REPORT OF INDEPENDENT FINANCIAL ADVISOR S OPINION

Transcription

1 REPORT OF INDEPENDENT FINANCIAL ADVISOR S OPINION IN RELATION TO THE ACQUISITION OF ASSETS BY MEAN OF PURCHASE AND ACCEPTANCE OF TRANSFER OF PARTIAL BUSINESS FROM CONNECTED PERSONS In order to proposed to the shareholders of NFC FERTILIZER PUBLIC COMPANY LIMITED NFC FERTILIZER PUBLIC COMPANY LIMITED Prepared by 18 March 2559

2 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons CONTENT Page Definition 3 Background and Characteristics of Transaction 5 Summary of Independent Financial Advisor Opinion 7 1. Disposition of assets and connected transaction Objective and background of the transaction Date/Month/Year of the Transaction Connected persons and characteristic of relationship with the Company General Characteristic and Size of the Transaction Details of Acquired Assets Total value of reciprocations The value of acquired assets Basis for setting value of reciprocations Expected benefits for the company Utilized source of fund Conditions for the program Effects on Issuance and offering the company s ordinary shares only to C&A which is a connected person 32 2.Transaction s Validity and Benefits Transaction s validity and benefits for listed company Risks from transaction Comparison of pros and cons of transaction and non-transaction Comparison of pros and cons of transaction and non-transaction with related persons 40 3.Appropriateness of transaction price and condition Appropriateness of transaction price Appropriateness of Conditions for the Transaction Summary of the Independent Financial Advisor s Opinion against all Transactions 69 Attachment 1- Overview of the Business Operation and the Performance of NFC Fertilizer Public Company Limited Attachment 2- Overview of the Business Operation and the Performance of Chemicals and Aromatics (Thailand) Co.,Ltd. Attachment 3- Summary of Information of SC Carrier Co.,Ltd. Attachment 4- Summary of Information of SC Management Co.,Ltd. Attachment 5- Summary of Independent Appraisers Appraisal Page 2/74

3 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Definition The Independent Financial Advisor has provided the definitions to have the meaning as specified herein in order to be used in this document. In terms of the accounting definition, the meanings are in accordance with the generally accepted accounting principle at present. These definitions are as follows:- Abbreviations Company or NFC Independent Financial Advisor or KTBS SET Office of SEC IEAT C&A RBT SCC SCM Partial Business Full name/text NFC Fertilizer Public Company Limited KTB Securities (Thailand) Co.,Ltd. Stock Exchange of Thailand Office of the Securities and Exchange Commission Industrial Estate Authority of Thailand Chemicals and Aromatics (Thailand) Co.,Ltd. Rayong Bulk Terminal Co.,Ltd. SC Carrier Co.,Ltd. SC Management Co.,Ltd. Partial Business transferred from C&A Page 3/74

4 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons No. 041/2016 March 18, 2016 Subject: The opinion report of the Independent Financial Adviser on the asset acquisition via the purchase of assets and the acceptance of partial business transfer from related parties Attention: The Board of Directors and Shareholders of NFC Fertilizer Public Company Limited Reference: 1. The resolution of the Board of Directors Meeting no. 2/2016 held on March 2, The information on the asset acquisition and the connected transaction of the Company 3. The 2014 Annual Registration Statement (Form 56-1) of NFC Fertilizer Public Company Limited 4. The financial statement of the Company and its subsidiaries audited by certified public accountant for the twelve months ended December 31, The financial statement of Chemicals and Aromatic (Thailand) Co., Ltd., ( C&A ) audited by certified public accountant for the twelve months ended December 31, The 2015 trial balance of NFC Fertilizer Public Company Limited 7. The 2015 trail balance of Chemicals and Aromatic (Thailand) Co., Ltd., ( C&A ) 8. The legal documentation and contracts relevant to the transaction 9. Certificate / Memorandum of Association / List of shareholders names (Bor Or Jor. 5) of the Company and its subsidiaries and C&A and other documents, as well as the interviews with the management of the Company and its subsidiaries and relevant staff The results analyzed by KTB Securities (Thailand) Co., Ltd., ( the IFA or "KTBS") in this report are based on the information and assumptions obtained from the management of NFC Fertilizer Public Company Limited ( the Company" or "NFC") and the information revealed to the public by the Company on the websites of the Securities and Exchange Commission ( and the Stock Exchange of Thailand ( The IFA shall not be responsible for any profits/losses and impacts arising from the transaction. Most documents related to the Company and the relevant companies are in electronic format or the Scan of Original Documents where the IFA granted by the Company believes that they are true copy. The IFA undertakes the study using its knowledge, skill and discretion as a professional whose consideration and opinions, in certain circumstances and information, can be realized today. If the situation and information has been changed significantly, it may affect the results of the IFA study. Page 4/74

5 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Background and Characteristic of the Transaction NFC Fertilizer Public Company Limited ( the Company" or "NFC"), a company listed on the Stock Exchange of Thailand ("the Stock Exchange or SET"), originally the Company ran a business in the production and distribution of chemical fertilizers, the sales of gypsum, ammonia and sulfur acid including providing sulfuric-acid storage tank service, but afterwards, the Company experienced business problems until being required to carry out the rehabilitation plan as ordered by the Central Bankruptcy Court in During the process of rectifying the situation according to the plan, the Company has adjusted its business approach by maintaining the main revenues derived from the operation of the import and distribution of ammonia to C&A and from the sale and service of sulfuric-acid containers. While the Company was under the rehabilitation, as a planning administrator, the Company has had a plan to acquire the assets and partial business transfer from C&A. In the first step, the Company has entered into a new contract to replace the original trading ammonia contract with C&A on July 1, The main point was the changes in the price of goods and certain conditions of the contract. The change in the conditions would give the Company a higher profit from the sales increase and would have a positive effect on the Company s earnings in the future (as detailed in the summary table of the differential of ammonia contracts with changes under section General Characteristic of the Transaction). However, on November 3, 2015, the Supreme Court lifted the order of the request for the rehabilitation of the Company. As a result, the Company had to leave the rehabilitation plan, which made its intention to buy the ammonia business from C&A under such plan unsuccessful. Currently the Company is in the process of urgently resolving the delisting issue within March 31, 2016 according to the notice from the Stock Exchange. Previously, the Company was all along looking for opportunities and business practice that could generate more revenues and earnings to the Company to improve its financial position in the future. Therefore, the Board of Directors Meeting of the Company no. 2/2016 held on March 2, 2016 has made a resolution to propose to the 2016 Annual General Meeting of Shareholders for the approval to acquire the assets and partial business transfer from Chemicals & Aromatic (Thailand) Co., Ltd., ("C&A") in relation to the distribution business of chemical products - ammonia and ammonium hydroxide type, i.e. the ownership of the property in all relevant distribution business of chemicals products - ammonia and ammonium hydroxide type, which includes the land lease agreement with buildings at two locations of plants in Pathum Thani and Surat Thani Provinces, the ammonia tanks and accessories, the customer data with trading agreements such as the ammonia trade, the loan of ammonia cylinder and accessories and other contracts related to the operations, with the total value of 282,896, baht inclusive of VAT. The payment for such assets and partial business transfer will be made by the issuance of new ordinary shares to specific investors (Private Placement: PP) of 1,768,106,235 shares at the price of Baht 0.16 per share (par value of Baht 0.16 per share), such price is not lower than 90% of the market price according to the related announcement of the Securities and Exchange Commission. The transaction is deemed to be of the asset acquisition in accordance with the announcement of the Capital Market Supervisory Board no. Tor Jor. 20/2551 Re: Rules on Entering into Significant Transaction Deemed as the Acquisition or Disposition of Assets dated August 31, 2008 and additional amendment and the notification of the Securities and Exchange Commission of Thailand Re: Disclosure of the Information and the Operation of Listed Companies concerning the Acquisition or Disposition of Page 5/74

6 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Assets B.E dated October 29, 2004 ( the Notification of Acquisition or Disposition"). When calculating based on criteria in the notification by using the highest value derived from any of the criteria, the total value is equal to 72% of the total assets of the Company under the consolidated financial statements as of December 31, 2015 according to the total value of consideration, greater than 50% but less than 100% and deemed as the transaction type 1 in accordance with the notification of acquisition or disposition. However, the asset acquisition and partial business transfer of C&A as well as the relevant contracts have involved directors, executives and major shareholders related to the Company. Such transaction is thus considered to be a connected transaction in accordance with the announcement of the Capital Market Supervisory Board no. Tor Jor. 21/2551 Re: Rules on the Connected Transactions and the Notification of the Securities and Exchange Commission Re: Disclosure of the Information and the Operation of Listed Companies concerning the Connected Transactions B.E ( the Notification of Connected Transaction"). The value of transaction is equal to % of the value of Net Tangible Assets ("NTA") of the Company according to the consolidated financial statements as of December 31, 2015 (NTA equals million baht), which is higher than 20 million baht or more than 3.00% of the value of net tangible assets of the Company. Therefore, the Company shall request approval from the general meeting of shareholders to enter the connected transaction with the votes of no less than 3 in 4 votes of the total votes of the shareholders present at the meeting with voting rights excluding the stakeholders and shall prepare a disclosure report of information of such transaction. In this regard, the Company has appointed KTB Securities (Thailand) Co., Ltd., ("KTBS" or "IFA") as an Independent Financial Advisor to provide opinions to the shareholders of the Company on the asset acquisition and the connected transaction and to disclose information of such acquisition and connected transaction to the Stock Exchange and to propose to the shareholders meeting for approval of the asset acquisition and the connected transaction. The Company shall propose to the 2016 General Meeting of Shareholders held on April 29, 2016 for approval of such transaction. Page 6/74

7 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Summary of the IFA s Opinion KTB Securities (Thailand) Co., Ltd., as an Independent Financial Adviser to the shareholders appointed by the Company, gives its opinion on the transaction as follows: With regard to the valuation of new ordinary shares under private placement issued by the Company to pay for the assets and partial business transfer of C&A, the IFA has assessed the appropriateness of the share price by various approaches as below summary: Valuation Approach The Assessed Value of Shares (Baht / Share) Selling Price (Baht / Share) Higher (Lower) than Selling Price of Ordinary Shares (Baht / Share) Higher (Lower) than Selling Price of Ordinary Shares (%) The Assessed Value of Shares under PP * (Million Baht) 1. Market Price N/A 0.16 N/A N/A N/A Approach 2. Book Value (0.1519) (94.94) Approach 3. Adjusted Book (0.1519) (94.94) Value Approach 4. Price-to-Book Ratio (0.1586) - (0.1587) (99.13) - (99.19) Approach 5. Price-to-Earnings Ratio Approach 6. Discounted Cash (0.133) - (0.136) (82.89) - (84.71) Flow Approach *Remark: The assessed value of shares under PP (million baht) = The assessed value of shares (baht / share) x the quantity of newly-issued shares In the IFA s opinion, the book value and the adjusted book value approaches were the past information that has not shown future business potential in terms of business value and the Company was suspended from trading so there is no market price to compare. The price-to-book ratio and the price-to-earnings ratio are the comparison of the Company s status with the companies in the Stock Exchange which reflect the value from the viewpoint of investors. But because the status and performance of the Company in 2015 was not the real operating result of the Company but it was the result of debt restructuring and reversal entries of more than 508 million baht so this value may not appropriately reflect the real value of the business. The IFA then agrees to choose the Discounted Cash Flow Approach (DCF) which indicates the future operating performance of the Company better than the others, with the assessed value of the Company s shares at baht/share where its value is lower than the newly issued shares at baht/share or lower than the selling price of ordinary shares at %. Thus the shares of the Company at a price of 0.16 baht/share, the IFA is of the opinion that it delivers significant value and benefit to shareholders and the Company. Page 7/74

8 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons The Company has a valuation of C&A property conducted by two appraisers: American Appraisal (Thailand) Co., Ltd., and The Valuation and Consultants Co., Ltd., with its objective to assess for public purpose. The estimated price of the property assessed by the two appraisers, the listed appraisers authorized by the SEC, averages about million baht. But such property valuation does not reflect the status of the business acquired. Although there is a valuation of intangible assets appraised by the Company s financial adviser at a value of million baht with the Income Approach Multi Period Excess Earnings Method: MPEEM the assessment of intangible assets calculated by the future cash flow minus the return of tangible assets and the return of working capital, one of the appropriate approaches to the valuation, however, the Company has only received the assessment report in summary presentation, not the full report. So the IFA commented that it is inappropriate and insufficient to use as a reference document for the valuation of assets in this segment (details of the valuation appeared in section 1.5, Details of the Asset Acquisition). Hence, the IFA is of the opinion that the valuation of the assets and the business acquired should be evaluated as a new business with the transferred assets by using the selling price and cost structure mainly from the real operational status of C&A. With the discounted cash flow approach based on the agreed purchase value at million baht inclusive of VAT, the business valuation can be summarized as follows: Valuation Approach 1. Net Present Value (NPV) of Partial Business million baht 2. Internal Rate of Return (IRR) of Partial Business 34.3% 3. Payback Period of Partial Business 4 years, 10 months and 19 days The IFA assesses the value investing with three financial approaches: Net Present Value (NPV), Internal Rate of Return (IRR) and Payback period. The NPV of partial business equals million baht, greater than 0; and the IRR equals 34.3%, greater than the Weighted Average Cost of Capital (WACC) based on the capital structure of the Company spent on the acquisition of partial business of C&A which, at this time, equals 7.54% per year. In regard to the payment for the asset acquisition and partial business transfer of C&A, the Company shall issue new ordinary shares of 1,768,106,235 shares with par value of Baht 0.16 per share at the selling price of Baht 0.16 per share for the allocation through Private Placement (PP) at the value of million baht. The IFA calculated that the Net Present Value of C&A business is million baht, higher than the value of paid-shares at million baht or 77.87%. Hence, the IFA is of the opinion that the purchase of assets and the transfer of partial business from C&A are reasonable in terms of price and value investing with the assessment of the net present value of the partial business transfer at million baht and the internal rate of return at 34.3%, higher than the financial cost of the Company with payback period of 4 years, 10 months and 19 days. Page 8/74

9 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Appropriateness of Conditions of the Transaction The IFA, based on the information has been obtained, given that the Company will acquire partial business from C&A by the issuance of new ordinary shares under private placement to C&A for payment of the acquisition, the IFA is of the opinion that the conditions of the transaction are appropriate because the Company has already been in the business of importing chemical products i.e. ammonia so the acquisition of partial business of C&A will enhance a full range of the Company's business from its expansion in distribution and services to end-customers. This could affect the Company's operating result and financial position in a positive way in the long term; and the conditions of the transaction stated in the agreement prohibit C&A and major shareholders from competing business in the future, including the pre-defined regulatory conditions that must be approved by the shareholders before engaging in the transaction as well as the requirements to obtain permission from the SEC for the issuance of new shares to pay for the acquisition without significant changes in the business, which are the appropriate conditions. However, the asset acquisition and partial business transfer at this time has been paid by the issuance of new shares under private placement (PP) to the seller - C&A, amounted to 1,768,106,235 shares at a price per share of 0.16 baht. After the increase in capital stock, the shareholding structure of the Company will be changed, which makes Nataphob Ratanasuwanthawee Group increase its stake from 45.60% to 56.90%, leading to the responsibility of Nataphob Ratanasuwanthawee Group to launch a tender offer to other shareholders. If Nataphob Ratanasuwanthawee Group has insufficient funds for buyback of shares from other shareholders, the Group must reduce its stake down to less than 50%. The issuance of new shares through Private Placement (PP) at this time will make Nataphob Ratanasuwanthawee Group hold the voting rights of the company more than half of the total voting rights of all ordinary shares of the Company (if there is sufficient funds for buyback of shares from other shareholders) or nearly half of the total voting rights of all ordinary shares of the Company (in case the reduction of its stake to less than 50%). Rationale and Benefits of the Transaction As the Company is now in a position that may be delisted from the Stock Exchange due to its financial and operating-result problems, with the time to resolve the delisting issue until March 31, 2016, it is all along attempting to generate more revenues and improve performance of the Company. Thus the transaction to acquire the assets and partial business transfer of C&A, at this time, with a total value of transaction at 282,896, million baht is expected to be a positive result on the financial position and performance of the Company in the future. In summary, the Company will gain benefits from the transaction as follows: Benefits of the transaction 1. Reduce reliance on a single customer in terms of ammonia business where C&A is the only customer of the Company 2. Reduce transaction / conflict of interest with shareholders and executives because C&A is a related party who has the function of co-major shareholder, co-director and co-executive with the Company Page 9/74

10 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons 3. Obtain the assets and business of C&A, as well as retail customers without paying cash 4. An opportunity to gain a higher profit from the sale of goods to customer directly without an intermediary 5. Add value to the Company in terms of a complete range of ammonia import Summary of the Risk of the Transaction In this transaction, the IFA commented that shareholders shall consider the risks of the following issues (as described in the risk section - 2.2): 1. The risk that SCC and SCM may not allow the Company to renew the lease of land after the expiration of the lease in the future. The Company may have difficulty finding a place to support their business. However the Company plans to negotiate the renewal of the lease with the lessee in advance and because the machines and most of the equipment are ammonia tanks, valves, and pipelines, which are not too difficult to move them to a new location if the lease cannot be renewed. 2. The risk of a longer credit term to retail customers of C&A will cause the Company more revolving period on accounts receivable. However, the financial information on previous accounts receivable of C&A showed that the proportion has been declined and there was no default on debt payments later than specific time. 3. The risks of fluctuation in the price of ammonia and the exchange rate after a change to the ammonia agreement. After the change in the contract, the Company is exposed to the risk of fluctuation in the price of imported ammonia comparing to the ammonia price in the country including the risk of the exchange rate of ammonia import in US dollars. However, in respect of the prevention for the risk of fluctuation in the price of ammonia, the selling price is determined and adjusted by the Company according to the fluctuation in global market price. It also has futures contract to hedge the exchange rate risk. 4. An increase in the risk of ammonia shipping to the end customer - both the products and the cost go to the Company s responsibility. However, the Company has hedged this kind of risk by contracting with the insurer, SCC, to be liable for damages in transportation. Below is the summary of advantages and disadvantages of the transaction and non-transaction: Advantages and Disadvantages of the transaction Advantages of the transaction 1.Reduce the reliance on a single customer. Previously, there was only C&A, after the transaction, the Company will directly sell our products to other retail customers of C&A. 2.Increase revenue from an increasing proportion of earnings because the Company will receive profit from other retail customers of C&A instead. 3.No commitment of financing on the transaction. 4.Reduce conflict of interests with connected persons in the future especially C&A who was the sole ammonia purchaser Disadvantages of the transaction 1.The Company takes more risks from retail customers due to the risk from payment and longer credit term including the risk from the existence of retail customers of C&A. 2.The Company s shareholders have a dilution effect at 20.80%. 3.New transactions with connected persons (with SCC and SCM) have been increased. 4.To have more expenses in hiring the employees transferred from C&A Page 10/74

11 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Advantages and Disadvantages of non-transaction Advantages of non-transaction Disadvantages of non-transaction 1.The Company shall not bear the risks resulting 1.Lose opportunity to gain the margin from the from the customers of C&A directly. ammonia sale. 2.The Company s shareholders have no dilution 2.The Company loses opportunity to get the effect. experienced team from C&A. 3.To further have the transaction with C&A which is the related transaction Below is the summary of advantages and disadvantages of the transaction and non-transaction with connected persons: Advantages and Disadvantages of the transaction with connected persons Advantages of the transaction with connected Disadvantages of the transaction with connected persons persons 1.Acquire the assets, customer base and skilled 1.Changes in the shareholding structure where employees immediately. the connected persons of the Company will have their higher shareholding ratio. 2.Generate more transactions with other related companies (with SCC and SCM) Advantages and Disadvantages of non-transaction with connected persons Advantages of non-transaction with connected Disadvantages of non-transaction with persons connected persons 1.Shareholders have more confidence in the 1.High initial investment in operating business transaction. 2.Take time to build a customer base 3.The Company will have C&A customers who is only one related party If the Company wants to deal in ammonia business with retail customers, the most appropriate guideline is to do such connected transaction; since it is the transfer of assets and the ammonia sale to retail customers has already been performed by C&A, as well as the transfer of partial staff of C&A to become the Company s employees, the Company can thus operate its business continuously and immediately. The Company is not required to pay those employees for the compensation because it is the C&A responsibility. Moreover, the Company is not required to give those employees the time to learn a new business. These will gain more benefits than making the transaction with third parties. In summary, when comparing benefits, advantages and disadvantages as well as the rationale of the transaction, the IFA is of the opinion that such transaction shall improve the Company's revenue and operating results. Moreover, as the appraised value of shares being issued to pay the value of properties and the business transfer acceptance was in the amount of Baht/share (which is lower that the share price used to pay the share price i.e Baht), accordingly, the Company will benefit from the Page 11/74

12 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons issuance of shares for paying such price. In addition, the value of business (especially the ammonia business accepted from C&A i.e Million Baht) was quite higher than the value of payment a lot, therefore, the Company had benefitted from the purchase of business at this time. The transaction is deemed to be reasonable and beneficial to the Company and the Company s shareholders in terms of the appropriateness of the price and the conditions of the transaction, as mentioned above. Therefore, we have the opinion that the shareholders should approve the acquisition of assets by purchasing the assets and to accept the partial business transfer from such connected persons. However, shareholders should study the IFA s opinion report with all attachments thoroughly including documents attached to the meeting invitation in order to support decision-making for the votes. The approval of the disposal of assets is significantly based on the judgments and decisions of the shareholders. KTBS, as an Independent Financial Adviser, certifies that the above-mentioned opinions have been given with prudence in accordance with the professional standards and have been taken into account the shareholders interests as a main purpose. Page 12/74

13 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons 1. Disposition of assets and connected transaction 1.1 Objective and background of the transaction NFC Fertilizer Public Company Limited ( the Company or NFC ), a company listed on the Stock Exchange of Thailand ("the Stock Exchange or SET"), operated the business relating to the sale and manufacture of chemical fertilizer, distribution of gypsum, ammonia and sulfuric acid including the service of storage tank-sulfuric acid. Later, the Company faced its business problem and it must be under the business rehabilitation plan according to the order of Central Bankruptcy Court in During the time that the Company was under business rehabilitation plan, the Company had adjusted its guideline of business operation, that is, its main operating revenue was from the import and distribution of ammonia to C&A and to distribute and render the service of sulfuric storage tank. During the time that the Company was under business rehabilitation plan, the Company, as the plan executive, had the work plan to buy partial assets and business of C&A in order to generate revenue and to result in good operating result of the Company. Hence, firstly, the Company entered into a contract to replace the original trading ammonia contract with C&A on 1 July The key point is the changes in the price of goods and certain conditions of the contract. Such change of conditions will make the Company to receive more margin of the profit from sale and it will be beneficial to the Company s operating result in the future (as detailed in the summary table of the difference of ammonia contracts with changes under section 1.4.1: General Characteristic of the Transaction). However, on 3 November 2015, the Supreme Court ordered to dismiss the request for business habilitation of the Company, accordingly, the Company was not under the business rehabilitation plan anymore. The work plan to buy the ammonia business of C&A under the business rehabilitation plan was unsuccessful. At present, the Company is taking action speedily to rectify the cause of delisting of shares within 31 March 2016 according to the letter notified by the Stock Exchange of Thailand. For the past period of time, the Company had put our effort to have opportunity and guideline for operating the business which can generate higher revenue and better operating result for the Company for the Company s higher financial status in the future. Accordingly, the Board of Directors Meeting of the Company no. 2/2016 held on March 2, 2016 has passed a resolution to propose to the 2016 Annual General Meeting of Shareholders for the approval to acquire the assets and partial business transfer from Chemicals & Aromatic (Thailand) Co., Ltd., ("C&A") in relation to the distribution business of chemical products - ammonia and ammonium hydroxide type, that is, the ownership of the property in all relevant distribution businesses of chemical products - ammonia and ammonium hydroxide type, which are, the agreement of lease of land and structures of 2 plants located in Pathum Thani Province and Surat Thani Province, the ammonia tanks and accessories, the customer base and trading agreements executed with the customers, such as the ammonia sale agreement, the loan of ammonia storage tanks and accessories and other contracts with all permits related to the business operations, with the total value of 282,896, Baht inclusive of VAT. The payment for such assets and partial business transfer will be made by the issuance of new ordinary shares to specific investors (Private Placement: PP) of 1,768,106,235 shares at the price of Baht 0.16 per share Page 13/74

14 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons (par value of Baht 0.16 per share), such price is not lower than 90% of the market price according to the related announcement of the Securities and Exchange Commission. The transaction is deemed to be of the asset acquisition in accordance with the announcement of the Capital Market Supervisory Board no. Tor Jor. 20/2551 Re: Rules on Entering into Significant Transaction Deemed as the Acquisition or Disposition of Assets dated August 31, 2008 and additional amendment and the notification of the Securities and Exchange Commission of Thailand Re: Disclosure of the Information and the Operation of Listed Companies concerning the Acquisition or Disposition of Assets B.E dated October 29, 2004 ( the Notification of Acquisition or Disposition"). When calculating based on criteria in the notification by using the highest value derived from any of the criteria, the total value is equal to 72% of the total assets of the Company under the consolidated financial statements as of December 31, 2015 according to the total value of consideration, greater than 50% but less than 100% and deemed as the transaction type 1 in accordance with the notification of acquisition or disposition. However, the asset acquisition and partial business transfer of C&A as well as the relevant contracts have involved directors, executives and major shareholders related to the Company. Such transaction is thus considered to be a connected transaction in accordance with the announcement of the Capital Market Supervisory Board no. Tor Jor. 21/2551 Re: Rules on the Connected Transactions and the Notification of the Securities and Exchange Commission Re: Disclosure of the Information and the Operation of Listed Companies concerning the Connected Transactions B.E ( the Notification of Connected Transaction"). The value of transaction is equal to % of the value of Net Tangible Assets ("NTA") of the Company according to the consolidated financial statements as of December 31, 2015 (NTA equals million Baht), which is higher than 20 million Baht or more than 3.00% of the value of net tangible assets of the Company. Therefore, the Company shall request approval from the general meeting of shareholders to enter the connected transaction with the votes of no less than 3 in 4 votes of the total votes of the shareholders present at the meeting with voting rights excluding the stakeholders and shall prepare a disclosure report of information of such transaction. 1.2 Date/Month/Year of the Transaction The Company shall enter into the transaction after the approval from the 2016 General Meeting of Shareholders which is scheduled to be held on April 29, 2016 and is subject to the approval of the SEC to offer new shares through private placement in order to pay C&A for the asset acquisition and partial business transfer within the specific time when the conditions precedent in the partial acquisition contract fulfilled in accordance with the details provided below in section 1.3. The Company expects to enter into the transaction within the 2nd quarter of Page 14/74

15 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons 1.3 Connected persons and characteristic of relationship with the Company In regard to the asset acquisition and partial business transfer at this time, the Company shall enter into two main contracts: the Asset Acquisition and Partial Business Transfer Contract, and the Agreement of Lease of C&A s Factory Location Land (to be bought by Company), the contractual parties and the characteristics of relationship with the Company are as follows: 1.Asset Acquisition and Partial Business Transfer Contract Buyer : the Company Seller : C&A Relationship : Being a connected person of the Company, namely co-directors, executives and major shareholders as below: Connected persons 1. Mr. Nataphob Ratanasuwanthawee Relationship as a co-director, executive and co-major shareholder holding shares of C&A and the Company at 91.67% and 44.11% of paid-up capital of C&A and the Company respectively 2. Mr. Nataphong Ratanasuwanthawee as a co-director and co-shareholder holding shares of C&A and the Company at 8.33% of paid-up capital of C&A and holding 10 shares of the Company respectively 2. Agreement of Lease of Land with Buildings, two locations of plants of the business acquired 2.1 Agreement of Lease of Land with Buildings, which are the plant location in Pathum Thani province Lessee : the Company Lessor : S. C. Management Co., Ltd ("SCM"). Relationship : Being a related party to the Company, namely co-directors, executives and major shareholders as below: Connected persons Relationship 1. Mr. Nataphob Ratanasuwanthawee as a co-director and co-major shareholder holding shares of SCM and the Company at 99.35% and 44.11% of paid-up capital of SCM and the Company respectively 2. Mr. Nataphong Ratanasuwanthawee as a co-director and co-shareholder holding shares of SCM and the Company at 0.65% of paid-up capital of SCM and holding 10 shares of the Company 3. Mrs. Bongkot Rungkornpaisarn as a co-director holding 1 share of SCM and 10 shares of the Company Page 15/74

16 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons General condition of factory area in Pathumthani Province Ammonia Factory Building 2.2 Agreement of Lease of Land with Buildings, which are the plant location in Surat Thani Province Lessee : the Company Lessor : S. C. Carrier Co., Ltd. ("SCC") Relationship : Being a related party to the Company, namely co-directors, executives and major shareholders as below: Connected persons Relationship 1. Mr. Nataphob Ratanasuwanthawee as a co-director and co-major shareholder holding shares of SCC and the Company at 92.22% and 44.11% of paid-up capital of SCC and the Company respectively 2. Mr. Nataphong Ratanasuwanthawee as a co-director and co-shareholder holding shares of SCC and the Company at 7.78% of paid-up capital of SCC and holding 10 shares of the Company 3. Mrs. Bongkot Rungkornpaisarn as a co-director holding 1 share of SCC and 10 shares of the Company Page 16/74

17 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons General condition of factory area in Surat Thani Province (a) Ammonia Sale Contract Ammonia Factory Building Buyer : Seller : C&A Company Contract execution date: 1 July 2015 Relationship : Being a connected person of the Company, the same as the above-mentioned the Asset Acquisition and Partial Business Transfer Contract (the details of the Contract appeared in Clause hereof) (b) Logistics Contractor Contract Employer : The Company Contractor : S.C. Carrier Co., Ltd. ("SCC") Relationship : Being a connected person of the Company, the same as the above-mentioned land lease agreement Contract execution date: 1 July 2015 Page 17/74

18 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons 1.4 General Characteristic and Size of the Transaction General Characteristic of the Transaction The Board of Directors Meeting of the Company has made a resolution to acquire the assets and partial business transfer from C&A in relation to the distribution business of chemical products - ammonia and ammonium hydroxide type, including the ownership of the property in relevant distribution business of chemical products - ammonia and ammonium hydroxide type, that is, the ownership of the property in all relevant distribution businesses of chemical products - ammonia and ammonium hydroxide type, which are, the agreement of lease of land and structures of 2 plants located in Pathum Thani Province and Surat Thani Province, the ammonia tanks and accessories, the customer base and trading agreements executed with the customers, such as the ammonia sale agreement, the loan of ammonia storage tanks and accessories and other contracts with all permits related to the business operations, with the total value of 282,896, Baht, inclusive of VAT. The payment for such assets and partial business transfer will be made by the issuance of new ordinary shares to specific investors (Private Placement: PP) of 1,768,106,235 shares at the price of Baht 0.16 per share (par value of Baht 0.16 per share), such price is not lower than 90% of the market price according to the related announcement of the Securities and Exchange Commission. Such asset acquisition and partial business transfer are the transaction with connected persons: co-directors and co-major shareholders. In this regard, the Company will enter into the contracts with the connected persons according to the details and the key point of the agreements as follows: The key point of the C&A Partial Business Transfer Contract: Subject 1. Asset acquisition and partial business transfer 2. Payment for the asset acquisition and partial business transfer 3. Prohibition of the business competition Details / conditions On the day of the business transfer, the Company shall acquire the assets and partial business transfer from C&A in relation to the distribution business of chemical products - ammonia and ammonium hydroxide type, that is, the ownership of the property in all relevant distribution businesses of chemical products - ammonia and ammonium hydroxide type, which are, the agreement of lease of land and structures of 2 plants located in Pathum Thani Province and Surat Thani Province, the ammonia tanks and accessories, the customer data with trading agreements such as the ammonia trade, the loan of ammonia cylinder and accessories and other contracts with all permits related to the operations, as specified in the partial business transfer contract. The company shall pay C&A for the asset acquisition and partial business transfer by the issuance of new ordinary shares. The Company shall pay C&A for the asset acquisition and partial business transfer at 282,896, Baht inclusive of VAT (the business value is equal to 264,389, Baht and VAT is 18,507, Baht) by the issuance of new ordinary shares of the Company and the allocation under private placement to C&A at 1,768,106,235 shares with par value of Baht 0.16 per share and the selling price of Baht 0.16 per share. C&A confirms and agrees to not allow the largest shareholders of C&A, Mr.Nataphob Ratanasuwanthawee and Mr.Nataphong Ratanasuwanthawee, to operate the distribution business of chemical products ammonia and ammonium hydroxide type, including any other Page 18/74

19 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Subject Details / conditions business related to the distribution of chemical products ammonia and ammonium hydroxide type, whether directly or indirectly, in competition with the Company s business of chemical products ammonia and ammonium hydroxide type. 4. Conditions Precedent The asset acquisition and partial business transfer from C&A shall be subject to the Conditions Precedent, as stated in the partial business transfer contract including the following key terms: The asset acquisition and partial business transfer from C&A to the Company has been approved by the Board of Directors and the Company s Shareholders Meeting. The increase in the Company s authorized capital of 282,896, Baht inclusive of VAT, from 1,076,894, Baht to 1,359,792, Baht and the allocation of new ordinary shares at 1,768,106,235 shares with par value of 0.16 Baht per share to C&A has been approved by the Company s Shareholders Meeting. The sale and partial business transfer from C&A to the Company has been approved by the Board of Directors and the C&A Shareholders Meeting. No Material Adverse Change in the business transferred from C&A from the date of entering into the contract until the date of business transfer. The SEC has given its approval to the Company for the offering of new shares as the payment for the asset acquisition and partial business transfer to C&A in accordance with the related announcement of the Capital Market Supervisory Board. 5. Processing time The transfer date shall take place within 7 business days from the date of the completion of Conditions Precedent as set forth in the partial business transfer contract or the exemption or any other date to be agreed by both parties. 6. Other conditions In case where the Company Shareholders Meeting resolved not to approve the purchase and the acceptance of partial business transfer from C&A, then, the Company and C&A agreed to terminate the ammonia sale contract between the Company and C&A dated 1 July 2015 and agreed to enter into the new contract containing the terms and conditions in line with the ammonia sale contract between the Company and C&A dated 15 June REMARK: After transferring the business to the Company, then, C&A s main properties would be the trade account receivables approximately in the amount of 88 Million Baht, the loan and the unpaid debt of the Group of Companies approximately in the amount of 427 Million Baht, and the liabilities would be the trade account payables approximately in the amount of 49 Million Baht, debt of financial institution approximately in the amount of 228 Million Baht, loan from the Group of Companies approximately in the amount of 12 Million Baht in accordance with the estimate of financial statements as of 31 December After transferring the business to the Company, then, C&A may operate its business in manner of Holding or operate other businesses or may wind up the company. Page 19/74

20 Report of Independent Financial Advisor s Opinion in relation to the Acquisition of Assets by mean of Purchase and Acceptance of Transfer of Partial Business from the Connected Persons Summary of General Information of C&A Business Operation C&A operated its main business in the manufacture and distribution of petrochemical products, which are, ammonia and Ammonium Hydroxide. Ammonia was the raw material used in various industries, for instance, rubber manufacture industry, chemical industry, metal industry, cool tissue, etc. Generally, ammonia was imported by the operators who used ammonia in their production process, for instance, chemical fertilizer factory. Partial ammonia was imported by the operators importing the ammonia for being distributed to industrial factories. The world s major manufacturers were China, India, USA and Indonesia. Moreover, C&A also operates other business of loan and lending money to other companies in Mr.Nattaphob Ratanasuwantawee s group. Currently, regarding the business of ammonia import and distribution in Thailand, the ammonia was mainly imported from Indonesia, Malaysia and Saudi Arabia. The 2 major distributors of ammonia in Thailand were Chemicals and Aromatics (Thailand) Co.,Ltd. (its market share was nearly 60%) and UNIGAS and Petrochemicals Public Company Limited (its market share was nearly 40%). In addition, there were some retail distributors who imported ammonia from Malaysia by motorcars to be distributed to the rubber manufacture factory in bordering provinces in the South of Thailand, etc. There was only few importers and distributors of ammonia because the application for operating this business is complicated. Moreover, the investment in such business needed high investment. Further, as ammonia market in Thailand was still small, therefore, there was no operator being interested to invest in the construction of ammonia manufacture factory. (see C&A additional information in the Attachment 2 hereof). The key point of the Land Lease Agreement with Buildings as the locations of two ammonia plants: 1. Agreement of Lease of Land with Buildings, - the plant location in Thanyabui District, Pathum Thani Province. Subject Agreement 1. Lessee The Company 2. Lessor SCM 3. Leased Property Land title deed no with buildings, located in Buengyeetho Sub-district, Thanyabui District, Pathum Thani Province 4. Leased Area 2,509 square meters 5. Rental charges 90,000 Baht per month 6. Rental period Land lease agreement with buildings for a period of three years. When the lease ends, the lessor agrees to renew the lease for another three years under the same terms and conditions in all respects, except for rental charges which the parties will renegotiate. 7. Other significant agreements The lessee can construct buildings on the leased property without prior consent of the lessor. Page 20/74