Submitting Merchant Bank
PERWIRA AFFIN MERCHANT BANK BERHAD
SETEGAP BERHAD (“SETEGAP” OR “COMPANY”)
I. Proposed Rights Issue;
II. Proposed Special Issue; and
III. Proposed Private Placement
(I, II and III are collectively referred to as the "Proposals")
On behalf of the Board of Directors of Setegap, PAMB wishes to announce that the Company intends to undertake the following proposals:-
(i) A rights issue of up to 10,428,173 new ordinary shares of RM1.00 each at par on the basis of one (1) new ordinary share for every five (5) existing ordinary shares held (“Proposed Rights Issue”);
(ii) A special issue of 35,000,000 new ordinary shares of RM1.00 each at par to Bumiputra investors, namely Lembaga Tabung Angkatan Tentera (“LTAT”), Dato’ Mohd. Hussaini Bin Haji Abdul Jamil and Tan Sri Dato’ (Dr) Abdullah Bin Abdul Rahman (“Proposed Special Issue”); and
(iii) A private placement of 4,970,267 new ordinary shares of RM1.00 each representing 10% of the issued and paid-up share capital of Setegap (“Proposed Private Placement”).
Details of the Proposals are set out in the ensuing paragraphs.
2. THE PROPOSED RIGHTS ISSUE
The Company proposes to implement a rights issue of up to 10,428,173 new ordinary shares of RM1.00 each (“Rights Shares”) at par which shall be provisionally allotted to the shareholders of Setegap for subscription on a renounceable basis of one (1) new ordinary share for every five (5) existing ordinary shares held in Setegap at a date to be determined later. The new shares will be payable in full upon acceptance.
The issue price of RM1.00 per Rights Share was arrived at after taking into consideration the following:-
(i) The par value of Setegap shares of RM1.00;
(ii) The theoretical ex-rights price of RM0.95 and RM1.05 based on the weighted average market price of Setegap shares for the past five days and three months to 19 October 2000 of RM0.94 and RM1.06 respectively, to which the issue price represents a premium of 5.3% and a discount of 4.8% respectively; and
(iii) The theoretical ex-rights price of RM0.92 based on the last transacted market price of Setegap shares on 19 October 2000 of RM0.90, to which the issue price represents a premium of 9.1%.
Should the issue price be at a discount of more than 30% from the theoretical ex-rights price at the price fixing date, as required by the Securities Commission (“SC”), the promoters and the Directors of Setegap will provide an undertaking that they will not dispose of their Setegap shares from the “ex-date” of the shares until ten market days after the listing of the new shares. In this regard, all the Directors and the promoter of Setegap, namely Chong Chee Huat, have given their undertakings.
The number of Rights Shares has been arrived at after allowing for the possible exercise of share options granted under the Company’s employees’ share option scheme (“ESOS”) prior to the entitlement date for the Proposed Rights Issue.
The Rights Shares shall, upon allotment and issue, rank pari passu in all respects with one another and the existing Setegap shares except that these shares shall not be entitled to any dividends or other distributions that may be declared in respect of the financial year ending 31 December 2000, nor any distribution or entitlements for which the entitlement date is prior to the date of issue and allotment of the Right Shares.
3. THE PROPOSED SPECIAL ISSUE
The Company proposes to implement a special issue of 35,000,000 new ordinary shares of RM1.00 each (“Special Shares”) at par which shall be allotted for subscription by Bumiputra investors to be approved by the Ministry of International Trade and Industry (“MITI”).
The issue price of RM1.00 per Special Share was determined on the same basis as that of the Rights Shares.
The Special Shares represents 34% of the enlarged share capital of Setegap after the Proposals.The Bumiputra investors nominated by the Company for the allotment of the Special Shares are as set out in Table 1 below.
The Special Shares shall, upon allotment and issue, rank pari passu in all respects with one another and the existing Setegap shares except that these shares shall not be entitled to any dividends or other distributions that may be declared in respect of the financial year ending 31 December 2000, nor any distribution or entitlements for which the entitlement date is prior to the date of issue and allotment of the Special Shares. The Special Shares will also not be entitled to the Proposed Rights Issue.
4. THE PROPOSED PRIVATE PLACEMENT
The Company also proposes to undertake an issue and private placement of 4,970,267 new ordinary shares of RM1.00 each (“Placement Shares”) which represent 10% of the issued and paid-up share capital of the Company.
The issue price of the Placement Shares will be based on a discount of not more 10% to the five days weighted average market price of Setegap shares prior to the announcement of the price fixing date.
It is intended that the prospective placees for the Placement Shares will be parties that have no connection to the Directors and substantial shareholders of Setegap and that each placee will be allotted with not more than 20% of the total Placement Shares.
The Placement Shares shall, upon allotment and issue, rank pari passu in all respects with one another and the existing Setegap shares except that these shares shall not be entitled to any dividends or other distributions that may be declared in respect of the financial year ending 31 December 2000, nor any distribution or entitlements for which the entitlement date is prior to the date of issue and allotment of the Placement Shares. The Placement Shares will not be entitled to the Proposed Rights Issue.
5. RATIONALE FOR THE PROPOSALS
Tight policies implemented by the Government in containing the effect of the financial crisis in 1997/98 had affected certain sectors of the economy, inter-alia, the construction and property sectors. As a result, the Company’s cashflow and profitability were adversely affected.
In this respect, Setegap had on 9 August 1999 sought the assistance of the Corporate Debt Restructuring Committee (“CDRC”) set up by the Government with its secretariat at Bank Negara Malaysia on the restructuring of the Setegap Group’s debts amounting to RM95.29 million as at 15 July 2000 by converting it into a 5-year 9.5% fixed rate term loan. The approvals from all the creditor banks for the Proposed Debt Restructuring Scheme have been obtained and the Company had on 17 October 2000 entered into a debt restructuring agreement. Announcement on the Proposed Debt Restructuring Scheme was made on 17 October 2000
As an integral part of the Proposed Debt Restructuring Scheme, the Company is proposing the implementation of the Proposals to raise fresh equity capital. The proceeds raised from the Proposals will be utilised to provide security for the performance bonds in respect of its debt restructuring exercise, to partially repay bank borrowings and to meet the working capital requirements.
The Proposed Special Issue is undertaken to achieve a level of Bumiputra equity participation in the Company that is more in line with the National Development Policy (“NDP”). Notwithstanding that the minimum Bumiputra requirement for a public listed company is 30%, it is the Company’s intention to obtain the status of a Bumiputra majority-owned company. In this respect, Setegap proposes a large special issue to increase its bumiputra equity holding to approximately 51%. Accordingly, the Company’s chances of securing additional contracts offered by the Government and certain private sector companies should be enhanced given the status of a Bumiputra majority-owned company.
The management envisages that the presence of LTAT as a long-term investor in Setegap should augur well for the Company. As LTAT, an institution with diversified interests, does not have a construction arm, the Company may draw on the resources and influences of LTAT and derive synergistic benefits vide the latter’s investment in Setegap.
Dato’ Mohd. Hussaini Bin Haji Abdul Jamil and Tan Sri Dato’ (Dr) Abdullah Bin Abdul Rahman is the Chairman and a director of Setegap respectively. Both of them have made invaluable contributions not only in serving as members of the Board and in various committees of the Board but also in representing the Company in public relations and negotiations. They have vast experience in the management of various Government departments. Their equity participation in the Company will also serve as an incentive for them to strategise and draw on their vast experiences to negotiate for further contracts and projects for the Group.
The Proposed Private Placement will allow the Company the time to secure potential placees for its shares and to mitigate the concerns of the Company in respect of undersubscription through a larger right issue and the higher costs of underwriting these shares. As Setegap may be able to determine the placees for the placement, the Proposed Private Placement may also allow the Company to establish a tie-up with potential strategic partners which may benefit the Group in the long term.
6. UTILISATION OF PROCEEDS
Based on the issue price of RM1.00 for the Rights Shares and the Special Shares, the Proposed Rights Issue and the Proposed Special Issue will raise a minimum gross proceeds of RM44,940,533 which will be utilised by Setegap in the manner set out in Table 2 below.
Presently, the Company has 2,438,200 outstanding share options granted under the ESOS which have not been exercised. Assuming all the outstanding 2,438,200 share options granted under the ESOS are exercised before the entitlement date for the Proposed Rights Issue, the Company intends to use the additional funds of RM487,640 as working capital.
On the assumption that the Private Placement Shares are issued at RM1.00 per share, the Proposed Private Placement will raise gross proceeds of RM4,970,267 which will be utilised as working capital.
7. FINANCIAL EFFECTS OF THE PROPOSALS
7.1 Share capital
The effects of the Proposals on the issued and paid-up share capital of Setegap are as set out in Table 3 below.
The Proposals are expected to contribute positively to the future earnings of the Setegap Group as a result of, inter-alia, enhanced capability in securing additional contracts with the availability of performance bonds and the availability of fresh working capital.
7.3 Net tangible assets (“NTA”)
The proforma effects of the Proposals on the NTA of the Setegap Group based on the latest audited balance sheets as at 31 December 1999 are as set out in Table 4 below.
7.4 Substantial shareholdings
The proforma effects of the Proposals on the substantial shareholdings structure of Setegap based on the shareholdings as at 25 September 2000 are set out in Table 5 below.
8. APPROVALS REQUIRED
The Proposals are subject to the approvals of the following:-
(i) the SC;
(ii) the MITI;
(iii) the Foreign Investment Committee;
(iv) the shareholders of Setegap at an extraordinary general meeting (“EGM”) to be
(v) the KLSE for the listing of and quotation for the new ordinary shares to be issued
to the Proposals; and
(vi) any other relevant authority, if required.
9. INTERESTS OF DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS AND PERSONS CONNECTED TO THEM
The Proposed Rights Issue will be implemented on a rights basis. In this regard, all entitled shareholders including the Directors and/or substantial shareholders and persons connected to them who hold Setegap shares, will be offered on an equitable and pro rata basis relative to their respective shareholdings.
Dato’ Mohd. Hussaini Bin Haji Abdul Jamil and Tan Sri Dato’ (Dr) Abdullah Bin Abdul Rahman, who are being nominated as placees for the Proposed Special Issue, are the Chairman and a director of Setegap respectively. Dato’ Mohd. Hussaini Bin Haji Abdul Jamil is also a shareholder in Setegap. They are therefore deemed to be interested in the Proposed Special Issue. Accordingly, they have abstained and will continue to abstain from all deliberations and voting in respect of the Proposed Special Issue at the board meetings of the Company.
Save as disclosed above, none of the Directors, substantial shareholders of Setegap and persons connected to them have any interest, direct and indirect in the Proposals.
10. SHAREHOLDERS’ UNDERTAKING AND UNDERWRITING ARRANGEMENT FOR THE PROPOSED RIGHTS ISSUE
Chong Chee Huat, a director and substantial shareholder with an interest in 6,798,750 ordinary shares of RM1.00 each in Setegap representing an equity interest of 13.68% therein as at 25 September 2000 has given an irrevocable written undertaking to subscribe for his entitlement of 1,359,750 Rights Shares. Accordingly, these Rights Shares will not be underwritten.
Underwriting will be procured by the Company for the balance of the Rights Shares for which no undertaking for subscription have been received from the shareholders. Chong Chee Huat has also given an irrevocable written undertaking that, in the event Setegap is unable to secure underwriters for the open portion of the Proposed Rights Issue, he will further subscribe through excess application for such number of Rights Shares that remain unsubscribed at the closing of the application for the Proposed Rights Issue.
11. ADVISERS TO THE PROPOSALS
Perwira Affin Merchant Bank Berhad has been appointed by Setegap as the Adviser for the Proposals.
12. APPLICATION TO THE SC, CIRCULAR TO SHAREHOLDERS AND NOTICE OF EGM
An application to the SC for the Proposals will be made within two (2) months from the date of this announcement.
A circular setting out further details on the Proposals and the Notice of EGM will be despatched to shareholders of Setegap in due course.
Table 1 – Nominated bumiputra investors for the Proposed Special Issue
No. of shares
to be allocated
Dato’ Mohd. Hussaini Bin Haji Abdul Jamil
Tan Sri Dato’ (Dr) Abdullah Bin Abdul Rahman
Table 2 – Proposed utilisation of proceeds from the Proposed Rights Issue and the
Proposed Special Issue
Security for performance bond
Repayment of bank borrowings *
Incidental expenses of the Proposals
* The Proposed Debt Restructuring Scheme sets out that in the event the collection from assigned debtors and operational inflow is insufficient to meet the minimum funds in the term loan repayment account at the next quarterly review after the receipt of the proceeds from the Proposals, an amount of RM5.0 million from the proceeds of the Proposals will be deposited into this term loan repayment account. f the collection from assigned debtors and operational inflow is sufficient to meet the minimum funds requirement, the RM5.0 million of the proceeds from the
Proposals will be utilised as working capital for the Setegap Group.
Table 3 – Financial effects of the Proposals on the share capital of Setegap
Audited as at 31.12.99
Exercise of ESOS options up to 25 September 2000
As at 25 September 2000
Outstanding ESOS to be exercised prior to books closure date
To be issued pursuant to the:-
- Proposed Rights Issue
- Proposed Special Issue
- Proposed Private Placement
Enlarged share capital
1. Minimum Scenario – Assuming all the 2,438,200 options granted under the ESOS
which are exercisable by April 2001, will not be exercised before the entitlement date
for the Proposed Rights Issue.
2. Maximum Scenario – Assuming all the 2,438,200 options granted under the ESOS
which are exercisable by April 2001, will be exercised before the entitlement date
for the Proposed Rights Issue.
Table 4 – Financial effects of the Proposals (based as minimum scenario) on the NTA of the Setegap Group
as at 31.12.99
After the Proposed Debt Restructuring Scheme
Proposed Private Placement
Expenditure carried forward
NTA per share (RM)
# The new shares issued are in respect of the exercise of ESOS options between 1 January 2000 to 25 September 2000.
^ After deducting estimated expenses for the Proposed Debt Restructuring Scheme of approximately RM0.8 million from the Reserves Account.
* After deducting total estimated expenses for the Proposals of approximately RM0.908 million and RM0.292 million (totaling RM1.2 million) from the Share Premium Account and the Reserves Account respectively
Table 5- Effects of the Proposals (based on minimum scenario) on the substantial shareholdings structure of Setegap as at 25 September 2000
Before Proposals as at 25 Sept. 2000
After the Proposed Rights Issue
After the Proposed Special Issue
After the Proposed Private Placement
No. of shares held
No. of shares held
No. of shares held
No. of shares held
Chong Chee Huat
Employees Provident Fund
Netsen Holdings Sdn Bhd
Netsen Sdn Bhd
Tan Siew Suan
Wan Haron bin Wan Hassan
Tan Heng Hock
Lai Siew Moi
Dato’ Mohd Hussaini bin Haji Abdul Jamil
Tan Sri Dato’ Dr. Abdullah Abdul Rahman
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