| General Announcement |
| Reference No MM-070518-57303 |
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Announcement |
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KPJ HEALTHCARE BERHAD ("KPJ" OR "COMPANY")
PROPOSED DISPOSALS OF KPJ'S ENTIRE INTEREST IN PERDANA SPECIALIST HOSPITAL BUILDING, KUANTAN SPECIALIST HOSPITAL BUILDING, SENTOSA MEDICAL CENTRE BUILDING, KPJ KAJANG SPECIALIST HOSPITAL BUILDING AND KEDAH MEDICAL CENTRE BUILDING (COLLECTIVELY KNOWN AS THE "PROPERTIES") TO AL-‘AQAR KPJ REAL ESTATE INVESTMENT TRUST ("AL-‘AQAR KPJ REIT") FOR A TOTAL SALE CONSIDERATION OF RM170,040,000 TO BE SATISFIED PARTLY BY CASH CONSIDERATION OF RM85,755,050 AND PARTLY BY ISSUANCE OF 88,721,000 NEW UNITS IN AL-‘AQAR KPJ REIT AT AN ISSUE PRICE OF RM0.95 PER UNIT TO BE CREDITED AS FULLY PAID-UP ("PROPOSED DISPOSALS") |
Contents :
1. INTRODUCTION
On behalf of the Board of Directors of KPJ, AmInvestment Bank Berhad (formerly known as AmMerchant Bank Berhad), a member of AmInvestment Bank Group ("AmInvestment Bank") wishes to announce that the Company is proposing to dispose of its entire interest in the following Properties to Al-‘Aqar KPJ REIT:
? Hospital and car park space located on leasehold land held under title no. HSD 917, Lot No. PT 616, Section 14, Town of Kota Bharu, District of Kota Bharu, Kelantan which is owned by Pusat Pakar Darul Naim Sdn Bhd ("PPDNSB") (a 60%-owned subsidiary of KPJ) ("Perdana Specialist Hospital Building");
? Hospital and car park space located on freehold land held under title nos. GM 3441, GM 3442, GM 3466, GM 2827, GM 2823, GM 3443, GM 1575, GM 6875, Lot Nos. 5885, 5886, 5888, 5889, 5890, 5891, 10747 and 10748 respectively, Mukim of Kuala Kuantan, District of Kuantan, Pahang which is owned by Kuantan Specialist Hospital Sdn Bhd ("KSHSB") (a 78%-owned subsidiary of KPJ) ("Kuantan Specialist Hospital Buidling");
? Hospital and car park space located on freehold land held under title no. GRN 43923, Lot No. 671, Town of Kuala Lumpur, District of Kuala Lumpur, Federal Territory of Kuala Lumpur which is owned by Sentosa Medical Centre Sdn Bhd ("SMCSB") (a wholly-owned subsidiary of KPJ) ("Sentosa Medical Centre Building");
? Hospital and car park space located on freehold land held under title no. HSM 22394, Lot No. PT 53903, Mukim of Kajang, District of Hulu Langat, Selangor which is owned by Hospital Sentosa Sdn Bhd ("HSSB") (a wholly-owned subsidiary of SMCSB) ("KPJ Kajang Specialist Hospital Building") (KPJ Kajang Specialist Hospital is formerly known as Hospital Sentosa); and
? Hospital and car park space located on freehold land held under title no. HSM 10923, Lot No. PT 1280, Bandar Alor Setar, Tempat Pumpong ("Lot No. PT 1280") and title nos. HSM 1/1997, GM 1436 and GM 1437, Lot Nos. PT 1350, 336 and 337 respectively, Mukim of Alor Merah, Tempat Tok Keramat and Pumpong("Lot Nos. PT 1350, 336 and 337"), all in the District of Kota Setar in the State of Kedahwhich is owned by Kedah Medical Centre Sdn Bhd ("KMCSB") (a 46% associated company of KPJ) ("Kedah Medical Centre Building")
(collectively referred to as the "Proposed Disposals").
The total sale consideration of RM170,040,000 to be satisfied partly by cash consideration of RM85,755,050 and partly by the issuance of 88,721,000 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit to be credited as fully paid-up.
The registered proprietors of the Properties are set out in Table 1 as attached.
PPDNSB, KSHSB, SMCSB, HSSB and KMCSB are collectively known as the "Vendors".
2. DETAILS OF THE PROPOSED DISPOSALS
The Vendors proposes to dispose of the entire interest in the Properties to Al-‘Aqar KPJ REIT for a total sale consideration of RM170,040,000 ("Total Sale Consideration") to be satisfied as follows:
(i) issuance of 88,721,000 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit ("Consideration Units"), to be credited as fully paid-up; and
(ii) cash consideration of RM85,755,050 to be funded by a new financing to be raised by Al-‘Aqar KPJ REIT.
The Properties are to be disposed of free from encumbrances but subject to the restrictions in interest and conditions whether express or implied in the issue documents of title to the Properties upon the terms and subject to the terms and conditions stipulated in the conditional sale and purchase agreements ("SPAs"). Save for KMCSB, all the other Vendors had on 17 May 2007 entered into the SPAs with Amanah Raya Berhad ("ARB" or "Trustee"), who is acting as purchaser for and on behalf of Al-‘Aqar KPJ REIT. The salient terms of the SPAs are set out in Section 3 of this Announcement.
The Trustee had on 17 May 2007 issued a letter of offer to KMCSB for the proposed acquisition of Kedah Medical Centre Building, the terms of which shall be formalised upon execution of the SPA between the Trustee and KMCSB. The SPAs for the five (5) Properties are not inter-conditional.
Upon completion of the Proposed Disposals, KPJ and its subsidiaries ("Group") will hold an effective interest of 58.95% comprising 252,749,300 units in Al-‘Aqar KPJ REIT.
2.1. Information on the Properties
2.1.1 Perdana Specialist Hospital Building
Perdana Specialist Hospital Building erected on a piece of leasehold land held under title no. HSD 917, Lot No. PT 616, Section 14, Town of Kota Bharu, District of Kota Bahru, Kelantan, having a provisional land area of approximately 8,283 sq. m.
Perdana Specialist Hospital Building consists of five (5)-storey purpose built private specialist hospital with a sub-basement bearing postal address of No. PT 37 and PT 600, Jalan Bayam, Section 14, 15200 Kota Bharu, Kelantan. The registered owner is PPDNSB.
Other pertinent information of Perdana Specialist Hospital Building is set out in Table 2 as attached.
PPDNSB proposes to dispose of the Perdana Specialist Hospital Building to Al-‘Aqar KPJ REIT for a total consideration of RM40,700,000 to be satisfied by the following:
(i) Issuance of 21,789,474 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit to PPDNSB; and
(ii) Cash consideration of RM20,000,000 to be raised from new financing by Al-Aqar KPJ REIT.
As at 31 March 2007, Perdana Specialist Hospital Building is subject to the following encumbrances and also subject to the restrictions in interest and conditions, whether express or implied, in the issue documents of title to Perdana Specialist Hospital Building upon the terms and subject to the terms and conditions stipulated in the SPA.
The details of the chargee and encumbrances are set out in Table 3as attached.
2.1.2 Kuantan Specialist Hospital Building
Kuantan Specialist Hospital Building is erected on a piece of freehold land held under title nos. GM 3441, GM 3442, GM 3466, GM 2827, GM 2823, GM 3443 GM 1575, GM 6875, Lot Nos. 5885, 5886, 5888, 5889, 5890, 5891, 10747 and 10748 respectively, Mukim of Kuala Kuantan, District of Kuantan in Pahang, having a provisional land area of approximately 6,697 sq. m.
Kuantan Specialist Hospital Building consists of a purpose-built private specialist hospital (comprising three (3)-storey Block A and five (5)-storey annexe Block B) and an open car park bearing postal address of No. 51, Jalan Alor Akar, Taman Kuantan, 25250 Kuantan, Pahang. The registered owner is KSHSB.
Other pertinent information of Kuantan Specialist Hospital Building is set out in Table 4 as attached. KSHSB proposes to dispose of the Kuantan Specialist Hospital Building to Al-‘Aqar KPJ REIT for a total consideration of RM19,250,000 to be satisfied by the following:-
(i) Issuance of 17,205,211 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit to KSHSB; and
(ii) Cash consideration of RM2,905,050 to be raised from new financing by Al-Aqar KPJ REIT.
As at 31 March 2007, Kuantan Specialist Hospital Building is subject to the following encumbrances and also subject to the restrictions in interest and conditions, whether express or implied, in the issue documents of title to Kuantan Specialist Hospital Building upon the terms and subject to the terms and conditions stipulated in the SPA.
The existing charges created by KSHSB over its land titles as security for the banking facilities granted by the relevant banks to KSHSB are set out in Table 5 as attached.
Save as disclosed in Table 5, there are other existing charges over freehold land held under title nos. GM 2823, Lot No. 5890, GM 2827, Lot No. 5889, GM 3441, Lot No. 5885, GM3443, Lot No. 5891, GM 1575, Lot No. 10747 and GM6875, Lot No. 10748 in relation to the various banking facilities granted by various banks for which KSHSB confirmed to have been fully settled but are still pending discharge at the relevant land office.
2.1.3 Sentosa Medical Centre Building
Sentosa Medical Centre Building erected on a piece of freehold land held under title no. GRN 43923, Lot No. 671, Town of Kuala Lumpur, District of Kuala Lumpur, Federal Territory of Kuala Lumpur having a provisional land area of approximately 2,198 sq. m.
Sentosa Medical Centre Building consists of a seven (7)-storey purpose built private specialist hospital with a lower ground floor bearing postal address of No. 36, Jalan Chemur, Damai Complex, 50400 Kuala Lumpur. The registered owner is SMCSB.
Other pertinent information of Sentosa Medical Centre Building is as set out in Table 6as attached.
SMCSB proposes to dispose of the Sentosa Medical Centre Building to Al-‘Aqar KPJ REIT for a total consideration of RM24,180,000 to be satisfied by the issuance of 25,452,632 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit to SMCSB.
As at 31 March 2007, Sentosa Medical Centre Building is free from any encumbrances but subject to the restrictions in interest and conditions, whether express or implied, in the issue documents of title to Sentosa Medical Centre Building upon the terms and subject to the terms and conditions stipulated in the SPA.
2.1.4 KPJ Kajang Specialist Hospital Building
KPJ Kajang Specialist Hospital Building erected on a piece of freehold land held under title no. HSM 22394, Lot No. PT 53903, Mukim of Kajang, District of Hulu Langat, Selangor having a provisional land area of approximately 6,404 sq. m.
KPJ Kajang Specialist Hospital Building consists of a seven (7)-storey purpose built private specialist hospital with a lower ground floor bearing postal address of Jalan Cheras, 43000 Kajang, Selangor. The registered owner is HSSB.
Other pertinent information of KPJ Kajang Specialist Hospital Building is as set out in Table 7 as attached.
HSSB proposes to dispose of the KPJ Kajang Specialist Hospital Building to Al-‘Aqar KPJ REIT for a total consideration of RM39,060,000 to be satisfied by the following:
(i) Issuance of 24,273,684 new units in Al-‘Aqar KPJ REIT at an issue price of RM0.95 per unit to HSSB; and
(ii) Cash consideration of RM16,000,000 to be raised from new financing by Al-Aqar KPJ REIT.
As at 31 March 2007, KPJ Kajang Specialist Hospital Building is subject to the following encumbrances and also subject to the restrictions in interest and conditions, whether express or implied, in the issue documents of title to KPJ Kajang Specialist Hospital Building upon the terms and subject to the terms and conditions stipulated in the SPA:
The details of the chargee and encumbrances are set out in Table 8as attached.
2.1.5 Kedah Medical Centre Building
Kedah Medical Centre Building is erected on a piece of freehold land held under title no. HSM 10923, Lot No. PT 1280, Bandar Alor Setar, Tempat Pumpong and title nos. HSM 1/1997, GM 1436 and GM 1437, Lot Nos. PT 1350, 336 and 337 respectively, Mukim of Alor Merah, Tempat Tok Keramat and Pumpong, all in the District of Kota Setar in the State of Kedah, having a total provisional land area of approximately 7,729 sq. m.
Kedah Medical Centre Building consists of a ten (10)-storey private specialist hospital (inclusive of two (2) shell floors) with three (3)-storey annexe block bearing postal address of Lebuhraya Darulaman, Pumpong, 05250 Alor Setar, Kedah Darul Aman. The registered owner of Kedah Medical Centre Building is KMCSB, save for Lot Nos. PT 1350, 336 and 337 which have been compulsorily acquired by State Government of Kedah for PKNK, a major shareholder of KMCSB, pursuant to Section 22 of the Land Acquisition Act 1960 and vide Gazette Notification No. 36/16.01.2003 and are in the process of being transferred to PKNK and ultimately to KMCSB .
Other pertinent information of Kedah Medical Centre Building is as set out in Table 9as attached. KMCSB proposes to dispose of the Kedah Medical Centre Building to Al-‘Aqar KPJ REIT for a total cash consideration of RM46,850,000 to be raised from new financing by Al-Aqar KPJ REIT. As at 31 March 2007, Kedah Medical Centre Building is subject to the following encumbrances and also subject to the restrictions in interest and conditions, whether express or implied, in the issue documents of title to Kedah Medical Centre Building upon the terms and subject to the terms and conditions stipulated in the SPA.
The details of the chargee and encumbrances are set out in Table 10as attached.
There is no rental revenue recorded by all the abovementioned hospital buildings as the said hospital buildings are fully occupied and utilised by the Vendors.
In summary, the total sale consideration for the hospital buildings and the settlements are as set out in Table 11 as attached.
3. SALIENT TERMS OF THE SPAs
The Proposed Disposals are subject to, inter alia, the following main conditions:
(a) the Properties are free from encumbrances and to be sold subject to any express and implied conditions of title and restrictions in interest affecting the Properties;
(b) specific representations and warranties made by the Vendors and the Trustee; and
(c) mode of payment and satisfaction of the sale consideration of the Properties.
The Proposed Disposals are also subject to the fulfilment of inter alia, the following conditions precedent:
(a) the approval of the SC in respect of the Proposed Disposals;
(b) the approval of KPJ's shareholders being obtained for the Proposed Disposals and in the event such approval is given conditionally, the satisfaction of all such conditions to the said approval;
(c) the approval of the shareholders and Board of Directors of the Vendors being obtained for the Proposed Disposals;
(d) the receipt of approval in principle of Bursa Malaysia Securities Berhad ("Bursa Securities") for the quotation and listing of the Consideration Units on the Main Board of Bursa Securities;
(e) the approval of the unitholders of Al-`Aqar KPJ REIT being obtained in accordance with the Guidelines on Real Estate Investment Trusts issued by the Securities Commission ("SC");
(f) where applicable, the receipt from the existing chargees of a redemption statement in respect of the redemption amounts owing to it and undertaking to refund in the event the discharge of charge cannot be registered for any reason whatsoever due to the reasons attributable to the existing chargees of the Properties;
(g) where applicable, the receipt of the relevant Vendors' undertaking in favour of the Trustee or its financier, an undertaking to refund the purchase consideration in the event the transfer of the relevant Properties cannot be registered for any reason whatsoever;
(h) in respect of Perdana Specialist Hospital Building, PPDNSB shall have made and/or caused an application to be made to the relevant State Authority under the provisions of the National Land Code 1965, to obtain the consent of such State Authority for the disposal of Perdana Specialist Hospital Building to the Trustee;
(i) in respect of Kedah Medical Centre Building, the proposed SPA shall include the following additional conditions precedent:
(i) obtain the written approval of PKNK for the proposed disposal of Kedah Medical Centre Building to the Trustee; and
(ii) procure PKNK to effect the immediate transfer of Lot Nos. PT 1350, 336 and 337 which have been compulsorily acquired by KMCSB or alternatively, transfer Lot Nos. PT 1350, 336 and 337 directly to the Trustee;
(j) the receipt by Messrs Abdul Raman Saad & Associates ("Stakeholder Solicitors") from the existing chargees of the discharge of charge documents;
(k) the receipt of a registrable memorandum of transfer of the Properties with the relevant stamp duty office endorsement on the same as being exempted from the payment of stamp duly pursuant to Stamp Duty (Exemption) (No. 4) Order 2004;
(l) all such other consents and regulatory and/or governmental approvals required to be obtained by the Vendors, KPJ and/or the Trustee in order to effect the completion of the Proposed Disposals have been obtained; and
(m) the Stakeholder Solicitors certifying that all conditions precedent under all the SPAs for the Properties are satisfied and the disposal of the Properties are ready for completion.
Upon the fulfilment of the conditions precedent, the Vendors will inter alia, deliver or cause to be delivered to Stakeholder Solicitors:
(i) the original issue document of title of the Properties;
(ii) the latest quit rent and assessment receipts in respect of the Properties;
(iii) all such documents required for the purpose of facilitating the registration and transfer of the beneficial and registered ownership in the Properties from the Vendors to the Trustee;
(iv) all security deposits and utilities deposits (if applicable); and
(v) all relevant documents, agreements, licences, permits, approvals, consents, certificate of fitness, plans, building plans and drawings in respect of the Properties.
The SPAs for the Properties are not inter-conditional and shall be completed within three (3) months from the date of fulfilment of the conditions precedent of the respective SPAs.
The Lease Arrangement
On completion, the Vendors shall inter alia deliver legal possession of the Properties to the Trustee. In accordance with the SPAs, the Trustee and the Vendors agree that upon the completion of the SPAs for the respective Properties, the Vendors will enter into a lease agreement with the Trustee upon the terms and conditions to be agreed upon.
4. BASIS OF ARRIVING AT THE TOTAL SALE CONSIDERATION
The Total Sale Consideration for the Proposed Disposals was arrived at on a "willing buyer willing seller" basis after taking into consideration the MV of the Properties which collectively amounts to RM179,900,000 based on the valuations performed by the Independent Valuer vide the respective valuations reports dated 18 April 2007 and a Certificate of Valuation dated 17 May 2007. The NBV of the Properties as at 31 December 2006 is RM157.79 million .
The valuations on the Properties have been carried out by using both Profits Method and Depreciated Replacement Cost Method.
Profits Method entails estimating the gross annual income that can be derived from the running of the hospital building as a business concern. The net annual income is then arrived at by deducting the operating costs and outgoings incidental to the running of the business and ownership of the hospital building, and allowing a margin of profit for the running of the business. The net annual income so arrived at is then capitalised at a suitable rate of return consistent with the type and quality of investment to arrive at the market value.
As a check, the subject property is also valued using Depreciated Replacement Cost Method. Depreciated Replacement Cost Method is based on an estimation of the market value of the land for its existing use and plus the current replacement cost of the buildings and improvements less allowances for physical deterioration and all relevant forms of obsolescence and optimisation.
5. BASIS OF DETERMINING THE ISSUE PRICE OF THE CONSIDERATION UNIT
The issue price of the Consideration Units is arrived at based on the 5-day weighted average market price of Al-Aqar KPJ REIT ended 16 May 2007 of RM0.95, being the market day before the date of the SPAs.
6. RANKING OF THE CONSIDERATION UNITS
The Consideration Units shall rank pari passu with other units in Al-Aqar KPJ REIT (i.e. the stakeholders units) without any preference or priority amongst themselves.
7. INFORMATION ON THE COMPANIES INVOLVED IN THE PROPOSED DISPOSALS
7.1 Information on KPJ
KPJ was incorporated in Malaysia under the Companies Act 1965 ("Act") on 18 August 1992 as a private limited company under the name of KPJ Management Sdn Bhd and subsequently changed its name to KPJ Healthcare Sdn Bhd on 14 September 1993. On 4 November 1993, it was converted to a public company and since then assumed its present name.
KPJ was listed on the Main Board of Bursa Securities on 29 November 1994.
The principal activities of the Company are those of an investment holding and provision of management services to its subsidiaries. The Group is principally involved in the operating of specialist hospitals, trading of pharmaceutical and consumer healthcare products, provision of pathology and laboratory services and the running of a private nursing college.
As at 31 March 2007, its authorised share capital is 500,000,000 ordinary shares of RM1.00 each, of which 205,251,615 ordinary shares of RM1.00 each are fully issued and paid-up.
Based on the latest audited consolidated financial statements for the financial year ended ("FYE") 31 December 2006, KPJ registered a consolidated profit after taxation and minority interest of RM40.96 million and the Net Assets ("NA") of the KPJ Group is RM487.28 million and NA per ordinary share is RM2.39.
7.2 Information on Al-‘Aqar KPJ REIT
Al-‘Aqar KPJ REIT is a real estate investment trust with an existing fund size of 340 million units. The investment strategies of Al-‘Aqar KPJ REIT is to own and invest in real estate and real estate-related assets whether directly or indirectly through the ownership of single-purposes companies whose principal assets comprise real estate.
ARB is the Trustee of Al-‘Aqar KPJ REIT. The Trustee was established in 1995 when the Department of Public Trustee and Official Administrator Malaysia, which existed since 1921 was corporatised. ARB was incorporated on 29 May 1995 under the Act and established under the Public Trust Corporation Act 1995. As at 31 March 2007, the issued and paid-up share capital of ARB is RM6,000,002 comprising 6,000,002 shares of RM1 each with an authorised share capital of RM10,000,000. ARB is wholly-owned by the Government of Malaysia and its shares are held by the Ministry of Finance (Incorporated) and the Federal Land Commissioner.
The Trustee's functions, duties and responsibilities are set out in the trust deed entered into between ARB and Damansara REIT Managers Sdn Berhad ("Manager") dated 27 June 2006 ("Trust Deed"). The general function, duties and responsibility of the Trustee include, but not limited to, the followings:
(a) acting as the trustee of Al-‘Aqar KPJ REIT and safeguarding the rights and interests of the unitholders;
(b) holding the assets of Al-‘Aqar KPJ REIT on the Trust Deed for the benefit of the unitholders; and
(c) exercising all the powers of a trustee and the powers that are incidental to the ownership of the assets of Al-‘Aqar KPJ REIT.
The management company of Al-‘Aqar KPJ REIT is the Manager. The Manager was incorporated in Malaysia under the Act under the name of Ultimate Benchmark Sdn Bhd on 8 December 2005 and assumed its present name on 15 March 2006. The issued and fully paid up share capital of the Manager as at 31 March 2007 is RM1,000,000.
The main responsibility of the Manager is to manage Al-‘Aqar KPJ REIT's assets and liabilities for the benefit of unitholders. In particular, the Manager is responsible for the day-to-day management of the assets held by Al-‘Aqar KPJ REIT and shall at its discretion, make recommendations of the Trustee on the management and operation of the assets and the annual budget.
7.3 Information on the Vendors
7.3.1 PPDNSB
PPDNSB was incorporated in Malaysia under the Act on 21 October 1996 as a private limited company under the name of Trinesis Sdn Bhd and assumed its present name on 10 January 1997.
PPDNSB is a 60%-owned subsidiary of KPJ and it is principally operating as a specialist hospital.
As at 31 March 2007, its authorised share capital is 25,000,000 ordinary shares of RM1.00 each, of which 21,292,250 ordinary shares of RM1.00 each are fully issued and paid-up.
Based on the latest audited financial statements for the FYE 31 December 2006, PPDNSB registered a loss after taxation of RM3.69 million and the NA of PPDNSB is RM1.35 million and NA per ordinary share is RM0.06.
7.3.2 KSHSB
KSHSB was incorporated in Malaysia under the Act on 20 October 1981 as a private limited company under the name of Kuantan Specialist Hospital Sdn Bhd and assumed its present name on 8 April 1987.
KSHSB is a 78%-owned subsidiary of KPJ and it is principally operating as a specialist hospital.
As at 31 March 2007, its authorised share capital is 5,000,000 ordinary shares of RM1.00 each, of which 3,791,762 ordinary shares of RM1.00 each are fully issued and paid-up.
Based on the latest audited financial statements for the FYE 31 December 2006, KSHSB registered a profit after taxation of RM3.38 million and the NA of KSHSB is RM19.22 million and NA per ordinary share is RM5.07.
7.3.3 SMCSB
SMCSB was incorporated in Malaysia under the Act on 13 September 1979 as a private limited company.
SMCSB is a wholly-owned subsidiary of KPJ and it is principally operating as a specialist hospital.
As at 31 March 2007, its authorised share capital is RM25,000,000 divided into 24,000,000 ordinary shares of RM1.00 each and 10,000,000 preference shares A of RM0.10 each, and the paid up capital is RM9,213,599.90 divided into 8,692,076 ordinary shares of RM1.00 each and 5,215,239 preference shares A of RM0.10 each fully issued and paid-up.
Based on the latest audited financial statements for the FYE 31 December 2006, SMCSB registered a profit after taxation of RM3.53 million and the NA of SMCSB is RM47.90 million and NA per ordinary share is RM5.51.
7.3.4 HSSB
HSSB was incorporated in Malaysia under the Act on 26 January 1991 as a private limited company.
HSSB is a wholly-owned subsidiary of SMCSB and it is principally operating as a specialist hospital.
As at 31 March 2007, its authorised share capital is RM25,000,000 divided into 25,000,000 ordinary shares of RM1.00 each, of which 12,000,000 ordinary shares of RM1.00 each are fully issued and paid-up.
Based on the latest audited financials statements for the FYE 31 December 2006, HSSB registered a loss after taxation of RM3.88 million and the NA of HSSB is RM7.82 million and NA per ordinary share is RM0.65.
7.3.5 KMCSB
KMCSB was incorporated in Malaysia under the Act on 7 June 1979 as a private limited company under the name of Syarikat Perubatan Utara Sdn Bhd and assumed its present name on 19 February 2001.
KMCSB is a 46%-owned associated company of KPJ and it is principally operating as a specialist hospital.
As at 31 March 2007, its authorised share capital is 25,000,000 ordinary shares of RM1.00 each, of which 19,000,000 ordinary shares of RM1.00 each are fully issued and paid-up.
Based on the latest audited financial statements for the FYE 31 December 2006, KMCSB registered a profit after taxation of RM0.14 million and the NA of KMCSB is RM33.40 million and NA per ordinary share is RM1.76.
8. RATIONALE FOR THE PROPOSED DISPOSALS
The Proposed Disposals will allow the KPJ Group to unlock the value of the Properties and realise its investment in the Properties. After taking into consideration the MV of the Properties at the respective valuation dates, the NBV of the Properties is approximately RM157.79 million in the book of KPJ as at 31 December 2006. The estimated capital gain to the KPJ Group is expected to be approximately RM10.47 million.
The Proposed Disposals will result in a cash inflow for the KPJ Group of RM85.76 million of which RM56.20 million will be used to reduce its existing bank borrowings. The potential interest savings for the KPJ Group amount to RM3.91 million per annum.
The Proposed Disposals will also enable the KPJ Group to participate in the local real estate investment trust industry where the growth prospects are expected to be high in view of the current environment in Malaysia which appears to be conducive for real estate investment trust due to the recent incentives and flexibilities accorded by the Malaysian authorities. The Manager will be directly involved in the operations of Al-`Aqar KPJ REIT, and hence, ensuring that the KPJ Group as a unitholder, will continue to reap benefits from the Properties through the stable cash distribution of Al-`Aqar KPJ REIT. The KPJ Group intends to hold the units as a long-term investment.
9. EFFECTS OF THE PROPOSED DISPOSALS
9.1 Share Capital and Major Shareholder's Shareholding
The Proposed Disposals will not have any effect on the issued and paid up share capital as well as major shareholder's shareholding in KPJ.
9.2 NA
The proforma effects of the Proposed Disposals on the NA and NA per share of the KPJ Group based on the latest audited consolidated financial statements of KPJ as at 31 December 2006 is set out in Table 12 as attached.
Upon completion of the Proposed Disposals, the NA per share of the KPJ Group is expected to increase from RM2.39 per share to RM2.45 per share.
9.3 Gearing
Based on the latest audited consolidated financial statements of the KPJ Group as at 31 December 2006, the total borrowings of the KPJ Group amounted to approximately RM371.37 million.
As most of the proceeds raised from the Proposed Disposals will be used for repayment of the KPJ Group's borrowings, the gearing level of the KPJ Group will be reduced as illustrated in Table 13 as attached.
9.4 Earnings and Earnings Per Share ("EPS")
The proforma effects of the Proposed Disposals on the earnings and EPS of the KPJ Group for the financial year ended 31 December 2006 is as set out in Table 14 as attached.
Upon completion of the Proposed Disposals, the net EPS of the Group will increase from 20.1 sen to 26.50 sen.
After taking into consideration the NBV of the Properties of approximately RM157.79 million in the book of the KPJ Group as at 31 December 2006, the estimated capital gain to the KPJ Group is expected to be RM10.47 million.
As the proceeds from the Proposed Disposals will mainly be used for repayment of the KPJ Group's bank borrowing of RM371.37 million as at 31 December 2006, the Proposed Disposals will result in interest savings of approximately RM3.91 million per annum to the KPJ Group. The interest savings and reduction of the loan will contribute positively to the future earnings and cash flows of the KPJ Group. Additionally, the Group would be able to obtain stable cash distribution from the Consideration Units should Al-‘Aqar KPJ REIT declares cash distribution to its unitholders in the future.
10. APPROVALS REQUIRED FOR THE PROPOSED DISPOSALS
The Proposed Disposals is conditional upon approvals being obtained from the following:
(i) the approval of the SC for the Proposed Disposals;
(ii) the approval of shareholders of KPJ for the Proposed Disposals and in the event such approval is given conditionally, the satisfaction of all such conditions to the said approval;
(iii) the approval of the shareholders and Board of Directors of the Vendors for the Proposed Disposals;
(iv) the receipt of approval in principle of Bursa Securities for the quotation and listing of the Consideration Units on the Main Board of Bursa Securities;
(v) the approval of the unitholders of Al-`Aqar KPJ REIT in accordance with the Guidelines on Real Estate Investment Trusts issued by the SC;
(vi) in respect of Perdana Specialist Hospital Building, PPDNSB shall have made and/or caused an application to be made to the relevant State Authority under the provisions of the National Land Code 1965, to obtain the consent of such State Authority for the disposal of Perdana Specialist Hospital Building to the Trustee; and
(vii) all such other consents and regulatory and/or governmental approvals required to be obtained by the Vendors, KPJ and/or the Trustee in order to effect the completion of the Proposed Disposals.
Apart from the approvals set out above and the other conditions precedent set out in the SPAs, KPJ and the Vendors are not subject to any other condition so as to render the Proposed Disposals to be conditional upon any other proposal undertaken or to be undertaken by the Company.
11. UTILISATION OF THE CASH PROCEEDS FROM THE PROPOSED DISPOSALS
The net cash proceeds from the Proposed Disposals amounting to RM85.76 million would be utilised principally for the repayment of the Group and KMCSB's bank borrowings, working capital and estimated expenses for the Proposed Disposals. The details of the utilisation of proceeds are set out as set out in Table 15 as attached.
Based on the KPJ Group's audited consolidated financial statements for the financial year ended 31 December 2006, the bank borrowings of the Group stood at RM371.37 million. Upon repayment of the KPJ Group's bank borrowings using the proceeds from the Proposed Disposals, the bank borrowings shall be reduced to RM334.17 million. Interest savings arising from the repayment on the bank borrowings are expected to be approximately RM3.91 million per annum.
12. DEPARTURE FROM THE POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ISSUED BY THE SC
To the best knowledge of the Company, the Proposed Disposals do not depart from the Policies and Guidelines on Issue/Offer of Securities issued by the SC.
13. DIRECTORS AND MAJOR SHAREHOLDER'S INTERESTS
Save as disclosed below, none of the Directors, major shareholders of KPJ and/or persons connected to the Directors and/or major shareholder has any interest, direct and/or indirect, in the Proposed Disposals.
Tan Sri Dato' Muhammad Ali Bin Hashim, Datin Paduka Siti Sa'diah Binti Sh Bakir and Kamaruzzaman Bin Abu Kassim are directors of KPJ, the Manager and are also senior management personnel of JCorp. (Tan Sri Dato' Muhammad Ali Bin Hashim, Datin Paduka Siti Sa'diah Binti Sh Bakir, Kamaruzzaman Bin Abu Kassim are collectively referred to as "Interested Directors").
The Interested Directors are deemed interested in the Proposed Disposals by virtue of them being persons connected to KPJ and JCorp.
Accordingly, the Interested Directors shall abstain and will continue to abstain from all deliberations and voting in respect of any resolution in relation to the Proposed Disposals at the forthcoming EGM of KPJ and shall undertake to ensure that persons connected to them shall abstain from voting in respect of their direct and/or indirect interests on the resolution pertaining to the Proposed Disposals to be tabled at the forthcoming EGM of KPJ.
The Vendors are the subsidiary and/or associated companies of KPJ and as such KPJ is deemed interested in the Proposed Disposals.
JCorp shall abstain from voting in respect of its direct and/or indirect interest on the resolution pertaining to the Proposed Disposals to be tabled at the forthcoming EGM of KPJ. In addition, KPJ shall undertake to ensure that persons connected to them shall abstain from voting in respect of their direct and/or indirect interest in KPJ Group.
14. APPOINTMENT OF ADVISER
The Board of Directors of KPJ have appointed AmInvestment Bank as the Adviser for the Proposed Disposals. In view of the Interested Parties have interest in the Proposed Disposals as mentioned above,the Board of Directors of KPJ have also appointed OSK Investment Bank Berhad to act as the Independent Adviser for the Proposed Disposals.
15. DIRECTORS' RECOMMENDATION
The Board of Directors of KPJ having considered the rationale for the Proposed Disposals, and after careful deliberation, is of the opinion that the Proposed Disposals are in the best and long term interests of the KPJ Group and its shareholders. Accordingly, they recommend that you vote in favour of the ordinary resolution to be tabled at the forthcoming EGM.
16. ESTIMATED TIMEFRAME FOR SUBMISSION OF THE APPLICATION TO THE SC
Barring any unforeseen circumstances, the Proposed Disposals are expected to be submitted to the SC within three (3) months after the date of this Announcement.
17. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Proposed Disposals are expected to be completed by the third quarter of 2007.
18. DOCUMENTS FOR INSPECTION
The SPAs, the letter of offer in respect of KMCSB, the valuation reports and certificate of valuation will be made available for inspection at the registered office of KPJ at 13th Floor, Menara Johor Corporation, KOTARAYA, 80000 Johor Bahru, Johor Darul Takzimduring normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this Announcement.
This announcement is dated 18 May 2007.
Tables(EDMS version2).doc
