News

1.             INTRODUCTION 

Knusford Berhad (Knusford) wishes to announce that Wengcon Holdings Sdn Bhd (WHSB), a wholly owned subsidiary of the Company had on 24 August 2010 entered into a Share Sale Agreement (SSA) with Dato’ Lim Kang Swee (“Purchaser”), a Director of Knusford for the purpose of  disposing the entire 300,002 ordinary shares of RM1.00 each representing the entire issued and paid-up share capital in Wengcon Machinery Sdn Bhd (“WMSB”) for the sum of Ringgit Malaysia: Four Million Seven Hundred Thirty Seven Thousand Eight Hundred And Five Only (RM4,737,805-00).

2.            DETAILS OF THE PROPOSED DISPOSAL 

The Proposed Disposal entails the disposal of WHSB’s entire equity interest in WMSB to the Purchaser for a total cash consideration of RM4,737,805-00 (“Sale Consideration”).

2.1           Salient terms of the SSA   

The salient terms of the SSA which are not confined to only the following are :- 

2.1.1               Conditions Precedent: 

The completion of the SSA is conditional upon, inter alia, the following conditions precedent being satisfied and fulfilled within a period of sixty (60) days from the date of the SSA or such extended period as WHSB and the Purchaser may mutually agree in writing (“Conditional Period”): -

(a)           the resolution of the board of directors of WHSB approving the Proposed Disposal; 

(b)           the replacement by the Purchaser by way of personal guarantee or such other security as financial institution may accept of the corporate guarantees given by WHSB/Knusford to the financial institutions and/or creditors of WMSB for the benefit of credit facilities granted to WMSB; and 

(c)        such other consents or approvals as may be required (or deemed necessary by WHSB and the Purchaser) from any third party or governmental or regulatory body or competent authority having jurisdiction over the business of WMSB or the transaction contemplated under the SSA. 

The SSA shall become unconditional on the date when all the Conditions Precedent set out above are satisfied and fulfilled. 

In the event that the Conditions Precedent set out above are not fulfilled within the Conditional Period, the rights and obligations of WHSB and the Purchaser under the SSA shall lapse and be of no further effect. The SSA shall deem mutually terminated unless WHSB and the Purchaser mutually agree to extend the completion period. 

2.1.2           Failure to Pay Sale Consideration 

In the event the Purchaser fails and/or neglects to pay the Sale Consideration, WHSB shall be entitled to forfeit the deposit already paid to WHSB under the SSA and such forfeiture right shall not preclude WHSB to the remedy of specific performance.   

2.1.3           Transfer of the Sale Shares Not Affected 

In the event the transfer of the entire 300,002 ordinary shares in favour of the Purchaser cannot be effected for any reason whatsoever not due to the fault of WHSB and the Purchaser, WHSB shall refund the deposit payable under the SSA to the Purchaser. 

2.2           Basis of arriving at the Sale Consideration 

The Sale Consideration of RM4,737,805-00 was arrived at based on a willing-buyer willing-seller basis after taking into consideration the audited net tangible assets of WMSB as at 31 December 2009 of RM5,520,205-00 and adjusted for the dividend payment of RM782,400-00  made on 20 April 2010. 

2.3          Terms of Payment for the Sale Consideration 

The terms of payment for the Sale Consideration are as follows:-

2.4         Information on WMSB  

WMSB is a private limited company incorporated in Malaysia under the Companies Act, 1965. When incorporated on 3 May 1993 it was called WCMT Industries (M) Sdn Bhd. It changed its name to Wengcon Machinery & Trading Sdn Bhd and Wengcon Sdn Bhd on 30 July 1993 and 12 April 1994 respectively.  Subsequently on 2 August 1994 assumed its present name.  The principal activities of WMSB consist of reconditioning, sales and rental of light and medium machinery.   

As at the date hereof, WMSB has an authorised share capital of RM500,000.00 comprising 500,000 ordinary shares of RM1.00 each, and paid-up share capital of RM300,002.00 divided into 300,002 ordinary shares of RM1.00 each.   

2.5           Information on the Purchaser  

Dato’ Lim Kang Swee is a Malaysian and is also a substantial shareholder and the Executive Director of Knusford. His shareholdings in Knusford as at 23 August 2010 is as follows:-

Note :  

^ Deemed interest by virtue of his shareholding in Bidarcita Sdn Bhd pursuant to Section 6A of the Companies Act, 1965. 

2.6           Utilisation of the sale proceeds from the Proposed Disposal  

The sale proceeds arising from the Proposed Disposal shall be used to fund the Knusford Group’s working capital requirements.  

2.7           Liabilities to be assumed by the Purchaser 

The Purchaser shall assume all liabilities as appeared in the audited balance sheet of WMSB as at 31 December 2009 without any adjustment to the Sale Consideration and without any further recourse of whatsoever nature to Knusford. 

2.8        Original Cost of Investment 

The original dates and costs of investment in WMSB by WHSB are as follows:-

3.      RATIONALE OF THE PROPOSED DISPOSAL 

WMSB is principally involved in reconditioning, sales and rental of light and medium machinery. The contribution by WMSB to Knusford’s overall income has declined in recent years. WMSB has incurred a loss before tax of RM1,952,614-00 and RM606,675-00 in the audited financial year ended 31 December 2008 and 2009 respectively. The Board of Directors is of the view that such declining trend will continue for the foreseeable future. 

Having taken into consideration the current economic situations the Board of Directors is of the view that it would be better for Knusford to hive off loss making operation and concentrate its effort on more profitable business activities. 

The proceeds from the disposal could then be used to expand Knusford Group’s construction activities, which have shown significant contribution during the last 18 months.  

4.             EFFECTS OF THE PROPOSED DISPOSAL 

4.1           Issued and paid-up share capital 

The Proposed Disposal will not have any effect on the issued and paid-up share capital of Knusford. 

4.2           Substantial shareholder’s shareholding in Knusford 

The Proposed Disposal will not have any effect on the substantial shareholders’ shareholdings in Knusford. 

4.3           Net Assets and Gearing 

The Proposed Disposal is not expected to have a material effect on the consolidated net assets and gearing of Knusford for the financial year ending 31 December 2010.  

4.4          Earnings and Earnings Per Share  

Upon completion of the Proposed Disposal, Knusford is expected to realize a net gain on disposal of approximately RM674,648-00 (“Net Disposal Gain”). The Net Disposal Gain will increase the consolidated earnings of Knusford, which will translate into an improvement in the earnings per share of approximately 0.68 sen based on the latest available audited consolidated financial statements as at 31 December 2009.  

5.              APPROVALS REQUIRED 

The Proposed Disposal does not require the approval of shareholders’ and the relevant government authorities. 

6.             ESTIMATED TIMEFRAME FOR COMPLETION 

 Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed by the fourth quarter of 2010. 

7.            COMPLIANCE WITH THE GUIDELINES ON THE OFFERING OF EQUITY AND EQUITY-LINKED SECURITIES (“SC GUIDELINES”) 

To the best knowledge of the Company, the Proposed Disposal has not departed from the SC Guidelines.  

8.             DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS 

Saved as disclosed below, none of the substantial shareholder and/or directors of KB and/or persons connected to them have any interests in the Proposed Disposal ; 

Dato’ Lim Kang Swee is the interested party and Dato’ Lim Kang Hoo is the brother of Dato’ Lim Kang Swee.  

Accordingly, they have abstained and will continue to abstain from deliberating on any resolution pertaining to the Proposed Disposal  and voting on the Proposed Disposal at all Board Meetings of Knusford.  

9.             PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL 

The highest percentage ratio applicable to the Proposed Disposal pursuant to paragraph 10.02(g) of the Listing Requirements is 3.60%. 

10.          DIRECTORS’ RECOMMENDATION 

The Board, save for the Interested Director, having considered all aspects of the Proposed Disposal, is of the opinion that the Proposed Disposal is fair and reasonable and is in the best interest of Knusford. None of the Directors of Knusford have recorded their disagreement with the Proposed Disposal.  

11.           DOCUMENTS FOR INSPECTION 

The SSA and the Audited Financial Statements for the financial year ended 31 December 2009 of WMSB will be made available for inspection at the registered office of Knusford at 33-35, Ground Floor, Wisma Ekovest, Jalan Desa Gombak 6, Taman Sri Setapak, Off Jalan Gombak, 53000 Kuala Lumpur, from 8.30 a.m. to 5.30 p.m. from Mondays to Fridays (except public holidays).

 This announcement is dated 24 August 2010.