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MBf Holdings Berhad
- Proposed disposal of 100% equity interest in MBF Cards (M’sia) Sdn Bhd
1. Introduction
The Board of Directors of MBf Holdings Berhad (“MBfH” or “the Company”) wishes to announce that, the Company together with its wholly owned subsidiaries Atox
Cards Sdn Bhd (“Atox”) and Jastura Sdn Bhd (“Jastura”) have on 10 July 2012 entered into a conditional share sale agreement (“SSA”) with AMMB Holdings
Berhad (“AMMB”) for the proposed disposal of 100% equity interest held by them in
MBF Cards (M’sia) Sdn Bhd (“MBF Cards”) for a total cash consideration of
RM623.40 million (subject to adjustment on completion) (“Sale Consideration”)(the
“Proposed Disposal”).
The shareholding of MBfH, Atox and Jastura (collectively called the “Vendors”) in
MBF Cards is as follows:-
Vendors % Equity interest
No. of ordinary shares of
RM1.00 each
MBfH
Jastura
Atox
Total
51.00
37.45
11.55
100.00
2,685,150
1,971,549
608,301
5,265,000
Information on MBF Cards
MBF Cards was incorporated on 5 August 1977 in Malaysia under the Companies
Act 1965 as a private limited company and commenced its business in 1987. Its principal businesses are issuing credit and charge cards, acquiring merchants, channel for bill payments and the retailing of trading goods via easy payment plan.
MBF Cards also has a 33.33% equity interest in Bonuskad Loyalty Sdn Bhd
(“Bonuskad”). Bonuskad’s principal business is conducting Customer Loyalty
Scheme as principal or agents on behalf of companies participating in such schemes.
Under the Payment Systems Act 2003, Bank Negara Malaysia has regulatory oversight of its cards business.
For the year ended 31 December 2011, MBF Cards reported consolidated profit after tax of RM50.18 million and net assets totalling RM238.43 million.
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3. The Proposed Disposal
3.1 The Sale Shares
The Vendors shall sell to AMMB 5,265,000 issued and fully paid up ordinary shares of RM1.00 each in MBF Cards (“Sale Shares”), which is 100% of the total and paid up capital of MBF Cards.
The Sale Shares shall be sold to AMMB free from encumbrances and with all rights (including dividends or other distributions) attached thereto.
The subsidiaries of MBF Cards, namely, MBf Building Technology Sdn Bhd,
MBf Card & Travel Network Sdn Bhd, MBf Discount Card Sdn Bhd
(“Excluded Subsidiaries”) and all immovable properties of MBF Cards
(“Excluded Properties”) shall be disposed off to MBfH at their respective carrying values and the net amounts due from the MBfH Group of companies to MBF Cards be settled by MBfH at the date of completion.
3.2 Sale Consideration
The sale consideration of RM623.40 million which is referenced against the net assets value of MBF Cards as at 31 December 2010 of RM207.19 million
(“Benchmark NAV”) is arrived at on a willing buyer-willing seller basis, after taking into consideration:
(i) the net assets value of MBF Cards;
(ii) the net profits after tax of MBF Cards; and
(iii) that the offer was derived from an independent bid carried out by the advisors, Messrs. PricewaterhouseCoopers Capital Sdn Bhd.
The sale consideration of RM623.40 million is subject to net assets value
(“NAV”) adjustment on completion, as more particularly described in Section
3.3 below.
3.3 Sale Consideration Adjustment
Within 7 days after Completion Date (which is 10 business days after the conditions precedents are fulfilled), MBF Cards will prepare the Completion
Accounts for the purpose of computing its NAV at the Completion Date
(“Completion NAV”). The Completion Accounts will be reviewed by the auditors jointly appointed by the parties.
The Sale Consideration will be adjusted by comparing the Completion NAV verified by the auditors with the Benchmark NAV. In the event that the
Completion NAV is:-
(i) higher than the Benchmark NAV, the Sale consideration will be increased by the excess in the Completion NAV.
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The Retained Sum (as defined in Section 3.4(iii) below) will be released to the Vendors together with the payment of the excess by
AMMB
.
(ii) lower than the Benchmark NAV, the Sale Consideration will be reduced by the resulting shortfall in the Completion NAV.
The shortfall will be deducted from the Retained Sum (as defined in
Section 3.4(iii) below) and the balance refunded to the Vendors.
3.4 Settlement of the Sale Consideration
The Sale Consideration will be settled as follows:-
(i) A deposit of RM62.34 million, being 10% of the Sale Consideration on signing of the SSA;
(ii) 80% of the Sale Consideration less the Settlement Amount, will be paid by AMMB to MBfH on Completion Date. AMMB shall pay the
Settlement Amount to MBF Cards (on MBfH’s behalf).
The “Settlement Amount” refers to the aggregate of:
(aa) the net amount of all inter-alia inter-company loans and other advances due to MBF Cards; and
(bb) amounts due from MBfH arising from the Excluded
Subsidiaries and Excluded Properties as in Section 3.1 above.
(iii) the remaining sum of RM62.34 million (“Retained Sum”), being 10% of the Sale Consideration, shall on Completion Date be forwarded to and held by the Escrow Agent.
The Retained Sum, after the Sale Consideration adjustment will be dealt with by the Escrow Agent in accordance with Section 3.3 above.
3.5 Conditions Precedent
The completion of the Proposed Disposal is subject to the fulfilment of, inter
alia, the following conditions precedent:-
(i) the approval of the Vendors’ shareholders in general meeting for the disposal of the Sale Shares;
(ii) notification by MBF Cards to Bank Negara Malaysia with respect to the change in shareholders;
(iii) notification to the trustee and investors of MBF Cards’ Commercial
Paper/Medium Term Note Programme;
(iv) settlement and repayment of non-working capital borrowings by MBF
Cards; and
(v) the receipt by AMMB of all relevant approvals including that from
Bank Negara Malaysia, notifications and confirmations from applicable third parties for the sale of the Sale Shares.
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The Conditions Precedent are to be fulfilled or deemed fulfilled within three
(3) months of signing of the SSA or no later than 15 December 2012 or such later date as may be agreed by all parties.
3.6 Termination Clause
(i) The Vendors shall be entitled to terminate the SSA at any time prior to
Completion Date in the event of inter alia :-
(a) a receiver and manager is appointed over any of the assets or undertaking of AMMB;
(b) the AMMB enters into or proposes or resolves to enter into any arrangement, composition or compromise with creditors;
(c) an order is made for the winding up or dissolution of AMMB and/or AMMB becomes insolvent; and
(d) if there is a breach of any provisions in the SSA by AMMB.
(ii) AMMB shall be entitled to terminate the SSA at any time prior to
Completion Date in the event of inter alia :-
(a) a receiver and manager is appointed over any of the assets or undertaking of MBF Cards and/or any of the Vendors;
(b) MBF Cards and/or any of the Vendors enters into or proposes or resolves to enter into any arrangement, composition or compromise with creditors;
(c) an order is made for the winding up or dissolution of MBF
Cards and/or any of the Vendors and/or MBF Cards and/or any of the Vendors becomes insolvent; and
(d) if there is a breach of warranties by the Vendors resulting in loss equivalent to 15% of the NAV as of the latest audited accounts date of MBF Cards
(iii) Either party shall be entitled to terminate the SSA at any time prior to
Completion Date if there is a material change, or where events, circumstances occurrences or changes that individually or in aggregate with other events, circumstances or occurrences or changes has had or could reasonably have a material adverse effect on the business, assets, condition (financial or otherwise), prospects or results in the operations of MBF Cards resulting in the reduction of more than 15% of the NAV of the latest audited accounts date of MBF
Cards.
4. Rationale
The credit card business operates in a highly competitive market where MBF Cards competes principally with bank backed card issuers. As it is dependent on bank borrowings or debts raised through the Capital Market, its ability to continuously
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raise funds will be increasingly challenging. Currently in the absence of deposits taking its costs of funds are generally much higher.
The Board believes that the Proposed Disposal is timely and provides an opportunity for MBfH to unlock the value of its investment in MBF Cards at an attractive valuation. The Proposed Disposal is expected to result in a gain of approximately
RM383.89 million (after deducting estimated expenses in relation to the Proposed
Disposal of RM2.00 million) based on the audited financial statements of the MBfH
Group for the financial year ended 31 December 2011. The Board is also of the opinion that it would be more beneficial to focus and utilise its existing resources on the other business divisions within the Group.
5.
6.
Cost of Investment
The cost of investment of the Vendors in MBF Cards is set out below:-
Vendor
MBfH
Jastura
Atox
Date of investment
June 2003
June 2005
June 2004
% Equity interest
51.00
37.45
11.55
Cost RM’Million
15.89
35.83
12.03
Total – Original cost
Post - acquisition profits
Total - Group cost
100.00 63.75
173.76
237.51
Effects
The effects of the Proposed Disposal are as follows:-
6.1 Share Capital
Being a cash transaction, the Proposed Disposal will not have any effect on
MBfH’s share capital or the shareholdings of its substantial shareholders.
6.2
Earnings
The Proposed Disposal is expected to be completed by the fourth quarter of
2012. The expected gain from the Proposed Disposal is RM383.89 million and is equivalent to earnings per share of RM0.67.
It is expected that the loss of contribution to the MBfH Group’s future earnings consequent to the Proposed Disposal will be mitigated by the higher contributions from other investments/businesses and interest savings arising from the application of the proceeds from the Proposed Disposal.
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6.3 Net Assets
The effect on the consolidated net assets per share of MBfH Group upon completion of the Proposed Disposal is an increase of RM0.64 from RM1.77 to
RM2.41 based on the audited accounts as at 31 December 2011.
6.4 Gearing
The effect of the Proposed Disposal on the gearing ratio of MBfH Group is an improvement from 1.54 times to 0.70 times, based on the audited accounts as at 31 December 2011.
7.
8.
Intended Utilisation of Sale Proceeds
As at the date of this announcement, the Board is still assessing and evaluating plans for the optimal utilisation of the cash proceeds from the Proposed Disposal which may include, but not limited to using certain of the proceeds:-
 for repayment of bank borrowings,
 as working capital for its business operations in Papua New Guinea and Fiji; and/or
 for acquisition of viable businesses/assets.
It is intended that the utilisation of the sale proceeds will be with the objective of maximising shareholders’ value.
Risk Factors
The completion of the Proposed Disposal is conditional upon the Conditions
Precedent as set out in Section 3.5 above being satisfied and the non-occurrence of any event for termination as in Section 3.6 above.
There can be no assurance that such approvals and/or conditions will be obtained and/or satisfied or the non-occurrence of any event for termination of the Proposed
Disposal. MBfH will take all reasonable steps to complete the Proposed Disposal by ensuring the satisfaction or waiver (as the case may be) of the Conditions Precedent and preventing the occurrence of any events that could terminate the Proposed
Disposal.
9. Directors’ and Major Shareholders’ Interests
None of the Directors, major shareholders of MBfH or persons connected to them, has any interest, direct or indirect, in the Proposed Disposal.
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10. Statement by Directors
The Board of MBfH, having considered all aspects of the Proposed Disposal, is of the opinion that it is in the best interest of MBfH Group.
11. Highest Percentage Ratio Applicable to the Proposed Disposal
The highest percentage ratio, computed in accordance with paragraph 10.02(g) of the
Main Market Listing Requirements (the “Listing Requirements”), attributable to the
Proposed Disposal is 80.42%. Accordingly, pursuant to the Listing Requirements, the Proposed Disposal requires the approval of the shareholders of MBfH.
12. Expected Date of Completion
Subject to the fulfilment of all the conditions precedent, the Proposed Disposal is expected to be completed by the fourth quarter of 2012.
13. Document for Inspection
A copy of the SSA is available for inspection at the Registered Office of MBfH at
Level 17, Menara MBf, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia, between
9.00 a.m. and 5.00 p.m. Monday to Friday (except for public holiday) for a period of three (3) months from the date of the SSA.
This announcement is dated 10 July 2012.
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