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MEMORANDUM OF UNDERSTANDING ON THE FOLLOWING :-
(I) PROPOSED TRANSFER OF DEBT OWING BY KUMPULAN HARTANAH SELANGOR BERHAD ("KHSB") AND VARIOUS OF ITS SUBSIDIARIES TO KPS, TO A NEWLY INCORPORATED WHOLLY-OWNED SUBSIDIARY OF KHSB ("NEWCO") ("PROPOSED DEBT TRANSFER");
(II) PROPOSED TRANSFER OF THE FOLLOWING ASSETS TO NEWCO :-
(A) PERANGSANG TEMPLER GOLF CLUB ("PTGC") TOGETHER WITH THE CLUB DIVISION ("GOLF CLUB & DIVISION") BY TEMPLER PARK GOLF & RESORT BERHAD ("TPGR"), A 95% INDIRECT SUBSIDIARY OF KHSB;
(B) 100% EQUITY INTEREST IN PERANGSANG HOTEL AND PROPERTIES SDN BHD ("PHP") BY KHSB; AND
(C) 49% EQUITY INTEREST IN KDE RECREATION BERHAD ("KDE") BY KHSB; AND
(ITEMS (A) TO (C) ARE TO BE COLLECTIVELY REFERRED TO AS "PROPOSED ASSET TRANSFER")
(III) PROPOSED CAPITALISATION BY KPS OF DEBT OWING BY NEWCO AS A RESULT OF THE PROPOSED DEBT TRANSFER VIA THE SUBSCRIPTION OF NEW SHARES IN NEWCO ("PROPOSED DEBT CAPITALISATION")
(ITEMS (I) TO (III) ARE TO BE COLLECTIVELY REFERRED TO AS "PROPOSED RATIONALISATION")
On behalf of KPS, AmMerchant Bank Berhad (a member of AmInvestment Group) ("AmMerchant Bank") would like to announce that the Company has today entered into a Memorandum of Understanding ("MoU") with its 52.07%-owned subsidiary, KHSB, for purposes of the Proposed Rationalisation. Pursuant to the MoU, both parties have agreed to exercise their best endeavour to finalise the terms of the Proposed Rationalisation with the intention to enter into the relevant sale and purchase agreements ("Agreements"). The MoU is binding upon the parties.
The components of the Proposed Rationalisation are inter-conditional upon each other.
2. INFORMATION ON ASSETS INVOLVED IN THE PROPOSED RATIONALISATION
2.1 Background Information On Golf Club & Division
PTGC is located within Templer Park Resort which is situated along Jalan Ipoh / Rawang. PTGC has an 18-hole international class golf course, 32 bays driving range and well-crafted putting and chipping greens. Other facilities include three (3) tennis courts, two (2) squash courts, badminton court, snooker room, gymnasium and aerobics room, eight (8) lane Olympic-size swimming pool, children's pool, child care centre, children's playground, sauna, massage room & bowling alley as well as a 100-capacity ballroom and two (2) seminar rooms catered for social and business functions. PTGC also boasts excellent food and beverage outlets, including a spacious golfers' terrace which overlooks the course, a chinese restaurant, a bar and karaoke lounge for late-night entertainment.
Based on the audited financial statements of TPGR for the financial year ended 31 December 2005, the net profit and net assets ("NA") of the Golf Club & Division of TPGR are RM1.67 million and RM89.98 million respectively.
2.2 Background Information On PHP
PHP was incorporated as a private limited company in Malaysia under the Companies Act, 1965 ("Act") on 11 July 1981. As at the date of this Announcement, the authorised share capital of PHP is RM50,000,000 comprising 50,000,000 ordinary shares of RM1.00 each ("Shares"), of which 24,074,258 Shares have been issued and fully paid-up.
PHP manages and operates the Quality Hotel City Centre and the Quality Hotel Shah Alam, both of which are four (4) star hotels. Both hotels are also members of Choice Hotels International, one (1) of the largest hotel franchise companies in the world.
As at the date of this Announcement, PHP does not have any subsidiary or associated company.
Based on the audited financial statements for the financial year ended 31 December 2005, the net profit and NA of PHP are RM1.02 million and RM62.8 million respectively.
2.3 Background Information On KDE
KDE was incorporated as a private limited company in Malaysia under the Act on 8 June 1984 under the name of Perangsang Recreation Bhd. It assumed its present name on 22 July 1991. As at the date of this Announcement, the authorised share capital of KDE is RM20,000,000 comprising 20,000,000 Shares, of which 10,000,000 Shares have been issued and fully paid-up.
KDE is principally involved in the provision of recreational facilities to its members on its wholly-owned recreational centre known as Kelab Darul Ehsan. Kelab Darul Ehsan which is located within Taman Tun Abdul Razak, Ampang Jaya, Selangor, has a 9-hole golf course, 40 bays driving range, one (1) practice putting green and one (1) practice chipping green, and a golf clubhouse. Kelab Darul Ehsan also has a sports complex with a 25-metre six (6) lane competition-size swimming pool, four (4) indoor squash courts, four (4) indoor badminton courts, six (6) tennis courts and a gymnasium. Other facilities include three (3) snooker tables, games room, reading room, children's playground, karaoke lounge, function rooms, meeting and conference facilities, nine (9) shopping arcades, two (2) pro-shops, three (3) saunas and three (3) steam facilities, five (5) food & beverage outlets and two (2) indoor table-tennis tables.
As at the date of this Announcement, KDE does not have any subsidiary or associated company.
Based on the audited financial statements for the financial year ended 30 April 2005, the net loss and NA of KDE are RM1.79 million and RM33.84 million (which includes members' initiation sum of RM31.03 million) respectively.
3. SALIENT TERMS OF THE MOU
The salient terms of the MoU are as follows :-
(a) The Proposed Rationalisation shall be subject to the approvals and consents of all appropriate authorities, corporate, creditors and any other parties which are required or advisable for or in connection with the Proposed Rationalisation, including but not limited to the approvals set out in Section 6 of this Announcement, and the fulfilment of all other condition precedents as may be determined by the parties;
(b) The cut-off date to determine the amount of debt to be transferred to NewCo for purposes of the Proposed Debt Transfer shall be mutually agreed upon by KHSB and KPS;
(c) The proposed consideration for the Proposed Asset Transfer shall be determined after taking into consideration the independent valuation to be carried out on the identified assets by an independent valuer acceptable to both KHSB and KPS, and/or such other valuation basis as may be mutually agreed by the parties;
(d) The final transfer consideration for the Proposed Asset Transfer shall be subject to the approval of the Securities Commission ("SC") and shall be satisfied by setting off the same against the debt to be transferred to Newco pursuant to the Proposed Debt Transfer, save for the amount owing by PHP to KPS ("Net Debt"). In the event the final transfer consideration as approved by the SC is higher than the Net Debt, the differential shall be an amount due and owing by Newco to KHSB which shall be waived by KHSB;
(e) In the event the final transfer consideration for the Proposed Asset Transfer as approved by the SC shall be a sum which is lower than the Net Debt or in the event the SC shall impose conditions on the Proposed Rationalisation which are not acceptable to KHSB and KPS, then the parties shall use their best endeavours to resolve the same; and
(f) The MoU shall automatically terminate upon the happening of the earlier of the following :-
(i) the mutual agreement of KHSB and KPS; or
(ii) the execution of a formal agreement(s) between the parties to formalise their respective undertakings, rights and obligations in respect of the Proposed Rationalisation on terms and in form and substance mutually agreed within thirty (30) days from the date of the MoU or such other period mutually agreed by the parties.
4. RATIONALE FOR THE PROPOSED RATIONALISATION
Today, KHSB is seen as the property arm of the KPS group of companies ("KPS Group"), principally involved in property development and, hospitality and recreation business. Property development is the largest contributor to the KHSB group of companies ("KHSB Group") revenue. Notwithstanding this, KHSB has not been profitable since its listing in 2003 and in turn, this has impacted the financial performance of the KPS Group as well as the value of KPS's investment in KHSB. With the Proposed Rationalisation, it is expected that the KHSB Group will be able to improve its efficiency and reposition itself to become a more focused property player on the back of a healthier financial standing and landbank available for development of approximately 4,747 acres. As the Proposed Rationalisation will significantly reduce the gearing level of the KHSB Group, it will give rise to interest savings which is expected to contribute positively to the future earnings of the KHSB Group. This bodes well for KPS, having considered its controlling stake in KHSB as any improvement in the financial performance of the KHSB Group will have a consequential effect on the financial performance of the KPS Group, as well as enhance the value of KPS's investment in KHSB.
The Proposed Rationalisation also addresses a long outstanding intercompany debt owing by KHSB and various of its subsidiaries to the Company. Via the Proposed Debt Capitalisation, KPS will have full ownership of assets involved in hospitality and recreation and this will complement Quality Hotel Shah Alam which is already owned by KPS. These assets will provide an additional income stream for the KPS Group as they are already income-generating. With its current financial standing, KPS is in a position to boost the performance of the hospitality and recreation business, thereby enhancing the revenue-generation capability of these assets.
5. EFFECTS OF THE PROPOSED RATIONALISATION
The effects of the Proposed Rationalisation can only be determined upon finalisation of the terms and conditions of the Proposed Rationalisation.
6. CONDITIONS TO THE PROPOSED RATIONALISATION
The Proposed Rationalisation is conditional upon the following :-
(a) the approval of the SC for the Proposed Asset Transfer;
(b) the approval of the Foreign Investment Committee for the Proposed Asset Transfer and the Proposed Debt Capitalisation;
(c) the approval of the shareholders of KPS and KHSB at an extraordinary general meeting ("EGM") to be convened; and
(d) the approval and/or consent from any other relevant authorities and/or persons, if
7. DEPARTURE FROM THE POLICIES AND GUIDELINES ON ISSUE / OFFER OF SECURITIES OF THE SC ("SC GUIDELINES")
To the best knowledge of the Board of Directors ("Board") of KPS, the Proposed Rationalisation does not depart from the SC Guidelines.
8. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS
Save as disclosed below, 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 Proposed Rationalisation :-
8.1 Directors' Interests
YBhg. Dato' Haji Abd Karim bin Munisar and YBhg. Datin Paduka Juma'ah binti Moktar are common Directors of KDEB, KPS and KHSB (collectively to be referred to as "Interested Directors"). Accordingly, the Interested Directors are deemed interested in the Proposed Rationalisation. The Interested Directors have abstained and will continue to abstain from deliberating and voting at Board meetings of KPS and voting in respect of their direct and/or indirect interest at the EGM of KPS to be convened for the Proposed Rationalisation.
The Interested Directors will ensure that all persons connected to them will abstain from voting in respect of their direct and/or indirect interest at the EGM of KPS to be convened for the Proposed Rationalisation.
8.2 Major Shareholders' Interests
As at the date of this Announcement, KDEB is the controlling shareholder of the Company, holding approximately 231,199,694 Shares, representing 53.59% of the equity interest in KPS. KDEB is also a shareholder of KHSB. As such, KDEB is deemed interested in the Proposed Rationalisation. As at the date of this Announcement, Perbadanan Kemajuan Negeri Selangor ("PKNS") is also a common major shareholder of KPS and KHSB and as such, PKNS is deemed interested in the Proposed Rationalisation.
Accordingly, PKNS and KDEB (collectively to be referred to as "Interested Major Shareholders") will abstain from voting at the EGM of KPS to be convened for the Proposed Rationalisation. The Interested Major Shareholders will also ensure that all persons connected to them will abstain from voting in respect of their direct and/or indirect interest at the EGM of KPS to be convened for the Proposed Rationalisation.
9. DIRECTORS' STATEMENT
Having considered the rationale for the Proposed Rationalisation and after due deliberation, the Board of KPS (save for the Interested Directors) is of the opinion that the Proposed Rationalisation is in the best and long-term interest of the KPS Group.
AmMerchant Bank has been appointed as Adviser to the Company for the Proposed Rationalisation. An independent adviser will be appointed for the Proposed Rationalisation once the terms have been finalised.
11. DOCUMENTS AVAILABLE FOR INSPECTION
The MoU will be made available for inspection at the registered office of KPS at 16th Floor, Plaza Perangsang, Persiaran Perbandaran, 40000 Shah Alam, Selangor Darul Ehsan during normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this Announcement.
A detailed announcement on the Proposed Rationalisation will be made upon finalisation of the terms and conditions of the Proposed Rationalisation, including the execution of the Agreements for the Proposed Rationalisation and the finalisation of the valuation on the identified assets.