MALAYSIA AIRPORTS HOLDINGS BERHAD (“MAHB” OR THE “COMPANY”)
(I)
RESTATEMENT OF THE RESPECTIVE RIGHTS AND COMMITMENTS OF THE
GOVERNMENT OF MALAYSIA (THE “GOVERNMENT”), MAHB AND MALAYSIA
AIRPORTS (SEPANG) SDN BHD (“MA SEPANG”), A WHOLLY-OWNED SUBSIDIARY OF
MAHB, IN RELATION TO THE OPERATION, MANAGEMENT, MAINTENANCE AND
DEVELOPMENT OF KL INTERNATIONAL AIRPORT (“KLIA”);
(II)
RESTATEMENT OF THE RESPECTIVE RIGHTS AND COMMITMENTS OF THE
GOVERNMENT, MAHB AND MALAYSIA AIRPORTS SDN BHD (“MASB”), A WHOLLYOWNED SUBSIDIARY OF MAHB, IN RELATION TO THE OPERATION, MANAGEMENT,
MAINTENANCE AND DEVELOPMENT OF AIRPORTS CURRENTLY OPERATED BY
MASB (“DESIGNATED AIRPORTS”),
(COLLECTIVELY, REFERRED TO AS THE “PROPOSED RESTRUCTURING”); AND
(III)
PROPOSED DISPOSAL OF NON-CORE ASSETS AND BUSINESSES
1.
INTRODUCTION
On behalf of the Board of Directors (“Board”) of MAHB, CIMB Investment Bank Berhad
(“CIMB”) wishes to announce that MAHB has, on 12 February 2009, entered into:
(i)
(ii)
an operating agreement with MA Sepang and the Government (“Operating
Agreement for KLIA”) whereby the Government and MA Sepang have agreed:
(a)
to restate their respective rights and commitments with respect to the
operation, management, maintenance and development of KLIA, and to
terminate all prior rights and commitments arising from the concession
agreement and lease agreement for KLIA entered into between the
Government and MA Sepang save for rights and commitments expressly
excluded in the Operating Agreement for KLIA; and
(b)
to the settlement of the Residual Payment (as defined in Section 2.1 below)
owing by MA Sepang to the Government; and
an operating agreement with MASB and the Government (“Operating Agreement
for the Designated Airports”) whereby the Government and MASB have agreed to
restate the rights and commitments of all parties with respect to the operation,
management, maintenance and development of the Designated Airports, and to
terminate all prior rights and commitments entered into between the Government and
MASB save for rights and commitments expressly excluded in the Operating
Agreement for the Designated Airports.
The Operating Agreement for KLIA and the Operating Agreement for the Designated Airports
shall collectively be referred to as the “Operating Agreements”.
In conjunction with the Proposed Restructuring, MAHB also proposes to dispose of:
(i)
its 100% equity interest in NECC Sdn Bhd (“NECC”) to the Minister of Finance, a
body corporate formed under the Minister of Finance (Incorporated) Act 1957, for a
sale consideration of RM159,632,122 (“Proposed NECC Disposal”); and
(ii)
its 100% equity interest in Sepang International Circuit Sdn Bhd (“SIC”) to the
Minister of Finance for a cash consideration of RM1.
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MASB also proposes to grant an option to the Minister of Finance to require MASB to
sell the Sepang International Formula One Circuit (“Circuit”) (“Proposed SIC
Disposal”) to the Minister of Finance (“Call Option”). The Call Option is exercisable
within ten (10) years from the date the agreement in relation to the Proposed SIC
Disposal is executed (“Call Option Period”). If the Call Option is not exercised by
the end of the Call Option Period, it shall be deemed exercised on the last date of the
Call Option Period.
The Proposed NECC Disposal and the Proposed SIC Disposal shall collectively be referred to
as the “Proposed Non-Core Disposals”. The agreements relating to the Proposed NonCore Disposals will be executed in due course.
The Proposed Restructuring and the Proposed Non-Core Disposals shall collectively
hereafter be referred to as the “Proposals”.
2.
RATIONALE FOR THE PROPOSALS
2.1
Proposed Restructuring
MA Sepang is licensed to manage, operate, maintain and develop KLIA for 50 years from 5
May 1998 to 4 May 2048 (“MA Sepang Original Licence”). In connection with the activities
licensed to be carried out under the MA Sepang Original Licence:
(i)
a concession agreement was entered into between the Government and MA Sepang
on 18 October 1999 (“Concession Agreement”); and
(ii)
MA Sepang was granted the right to use and occupy the KLIA Lands (as defined
below) by the Federal Lands Commissioner (“FLC”) under a lease agreement that
was entered into between MA Sepang and the FLC on the same date, and as
amended by a supplemental agreement dated 11 October 2000 (“FLC Lease
Agreement”).
Under the Concession Agreement and FLC Lease Agreement, MA Sepang is obliged to pay
concession fees (“Concession Fees”) and lease rentals to the Government and undertake all
future development of KLIA.
At the same time, the airport operations business segment of the MAHB group of companies
(“MAHB Group”) is subject to the regulated passenger service charges tariffs and
aeronautical charges imposed by the Government. Since 1992, aeronautical charges have
not been revised by the Government, while operating costs have been increasing, particularly
when KLIA came on-stream in 1998. Therefore, the MAHB Group has been experiencing an
increase in operating costs without a corresponding increase in revenue from its airports’
operations. Additionally, during the initial operational years of KLIA, the volume of passenger
traffic had been low relative to the optimal capacity of KLIA. This phenomenon was not
unexpected since the design and construction of KLIA had taken into consideration the long
term growth horizon of passenger traffic as well as expansion in airport services and facilities.
Due to financial constraints under these operating conditions, it is difficult for MA Sepang to
meet the relevant payment obligations under the Concession Agreement and the FLC Lease
Agreement. Enforcing the Concession Agreement and the FLC Lease Agreement would strip
the MAHB Group of its cash flows as well as available cash resources.
Pursuant to the Proposed Restructuring:
(i)
the existing Concession Agreement and the FLC Lease Agreement will be terminated
and all amounts due thereunder will be restated as an agreed sum of
RM1,429,698,449, being a sum calculated up to 31 March 2008 (“Residual
Payment”); and
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(ii)
the respective rights and commitments of the Government, MA Sepang, MASB and
MAHB with respect to the operation, management, maintenance and development of
KLIA and the Designated Airports would be restated under more preferable terms to
the MAHB Group.
Under the Proposed Restructuring, MAHB would be able to settle the Residual Payment in a
manner that would not significantly deplete the cash reserves of the MAHB Group, and that
would take into consideration the MAHB Group’s financial resources and business plans. The
Residual Payment would be partially settled by:
(i)
a cash payment amounting to RM507,889,908;
(ii)
the set-off against the NECC Sale Consideration; and
(iii)
the set-off against capital expenditure incurred by MA Sepang on the Low Cost
Carrier Terminal Expansion Project, KLIA Spurline Project and Air Traffic Control
Upgrade Project.
The remainder of the outstanding Residual Payment shall be settled under a new revenue
sharing arrangement via the introduction of the MA Sepang User Fee (as defined in Section
3.1 below).
Further to the above, MASB is licensed to manage, operate and maintain the Designated
Airports, amongst others, for 30 years from 1 November 1992 to 30 October 2022. However,
there was no concession agreement between MASB and the Government with regard to the
management, operation and maintenance of the Designated Airports. The Proposed
Restructuring will formalise the arrangement between the Government and MASB with regard
to the management, operation and maintenance of the Designated Airports by MASB. In
consideration of the Government entering into the Operating Agreement for the Designated
Airports, MASB and MAHB agree to pay the Government the MASB User Fee (as defined in
Section 3.2.5 below).
The MA Sepang User Fee and MASB User Fee arrangement attempts to align the economic
interest of the Government with the MAHB Group. Under the terms of the Operating
Agreement there will no longer be a requirement for concession fees payable to operate
KLIA, and there is a substantial reduction in the fixed lease payments payable for the KLIA
Lands, thus effectively reducing the operational leverage of the MAHB Group.
Under the Proposed Restructuring, the Government shall assist MAHB in bearing its socioeconomic obligations by compensating MA Sepang and MASB with a marginal cost support
sum (“MARCS”) for marginal losses suffered, arising from the undertaking of socio-economic
activities and Government policies. Thus, the aforesaid socio-economic undertakings
expected of the MAHB Group would not be at the expense of MAHB’s commercial objectives,
i.e., profitability and returns to shareholders.
With the re-establishment of the operator / manager role of KLIA and the Designated Airports
under the Operating Agreements and the transfer of the development capital expenditure
responsibilities back to the Government, the MAHB Group would be better able to focus on its
airport operations, leaving the primary responsibility of the development of KLIA and the
Designated Airports to the Government.
2.2
Proposed Non-Core Disposals
The Proposed Non-Core Disposals would enable the MAHB Group to streamline its
businesses and manage its resources more effectively. Greater emphasis and concentration
of efforts shall be directed to the growth and expansion of the airports operations business
segment to improve profitability and generate better return on assets and equity.
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The consideration to be received for the Proposed NECC Disposal would also enable MA
Sepang to satisfy part of the Residual Payment, without further taxing the MAHB Group’s
cash flows.
The proceeds from the Proposed SIC Disposal upon exercise of the Call Option will be
earmarked for working capital purposes.
3.
DETAILS OF THE PROPOSED RESTRUCTURING
3.1
Settlement of Residual Payment
The Proposed Restructuring would address the outstanding obligations of MA Sepang under
the Concession Agreement.
As specified in the Operating Agreement for KLIA, the Residual Payment shall be satisfied
and discharged via:
(i)
the payment of RM507,889,908 to the Government by MA Sepang;
(ii)
the transfer of all the issued and paid-up share capital in NECC by MAHB to the
Minister of Finance at an agreed valuation of RM159,632,122;
(iii)
the set off by MA Sepang of the capital expenditure incurred or to be incurred by MA
Sepang in relation to the Low Cost Carrier Terminal Expansion Project for the sum
not exceeding RM123,900,000 only provided that should the actual capital
expenditure incurred be less than RM123,900,000, MA Sepang shall reimburse the
differential sum to the Government in cash. In the event where the capital expenditure
in relation to the Low Cost Carrier Terminal Expansion Project exceeds
RM123,900,000, such excess shall be solely borne by MA Sepang;
(iv)
the set off by MA Sepang of the capital expenditure incurred or to be incurred by MA
Sepang in relation to the KLIA Spurline Project for the sum not exceeding
RM208,577,970 only provided that should the actual capital expenditure incurred be
less than RM208,577,970, MA Sepang shall reimburse the differential sum to the
Government in cash. In the event where the capital expenditure in relation to the KLIA
Spurline Project exceeds RM208,577,970, such excess shall be solely borne by MA
Sepang;
(v)
the set off by MA Sepang of the capital expenditure incurred or to be incurred by MA
Sepang in relation to the Air Traffic Control Upgrade Project for the sum not
exceeding RM10,000,000 only provided that should the actual capital expenditure
incurred be less than RM10,000,000, MA Sepang shall reimburse the differential sum
to the Government in cash. In the event where the capital expenditure in relation to
the Air Traffic Control Upgrade Project exceeds RM10,000,000, such excess shall be
solely borne by MA Sepang; and
(vi)
MA Sepang paying to the Government an amount equal to half the amount calculated
as the fee based on a share of the revenues generated from the commercial activities
carried out by MA Sepang and any other subsidiary of MAHB at KLIA ("MA Sepang
User Fee") every three (3) consecutive month period during the financial year of MA
Sepang, the first of which commences on 1 April 2008, (“Calendar Quarter”) until the
remaining balance of the Residual Payment being the sum of RM419,698,449.01
(“Balance Residual Payment”) is fully settled.
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3.2
Salient Terms of the Operating Agreements
The Proposed Restructuring will also restate the rights and obligations of MA Sepang and
MASB in relation to the operation, management, and maintenance of KLIA and the
Designated Airports, respectively, the development of KLIA by MA Sepang and development
of the Designated Airports by MASB.
The salient terms of the Proposed Restructuring are captured in the Operating Agreements
entered into on 12 February 2009 with the Government, a summary of which is set out below.
3.2.1
Subsequent conditions
(i)
The Parties must satisfy the following conditions within fourteen (14) days after the
execution date of the Operating Agreements or such extended date as may mutually
be agreed by the Government and MAHB in writing:
(a)
(b)
in respect of the Operating Agreement for KLIA:
(i)
the execution of the lease agreement(s) over various alienated
parcels of land measuring approximately 24,236 acres containing
KLIA which are registered in the name of the FLC (“KLIA Lands”)
(“New Lease Agreement for KLIA Lands”);
(ii)
the Operating Agreement for the Designated Airports being executed
and becoming unconditional in accordance with its terms; and
(iii)
the grant of the replacement licence to MA Sepang pursuant to
section 24A of the Civil Aviation Act 1969 (“CAA”) in accordance with
the terms of the Operating Agreement for KLIA (“New Licence for
MA Sepang”).
in respect of the Operating Agreement for the Designated Airports:
(i)
the execution of the lease agreement(s) over various alienated
parcels of the land forming part of and utilised for the Designated
Airports which are registered in the name of the FLC (“FLC Lands”);
(ii)
the Operating Agreement for KLIA being executed and becoming
unconditional in accordance with its terms; and
(iii)
the grant of the replacement licence to MASB pursuant to section
24A of the CAA in accordance with the terms of the Operating
Agreement for the Designated Airports (“New Licence for MASB”).
The New Lease Agreement for KLIA Lands and the new lease agreement for FLC
Lands, which will be executed in due course, shall collectively be referred to as the
“New Lease Agreements”.
The New Licence for MA Sepang and the New Licence for MASB shall collectively be
referred to as the “New Licences”.
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3.2.2
Termination of the previous arrangements
(i)
Termination of the Concession Agreement under the Operating Agreement for
KLIA
With effect from and including the day on which the subsequent conditions prescribed
in the Operating Agreement for KLIA are fulfilled (“MA Sepang Effective Date”), the
Concession Agreement (including any agreement supplemental or ancillary thereto
and FLC Lease Agreement) shall terminate and cease to have further force and effect
except for the matters expressly saved in accordance with the Operating Agreement
for KLIA.
Termination of the Concession Agreement shall not affect:
(a)
the Residual Payment; and
(b)
the liabilities of the Government and MA Sepang which have accrued under
the Concession Agreement prior to its termination.
Prior to the execution of the Operating Agreement for KLIA, MA Sepang entered into
various contracts with third parties for the provision of services and for the use of
facilities at KLIA, which may be terminated if the Operating Agreement is not
extended beyond twenty five (25) years. Such termination of these contracts may give
rise to claims. As such, MA Sepang has agreed to indemnify the Government against
any claim the Government may suffer arising from the termination of these contracts.
MA Sepang intends to renegotiate the terms of these contracts with the relevant
parties over the next twenty five (25) years and seek the assistance of the
Government to mitigate or remove any losses that could arise from the termination of
these contracts.
(ii)
Termination of previous arrangements under the Operating Agreement for the
Designated Airports
With effect from and including the day on which the subsequent conditions prescribed
in the Operating Agreement for the Designated Airports are fulfilled (“MASB Effective
Date”), all existing arrangements and understandings of the parties with respect to
the designated airports lands and the use of facilities shall terminate and cease to
have further force and effect except for the matters expressly saved in accordance
with the Operating Agreement for the Designated Airports.
Termination of the arrangements and understandings in accordance with the
paragraph above shall not affect the liabilities of the Government and MASB which
have accrued under the original licence dated 1 November 1992.
3.2.3
Operating rights and Operating Period
The operating rights are granted by the Government to further define and augment the rights
of MA Sepang as a licensed airport operator and manager of KLIA, and MASB as a licensed
airport operator and manager of the Designated Airports, and the operating rights shall run for
a period of twenty five (25) years from the Effective Date (“Operating Period”) and may be
renewed by the Government.
For this purpose, “Effective Date” refers to MA Sepang Effective Date and MASB Effective
Date collectively.
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3.2.4
Capital Expenditure
The Government shall pay, bear and be responsible for all Development Capex of the
Airports, except for Development Capex which is undertaken by MAHB, MA Sepang or MASB
at its own cost as specified in the Operating Agreements. MA Sepang and MASB shall pay,
bear and be responsible for all Operational Capex, defined as all other capital expenditure
other than Development Capex. MA Sepang and MASB shall notify the Government in writing
prior to undertaking and incurring Operational Capex.
For this purpose, “Development Capex” shall mean capital expenditure in respect of
developments on KLIA or the Designated Airports which directly contributes to capacity
enhancement of the airport and may include, amongst others, structural replacements or
upgrades of existing installations.
MAHB or any of its subsidiaries may also undertake Development Capex (“Self-Funded
Development Capex”) provided that the development is commercially viable and MAHB
obtains the approval of the Government. In certain cases, MAHB can also seek modification
to the User Fee payable in respect of the revenue generated specifically by the Self-Funded
Development Capex.
3.2.5
Payments by MA Sepang and MASB
(i)
The parties to the Operating Agreement for KLIA agree that the Residual Payment
shall be satisfied and discharged in the manner set out in Section 3.1 above.
(ii)
In consideration of the Government:
(a)
issuing and maintaining the New Licences; and
(b)
granting the operating rights,
MA Sepang and/or MAHB agree to pay the MA Sepang User Fee to the Government,
while MASB and MAHB also agree to pay the MASB User Fee to the Government.
MA Sepang shall pay to the Government a fee as prescribed in the Operating
Agreement for KLIA, equal to half of the amount calculated as the MA Sepang User
Fee every Calendar Quarter until the Balance Residual Payment is fully settled. After
the Balance Residual Payment has been settled, the MA Sepang User Fee is
calculated in accordance with the Operating Agreement for KLIA.
MASB shall pay to the Government a fee calculated based on a share of the
revenues generated from the commercial activities carried out by MASB and any
other subsidiary of MAHB at the Designated Airports (“MASB User Fee”) for every
Calendar Quarter.
(iii)
3.2.6
If MAHB delays in making any payment of the MA Sepang User Fee or MASB User
Fee to the Government in accordance with the provisions of the Operating
Agreements, MAHB and its relevant subsidiaries from whose revenue the MA
Sepang User Fee or MASB User Fee is derived shall be jointly liable to pay to the
Government interest on the outstanding amount of 1.5% per annum above the one
(1) month Kuala Lumpur Interbank Offered Rates calculated daily from the date the
MA Sepang User Fee or MASB User Fee becomes due and payable until full
settlement for the actual number of days elapsed based on a year of 365 days.
MARCS
The Operating Agreements provide for circumstances under which MA Sepang and MASB
may be compensated by the Government with MARCS calculated based on pre-determined
formulas.
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The circumstances are set out as follows:
(i)
where MA Sepang and/or MASB suffer losses due to extraneous Capex having
arisen from the implementation of any development projects for the Government. This
could be either greenfield airports or expansion of existing facilities. MARCS is paid to
MA Sepang and/or MASB to compensate for the marginal loss;
(ii)
where the Government has chosen not to increase passenger service charges
(“PSC”) to a benchmark level (which increases every five (5) years by the Consumer
Price Index less an adjustment factor), which results in a reduction in the revenue of
MAHB Group. Under such circumstances, MA Sepang and/or MASB shall be entitled
to MARCS, however payment is conditional on MA Sepang and/or MASB meeting
service levels and productivity targets, which is measured by increases in nonaeronautical revenue and achievement of baseline earnings before interest, tax,
depreciation and amortisation (EBITDA) margin targets.
The benchmark PSC rates for the first tariff cycle are set out as follows:
Benchmark PSC
LCCT
All other airports
International
RM25
RM65
Domestic
RM6
RM9
For this purpose, the period of each tariff cycle is five (5) years and the first tariff cycle
begins on the Effective Date.
(iii)
where the Government has instructed MA Sepang or MASB to implement a new
reduced rate on aeronautical charges which are lower than a benchmark level
resulting in a reduction in the revenue of MAHB Group. Aeronautical charges refer to
landing, parking and housing charges as described under the Civil Aviation
Regulations 1996;
(iv)
where the Government has instructed MA Sepang or MASB to implement a new
reduced rate on retail rental rates or rates for the grant of business concessions
which are lower than the benchmark level at the Airports and resulting in a reduction
in the revenue of the MAHB Group; and
(v)
where the Government has instructed MA Sepang to pay its PSC collections (whether
in whole or in part) to Express Rail Link Sdn Bhd (“ERL”) for the purpose of
supporting ERL’s services, and resulting in a reduction in revenue of MAHB Group.
Each MA Sepang and MASB may submit a written request to the Government for
consideration to be compensated with MARCS for circumstances that are not currently
covered under the Operating Agreements.
3.2.7
Termination
(i)
The Operating Agreements may be terminated by the Government or MAHB, and
subject to the respective provisions provided in the Operating Agreements.
(ii)
Notwithstanding any other provisions of the Operating Agreements, the Government
may at any time terminate the operating rights by expropriating KLIA or the
Designated Airports by giving not less than three (3) months’ written notice to that
effect to MAHB and MA Sepang or MASB, if the Government in its absolute discretion
considers that such expropriation is in the national interest or security. If the
Government expropriates KLIA or the Designated Airports, the Government shall pay
an amount to be determined by an independent valuer appointed by the Government,
MAHB and MA Sepang (or MASB as the case may be).
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(iii)
3.2.8
In the event any of the New Licences is suspended for more than three (3) months,
that New Licence shall be deemed to have been revoked by the Government
whereupon the relevant Operating Agreement will be terminated.
Lease of Land
(i)
The Government shall procure the FLC, as the registered owner of the KLIA Lands
and FLC Lands, to lease to MA Sepang and MASB the KLIA Lands and FLC Lands,
respectively, by procuring the execution by FLC of the New Lease Agreements no
later than fourteen (14) days after the execution date of the Operating Agreements.
The period of the lease under the New Lease Agreements shall be co-terminus with
the Operating Period to the extent that if the operating rights are extended pursuant
to the terms and conditions of the Operating Agreements, or otherwise, the period of
such leases shall be accordingly extended on such terms and conditions to be
determined by the Government, the FLC, and MA Sepang or MASB (as the case may
be) for the relevant period.
(ii)
Notwithstanding Section 3.2.8(i), MA Sepang may also request the Government to
procure an extended lease for a period of not more than sixty (60) years from the
date of the New Lease Agreement for KLIA Lands which MA Sepang considers
appropriate for commercial development. Such approved extended leases shall not
be affected by the termination or expiry of the Operating Agreement or the New
Lease Agreement for KLIA Lands.
(iii)
The Government shall use its best endeavour to assist MASB to procure lease over
the unalienated land forming part of and utilised for the Designated Airports (“State
Lands”).
(iv)
MA Sepang and MASB shall be entitled to use or develop or grant the right to any
person to use or develop any part of the KLIA Lands and FLC Lands for commercial
activities subject to the prior written approval from the Government, the FLC or any
regulatory or state authority and such utilization, development or grant complies with
the applicable laws, regulations or guidelines as may then be in force. Where
appropriate this right shall be incorporated into the New Lease Agreements and/or
the terms of use of the State Lands.
(v)
The Government shall ensure that the rental payable by MA Sepang to the FLC for
the use of KLIA Lands shall be the sum of RM20,000 per annum for each lot of KLIA
Lands. The nominal amount shall include the right of MA Sepang to permit any other
third party to occupy the KLIA Lands.
(vi)
The Government shall ensure that the rental payable by MASB to the FLC for all the
FLC Lands shall not exceed:
(a)
RM20,000 per annum for each lot of the FLC Lands at each Designated
Airport which is an international airport; and
(b)
RM10,000 per annum for each lot of the FLC Lands at each Designated
Airport which is not an international airport.
The amounts payable shall include the right of MASB to permit any other third parties
to occupy the FLC Lands.
(vii)
The parties to the Operating Agreement for the Designated Airports agree that
notwithstanding any provisions in the Operating Agreement for the Designated
Airports, the lease agreement executed by FLC and MAHB dated 25 October 2007 in
respect of the land where the Subang Airport is situated shall remain and continue to
subsist upon the terms and conditions thereto.
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4.
DETAILS OF THE PROPOSED NON-CORE DISPOSALS
In conjunction with the Proposed Restructuring, MAHB also intends to undertake the
Proposed Non-Core Disposals, which shall entail the Proposed NECC Disposal and
Proposed SIC Disposal. The agreements relating to the Proposed Non-Core Disposals will be
executed in due course.
4.1
Proposed NECC Disposal
The Proposed NECC Disposal shall entail the disposal of 162,388,926 ordinary shares of
RM1.00 each held by MAHB, representing the entire issued and paid up capital of NECC to
the Minister of Finance for a sale consideration of RM159,632,122 (“NECC Sale
Consideration”).
Under the agreement to be entered into relating to the Proposed NECC Disposal, the NECC
Sale Consideration shall be satisfied by deducting the NECC Sale Consideration from the
Residual Payment.
4.2
Proposed SIC Disposal
The Proposed SIC Disposal shall entail:
(i)
the disposal of 10,000,000 ordinary shares of RM1.00 each held by MAHB,
representing the entire issued and paid up capital of SIC (“SIC Shares”), to the
Minister of Finance for a cash consideration of RM1.00; and
(ii)
the granting of the Call Option to the Minister of Finance, the exercise of which would
require MASB to sell the Circuit to the Minister of Finance. The sale consideration for
the Circuit shall be the total sum of the book value of the Circuit as recorded in the
financial record of MASB as at the execution date of the agreement relating to the
Proposed SIC Disposal, less the book value of any capital expenditure incurred by
MASB for the purposes of maintenance or refurbishment of the Circuit which are
funded through Government. The Call Option is exercisable within the Call Option
Period. If the Call Option is not exercised by the end of the Call Option Period, it shall
be deemed exercised on the last date of the Call Option Period.
SIC has received from MAHB and MASB advances amounting to RM162.8 million and
RM183.2 million respectively over the period from year 1999 to year 2005 to pay for the
promoter’s rights fee and television rights fee.
SIC has repaid approximately RM224.9 million of these advances and as at 31 March 2008,
owes MAHB and MASB in aggregate, net advances of RM121.2 million (“Net Advances”).
Pursuant to the agreement to be entered into in relation to the Proposed SIC Disposal, the
Government will assume the obligation to repay the Net Advances to MAHB and MASB, as
the case may be at a date to be determined between the Minister of Finance and MAHB.
4.3
Basis for arriving at the sale considerations
4.3.1
Sale consideration of NECC
The NECC Sale Consideration was arrived at after taking into consideration the net book
value of its non-current assets of RM159,632,122 based on unaudited financial statements as
at 31 March 2008.
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In evaluating the NECC Sale Consideration, MAHB had also taken into account that the
activities of NECC had been suspended since 2001. The Board of MAHB is mindful that
substantial amount of financial resources would be required to revive the proposed
development of the National Exhibition and Convention Centre, Subang and the subsequent
lengthy gestation period required for its investment to generate adequate returns. Moreover,
moving forward, the proposed development activities of NECC are no longer in line with the
MAHB Group’s business strategy; wherein greater focus and resources shall be ploughed into
developing its airports operations business segment.
4.3.2
Sale consideration of SIC
The sale consideration of SIC was arrived at after taking into consideration its net liabilities
position of RM11,012,499 based on its latest audited financial statements as at 31 December
2007.
In arriving at the sale consideration, MAHB had also taken into account that the operations of
SIC have generally been funded by grants from the Government. Based on historical track
record, in certain years where revenue had been insufficient to cover operating cost, the
Government had provided grants to sustain operations. SIC operates and manages the
Circuit, where the Formula One (“F1”) World Championship and other world class motor-sport
events are staged. Hosting such events has elevated Malaysia to the front of the international
sporting community, as well as yielding significant economic benefit to the country. Needless
to say, it would be in the interest of the Government to sustain the operations of SIC. On the
contrary, the uncertain profitability associated with this business challenges the investment
objective of the MAHB Group. Furthermore, such event management activities are not in line
with the MAHB Group’s business strategy.
4.3.3
Sale consideration of the Circuit
The sale consideration of the Circuit will be based on the net book value of the Circuit as
recorded in the financial records of MASB as at the date of the share sale agreement relating
to Proposed SIC Disposal to be executed less the book value of any capital expenditure
incurred by MASB for the purposes of maintenance or refurbishment of the Circuit which are
funded through the Government’s grants.
4.4
Cost of investment
The original cost of investments in NECC and SIC and date of such investments are set out in
Table 1.
Based on the audited financial statements of NECC as at 31 December 2007, MAHB and
another subsidiary of MAHB have advanced a total of RM152,397,206 to NECC. The
aforesaid inter-company advances shall be fully converted into equity in NECC in the form of
shares to be issued by NECC to MAHB and/or the aforesaid subsidiary.
The original cost of investment/construction of the Circuit and the date such cost were
incurred were RM399,853,203 and 20 May 1999 respectively.
4.5
Liabilities to be assumed
4.5.1
NECC
The Government will not assume any liabilities pursuant to the Proposed NECC Disposal.
4.5.2
SIC
Under the agreement to be entered into in relation to the Proposed SIC Disposal, the
Government will assume the obligation to repay the Net Advances of RM121.2 million to
MAHB and MASB at a date to be determined by Minister of Finance and MAHB.
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4.5.3
Circuit
Upon the exercise of the Call Option, the Government shall agree to pay, discharge and
perform all of the obligations, duties and liabilities of MASB relating to the Circuit.
5.
BACKGROUND INFORMATION
5.1
Background information on NECC
NECC was incorporated as a private limited company in Malaysia on 21 July 2000 under the
Companies Act, 1965 with an authorised share capital of RM200,000,000 comprising
200,000,000 ordinary shares of RM1.00 each. Following a restructuring of inter-company
debts between MAHB, MA Sepang and NECC and the conversion of debts owing by NECC to
MAHB, MAHB is the legal and beneficial owner of all the 162,388,926 ordinary shares of
RM1.00 each representing the entire issued and paid up share capital of NECC.
NECC was incorporated for the purpose of undertaking the proposed development of the
National Exhibition and Convention Centre, Subang. Nevertheless, the proposed
development had been suspended since 2001.
NECC is a wholly-owned subsidiary of MAHB. The members of the Board of NECC are Dato’
Mahat bin Samah and Umar bin Bustamam. NECC does not have any subsidiary or
associated company.
The summarised audited financial information of NECC for the past five (5) financial years
ended 31 December 2003 to 2007 are set out in Table 2.
5.2
Background information on SIC
SIC was incorporated as a private limited company in Malaysia on 23 January 1998 under the
Companies Act, 1965. The authorised share capital of SIC is RM50,000,000 comprising
50,000,000 ordinary shares of RM1.00 each, of which 10,000,000 ordinary shares of RM1.00
each have been issued and fully paid-up.
The principal activities of the company are managing and operating the Circuit and the
organisation and promotion of motor sports and entertainment events.
SIC is a wholly-owned subsidiary of MAHB. SIC does not have any subsidiary or associated
company.
The members of the Board of SIC are Dato’ Mokhzani bin Mahathir, Dato’ Seri Bashir Ahmad
bin Abdul Majid, Datuk Hassan bin Abas, Syed Zaid bin Syed Jaffar Albar, Mohammed
Rashdan bin Mohd Yusof, Dr Ismail bin Haji Bakar, Dato’ Mohd Yasin bin Mohd Salleh, Dato’
Abd Hamid bin Mohd Ali, Faizal Sham bin Abu Mansor, Muhd Najib bin Mohd Rawi, Dato’
Che Azmi bin Murad (alternate to Dato’ Seri Bashir Ahmad) and Muhamad bin Batri (alternate
to Dato’ Mohd Yasin bin Mohd Salleh).
The summarised audited financial information of SIC for the past five (5) financial years
ended 31 December 2003 to 2007 are set out in Table 3.
5.3
Background information on the Circuit
The Circuit is held under H.S(D) 07420, No. P.T 4, Bandar Lapangan Terbang Antarabangsa
Sepang, Daerah Sepang, Negeri Selangor. The Circuit has been in operation since
November 1998 and it was officially launched in March 1999. The Circuit and its buildings are
approximately 10 years old. The entire Circuit is located on a piece of leasehold land which is
leased by Pesuruhjaya Tanah Persekutuan to MA Sepang for a term of 48 years 10 months
and twenty five (25) days, commencing from 11 June 1999 and expiring on 4 May 2048 for an
annual rent of RM2,840,201.
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As at 31 December 2007, the audited net book value of the Circuit is RM332,751,000.
The Circuit consists of the Sepang F1 Circuit, Sepang Go-Kart Circuit, Sepang 4x4 track and
other relevant buildings and site improvements. The site is irregular in shape with a total land
area of about 303.343 hectares. It is bounded and well served by the existing KLIA perimeter
service roads along its boundaries. The terrain is generally flat to undulating. There are
several water ponds within the subject site.
The description of the Circuit may be summarised into two (2) components:
(i)
infrastructure works /site improvements; and
(ii)
main buildings / structure.
The summarised description of the components of the Circuit is set out as below:
(i)
The infrastructure works / site improvements within the Circuit include the Sepang F1
Circuit, Sepang Go-Kart Circuit, Sepang 4x4 track, site improvements, e.g. paddock,
support paddock, car parks, internal service roads, fencing, drainage, gates, traffic
signs, ancillary buildings and a helipad.
(ii)
Erected on the Circuit are the main grandstand, grandstands and covered hillstands,
pit building, welcome centre, medical centre, plant building, garage and workshop,
and waste collection building.
6.
FINANCIAL EFFECTS OF THE PROPOSALS
6.1
Share capital
The Proposals will not have any effect on the issued and paid-up share capital of MAHB.
6.2
Earnings
The Proposed Restructuring is expected to contribute positively to the future earnings
capability of the MAHB Group, based on the new terms as set out in the Operating
Agreements.
The effects of the Proposed Non-Core Disposals on the earnings of the MAHB Group is
intended to be made available when the agreements relating to the Proposed Non-Core
Disposals are entered into and announced accordingly.
6.3
Net assets
Details of the proforma effect of the Proposals on the net assets of the MAHB Group is
intended to be made available when the agreements relating to the Proposed Non-Core
Disposals are entered into and announced accordingly.
6.4
Substantial shareholders
The Proposals will not have any effect on the substantial shareholders’ shareholding of
MAHB.
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7.
APPROVALS REQUIRED
The Proposals are conditional upon the following approvals being obtained:
(i)
the shareholders of MAHB for the Proposed Non-Core Disposals, at an extraordinary
general meeting (“EGM”) to be convened; and
(ii)
any other relevant authorities or parties, if required.
The agreements relating to the Proposals are not conditional upon each other except for:
8.
(i)
the Operating Agreements which are inter-conditional upon each other and become
effective upon the execution of the Lease Agreements; and
(ii)
the agreement to be entered into relating to the Proposed NECC Disposal, which is
conditional upon the satisfaction of all the subsequent conditions provided in the
Operating Agreement for KLIA.
ESTIMATED TIMEFRAME FOR THE COMPLETION OF THE PROPOSALS
The Proposals are expected to be completed by the first half of financial year 2009.
9.
DIRECTORS’ AND MAJOR SHAREHOLDERS' INTERESTS
Details of the Directors and major shareholders of MAHB who are deemed interested, or
persons connected to them, having an interest, directly or indirectly in the Proposals are set
out below.
(i)
As at 31 December 2008, Khazanah Nasional Berhad (“Khazanah”) holds 72.74%
directly in MAHB and is a wholly-owned subsidiary of the Minister of Finance.
Khazanah is therefore deemed interested in the Proposals.
Pursuant to Paragraph 10.08(9)(i) of the Listing Requirements of Bursa Malaysia
Securities Berhad, the Proposed Restructuring is not normally regarded as a related
party transaction. Therefore, the approval of MAHB’s shareholders is not required for
the Proposed Restructuring.
However, Khazanah will need to abstain from voting in respect of its shareholding in
MAHB, both direct and indirect (if any), on the respective resolutions for the Proposed
Non-Core Disposals at the forthcoming EGM of MAHB. Khazanah will also ensure
that persons connected to it (if any) will abstain from voting in respect of their direct or
indirect shareholdings on the respective resolutions for the Proposed Non-Core
Disposals.
(ii)
The Government, through the Minister of Finance, holds one special rights
redeemable preference share (“Special Share”) of RM1.00 each in MAHB. The
Special Share enables the Government to ensure that certain major decisions
affecting the operations of MAHB are consistent with the Government policies. The
Government or any representative or person acting on its behalf (“Special
Shareholder”) is entitled to receive notices of general meetings or any other
meetings of any class of shareholder of MAHB but not entitled to vote at such
meetings. However, the Special Shareholder is entitled to attend and speak at such
meetings.
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(iii)
10.
Hajah Jamilah Binti Dato’ Hj Hashim and Nadziruddin bin Mohd Basri are nonindependent non-executive directors of MAHB representing Khazanah’s interest in
MAHB and Dato’ Long See Wool is a non-independent non-executive director of
MAHB representing the Minister of Finance’s interest respectively in MAHB. In view
of the above, Hajah Jamilah Binti Dato’ Hj Hashim, Nadziruddin bin Mohd Basri and
Dato’ Long See Wool have abstained and will continue to abstain from deliberations
and voting at the relevant Board meetings of MAHB in respect of the Proposed NonCore Disposals. Hajah Jamilah Binti Dato’ Hj Hashim, Nadziruddin bin Mohd Basri
and Dato’ Long See Wool will also abstain from voting in respect of their shareholding
in MAHB, if any, whether direct or indirect, on the respective resolutions for the
Proposed Non-Core Disposals at the forthcoming EGM of MAHB. Presently, Hajah
Jamilah Binti Dato’ Hj Hashim, Nadziruddin bin Mohd Basri and Dato’ Long See Wool
have no direct or indirect shareholding in MAHB. They will also undertake to ensure
that persons connected to them (if any) will abstain from voting in respect of their
direct and indirect shareholdings on the respective resolutions for the Proposed NonCore Disposals at the forthcoming EGM of MAHB.
RELATED PARTY TRANSACTIONS
In view of the deemed interests disclosed in Section 9 above, the Proposed Non-Core
Disposals are considered related party transactions under Chapter 10 of the Listing
Requirements of Bursa Malaysia Securities Berhad.
An independent adviser will be appointed by the non-interested Directors of MAHB to
provide a fairness opinion on the Proposed Non-Core Disposals to the non-interested
directors and non-interested shareholders of MAHB.
11.
DIRECTORS’ STATEMENT
The Board of MAHB (save for Hajah Jamilah Binti Dato’ Hj Hashim, Nadziruddin bin Mohd
Basri and Dato’ Long See Wool who are deemed interested in the Proposed Non-Core
Disposals), after careful deliberations on the Proposed Non-Core Disposals, is of the
opinion that the Proposed Non-Core Disposals are in the best interest of the MAHB Group.
12.
ADVISER
BinaFikir Sdn Bhd (a wholly-owned subsidiary of Maybank Investment Bank) has been
appointed the Lead Adviser and CIMB has been appointed as the Principal Adviser to
MAHB for the Proposals.
13.
DEPARTURE FROM THE POLICIES AND GUIDELINES ON ISSUE/OFFER OF
SECURITIES OF THE SC (“SC GUIDELINES”)
The Proposals do not result in any departure from the SC Guidelines.
This announcement is dated 12 February 2009.
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