TITAN PETROCHEMICALS GROUP LIMITED (incorporated in Bermuda with limited liability)

Transcription

1 The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein. TITAN PETROCHEMICALS GROUP LIMITED (incorporated in Bermuda with limited liability) (Stock Code: 1192) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION RELATING TO THE PROPOSED ACQUISITION OF OIL TRADING BUSINESS CONTINUING CONNECTED TRANSACTION RELATING TO LEASE OF PROPERTY AND INCREASE IN PRICE AND TRADING VOLUME OF SHARES Financial Adviser to Titan Petrochemicals Group Limited WAG FINANCIAL SERVICES GROUP LIMITED Very substantial acquisition and connected transaction On 2 November 2004, the Purchaser, an indirect wholly-owned subsidiary of the Company, and the Vendor entered into the Sale and Purchase Agreement, pursuant to which the Purchaser agreed to acquire from the Vendor the Oil Trading Business for a consideration of US$25,000,000 (approximately HK$195,000,000) to be satisfied by the issue of an aggregate of 278,134,360 Consideration Shares credited as fully paid at HK$ per Consideration Share. The market value of the Consideration Shares is approximately HK$222,507,488, calculated on the basis of the closing price of HK$0.80 per Share on the Last Dealing Date. As at the date of this announcement, the Vendor (which is wholly-owned by Mr. Tsoi, the chairman and a director of the Company and his associate) is the controlling shareholder of the Company who together with its associates (excluding the Group) holds approximately 53.82% of the entire issued share capital of the Company. Accordingly, under the Listing Rules, the Vendor is a connected person of the Company. The Acquisition therefore constitutes a connected transaction and very substantial acquisition of the Company under the Listing Rules by virtue only of the revenue ratio calculated as required under the Listing Rules. 1

2 Accordingly, the Acquisition is subject to the approval of the Independent Shareholders on which voting shall be taken by poll. Great Logistics, Mr. Tsoi and their respective associates will abstain from voting on the resolution to approve the Acquisition at the SGM. An independent board committee of the Company will be established to consider the Acquisition and to advise the Independent Shareholders. An independent financial adviser will be appointed to advise the independent board committee of the Company and the Independent Shareholders regarding the Acquisition. A circular containing, among other things, a notice convening the SGM for approving the Acquisition, further details relating to the Acquisition, a letter from the independent board committee of the Company to the Independent Shareholders in relation to the Acquisition, and a letter from an independent financial adviser to be appointed to advise the independent board committee of the Company and the Independent Shareholders on the Acquisition will be dispatched to the Shareholders as soon as practicable. An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. Continuing connected transaction On Completion, the Purchaser will enter into the Tenancy Agreement with the Vendor/Landlord in respect of the lease of the Office Space. As the percentage ratios for the Tenancy Agreement is less than 2.5%, no independent shareholders approval is required pursuant to Rule 14A.34 of the Listing Rules. Details of the Tenancy Agreement will be included in the annual report and accounts of the Company for each of the relevant financial years in accordance with Rules 14A.45 and 14A.46 of the Listing Rules. Increase in price and trading volume of shares of the Company The Directors have noted the recent increase in price and trading volume of the shares of the Company and wish to state that they are not aware of any reasons for such increase. The Company continues to monitor the shipping market and, from time to time, discusses with independent third parties with a view to increasing its operating fleet size, whether by way of acquisition and/or chartering arrangements. No agreement has been entered into between the Company and any such third party in respect of any acquisition and/or chartering arrangements, save for the Sale and Purchase Agreement as disclosed in this announcement and two time charter agreements dated 2 November 2004 entered into between a subsidiary of the Company and an independent third party in respect of the time charter of two vessels as disclosed in the Company s announcement dated 5 November Save as aforesaid, the Directors confirm that there are no negotiations or agreements relating to intended acquisitions or realizations which are discloseable under Rule of the Listing Rules, neither is the Board aware of any matter discloseable under the general obligation imposed by Rule of the Listing Rules which may be of a price-sensitive nature. At the request of the Company, trading in the Shares on the Stock Exchange was suspended from 9: 30 a.m. on 3 November 2004, pending the issue of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange from 9: 30 a.m. on 8 November

3 THE SALE AND PURCHASE AGREEMENT Date: 2 November 2004 Parties: Petro Titan Pte. Ltd. (as Purchaser) Titan Oil Pte. Ltd. (as Vendor) Assets to be acquired: Pursuant to the Sale and Purchase Agreement, the Purchaser agreed to acquire from the Vendor the Oil Trading Business which includes, among other things, the following: (a) all of the Vendor s rights, benefits and interest in contracts relating to the Oil Trading Business as stated in the Sale and Purchase Agreement; and (b) all lists, data particulars and information of the clients of the Oil Trading Business of the Vendor and the related computer operation system. The existing contracts relating to the Oil Trading Business are to be transferred to the Group, either by way of assignment or (prior to such assignment) held on trust for the Group. All receivables and liabilities associated with such contracts immediately prior to Completion will belong to and are the responsibility of the Vendor and the Group will enjoy the benefit of such contracts after Completion. The Group may also enter into new contracts with those customers, if that is more practicable. An oil trading business does not require material tangible assets, apart from appropriate trading facilities and financial resources which will either be transferred to the Group or which the Group itself already enjoys. The assets referred to above, the employees being transferred and the benefit of the non-compete undertaking from the Vendor (as described below) together allow the Group to enjoy the future benefits that could be reaped from the Oil Trading Business. Certain employees, who accept the offer of the Purchaser to continue their employment with the Purchaser in connection with the Oil Trading Business will also be transferred to the Purchaser pursuant to the Sale and Purchase Agreement. The Purchaser will not acquire any assets or liabilities as at Completion from the Vendor. The Group expects that most employees of the Vendor currently involved in the Oil Trading Business will join the Group on Completion. Consideration: The total consideration for the Acquisition is US$25,000,000 (approximately HK$195,000,000), adjusted downward on a dollar for dollar basis so that the consideration is equal to 8 times the amount of the Net Profits if that amount is less than US$25,000,000 (approximately HK$195,000,000). The purchase price shall be satisfied by the issue of an aggregate of 278,134,360 Consideration Shares credited as fully paid up at HK$ per Consideration Share. The consideration (including the issue price for the Consideration Shares) was determined after arm s length negotiations between the parties to the Sale and Purchase Agreement based on normal commercial terms, and after taking into consideration the financial performance and future prospects of the Oil Trading Business, the market value and underlying asset value of the Shares. The price per Consideration Share represents an approximate 12.36% discount to the closing price of HK$0.80 per Share on the Last Dealing Date, an approximate 5% discount to the average 3

4 closing price of HK$0.738 per Share for the five consecutive trading days ending on and including the Last Dealing Date and an approximate 2.76% discount to the average closing price of HK$0.721 per Share for the ten consecutive trading days ending on and including the Last Dealing Date. The Consideration Shares will not be subject to any lock up or dealing restrictions. An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. Upon the issue of the Consideration Shares by the Company to the Vendor (and assuming that there is otherwise no change to the share capital of the Company or to the shareholding of the Vendor in the Company), the Vendor will remain the controlling shareholder of the Company under the Listing Rules and its shareholding interest in the Company will increase from approximately 53.82% to approximately 56.47% while the shareholding interest of the public in the Company will decrease from approximately 46.18% to approximately 43.53%. Conditions precedent: Completion of the Sale and Purchase Agreement is subject to, among other things, the following conditions being satisfied or waived on or before 31 December 2004 (or such other date as the parties to the Sale and Purchase Agreement may agree in writing): (a) the Purchaser obtaining at or before Completion the GTP Status in connection with the Oil Trading Business subject to such conditions (if any) that the Purchaser may in its absolute opinion accept; (b) to the extent required by the Listing Rules, the Sale and Purchase Agreement and the transactions contemplated thereunder being approved by the Independent Shareholders at the SGM; (c) the Stock Exchange having granted the listing of and permission to deal in the Consideration Shares; (d) the Vendor and (as the case may be) the Purchaser having received consent from its bank creditors (if and to the extent required) in connection with the banking facilities used by it as well as the Vendor having received consent (if required) from the relevant parties under the fuel oil contracts as set out in Schedule 1, Part A, Section 1 of the Sale and Purchase Agreement; (e) no breach of warranties given by the Vendor under the Sale and Purchase Agreement; and (f) the continued operation of the Oil Trading Business in the ordinary course as a going concern and there being no material adverse change to that business and the business assets to be transferred up to Completion. If the conditions are not satisfied or (in the case of items (e) and (f) above) waived by 31 December 2004, the Purchaser may elect to proceed to Completion, subject to such adjustment to the consideration as the parties may agree, or prescribe a new date for Completion, or terminate the Sale and Purchase Agreement, in which case neither party will have any claim against the other for costs, damages, compensation or otherwise, save for antecedent breaches. 4

5 Completion Completion shall, upon the satisfaction or waiver of conditions to Completion, take place on the later of the date falling 3 Business Days from Petro Titan s receipt of the relevant completion notice or on 31 December 2004, or such other date as the parties to the Sale and Purchase Agreement may agree in writing. Undertakings The Vendor undertakes to the Purchaser that it shall not at any time while Mr. Tsoi remains a controlling shareholder of the Vendor, be engaged, concerned or interested in operating, performing or carrying on a business that is similar to or in competition with the Oil Trading Business at any time after Completion save to the extent required or otherwise contemplated under the Sale and Purchase Agreement. Pursuant to the terms of the Sale and Purchase Agreement, the Vendor is entitled to retain, at Completion, among other things, all receivables, book debts and other debts which are due and owing to the Vendor by clients of the Oil Trading Business and such receivables that are due and owing to the Vendor in connection with services provided in connection with the Oil Trading Business prior to Completion (together with interest payable thereon). The Vendor has agreed under the Sale and Purchase Agreement to assist in procuring the transfer of the benefit of existing banking facilities (amounting to approximately US$214,779,192 (approximately HK$1,675,277,698) in principal amount as at 2 November 2004) which are utilized in connection with the Oil Trading Business to the Purchaser, without additional charge. The Vendor shall be liable for the amount of such banking facilities that have been utilized/drawn down up to Completion. To facilitate such transfer (which may take time), the Vendor has undertaken that it will, and it will procure that its beneficial owners will (without additional charge to the Purchaser), continue to provide the guarantees and security which secure the existing banking facilities to the relevant bank creditors at the request of the Purchaser. As there is no security granted over the Company s assets, the above guarantees and security are exempt from reporting, announcement and Independent Shareholders approval under the Listing Rules. THE TENANCY AGREEMENT Pursuant to the Sale and Purchase Agreement, the Purchaser will at Completion enter into the Tenancy Agreement with the Vendor/the Landlord for the lease by the Purchaser of the Office Space (being the premises currently used for the operation of the Oil Trading Business) for a term of 3 years commencing from 1 January 2005 till 31 December 2007 inclusive at an aggregate rental of S$212, (approximately HK$995,038.01) per annum. The aggregated cap for the rental will be S$213,000 (approximately HK$996,627) per annum on the basis of S$17, (approximately HK$82,919.83) per month which is less than 2.5% of each of the applicable percentage ratios in respect of the Company. The Directors (including the independent nonexecutive Directors) confirm, that having made due enquiries, the terms of the Tenancy Agreement (including the rental) are fair and reasonable, on normal commercial terms, and have been determined after arms length negotiations between the Vendor and the Purchaser and by reference to the prevailing market rental for similar properties (e.g. with respect to floor space and age of the building) in the vicinity. 5

6 INFORMATION ON THE GROUP The core business of the Group encompasses oil trading of petrochemicals, gas oil and fuel oil for power plants and other direct end users, storage, transportation, bunkering and other oil related services in the supply chain of the oil industry. It is a vertically integrated oil services company that offers various downstream oil services to clients in China and the Asia Pacific region. Its services include oil transportation, storage, bunkering, trading and ship management. INFORMATION ON THE VENDOR AND THE OIL TRADING BUSINESS The Vendor is a company incorporated in Singapore principally engaged in the trading, merchandising and selling of oil. Based in Singapore, it is located in the largest oil trading centre in South East Asia. The Oil Trading Business is primarily involved in the trading of fuel oil products and in order to hedge against the risk of price fluctuations, the Vendor currently engages in over-the-counter paper swaps. The principal customers of the Oil Trading Business include worldwide international oil trading companies. Based on the unaudited management financial statements as at 30 June 2004, the net asset value and total assets of the Oil Trading Business are approximately S$30.7 million (approximately HK$143.6 million) and approximately S$136.1 million (approximately HK$636.8 million) respectively. The revenue of the Oil Trading Business for the six months ended 30 June 2004 is approximately S$505.1 million (approximately HK$2,363.4 million). For the two years ended 31 December 2003 and the six months ended 30 June 2004, the Oil Trading Business recorded an unaudited net profit after taxation of approximately S$6.0 million (approximately HK$28.1 million), S$4.2 million (approximately HK$19.7 million) and S$4.9 million (approximately HK$22.9 million) respectively. During the same periods, it recorded an unaudited net profit before tax and extraordinary items of approximately S$7.0 million (approximately HK$32.8 million), S$4.7 million (approximately HK$22.0 million) and S$5.2 million (approximately HK$24.3 million) respectively. REASONS FOR THE ACQUISITION AND LEASE ARRANGEMENT The Group is a leading vertically integrated oil services company that offers various downstream oil services to clients in China and the Asia Pacific region. Its services include oil transportation, storage, bunkering, trading and ship management. The Group is striving to become a low cost logistics and oil services provider in China and the Asia Pacific region. In order to do so, it has been seeking to develop more businesses to capitalize on market opportunities. The Directors believe that the Acquisition would be instrumental to the Group in successfully implementing its business strategy. Upon the completion of the Acquisition, the Group would gain an oil trading presence in Singapore, the largest oil trading centre in South East Asia. Complemented by the Group s FSUs and expanding fleet of VLCCs, the Directors believe that the Group would be well on its way to becoming a one stop shop for downstream oil services, encompassing procurement, blending and transportation. As a result of the Acquisition, the Purchaser would require the use of the Office Space owned by the Vendor which is currently the premises used by the Vendor in operating the Oil Trading Business. Having considered the fact that the terms of the Tenancy Agreement are comparable to 6

7 prevailing market rental for similar properties in the vicinity and the disruption and expenses that relocation inevitably entails, the Directors consider that the continued use of the Office Space pursuant to the Tenancy Agreement after Completion to be desirable. The terms of the Sale and Purchase Agreement stipulate that the Purchaser and the Vendor shall enter into the Tenancy Agreement at Completion. The Directors consider the terms of the Sale and Purchase Agreement and the Tenancy Agreement have been made on normal commercial terms and are fair and reasonable and the Acquisition is in the interest of the Company and the Shareholders as a whole. The independent non-executive Directors will give their recommendations on the Acquisition to the Independent Shareholders, after they have received the advice of the independent financial adviser to be appointed as referred to below. GENERAL The Directors have noted that an article was published on 3 November 2004 in the newspapers including Hong Kong Economic Times regarding the Acquisition. Directors wish to clarify that the Company did not intend to make statements as to the forecast results attributable to the Oil Trading Business for the year ending 31 December They note that if the results attributable to the Oil Trading Business for the six months ended 30 June 2004 (as disclosed above) were to be annualised, then the consideration for the Acquisition would represent approximately 4.2 times over the annualised amount. However, the Directors wish to further clarify that such information has not been reviewed by auditors and the relevant commentary in the press article should not be regarded or construed as any guidance on any specific profit forecast of the Oil Trading Business. As at the date of this announcement, the Vendor (which is wholly-owned by Mr. Tsoi, the chairman and a director of the Company and his associate) is the controlling shareholder of the Company who together with its associates (excluding the Group) holds approximately 53.82% of the entire issued share capital of the Company. Accordingly, under the Listing Rules, the Vendor is a connected person of the Company. The Acquisition therefore constitutes a connected transaction and very substantial acquisition by virtue only of the revenue ratio calculated as required under the Listing Rules. Accordingly, the Acquisition is subject to the approval of the Independent Shareholders on which voting shall be taken by poll. Great Logistics, Mr. Tsoi and their respective associates will abstain from voting on the resolution to approve the Acquisition at the SGM. An independent board committee of the Company will be established to consider the Acquisition and to advise the Independent Shareholders. An independent financial adviser will be appointed to advise the independent board committee of the Company and the Independent Shareholders regarding the Acquisition. In respect of the Lease Arrangement, the annual rental payable under the Tenancy Agreement will not exceed S$213,000 (approximately HK$996,627) per annum on the basis of S$17, (approximately HK$82,919.83) per month. As each of the percentage ratios in respect of the Lease Arrangement is less than 2.5%, no independent shareholders approval is required pursuant to Rule 14A.34 of the Listing Rules. Details of the Tenancy Agreement will be included in the annual report and accounts of the Company for each of the relevant financial years in accordance with Rules 14A.45 and 14A.46 of the Listing Rules. 7

8 A circular containing, among other things, a notice convening the SGM for approving the Acquisition, further details relating to the Acquisition, a letter from the independent board committee of the Company to the Independent Shareholders in relation to the Acquisition, and a letter from an independent financial adviser to be appointed to advise the independent board committee and the Independent Shareholders on the Acquisition will be dispatched to the Shareholders as soon as practicable. An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. At the request of the Company, trading in the Shares on the Stock Exchange was suspended from 9: 30 a.m. on 3 November 2004, pending the issue of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange from 9: 30 a.m. on 8 November INCREASE IN PRICE AND TRADING VOLUME OF SHARES OF THE COMPANY This statement is made at the request of the Stock Exchange. The Directors have noted the recent increase in price and trading volume of the shares of the Company and wish to state that they are not aware of any reasons for such increase. The Company continues to monitor the shipping market and, from time to time, discusses with independent third parties with a view to increasing its operating fleet size, whether by way of acquisition and/or chartering arrangements. No agreement has been entered into between the Company and any such third party in respect of any acquisition and/or chartering arrangements, save for the Sale and Purchase Agreement as disclosed in this announcement and two time charter agreements dated 2 November 2004 entered into between a subsidiary of the Company and an independent third party in respect of the time charter of two vessels as disclosed in the Company s announcement dated 5 November Made by the order of the Board, the directors of which individually and jointly accept responsibility for the accuracy of the foregoing statement. Save as disclosed above, the Directors confirm that there are no negotiations or agreements relating to intended acquisitions or realizations which are discloseable under Rule of the Listing Rules, neither is the Board aware of any matter discloseable under the general obligation imposed by Rule of the Listing Rules, which may be of a price-sensitive nature. As at the date of this Announcement, the executive Directors are Mr. Tsoi Tin Chun, Mr. Barry Cheung Chun Yuen, JP, Mr. Patrick Wong Siu Hung, Mr. Dave Lee Yeow Long; the non-executive Director is Mr. Cheong Soo Kiong and the independent non-executive Directors are Mr. Liu Hongru, Miss. Maria Tam Wai Chu, JP and Mr. Wong Kong Hon, JP. DEFINITIONS In this announcement, unless the context requires otherwise, the following terms have the meanings as set out below: Acquisition the proposed acquisition of the Oil Trading Business by the Purchaser from the Vendor pursuant to the Sale and Purchase Agreement; 8

9 associate Board Business Day Company Completion Consideration Shares Directors FSU Great Logistics Group GTP Status HK$ Hong Kong Independent Shareholders Last Dealing Date Lease Arrangement Listing Rules Mr. Tsoi has the meaning ascribed thereto under the Listing Rules; the board of Directors; any day other than Saturday or Sunday on which commercial banks and financial institutions in Singapore are open for business; Titan Petrochemicals Group Limited, a company incorporated in Bermuda and the shares of which are listed on the Stock Exchange; completion of the Acquisition; 278,134,360 new Shares proposed to be allotted and issued to the Vendor or its nominee(s) as consideration for the Acquisition; the directors of the Company; floating storage unit; Great Logistics Holdings Ltd., a company incorporated in the British Virgin Islands, which is wholly-owned by the Vendor and which holds an approximate 53.82% equity interest in the Company; the Company and its subsidiaries; Global Trader Programme status granting an entity in Singapore a concessionary tax rate of 10% for its business; Hong Kong dollars, the lawful currency of Hong Kong; the Hong Kong Special Administrative Region of the People s Republic of China; the Shareholders other than Great Logistics, Mr. Tsoi and their respective associates; 2 November 2004, the last day of trading of the Shares on the Stock Exchange prior to suspension of trading of the Shares pending issue of this announcement; the leasing of the Office Space by the Landlord to the Tenant pursuant to the Tenancy Agreement; the Rules Governing the Listing of Securities on the Stock Exchange; Mr. Tsoi Tin Chun, the chairman who together with his associate wholly-own Titan Oil; 9

10 Net Profits the quotient which results from dividing (i) the aggregate of the net profit after taxation attributable to the Oil Trading Business for the three years ended 31 December 2003 and the six months ended 30 June 2004, each as set out in the accountants report to be included in the circular relating to the Acquisition by (ii) 3.5; Office Space 8 Temasek Boulevard, #29-02, Suntec Tower 3, Singapore , excluding exterior faces of external walls, exterior faces of boundary walls and the roof; Oil Trading Business or Business Petro Titan or Purchaser or Tenant S$ Sale and Purchase Agreement SGM Shareholders Shares Stock Exchange Tenancy Agreement Titan Oil or Vendor or Landlord US$ VLCC the core business conducted by the Vendor before Completion, comprising the trading of oil in Singapore and the South East Asia region; Petro Titan Pte. Ltd., a company incorporated in Singapore with limited liability, which is an indirect wholly-owned subsidiary of the Company; Singapore dollars, the lawful currency of Singapore; the conditional sale and purchase agreement dated 2 November 2004 entered into between the Purchaser and the Vendor in relation to, among other things, the Acquisition; the special general meeting of the Company to be convened to consider and, if thought fit, approve, amongst other things, the Sale and Purchase Agreement and the transactions contemplated thereunder; holder(s) of the Shares; ordinary share(s) of HK$0.01 each in the share capital of the Company; The Stock Exchange of Hong Kong Limited; the agreement to be entered into between the Landlord and Tenant at Completion in relation to the lease of the Office Space; Titan Oil Pte. Ltd., a company incorporated in Singapore with limited liability, which is wholly-owned by Mr. Tsoi and his associate, and which through a wholly-owned subsidiary held approximately 53.82% of the issued share capital of the Company, and which is a controlling shareholder (as the term is defined in the Listing Rules) of the Company as at the date of this announcement; US dollars, the lawful currency of the United States of America; and very large crude carrier. 10

11 Unless otherwise specified in this announcement, translations of S$ into HK$ are made in this announcement, for illustration only, at the rate of S$1.00 to HK$4.679 and translations of US$ into HK$ are made in the announcement, for illustration only, at the rate of US$1.00 to HK$7.80. No representation is made that any amounts in US$, S$ or HK$ could have been or could be converted at those rates or at any other rates. By order of the board Titan Petrochemicals Group Limited Barry Cheung Chun Yuen, JP. Chief Executive Hong Kong, 5 November 2004 Please also refer to the published version of this announcement in the (South China Morning Post) 11