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Tanjong PLC (TNJ)

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Wednesday 13 February, 2008

Tanjong PLC

Acquisition

Tanjong PLC
13 February 2008

TANJONG PUBLIC LIMITED COMPANY ('TANJONG' OR THE 'COMPANY')



PROPOSED ACQUISITION BY TANJONG ENTERTAINMENT SDN BHD 
('TESB' OR THE 'PURCHASER'), A WHOLLY-OWNED SUBSIDIARY OF TANJONG, OF:



(I)  1,250,000 ORDINARY SHARES OF RM1.00 EACH IN TGV CINEMAS SDN BHD 
     (' TGV') ('TGV SHARES') FROM GOLDEN HARVEST CINEMAS HOLDING LIMITED 
     ('GHC'); AND



(II) 1,250,000 TGV SHARES FROM GLOBAL ENTERTAINMENT AND MANAGEMENT SYSTEMS 
     SDN BHD ('GEMS').


('PROPOSED ACQUISITION')


1.      INTRODUCTION

The Board of Directors ('Board') of Tanjong wishes to announce that TESB, a
wholly-owned subsidiary of Tanjong, has today entered into a Sale and Purchase
Agreement to acquire the remaining 50% equity interest in TGV which is not owned
by TESB for a total consideration of RM40,164,998 ('Purchase Consideration').

Further information on the Proposed Acquisition is set out below.


2.      DETAILS OF THE PROPOSED ACQUISITION

On 13 February 2008, TESB entered into a Sale and Purchase Agreement with GHC
and GEMS (the 'Sellers') ('Agreement') for the proposed acquisition of 2,500,000
TGV Shares that are currently held by the Sellers ('Sale Shares'), of which
1,250,000 Sale Shares are held by each of the Sellers, subject to the terms and
conditions of the Agreement.

2.1     Salient Terms of the Agreement

The salient terms of the Agreement are as follows:

(a)     Sale Shares

The Sale Shares will be acquired free from encumbrances but with all rights
attached thereto with effect from the Completion Date (as defined below).

(b)     Consideration

The proportion of the Purchase Consideration payable by TESB to the respective
Seller in accordance with the terms of the Agreement is set out below.


Purchase Consideration                                                    Amount
That portion of the Purchase Consideration payable to GHC           RM20,082,499
That portion of the Purchase Consideration payable to GEMS          RM20,082,499
Total                                                               RM40,164,998


(c)     Conditions Precedent

Completion of the Proposed Acquisition is conditional upon the following
approvals being obtained on or before 6 months from the date of the Agreement,
from :

(i)     the ultimate holding company of each of the Sellers and TESB
respectively, if so required;

(ii)    the Foreign Investment Committee of Malaysia ('FIC'); and

(iii)   any other relevant regulatory or licensing authority, if required.

(d)     Completion and Payment

Completion of the sale and purchase of the Sale Shares as contemplated by the
Agreement ('Completion') shall take place not later than 7 days from the
fulfilment of all the conditions stipulated in Section 2.1(c) above ('Completion
Date').

TESB shall on the Completion Date:

(i)     pay the Purchase Consideration to the Sellers; and

(ii)    procure the repayment of the loans outstanding from TGV to the
Sellers ('Sellers' Loan').

(e)     Use of Name

Following the Completion, TGV shall be entitled to continue to use the name 'TGV
Cinemas Sdn Bhd' as the name of TGV and shall not be required as a consequence
of the Completion, to effect a change of its name.

(f)     Non-competition

Each of the Sellers undertakes to TESB not to, either alone or in conjunction
with or on behalf of any other person, do any of the following:

(i)     neither now nor within 5 years after the Completion Date, establish,
be engaged or be directly or indirectly interested in carrying on the business
or exhibition of films in Malaysia which competes with the business of TGV as it
is carried on at the Completion;

(ii)    disclose to any other person or use of any corporate, marketing and
technical information relating to TGV which is not in the public domain; nor

(iii)   assist any other person to do any of the foregoing things.



3.      FUNDING AND FINANCIAL CONSIDERATION

3.1     Funding Requirements

The Purchase Consideration and the repayment of the outstanding loans owed by
TGV to GHC and GEMS will be funded entirely by internally generated funds.

3.2     Basis for arriving at the Purchase Consideration

The Purchase Consideration is arrived at on a willing-buyer willing-seller basis
after taking into consideration the following:

(a)     the terms and conditions of the Agreement; and

(b)     the maximisation of the value of investment from the improved future
earnings and cashflows of TGV.


3.3     Liabilities to be assumed by TESB from the Proposed Acquisition

TESB will not assume any liability arising from the Proposed Acquisition.
However, TESB will be required, as part of the terms and conditions of the SPA,
to arrange for the repayment of the Sellers' Loans.  The breakdown of the
Sellers' Loans which will be repaid is set out below:


Sellers' Loans                                                            Amount
That portion of the Sellers' Loans repayable to GHC                  RM5,417,501
That portion of the Sellers' Loans repayable to GEMS                 RM5,417,501
Total                                                               RM10,835,002


Pursuant to the Agreement, the Sellers also agree not to demand repayment of the
Sellers' Loans prior to the Completion Date.


4.      RATIONALE AND PROSPECTS

Upon completion of the Proposed Acquisition, TGV will become a wholly-owned
subsidiary of TESB and Tanjong.  As the controlling shareholder of TGV, the
Tanjong Group will have full management control and hence will be able to
execute its business plans and strategies more effectively. The Proposed
Acquisition will also enable the Group to pursue expansion opportunities both
within Malaysia and regionally to improve its returns in the cinema business.



5.      BACKGROUND INFORMATION ON THE SELLERS AND TGV

5.1     GHC
            
GHC, a wholly-owned subsidiary of Golden Harvest Entertainment
(Holdings) Limited, was incorporated in British Virgin Islands on 25 May 1993.
It is an investment holding company.

The present authorised share capital of GHC is US$50,000 comprising 50,000
ordinary shares of US$1.00 each in GHC ('GHC Shares'), of which 1 GHC Share has
been issued and fully paid-up.

5.2     GEMS

           
GEMS, a wholly-owned subsidiary of Golden Harvest Entertainment
(Holdings) Limited, was incorporated in Malaysia on 2 November 1995 under the
Companies Act, 1965 ('Act') as a private company limited by shares. It is
primarily an investment holding company.

The present authorised share capital of GEMS is RM500,000 comprising 500,000
ordinary shares of RM1.00 each in GEMS ('GEMS Shares'), of which 300,000 GEMS
Shares have been issued and fully paid-up.

5.3     TGV

TGV was incorporated in Malaysia on 28 June 1994 under the Act as a private
company limited by shares under the name Tanjong Golden Village Sdn Bhd.  It
assumed its current name on 1 December 2004.

On 8 February 2002, TESB entered into a Joint Venture & Shareholders' Agreement
with GEMS, GHC and TGV ('JVSA'), resulting in TESB holding a 50% equity interest
in TGV, and GHC and GEMS each holding a 25% direct equity interest in TGV
respectively.

As at the date of this announcement, TGV's principal activity is in the film
exhibition business whereby it owns and operates eleven multiplexes located in
the Federal Territory of Kuala Lumpur and states of Selangor, Perak, Negeri
Sembilan and Johor in Malaysia.

The present authorised share capital of TGV is RM10,000,000 comprising
10,000,000 TGV Shares, of which 5,000,000 TGV Shares have been issued and fully
paid-up.  Upon completion of the Proposed Acquisition, TGV will become a
wholly-owned subsidiary of TESB and Tanjong.

For the financial year ended 31 December 2006, the profit after taxation of TGV
was RM5.56 million.  The Net Assets ('NA') of TGV as at 31 December 2006 were
RM23.90 million.



6.      EFFECTS OF THE PROPOSED ACQUISITION

6.1     Share Capital and Substantial Shareholders' Shareholding

The Proposed Acquisition will not have any effect on the share capital of
Tanjong and its substantial shareholders' shareholding in the Company, as the
Purchase Consideration will be satisfied entirely in cash.

6.2     Earnings

The Proposed Acquisition will not have any material effect on the consolidated
earnings and consolidated earnings per share of Tanjong for the financial year
ended 31 January 2008.

6.3     NA, NA per share and gearing

The Proposed Acquisition is not expected to have any material effect on the NA,
NA per share and gearing of Tanjong.


7.      INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS OF TANJONG AND PERSONS 
        CONNECTED TO THEM

None of the Directors has any interest, direct or indirect, in the Proposed
Acquisition. To the best of the knowledge of the Directors, none of the major
shareholders or persons connected to the Directors or major shareholders has any
interest, direct or indirect, in the Proposed Acquisition.


8.      DEPARTURE FROM THE POLICIES AND GUIDELINES ON ISSUE/OFFER OF
        SECURITIES ISSUED BY THE SECURITIES COMMISSION ('SC GUIDELINES')

The Board of Tanjong, to the best of its knowledge and belief, is of the opinion
that the Proposed Acquisition does not result in any departure from the SC
Guidelines.


9.      STATEMENT BY THE BOARD OF TANJONG

The Board of Tanjong, having carefully considered all aspects of the Proposed
Acquisition, is of the opinion that the Proposed Acquisition is in the best and
long term interests of Tanjong and its shareholders.



10.     ADVISER

CIMB Investment Bank Berhad has been appointed by Tanjong as the Adviser for the
Proposed Acquisition in respect of advising on the Malaysian regulatory
requirements in relation thereto.



11.     ESTIMATED TIME FRAME FOR COMPLETION

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be
completed by mid 2008.



12.     RISKS

The risks in relation to the Proposed Acquisition include (but are not limited
to) the following:

(i)     Economic, Political and Regulatory Risks

As with all investments undertaken in any country, the economic, political and
regulatory environments are inherent risk factors.  Upon completion of the
Proposed Acquisition, Tanjong Group will have a larger exposure to the film
exhibition industry in Malaysia, hence its business, prospects, financial
conditions and level of profitability will be more affected by the development
of the local economic, political and regulatory environment.  Any adverse
development in the political and economic conditions or changes in the
regulatory environment in Malaysia such as higher entertainment tax and local
council restrictions on cinema operation could adversely affect the financial
performance of TGV and hence that of Tanjong.

Tanjong does not believe that the risks that TGV faces are any different than
other companies operating in the same industry in Malaysia.

(ii)    Inherent Business Risks

As with the operations of similar film exhibition operators within Malaysia, TGV
will be subject to inherent business risks, inter alia, the risk of competitive
threats, hardware technology obsolescence, possible funding limitations, changes
in the regulatory regime and market adoption.

There is no assurance that the performance of TGV will not be adversely affected
with increased competition or other factors mentioned above.

(iii)   Compliance with Regulations

TGV may be subject to film exhibition regulations and legislation governing film
exhibition activities such as censorship. It is possible that any change to the
regulations pertaining to film exhibition may result in a need to modify its
facilities, incur further expenses to meet the new requirements, or further
limit the types or quantity of films that it may exhibit. In such event, no
assurance can be given that the steps taken by TGV to comply with such new
regulations will not have a material effect on its operating results.



13.     DOCUMENTS FOR INSPECTION

A copy of the Agreement is available for inspection during normal business hours
in Tanjong's principal office located at Level 30, Menara Maxis, Kuala Lumpur
City Centre, 50088 Kuala Lumpur, Malaysia, from Mondays to Fridays (except
public holidays) for a period of 3 months from the date of this announcement.



This announcement is dated 13 February 2008.


                      This information is provided by RNS
            The company news service from the London Stock Exchange                             

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