Trans Pacific Partnership Agreement and the ASEAN Economic Community. POS will be better positioned to defend its domestic market share in the face of foreign competition within the ASEAN region which is expected to increase with the reduction and/or elimination of trade barriers for both goods and services and from improved trade linkages between member countries. 4.2 Proposed Land Acquisition The Proposed Land Acquisition is in line with the Proposed KLAS Acquisition, whereby the Section 28 Land is intended to be subsequently developed into a warehouse that will form part of the future integrated logistics value chain of POS Group. The Section 28 Land is strategically located as it is in close proximity to Port Klang and major highways. 4.3 Proposed Exemption The Proposed Exemption will allow DRB-HICOM and the PACs to be exempted from the obligation to undertake the Mandatory Offer, as DRB-HICOM and the PACs do not intend to undertake the Mandatory Offer. 13

14 5. OVERVIEW, INDUSTRY OUTLOOK AND FUTURE PROSPECTS 5.1 Overview of the Malaysian economy The Malaysian economy is expected to remain steady in 2016, with real Gross Domestic Product ( GDP ) growth between 4% to 5% led by domestic demand. Private sector expenditure will remain the main driver of growth with private consumption and investment expected to grow by 6.4% and 6.7%, respectively. Meanwhile, government expenditure is forecast to expand, albeit at a moderate pace, in line with efforts to strengthen the fiscal position. On the supply side, growth is expected to be broad-based, with all the sectors registering positive growth. Malaysia s external position is forecast to remain positive supported by better prospects for global growth and trade. Against this backdrop, the nominal Gross National Income ( GNI ) per capita is expected to increase by 5.6% from RM36,397 in 2015 to RM38,438 in With total investment surpassing savings, the savings-investment gap is expected to narrow between 0.5% to 1.5% of GNI. The economy will continue to operate under conditions of full employment with the unemployment rate remaining below 4%. Despite a weak ringgit, inflation is expected to remain benign attributed to low oil prices and the waning impact of goods and services tax. For 2016, inflation is expected to range between 2% to 3%. The Government remains committed to fiscal consolidation. The fiscal deficit is expected to further decline to 3.1% of GDP in 2016 (2015: 3.2%) while the federal government debt level will remain manageable within the prudent limit of 55% of GDP. The projection for growth in 2016 takes into account concerns over the severity of growth slowdown in emerging markets, particularly China. Other downside risks include declining commodity prices, rising volatility in financial markets and depreciating currencies of emerging economies. Against the backdrop of increased uncertainty in the global economy, growth in the Malaysian economy will be driven by domestic demand, with private expenditure as the main anchor, while public expenditure will increase moderately. Strong economic fundamentals such as benign inflation and stable employment supported by an accommodative monetary policy are expected to support growth. Thus, the Malaysian economy is expected to remain on a steady growth path, expanding between 4% to 5% in On the supply side, growth though moderating, is expected to be broad-based supported by expansion in all sectors of the economy, led by the services and manufacturing sectors. Thus, the nominal GNI per capita is expected to increase by 5.6% to RM38,438 in 2016 (2015: 4.2%; RM36,397). In 2016, the impact of goods and services tax on prices is expected to wane, while the weakening ringgit may lead to higher prices in some imported goods. However, this will be mitigated by weak commodity prices and lower global inflation. Furthermore, the economy is expected to operate in line with its potential output without any significant upward pressure on domestic prices. Hence, inflation is expected to remain stable at 2% to 3% for (Source: Economic Management and Prospects, Economic Report 2015/2016, Ministry of Finance) 5.2 Industry outlook The services sector increased by 5.7% during the first half of 2015 (January June 2014: 6.6%), mainly driven by sustained consumption and investment activities. In 2015, the services sector is expected to record 5.7% growth, accounting for 53.8% of GDP (2014: 6.5%; 53.5%). In the first half of 2015, the transport and storage subsector expanded further by 5.6% (January June 2014: 4.8%) attributed to higher highway, port and airport operations. 14

15 The water transport segment rebounded by 1.2% (January June 2014: -2.9%) on account of stronger port activities. This is reflected in the improvement in the freight segment with cargo services posting a positive growth. Total container throughput in major ports (Port Klang, Port of Tanjung Pelepas, Pulau Pinang, Johor, Bintulu, Kuching and Kuantan) grew by 8.4% to 11.6 million twenty-foot equivalent units ( TEUs ) (January June 2014: 5.1%; 10.7 million TEUs). In addition, Port Klang and Port of Tanjung Pelepas ( PTP ) registered higher volumes at 5.8 million TEUs and 4.4 million TEUs (January June 2014: 5.3 million TEUs; 4.1 million TEUs) accounting for 50% and 38.4% of total container throughput, respectively (January June 2014: 49.4%; 38.2%). Port Klang and PTP, the leading container ports in the country, continued to be ranked among the world s top 20 container ports. According to the Containerisation International Report, in terms of total TEUs handled in 2014, Port Klang ranked at 12th while PTP ranked at 18th position. Moving forward, several initiatives including the Logistics and Trade Facilitation Masterplan (LTFM) launched in March this year, to improve the last-mile connectivity to Port Klang and a new queuing system at PTP, are expected to enhance port operations, cargo clearance and container services in the future. During the first half of 2015, the air transport segment moderated to 2.4% (January June 2014: 4.9%) following lower passenger arrivals and air cargo handled. The air passenger segment recorded a marginal growth of 0.4% to 42.6 million (January June 2014: 12%; 42.4 million). Meanwhile, total air cargo grew by 2.9% to 498,255 tonnes (January June 2014: 7.1%; 484,238 tonnes) on account of slower regional trade. However, growth of the subsector is anticipated to increase further to 5.4% in 2015 (2014: 5.2%) on account of new routes as well as promotions offered by airlines and incentive programmes to encourage new and existing airlines to fly in more passengers. (Source: Economic Performance and Prospects, Economic Report 2015/2016, Ministry of Finance) In the third quarter of 2015, the transport and storage subsector expanded by 5.6% (Q : 5.4%) led by warehousing and highway operation activities and the air transport segment rose 3.2% (Q2 2015: 2.6%) on account of higher passenger traffic at 6.1% to 21.7 million (Q2 2015:1.6%, 21.6 million). In contrast, total air cargo handled at all airports contracted by 5% to 242,894 tonnes (Q2 2015: -0.6%, 251,218 tonnes) due to slower international trade. The water transport segment grew by 1.6% (Q : 1.3%) with total volume of containers handled at seven major ports rising by 7.1% to 6.1million TEUs (Q : 5.5%; 5.8 million TEUs). Port Klang and Tanjung Pelepas saw an increase in total volume handled at 3 million TEUs and 2.4 million TEUs (Q : 2.8milion TEUs; 23 million TEUs), contributing 49.9% and 38.8%, respectively total container throughput (Q : 48.6%; 29.6%) (Source: 3 rd Finance) Quarter Quarterly Update on the Malaysian Economy, Ministry of The services sector is projected to grow by 5.4% in 2016 (2015: 5.7%), increasing its share to 54% of GDP (2015: 53.8%) with all subsectors continuing to expand. The transport and storage subsector is projected to expand by 5% (2015: 5.4%) contributed by the expansion in port and rail services as well as improved bus services. In 2016, the transport and other services accounts are projected to remain in deficit following improved prospects for traderelated and investment activity. (Source: Economic Performance and Prospects, Economic Report 2015/2016, Ministry of Finance) 15

16 5.3 Future Prospects of KLAS Group The Board believes that after the Proposed Acquisitions, the KLAS Group operations will be integrated into the POS Malaysia and its group of companies ( POS Malaysia Group ) to become an ILS provider to serve the traditional and e-commerce markets. The e-commerce integrated logistics market relates to the integrated logistics supply chain that allows the seamless purchase, fulfilment and delivery of merchandise via online/electronic transactions to the end customers versus the traditional logistics supply chain that mainly handles oldschool brick and mortar products. KLAS Group will contribute to POS Malaysia Group to offer a wider suite of e-commerce solutions, from first mile delivery to warehousing, logistics and fulfilment operations. POS Malaysia expects to retain the current senior management personnel and employees of KLAS Group after the Proposed Acquisitions to ensure smooth continuity of business and operations. In addition, with KLAS Group s experiences in the ground handling and total logistics services industry will enhance and further accelerate POS Malaysia Group business to wider markets. Premised on the above and the outlook of the industry disclosed in Section 5.2 of this Announcement, the Board believes that the KLAS Group will continue to sustain its financial performance and is cautiously optimistic that the prospect of KLAS Group going forward is positive. (Source: Management of POS Malaysia) 6. RISK FACTORS The risk factors in relation to the Proposals are set out below. There can be no assurance that any change in relation to the risk factors as described below, will not have a material adverse effect on our business, operations and financial performance: (i) Political, economic and regulatory conditions The future growth and level of profitability of KLAS Group are subject to risks that are linked to the political and economic developments in Malaysia and other overseas markets in which its clients serve. Any adverse developments in the political situation and economic uncertainties in those markets could materially and adversely affect the businesses of KLAS Group s clients and hence indirectly affecting the financial performance of the KLAS Group. Such determining factors include, inter alia, risks of war, global economy downturn, risks of renegotiations or nullification of existing contracts due to government directives or change in market conditions, changes in interest rate and inflation and variation in tax and duties. As these factors are not within the control of KLAS Group, there is no assurance there will not be any changes that may materially affect the operations of KLAS Group after the Proposed KLAS Acquisition. 16

17 (ii) Business risk KLAS Group is involved in the provision of ground handling services, total logistics services and inventory solutions, which include the provision of container haulage services, freight forwarding, shipping agency and chartering services, warehousing and distribution services and insurance agency. Therefore, KLAS Group is subject to risks inherent to the ground handling and integrated logistics services industry. Such risks include, inter alia, the ability to procure or renew contracts with potential and existing customers at rates that are acceptable to KLAS Group, adequate insurance coverage for its assets and the ability to maintain profitable operating margins. Although these risks can be mitigated by, inter alia, securing long-term contracts, periodic review of adequacy of insurance coverage and prudent financial policy, risk management and liquidity framework, no assurance can be given that any change to these factors will not have material adverse effect on the business of the KLAS Group after the Proposed KLAS Acquisition. (iii) Dependency on a key group of customers A portion of KLAS Group s revenue is derived from the contribution of a steady group of customers. However, there is no assurance that the performance of KLAS Group will not be adversely affected by any changes to the business environment of any of its customers or that the existing arrangements or contracts between KLAS Group and its customers will be maintained on terms that are acceptable to KLAS Group. (iv) Impairment risk We will recognise goodwill arising from the Proposed Acquisitions, the amount of which will depend on fair value of the assets and liabilities as at the completion of the Proposed Acquisitions. Any fair value adjustments allocated to the identifiable assets and liabilities, and the effect of amortisations of the fair value adjustments (including the amortisation of the intangible assets identified), if any, from the Proposed Acquisitions may adversely affect our financial position. (v) Risk of non-approval by non-interested shareholders The Proposals are subject to, inter-alia, the approval of our non-interested shareholders at the EGM to be convened. In the event that the Company does not succeed in obtaining the approval of our shareholders, the Definitive Agreements shall lapse and the Proposals will not be carried out. (vi) Non-completion of the Proposed Acquisitions The completion of the Proposed Acquisitions are subject to the fulfilment of the conditions precedent to the Definitive Agreements as set out in Sections and of this Announcement, some of which are beyond the control of the Company. In the event any of these conditions precedent are not fulfilled or waived, the Definitive Agreements shall lapse and hence, the Company will not be able to complete the Proposed Acquisitions. Nevertheless, the Company will take all proactive and reasonable steps to ensure a successful completion of the Proposed Acquisitions and endeavours to fulfil all the conditions precedent which are within its control pursuant to the Definitive Agreements within the stipulated timeframe. 17

18 7. EFFECTS OF THE PROPOSALS The Proposed Exemption will not have any effect on the share capital, substantial shareholders shareholdings, convertible securities and public shareholding spread of POS Malaysia and net assets ( NA ), gearing and earning of the POS Malaysia Group. The effects of the Proposed Acquisitions are illustrated based on the following events or transactions: (a) Proposed KLAS Acquisition (i) (ii) (iii) (iv) (v) (vi) On 30 March 2015, KLB entered into a conditional sales and purchase agreement with NGFZ for the acquisition of the Kota Perdana Land for a cash consideration of RM65.3 million. Subsequently, on 3 February 2016, KLB, HICOM Ve rtex and NGFZ entered into a novation agreement for KLB to novate all rights, title, benefits, interests and obligations under the sale and purchase agreement dated 30 March 2015 entered into between KLB and NGFZ in relation to the sale by NGFZ and the purchase by KLB of the Kota Perdana Land, for a total consideration of approximately RM66.95 million, with effect from 3 February As the acquisition of the Kota Perdana Land was not recognised in the audited financial statements of POS Malaysia as at 31 March 2015, the transfer of the beneficial ownership of the Kota Perdana Land to HICOM Vertex will not have any effects and no adjustment will be required. As at the LPD, KLAS had drawn down amounts totalling RM57.13 million and repaid amounts totalling RM41.83 million for its Murabahah term loan facility obtained from Kuwait Finance House (Malaysia) Berhad ( KFH ). The incidental costs arising from the drawdown of the term loan facility obtained from KFH of RM5.53 million was expensed off to KLAS s retained earnings. This has resulted in a net increase in KLAS s cash and cash equivalents to RM43.92 million and accordingly a net increase in KLAS s term loan facility obtained from KFH to RM million; The capitalisation of the KLAS Loan Facility of RM million via the issuance of new KLAS Shares at the par value of RM1.00 per KLAS Share to HICOM Holdings resulting in the increase of KLAS s ordinary share capital to RM million. The carrying value of the KLAS Loan Facility of RM million approximates its fair value at the date of capitalisation to KLAS s ordinary share capital; As at the LPD, KLAS had repaid amounts totalling RM8.37 million for its intercompany loan facility obtained from DRB-HICOM. This has resulted in a decrease in KLAS s cash and cash equivalents to RM35.56 million and accordingly a decrease in KLAS s intercompany loan facility obtained from DRB-HICOM to RM million; The capitalisation of the Amount Owing to DRB amounting to RM million via the issuance of new KLAS Shares at the par value of RM1.00 per KLAS Share to HICOM Holdings resulting in the increase of KLAS s ordinary share capital to RM million; and POS Malaysia will then acquire the entire issued and paid-up share capital of KLAS held by HICOM Holdings, for a total consideration of RM million which will be satisfied via the issuance of 225,030,030 new POS Malaysia Shares to HICOM Holdings at the Issue Price. (b) Proposed Land Acquisition The acquisition of the Section 28 Land from HICOM Indungan for a consideration of RM69.00 million will be satisfied via the issuance of approximately 20,720,721 new POS Malaysia Shares to HICOM Holdings, at the nomination of HICOM Indungan at the Issue Price. 18