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1. INTRODUCTION
Further to the announcement dated 16 May 2008, the Board of Directors of QL Resources Berhad ("QL") ("Board") is pleased to inform that QL Feedingstuffs Sdn. Bhd.("QLF"), a wholly owned subsidiary of QL had, on 20 May 2008, signed a Share Acquisition Agreement (“SAA”) with Tan Soo Pheng and Tan Peng Tee (“the Vendors") to acquire 100% equity interest of Heap Loong Poultry Farm Sdn. Bhd.(“Proposed Acquisition”)for a total consideration of RM6.68 million.
The consideration is arrived based on a willing buyer-willing seller basis, taking into consideration the Net Tangible Asset ("NTA") value of the Company as at 30 April 2008 of not less than RM5.20 million. Without prejudice to the right of QLF to terminate the SAA, the Vendors agree in the event the due diligence findings of the QLF shall reveal that the NTA value of Heap Loong Poultry Farm Sdn. Bhd. ("HL") is less than the amount stipulated, the consideration shall automatically be adjusted downwards by an amount equivalent to the deficit in the said NTA in excess of RM167,000 (2.5% of the consideration).
2. SALIENT TERMS OF THE SAA
As an integral part of this transaction for the sale and purchase of the Sale Shares, QLF has agreed to the disposal of the following fixed assets by HL to the Vendors at a sale price of RM2,016,403 to be satisfied by way of contra and set-off against an amount due to the Vendors and thier brothers namely Tan Siew Fok and Tang Sooi Kooi, of RM2,025,000 as shown in the latest management accounts of HL as at 30 April 2008.
The following are the fixed assets of HL which are to be disposed:-
(i) all that piece of leasehold industrial land together with one (1) unit of factory erected thereon, held under H.S (D) 44418, PT 25 Mukim 01, District of Seberang Perai Tengah, Pulau Pinang measuring approximately 1994.8417 square meters, at a sale price of RM1,686,814;
(ii)three (3) units of motor vehicles at a sale price of RM329,589.
The consideration shall be satisfied by QLF in the following manner:
(a)a sum of Ringgit Malaysia Three Hundred Thirty Four Thousand (RM334,000) equivalent to 5% of the consideration was paid to the Vendors in equal proportions, as earnest deposit upon signing of the Memorandum on Understanding;
(b) a sum of Ringgit Malaysia One Million Six Hundred Seventy Thousand (RM1,670,000) equivalent to 25% of the consideration was paid to the Vendors in equal proportions simultaneously with the execution of the SAA; and
(c) a sum of Ringgit Malaysia Four Million Six Hundred Seventy Six Thousand (RM4,676,000) shall be paid to the Vendors in equal proportions on the Completion Date ie unless otherwise agreed by the parties, completion of the SAA shall take place on a business day not later than three (3) months after the Unconditional Date (with an automatic extension of one (1) month at the rate of 8% per annum on the balance sum).In the event there shall be downward adjustment to the consideration, the balance sum shall be reduced accordingly provided that in the event QLF shall pay the balance sum prior to the expiry of three (3) months from the Unconditional Date, QLF shall be entitled to an early settlement discount equivalent to RM500 per day, based on the total number of days from the date of payment until the last day of the said three (3) months period.
In the event that QLF fails to pay or cause the payment of the balance sum together with the Vendor's advances as may be required for working capital from time to time, the SAA shall authomatically terminate and the sum equivalent to 10% of the consideration shall be forfeited absolutely by the Vendors and the Vendors shall refund such balance of such sums paid by QLF within sixty (60) days of such termination and thereafter neither party shall have any further claim against the other.
SAA becomes unconditional ("Unconditional Date") upon completion of the sale and purchase of the Sale Shares upon the following conditions being satisfied within three (3) months from the SAA or within such further period as may be mutually agreed upon by the parties :
(i) the approval of the QLF board for the acquisition of the Sale Shares;
(ii) the approval of the Foreign Investment Committee (FIC) to the sale and purchase of the Sale Shares;
(iii)the approval or consent of any third party to the sale and purchase of the Sale Shares (if required);
(iv) the approval or consent of any financier (if required);
(v) the approval or waiver of any regulatory requirement by any other relevant authorities, if required;
(vi) the QLF being satisfied with the result or findings of a legal, operational and/or financial due diligence to be conducted by QLF and/or its financial and legal advisers on HP within three (3) weeks after the execution of SAA or such further period as may be agreed by the parties in writing;
3. INFORMATION ON HL
HL is a company incorporated in Malaysia with an authorised and paid-up capital of RM10,000,000 each and having its registered office at Lot 2051, 2053 & 2054 MK Sidam Kanan, Kg Paya Union, 09400 Padang Serai, Kedah. HL is principally involved in the business of poultry farm and oil palm plantation.
The production capacity and current production of HP is 400,000 eggs per day and 305,000 eggs per day respectively. The total land area is 85 acres of which 40 acres is used for layer farming and balance is planted with oil palm tree.
4. RATIONALE FOR THE PROPOSED ACQUISITION
The Proposed Acquisition will enable QL Group to expand its existing integrated livestock farming business.
5. APPROVALS REQUIRED
The Proposed Acquisition is not subject to the approval of the shareholders of QL but is however subject to approval of FIC.
6. SOURCES OF FUNDS
QL will finance the Proposed Acquisition via internally generated funds and borrowings.
7. FINANCIAL EFFECTS
7.1 Share Capital
The Proposed Acquisition will not have any effect on the issued and paid-up share capital of QL as it does not involve any issuance of new shares.
7.2 Net Assets and Gearing
The Proposed Acquisition will not have any material effect on the net assets and gearing of QL.
7.3 Earnings
Upon completion of the Proposed Acquisition, the Proposed Acquisition is expected to contribute positively to the future earnings of the QL Group.
8. THE ESTIMATED TIME FRAME FOR COMPLETION
The Proposed Acquisition is estimated to be completed by end of calendar year 2008.
9. INTEREST OF DIRECTORS AND MAJOR SHAREHOLDERS
None of the directors and / or substantial shareholders and / or persons connected to the directors or substantial shareholders of QL has any interest, whether directly or indirectly, in the Proposed Acquisition.
10. DIRECTORS’ RECOMMENDATION
The Board having considered all the relevant factors in respect of the Proposed Acquisition is of the opinion that the proposed acquisition is in the best interest of QL Group.
11. DEPARTURE FROM GUIDELINES
The Directors of QL are not aware of any departure from the Guidelines on Offering of Equity and Equity-Linked Securities issued by the Securities Commission.
12. DOCUMENTS FOR INSPECTION
A copy of the SAA can be inspected at the registered office of QL at No.16A, Jalan Astaka U8/83, Bukit Jelutong, 40150 Shah Alam, Selangor from Monday to Friday (expect public holidays) during business hours from 8.30 am to 5.00 pm for the period of three months from the date of this announcement.
This announcement is dated 21 May 2008.
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