FEDERAL INTERNATIONAL (2000) LTD

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FEDERAL INTERNATIONAL (2000) LTD

FEDERAL INTERNATIONAL (2000) LTD(Company Registration Number: 199907113K)(Incorporated in Singapore)(the “Company”)PROPOSED TRANSACTION BY THE COMPANY1. IntroductionThe Board of Directors (“Board”) of the Company (and together with its subsidiaries, the “Group”)wishes to announce that the Company had on 20 December 2011 entered into a conditional saleand purchase agreement (the "Agreement") with Greenbridge Engineering Pte. Ltd. (the“Purchaser”) pursuant to which the Company shall:(i)(ii)sell to the Purchaser all its 2,460,000 shares (“Sale Shares”) in Banyan Utilities Pte. Ltd.(“Banyan Utilities”); andassign absolutely to the Purchaser all of its rights, title and interests in, under and to theamount of the shareholder’s loan to Banyan Utilities (“Shareholder’s Loan”) outstandingas at completion,(the “Proposed Transaction”).Further details of the Proposed Transaction are set out in paragraph 3 of this Announcement.2. Information on Banyan UtilitiesBanyan Utilities is a company incorporated in Singapore on 30 April 2007 with an issued and paidup capital of S$3,260,000 comprising 3,260,000 ordinary shares of which 2,460,000 sharesrepresenting approximately 75% of the issued shares are held by the Company with the balance800,000 shares representing approximately 25% of the issued shares held by Utility DevelopmentCorporation Pte. Ltd. (“UDC”).Banyan Utilities operates a steam co-generation plant located on Jurong Island.Upon completion of the Proposed Transaction (“Completion”), the Company will cease to haveany interest in Banyan Utilities and Banyan Utilities shall cease to be a subsidiary of the Company.3. The Proposed Transaction3.1 Details of the PurchaserThe Purchaser is a company incorporated in Singapore. As at the date of this Announcement, MrR Kalaichelvan (“RK”) is the sole shareholder and director of the Purchaser. RK is also a directorof and is deemed interested in shares in UDC and further is a director of Banyan Utilities.1


3.2 Rationale of the Proposed TransactionBanyan Utilities was established as a joint venture between the Company and UDC to constructand operate a steam co-generation plant in Jurong Island. However, Banyan Utilities has beenoperating under challenging conditions since Natural Fuel Limited ( the parent company of NaturalFuel Pte Ltd, Banyan Utilities’ only major customer) was placed into administration and NaturalFuel Pte Ltd was compulsorily wound up by court order in October 2009. Given that Natural FuelPte Ltd was Banyan Utilities’ only major customer and taking into account the position of NaturalFuel Pte Ltd’s parent Natural Fuel Limited and consequently the business and financial position ofBanyan Utilities, the Board is of the view that the Proposed Transaction is in the best interests ofthe Group.3.3 Principal Terms of the Proposed TransactionThe principal terms of the Proposed Transaction are as follows :-(a)Sale and Purchase: Under the terms of the Agreement, the Company shall sell and thePurchaser shall purchase :-(i)(ii)the Sale Shares free and clear of all encumbrances, and with all rights andbenefits attaching thereto as at the date of Completion (“Completion Date”) andthereafter; andall of its rights, title and interests in, under and to the amount of the Shareholder’sLoan outstanding as at the Completion Date and any rights, benefits, remediesand powers arising therefrom (including any rights against third parties).As at the date of the Agreement, the outstanding amount of the Shareholder’s Loan isapproximately S$12,559,123.96. However, under the terms of the Agreement, the amount ofthe Shareholder’s Loan may be adjusted by the Company at its sole discretion prior toCompletion provided always that the amount of the Shareholder’s Loan shall not onCompletion be less than S$7,000,000.00.(b)Purchase Consideration: The aggregate purchase consideration payable by thePurchaser to the Company for the Proposed Transaction is S$2,634,277.36 (“PurchaseConsideration”) comprising :-(i)(ii)S$7.00 in aggregate for all the Sale Shares; andS$2,634,270.36 for the Shareholder’s Loan.The Purchase Consideration shall be paid by the Purchaser as to S$70,000.00 (the“Downpayment”) on signing of the Agreement (which the Company has received) andthe balance on Completion. The Company is not be under any obligation to return orrefund the Downpayment including in the event that Completion does not for any reasontake place save where Completion shall not take place as a direct result of a breach of theterms of the Agreement by the Company.2


The Purchase Consideration was arrived at on a willing-buyer willing-seller basis takinginto account the financial position and business prospects of Banyan Utilities.(c)Conditions precedent: The obligations of the Company are conditional, inter alia, on thefollowing:(i)(ii)(iii)(iv)UDC waiving all pre-emption rights, rights of first refusal, tag-along rights or otherrights (whether under the shareholders’ agreement dated 16 May 2007 orotherwise) in respect of the sale of the Sale Shares and assignment of theShareholder’s Loan to the Purchaser;the Purchaser redeeming or purchasing from United Overseas Bank Limited(“UOB”) the existing loan facility granted by UOB in favour of Banyan Utilities(“UOB Loan”);the Purchaser depositing with UOB the amount of US$375,634.00 which amountshall secure the bank guarantee of US$375,634.00 issued by UOB on behalf ofBanyan Utilities (“UOB Bank Guarantee”); andthe full, final and complete unconditional and irrevocable release and discharge ofthe corporate guarantee given by the Company in favour of UOB as part of thesecurity for the UOB Loan and the UOB Bank Guarantee to or for the benefit ofBanyan Utilities.4. Value of the Assets and use of Sale Proceeds4.1 Value of AssetsBased on the unaudited accounts of the Company as at 30 September 2011, the book value andnet tangible liability value of the Sale Shares was nil and S$7,887,743.00 respectively. The openmarket value of the Sale Shares is not available. As at the date of the Agreement, the outstandingamount of the Shareholder’s Loan is approximately S$12,559,123.96; out of which S$10,555,296has been fully provided for as doubtful debts in the unaudited accounts of the Company as at 30September 2011.Based on the above and after taking into consideration the purchase consideration of S$7.00 for theSale Shares and of S$2,634,270.36 for the Shareholder’s Loan, the Company will record a gain ofS$630,449.00 over the book value of the Sale Shares and Shareholder’s Loan.The Group will record a gain of S$11,275,227.00, after deducting estimated expenses uponcompletion of the Proposed Transaction. This gain is obtained by taking the purchase considerationof S$7.00 over the net tangible liability of Banyan Utilities, as well as taking into the account the noncontrollinginterests’ share of Banyan Utilities’s loss for the 9 months ended 30 September 2011.4.2 Use of Sale ProceedsThe proceeds from the Proposed Transaction will be utilised for the Group’s working capitalpurposes.3


5. Chapter 10 of the Listing ManualThe relative figures for the Proposed Transaction computed on the bases set out in Rule 1006 ofthe Listing Manual are as follows :-Bases under Rule 1006 of the Listing Manual for theProposed TransactionRelative FiguresRule1006(a)Rule1006(b)Rule1006(c)Rule1006(d)Net asset value of the assets to be disposed ofcompared with the Group’s net asset valueNet profits attributable to the assets being disposedof compared with the Group’s net profitsAggregate value of the consideration given comparedwith the Group’s market capitalisation based on thetotal number of issued shares excluding treasuryshares of the Company (as at the market daypreceding the date of the Agreement)Number of equity securities issued by the Companyas consideration for the acquisition, compared withthe number of equity securities previously in issue5%Not meaningful (2)8%Not applicableNotes:(1) The above relative figures are calculated based on the latest announced unaudited consolidated financialstatements of the Group for the nine months ended 30 September 2011.(2) The relative figure calculated under Rule 1006(b) is not meaningful as Banyan Utilities recorded a net lossbefore income tax, minority interests and extraordinary items of S$1,386,952.00 for the period commencing from1 January 2011 to 30 September 2011 as compared to the Group’s net profit before income tax, minorityinterests and extraordinary items of S$3,247,660.00 for the same period.As the relative figures under Rules 1006(a) and (c) exceed 5% but not 20%, the ProposedTransaction constitutes a discloseable transaction within the meaning of Rule 1010 of the ListingManual.6. Financial Effects of the Proposed TransactionThe proforma financial effects of the Proposed Transaction :-(i)(ii)on the net tangible assets (“NTA”) per share of the Group for the most recently completedfinancial year (being the financial year ended 31 December 2010 (“FY2010”)), assumingthe Proposed Transaction had been completed on 31 December 2010; andon the earnings per share (“EPS”) of the Group for the most recently completed financialyear (being FY2010), assuming the Proposed Transaction had been effected on 1January 2010,are set out below.4


NTA per ShareThe effect of the Proposed Transaction on the NTA per share of the Group for FY2010 is asfollows:FY2010S$’000 Before Proposed Transaction After Proposed TransactionNTA 94,047 107,526NTA per Share (cents) (1) 10.27 11.43EPSThe effect of the Proposed Transaction on the EPS of the Group for FY2010 is as follows:FY2010S$’000 Before Proposed Transaction After Proposed TransactionNet loss after tax (54,511) (43,867)EPS (cents) (2) (9.30) (7.49)Notes :-(1) Based on the number of ordinary shares of 916,043,490 in issue as at 31 December 2010.(2) Based on the weighted average number of ordinary shares of 585,973,675 in issue during FY2010.The purpose of the proforma financial effects is to illustrate what the historical financial informationof the Group might have been had the Proposed Transaction been completed at an earlier date.Given that the proforma financial effects set out above are theoretical in nature and only forillustrative purposes, they do not represent the actual financial position and/or results of theoperations of the Group after the completion of the Proposed Transaction and are not indicative ofthe future financial position and earnings of the Group.7. Interests of Directors and Controlling ShareholdersNone of the Company’s Directors or controlling shareholders has any direct or indirect interest inthe Agreement, other than through their respective shareholdings in the Company.5


8. Directors’ Service ContractsNo person is proposed to be appointed as a director of the Company in connection with theProposed Transaction or any other transactions contemplated in relation to the ProposedTransaction.9. Documents available for inspectionA copy of the Agreement will be available for inspection during normal business hours at theregistered office of the Company at 47/49 Genting Road Singapore 349489 from the date of thisAnnouncement up to and including the date falling three (3) months after the date of thisAnnouncement.BY ORDER OF THE BOARDFederal International (2000) LtdKoh Kian KiongExecutive Director21 December 20116

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