UOADEV- Announcement-Subscription Agreement

UOA DEVELOPMENT BHD (“UOA” or “the Company”)
SUBSCRIPTION AGREEMENT BETWEEN UOA, REGENTA DEVELOPMENT SDN BHD, LAU
SOON WOH, MOW CHOOI YOON AND KOK KOEK HUNG
1.
INTRODUCTION
The Board of Directors of UOA wishes to announce that the Company has on 28 January 2014
entered into a subscription agreement (“Subscription Agreement”) with Eureka Equity Sdn
Bhd (Company No. 1030014-H) (“Eureka”), Regenta Development Sdn Bhd (Company No.
1030532-H) (“Regenta”), Lau Soon Woh (“LSW”), Mow Chooi Yoon (“MCY”) and Kok Koek
Hung (“KKH”) for the subscription of 3,000,000 ordinary shares of RM1.00 each in Eureka
(“Subscription Shares”) at par by UOA and Regenta (collectively referred to as
“Subscribers”). The Subscription Shares shall rank parri passu with the existing ordinary
shares of RM1.00 each in Eureka (“Proposed Subscription”).
2.
INFORMATION ON REGENTA
Regenta, a wholly owned subsidiary of UOA, was incorporated in Malaysia as a private limited
company under the Companies Act, 1965 on 8 January 2013. The authorised share capital of
Regenta is RM100,000.00 comprising of 100,000 ordinary shares of RM1.00 each of which 2
ordinary shares are issued and fully paid up. The principal activity of Regenta is property
development.
3.
INFORMATION ON EUREKA
Eureka was incorporated in Malaysia as a private limited company under the Companies Act,
1965 on 2 January 2013. The current authorised share capital of Eureka is RM5,000,000.00
comprising of 5,000,000 ordinary shares of RM1.00 each (“Eureka Shares”) of which
2,000,000 Eureka Shares are issued and fully paid up. Subsequent to the Subscription
Agreement, the issue and paid-up share capital shall increase to 5,000,000. Eureka holds the
pieces of land as set out in Section 4 below (“the Lands”). The principal activity of Eureka is
property development and is currently dormant.
4.
LAND HELD BY EUREKA
The following pieces of land are held by Eureka at the time the Subscription Agreement is
entered into:(i)
All that piece of land held under Geran Mukim No. Hakmilik 1826, Lot 1242, Tempat
Petaling Lama, Mukim Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan.
(ii)
All that piece of land held under Geran Mukim No. Hakmilik 2352, Lot 2650, Tempat
Petaling Lama, Mukim Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan.
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The parcels of land in items (i) and (ii) above (collectively known as “Jalan Klang Lama
Land”) measuring approximately three (3) acres in total and were held by Eureka at a total
cost of RM63,500,000.00.
Note: The purchase of item (ii) above by Eureka is pending completion and is expected to
complete by the first quarter of year 2014.
5.
SALIENT TERMS OF THE SUBSCRIPTION AGREEMENT
5.1. The Proposed Subscription is subject to a due diligence being carried out by the Subscribers on
Eureka being the issuer of the Subscription Shares, and the Subscribers being satisfied with the
outcome of the said due diligence.
5.2. Subsequent to the due diligence being favourable, the Subscribers shall enter into a
Shareholders’ Agreement with LSW, MCY and KKH (“Existing Shareholders”).
5.3. Pursuant to the Subscription Agreement, the shareholding structure of Eureka shall be as
follows:
Shareholders
6.
No. of Eureka Shares
Percentage of
Shareholdings (%)
LSW
MCY
KKH
UOA
Regenta
500,000
1,000,000
500,000
2,999,999
1
10
20
10
59.99998
0.00002
TOTAL
5,000,000
100
LIABILITIES TO BE ASSUMED
There is a current banking facility in the sum of RM60,000,000.00 utilised for the purchase of
the Lands and payment of land premiums, out of which RM8,000,000.00 will be utilised towards
bridging financing for the development to be carried out on the Lands.
7.
RATIONALE FOR THE PROPOSED SUBSCRIPTION
7.1
The Jalan Klang Lama Land held by Eureka is strategically located along Jalan Klang Lama
approximately 1 kilometre away from Federal Highway. It is within close proximity to Mid Valley
City and has a prominent frontage to Jalan Klang Lama. The location of the land is also highly
accessible. The land is ideal for condominium and commercial development.
7.2
The Proposed Subscription shall provide the Company the opportunity to strategically expand
its land bank in Kuala Lumpur that matches the fast turnaround strategy.
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8.
FINANCIAL EFFECTS OF THE PROPOSED SUBSCRIPTION
8.1
Earnings
The Proposed Subscription is expected to contribute positively to the future earnings of UOA
when the development of the Lands commences.
8.2
Net Assets
The Proposed Subscription is not expected to have an immediate effect on the net assets per
share. Enhancement to the net assets is expected in the future as a result of the future
potential profit contribution from the development of the Lands.
8.3
Gearing
The Proposed Subscription is not expected to have any impact on the gearing of UOA for the
financial year ending 31 December 2014. Any potential impact on gearing can only be
ascertained when the development of the Lands commences.
8.4
Share Capital and Substantial Shareholders’ shareholding
The Proposed Subscription is not expected to have any impact on the issued and paid-up
share capital of the Company or the Substantial Shareholders’ shareholding.
8.5
Shareholding Structure
The Proposed Subscription will have no effect on the shareholding structure of UOA.
9.
HIGHEST PERCENTAGE RATIO
The cumulative highest percentage ratio applicable to the Proposed Acquisition pursuant to
paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities
Berhad is 0.14% computed based on the audited accounts of UOA as at 31 December 2012.
10.
RISK FACTORS
The Proposed Subscription is subject to financial risks inherent in the development business
and include competition in the industry, changes in economic and political conditions and
increases in costs. The Board is not aware of any other material risk arising from the Proposed
Subscription.
11.
OUTLOOK AND PROSPECTS
The Malaysian economy recorded a stronger growth of 5.0% in the third quarter of 2013 (2Q
2013: 4.4%). Domestic demand remained the key driver of growth, expanding by 8.3% (2Q
2013: 7.4%).
Going forward, emerging signs of a recovery in the major advanced economies are expected to
support overall global growth. Uncertainties surrounding the fiscal and monetary policy
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adjustments in these economies, however, may affect market sentiment and overall growth
prospects in the global economy. While global policy spill-overs may have some impact on
Asia, growth will continue to be underpinned by domestic demand.
For Malaysian economy, the gradual recovery in the external sector will support growth.
Domestic demand from the private sector will remain supportive of economic activity amid the
continued consolidation of the public sector. The economy is therefore expected to remain on
its steady growth trajectory.
(Source : Quarterly Bulletin, Third Quarter 2013, Bank Negara Malaysia )
In view of the above, the management of UOA is optimistic about the prospects of the
development of land held by Eureka.
12.
APPROVALS REQUIRED
The Proposed Subscription is not subject to the approval of the shareholders of UOA or any
other regulatory authorities.
13.
DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS
None of the Directors and Substantial Shareholders of the Company or persons connected to
them has any interest, direct or indirect, in the Proposed Subscription.
14.
DIRECTORS’ STATEMENT
The Board of UOA having considered the rationale of the Proposed Subscription is of the
opinion that the Proposed Subscription is in the best interest of the Company.
15.
DOCUMENTS AVAILABLE FOR INSPECTION
The Subscription Agreement will be available for inspection by shareholders of UOA at the
principal place of business of UOA at Wisma UOA Bangsar South, Tower 1, Avenue 3,
Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur during business hours from
Monday to Friday (save for public holidays) for a period of three (3) months from the date of this
announcement.
This announcement is dated 28 January 2014.
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