1. Introduction

The Board of Directors of Denko Industrial Corporation Berhad (“Denko”) wishes to announce that ATA Industrial (M) Sdn. Bhd. (Company No. 231055-D) (“AIM”, “the Purchaser”), a wholly owned subsidiary of Denko, had on 14 March 2018, entered into a Sale and Purchase Agreement (“SPA”) with Blessplus Sdn. Bhd. (Company No. 333162-U) (“the Vendor”) to acquire a piece of land held under GRN 128419, Lot 1572, Mukim Tebrau, Daerah Johor Bahru, Negeri Johor (“the Land”) measuring a total of 62,127 sq. ft., for a total cash consideration of RM4,255,699.50 (“the Proposed Acquisition”).

2. Details of the Proposed Acquisition

2.1 Information on Denko Industrial Corporation Berhad

Denko was incorporated in Malaysia on 29 November 1989 under the name of Ecodynamic (M) Sdn. Bhd.. The Company changed its name to Denko Industrial Corporation Sdn. Bhd. on 7 July 1990. In October 1990, the Company was converted into a public company and adopted its present name. Denko was listed on the Second Board of Kuala Lumpur Stock Exchange (now the Main Market of Bursa Malaysia Securities Berhad) on 11 April 1991.

Denko is principally engaged in the business of investment holding. The principal activities of the Group are the manufacture and sales of precision plastic injection moulded parts, full assembly of electrical and electronic finished products, and moulded tooling fabrication, and wholesaler/retailer of foodstuff and consumer goods.

On 5 February 2018, Denko completed the acquisition of the entire issued share capital of Integrated Manufacturing Solutions Sdn. Bhd. (“IMS”) and its three (3) 100% owned subsidiaries, which includes AIM.

2.2 Information of AIM

AIM is a private limited company incorporated in Malaysia on 18 December 1991 and having its registered office at Unit 901, Level 9, City Plaza, No.21 Jalan Tebrau, 80300 Johor Bahru, Johor.

It has an issued capital of RM5,000,000.00 and is wholly-owned by IMS. It’s principal activities are the manufacturing and sales of precision plastic injection moulded parts and assembly of electrical and electronic components and products.

2.3 Information of the Vendors

Blessplus Sdn. Bhd. (Company No. 333162-U) is a private limited company incorporated in Malaysia and having a principal place of business at No.5 Jalan Riang 24, Taman Gembira, 81200 Johor Bahru.

2.4 Information of the Land

2.5 Basis of the Purchase consideration

The purchase consideration of RM4,255,699.50 was arrived at on a willing buyer and willing seller basis, of which the estimated land prices in the nearby industrial areas are within the range of RM60.00 to RM70.00 per square feet.

2.6 Salient terms of the SPA

      (a) 10% of the purchase consideration shall be paid upon execution of the SPA as deposit;

      (b) The balance of the purchase consideration shall be paid within three (3) months from the date of the SPA.

2.7 Liabilities to be Assumed

There are no liabilities, including contingent liabilities and guarantees, to be assumed by Denko Group arising from the Proposed Acquisition.

2.8 Source of funding

The source of funding for the Proposed Acquisition will be a combination of bank borrowings and internally generated funds.

2.9 Estimated Time Frame for Completion

The Proposed Acquisition is expected to be completed within six (6) months from the date of the SPA.

3. Effects of the Proposed Acquisition

    (a) Earnings per share

         The Proposed Acquisition is not expected to have any material effect on the earnings per share of Denko for the financial years ending 31 March 2018 and 31 March 2019.

     (b) Net Assets per share

          The Proposed Acquisition is not expected to have any material effect on the net assets per share of Denko for the financial years ending 31 March 2018 and 31 March 2019.

      (c) Share Capital and substantial shareholder’s shareholding

            The Proposed Acquisition is not expected to have any effect on the share capital and substantial shareholders’ shareholdings as the Acquisition does not involve any issuance   

            of the Company’s shares.

4. Risk Factors

The Board of Directors of Denko is not aware of any risk factors arising from the Proposed Acquisition other than ordinary property market and global economic risks. However, the Board may, where appropriate, undertake various market studies, assessments and appropriate business measures to mitigate these risks.

5. Highest Percentage Ratio

The highest percentage ratio pursuant to paragraph 10.02(g) of the Bursa Malaysia Securities Berhad’s Main Market Listing Requirements is 9.35% based on the latest audited financial statements of Denko for the financial year ended 31 March 2017.

6. Approval Required

The Proposed Acquisition is not subject to the approval of the shareholders of Denko. However, a Condition Precedent (“CP”), stated in the SPA does require that in the event the Purchaser is a foreigner/foreign company/foreign interest within the meaning of Section 433A of the National Land Code, 1965 and the Appropriate Authorities’ approval is required for the acquisition of the Land, the agreement is conditional upon the Appropriate Authorities’ approval for the transfer of the property from the Vendor to the Purchaser within the CP Period, which expires six (6) months from the date of the SPA, and such application to obtain the Appropriate Authorities’ approval shall be made by the Purchaser.

7. Departure from Securities Commission’s Guidelines on the Offering of Equity and Equity-Linked Securities

The Securities Commission’s Guidelines on the Offering of Equity and Equity-Linked Securities is not applicable for this Acquisition.

8. Directors’ and Major Shareholders’ Interests

The Directors and major shareholders of Denko and persons connected to them do not have any interest, whether direct or indirect in the Proposed Acquisition.

9. Rationale and Prospects

The management intends to construct a warehouse on the Land, and shift some of the existing rented warehouses to this new warehouse which will be closer to the main manufacturing base of AIM.

The rationale for the Proposed Acquisition are as follows :

(a) To own and construct a warehouse which is in close proximity to the main manufacturing base of AIM so that the company’s operations can be more centralized and streamlined;

(b) Improve inventory controls and reduce transport costs between the warehouse and manufacturing facilities

(c) To reduce reliance on rented premises and rental costs.

These factors may have a positive effect on the Group’s earnings for the financial years 2019/2020.

10. Statement by Directors

The Board of Directors of Denko having taken into consideration all aspects of the Proposed Acquisition is of the opinion that the Proposed Acquisition is in the best interest of Denko.

11. Documents for Inspection

A copy of SPA is available for inspection at the registered office of Denko at Suite 13.01 13th Floor, City Plaza, Jalan Tebrau, 80300, Johor Bahru, Johor, from Monday to Friday (Excluding public holidays) during normal business hours for a period of three (3) months from the date of this announcement.

This announcement is dated 14 March 2018.