Kpj Healthcare Berhad ("kpj" Or the "company") Proposed Disposals of Kpj's Entire Interest in :- - Seremban specialist hospital building; - Taiping Medical Centre building; - Kota Kinabalu specialist hospital building; - Bukit Mertajam specialist hospital building; - kpj Penang specialist hospital building; - tawakal hospital Existing building; - kpj Tawakal Specialist Hospital Building; and - Pnc International College of Nursing and Health Sciences ("pnc") Building (collectively Known as The "properties") to al-‘aqar Kpj Reit ("al-'aqar") For A Total Sale consideration of Rm296,400,000 to be Satisfied partly by Cash Consideration of Rm179,526,250 And Partly By Issuance of 123,025,000 New Units In Al-'aqar At An Issue Price Of Rm0.95 Per Unit To Be Credited As Fully Paid-up ("proposed Disposals")
- SEREMBAN SPECIALIST HOSPITAL BUILDING; - TAIPING MEDICAL CENTRE BUILDING; - KOTA KINABALU SPECIALIST HOSPITAL BUILDING; - BUKIT MERTAJAM SPECIALIST HOSPITAL BUILDING; - KPJ PENANG SPECIALIST HOSPITAL BUILDING; - TAWAKAL HOSPITAL EXISTING BUILDING; - KPJ TAWAKAL SPECIALIST HOSPITAL BUILDING; AND - PNC INTERNATIONAL COLLEGE OF NURSING AND HEALTH SCIENCES ("PNC") BUILDING
(COLLECTIVELY KNOWN AS THE "PROPERTIES")
TO AL-‘AQAR KPJ REIT ("AL-‘AQAR") FOR A TOTAL SALE CONSIDERATION OF RM296,400,000 TO BE SATISFIED PARTLY BY CASH CONSIDERATION OF RM179,526,250 AND PARTLY BY ISSUANCE OF 123,025,000 NEW UNITS IN AL-‘AQAR AT AN ISSUE PRICE OF RM0.95 PER UNIT TO BE CREDITED AS FULLY PAID-UP ("PROPOSED DISPOSALS")
Contents
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Announcement Details :
1. INTRODUCTION
We refer to announcement dated 19 August 2008 where, on behalf of the Board of Directors of KPJ, AmInvestment Bank Berhad, a member of AmInvestment Bank Group ("AmInvestment Bank"), had announced the Proposal Disposals.
Pursuant to the revised Guidelines on Real Estate Investment Trusts ("REIT Guidelines"), which came into effect on 21 August 2008, KPJ wishes to revise the Proposed Disposals to exclude HS(D) 189781, Lot No. PT 8, Bandar Baru Kota Sri Mas and HS(D) 180299, Lot No. PT 29558, Mukim of Labu, being two (2) parcels of vacant land which formed part of PNC Building as announced earlier.
Details of the changes are set out in Table 1and the ensuing sections.
2. DETAILS OF THE REVISIONS TO THE PROPOSED DISPOSALS
2.1 Revision to the Sale Consideration
Pursuant to the exclusion of the two (2) parcels of vacant land from PNC Building, the sale consideration of PNB Building will be reduced to RM16,500,000. Accordingly, the total sale consideration for the Proposed Disposals would be reduced to RM296,400,000 ("Total Sale Consideration") to be satisfied as follows:
(i) issuance of 123,025,000 new units in Al-‘Aqar at an issue price of RM0.95 per unit ("Consideration Units"), to be credited as fully paid-up; and
(ii) cash consideration of RM179,526,250 to be funded by new Islamic financing to be raised by Al-‘Aqar.
2.2 PNC Building
The announcement dated 19 August 2008 had described PNC Building as follows:-
"PNC Building is a private nursing and health sciences college consisting of a block of hostels and car parks together with all the fixtures and fittings erected on freehold lands held under title nos. HS(D) 189780, Lot No. PT 7, Bandar Baru Kota Sri Mas, and HS(D) 180301, Lot No. PT 29560, Mukim of Labu, and future expansion site held under title nos. HS(D) 189781, Lot No. PT 8, Bandar Baru Kota Sri Mas and HS(D) 180299, Lot No. PT 29558, Mukim of Labu, all in District of Seremban, Negeri Sembilan on a combined land area of 91,411.0 sq. m. bearing the postal address PT 17010, Persiaran Seriemas, Kota Seriemas, 71800 Nilai, Negeri Sembilan."
With the exclusion of the two (2) parcels of vacant land, PNC Building will be described as follows:-
"PNC Building is a private nursing and health sciences college comprising administrative and academic block, a block of students' hostel and car parks together with all the fixtures and fittings erected on freehold lands held under title nos. HS(D) 189780, Lot No. PT 7, Bandar Baru Kota Sri Mas, and HS(D) 180301, Lot No. PT 29560, Mukim of Labu all in District of Seremban, Negeri Sembilan on a combined land area of 19,223.8 sq. m. bearing the postal address PT 17010, Persiaran Seriemas, Kota Seriemas, 71800 Nilai, Negeri Sembilan.
As such, PNCSB proposes to dispose off PNC Building to Al-‘Aqar for a total consideration of RM16,500,000 to be satisfied wholly by cash consideration to be raised from new Islamic financing by Al-‘Aqar."
Other pertinent information in respect of PNC Building is set out in Table 2.
The Trustee had, on 18 August 2008, issued a letter of offer to PNCSB for the proposed acquisition of PNC Building for RM26 million ("Letter of Offer"), the terms of which are to be formalised by the execution of a formal agreement between the Trustee, PNCSB and the existing registered owner. Subsequently, the Letter of Offer was revoked and a revised letter of offer was issued by the Trustee to PNCSB on 4 September 2008 for the proposed acquisition of PNC Building at the purchase consideration of RM16.5 million ("Revised Letter of Offer"), the terms of which are to be formalised by the execution of a formal agreement between the Trustee, PNCSB and the existing registered owner. The Revised Letter of Offer was accepted by PNCSB on 4 September 2008.
3. SALIENT TERMS OF THE SPAs
Save for the following changes, all other terms and conditions of the Proposed Disposals remains unchanged:-
(j) in respect of PNC Building, the proposed tripartite agreement shall include, inter alia, the following terms and conditions:-
(a) the new purchaser at its own cost and expense obtaining the approval or letter of non-objection of the Foreign Investment Committee ("FIC") for the purchase of PNC Building in favour of the new purchaser ("FIC Approval") and in the event the FIC Approval is given conditionally, the satisfaction of all such conditions to the FIC Approval;
(b) the vendor shall have made and/or caused an application to be made, or the vendor shall have procured the proprietor to make and/or caused an application to be made to the relevant State Authority under the provisions of the National Land Code, to obtain the consent/approval of such State Authority for the transfer of the P.T. No 29560 and P.T. No 29558 from the proprietor / the vendor directly to the new purchaser; and
(c) the receipt of confirmation that the memorandum of transfer for PNC Building have been duly perfected and registered at the relevant land office or alternatively, receipt of the original undertaking of the vendor to effect the direct transfer of PNC Building from the proprietor to the new purchaser.
4. BASIS OF ARRIVING AT THE TOTAL SALE CONSIDERATION
The sale consideration of PNC Building of RM16,500,000 and the Total Sale Consideration for the Proposed Disposals was arrived at on a "willing buyer willing seller" basis after taking into consideration the Market Value ("MV") of the Properties which collectively amounts to RM306,750,000 based on the valuations performed by the Independent Valuer vide the valuation report dated 15 July 2008. The adjusted NBV of the Properties as mentioned in Section 5 herein is RM277.90 million.
5. 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. The aggregate NBV of the Properties as at 31 December 2007 is RM217.86 million. Subsequently in 2008, the NBV of all the Properties shall be adjusted to RM277.90 million pursuant to the completed acquisition of Taiping Medical Centre Building and PNC Building and the inclusion of estimated cost to completion for KPJ Penang Specialist Hospital Building and KPJ Tawakal Specialist Hospital Building of RM60.04 million.
After taking into consideration the MV of the Properties at their respective valuation dates, and the adjusted NBV of all the Properties in 2008 as mentioned above, the estimated capital gain to the KPJ Group is expected to be approximately RM14.61 million (excluding the NBV for JCorp's Portion).
The Proposed Disposals will result in a cash inflow for the KPJ Group of RM179.53 million of which RM157.09 million will be used to reduce its existing bank borrowings.
6. EFFECTS OF THE PROPOSED DISPOSALS
Save for the following sections below, there are no changes to the effects of the Proposed Disposals:
6.1 Net Assets ("NA") and Gearing
The proforma effects of the Proposed Disposals on the NA, NA per share and gearing of the KPJ Group based on the latest audited consolidated financial statements of KPJ as at 31 December 2007 is set out in Table 3.
6.2 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 2007 are set out in Table 4.
Upon completion of the Proposed Disposals, the net EPS of the Group will increase from 35.73 sen to 46.84 sen.
As mentioned in Section 5 above, the estimated capital gain to the KPJ Group is expected to be approximately RM14.61 million (excluding the NBV for JCorp's Portion).
As the proceeds from the Proposed Disposals will mainly be used for repayment of the KPJ Group's bank borrowing of RM157.09 million as at 31 December 2007, the Proposed Disposals will result in interest savings of approximately RM10.00 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.
7. UTILISATION OF THE CASH PROCEEDS FROM THE PROPOSED DISPOSALS
The cash proceeds from the Proposed Disposals amounting to RM179,526,250 would be utilised principally for the repayment of the Group's bank borrowing, working capital and estimated expenses in relation to the Proposed Disposals. The details of the utilisation of proceeds are set out as set out in Table 5.
Based on the KPJ Group's audited consolidated financial statements for the financial year ended 31 December 2007, the bank borrowings of the Group stood at RM393.93 million. Upon repayment of the KPJ Group's bank borrowings using the proceeds from the Proposed Disposals, the bank borrowings shall be reduced to RM292.85 million. Interest savings arising from the repayment on the bank borrowings are expected to be approximately RM10.0 million per annum.
Save for the above changes, all other information and terms of the Proposed Disposals remain unchanged from the previous announcement dated 19 August 2008.
