Disposal of Assets
5th Jul, 2004  
In response to the letter from Singapore Exchange Limited dated 2 July 2004, regarding the Company’s announcement on 1 July 2004, the Board of Directors of the Company wishes to provide the following information:


(a) Identity of and details on the Purchasers


The Purchasers are The Jacmar Companies, Shakey’s Restaurants Franchising Company, LLC and Jacmar Covina, LLC.

The Jacmar Companies, a California corporation, is a privately held company engaged in foodservice distribution, real estate management and the operations of franchised restaurants in California and through its majority owned subsidiary, in Guam. Jacmar is the largest Shakey’s franchisee in the USA with 19 restaurants. It also operates Taco Bell and Long John Silver restaurants in Guam. Jacmar provides foodservice distribution to over 1,400 accounts throughout California and Nevada from its facilities in Irwindale and Sacramento, California.

Shakey’s Restaurants Franchising Company, LLC and Jacmar Covina, LLC are California limited liability companies wholly owned by Jacmar. Shakey’s Restaurants Franchising Company, LLC was formed for the sole purpose of acquiring all of the assets and business of Shakey’s, Incorporated and to operate its restaurants franchising business following the acquisition. Jacmar Covina, LLC was formed for the purpose of acquiring substantially all of the assets of Shakey’s of California, and to operate its Shakey’s restaurant in Covina, California following the acquisition.

The address for Jacmar, Shakey’s Restaurants Franchising Company, LLC and Jacmar Covina, LLC is 2200 W. Valley Blvd., Alhambra, California 91803.

Jacmar, and each of its officers, directors and shareholders, has no investment in, either directly or indirectly, Inno-Pacific or any of its subsidiaries or affiliates.


(b) Factors taken into account in arriving at the consideration of US$4,500,000

The consideration of US$4,500,000 was agreed on a willing-buyer willing-seller basis. The factors considered by the Company to dispose of the Assets and at the consideration price, included:

1. The assumption of the litigation by the Purchasers;
2. The future prospects of continuing with the ownership of the assets and business, in the light of the discriminatory and litigious environment; and
3. The acrimonious and irreconcilable relationship between Shakey’s and its franchisees.

(c) Value of the Assets disposed

The net book value of the Assets was US$422,802 equivalent to S$720,032 based on an exchange rate of U$1=S$1.703 as at 31 December 2003. The valuation of the Assets is based on net book value and not based on open market value or valuation by professional valuers.


(d) Excess or deficit of the proceeds over the book value

Upon the Disposal of Assets, there will be an excess of proceed over the net book value of US$4,077,198 (equivalent to approximately S$6,943,468) as at 31 December 2003.


(e) The intended use of proceeds from the Disposal

The net proceeds from Disposal of the Assets is about S$7,300,000; after expenses for the transaction, closure of operations and winding-up of Shakey’s Incorporated and Shakey’s of California.

The Company intends to use the net proceeds of about S$7,300,000 as follows:

1. $1,300,000 for the Company’s working capital and overhead for the next 12 months;
2. $1,000,000 for working capital and upgrading of its telecommunication business;
3. $1,000,000 for working capital and expansion of its paper pallet business; and
4. $4,000,000 will be invested in short-term bank deposits and marketable securities pending investments in new businesses and investments, which the Directors of the Company is currently investigating and reviewing.


(f) The amount of any gain or loss on disposal


After adjusting for exchange translation reserves and estimated transaction expenses, a gain of approximately S$6,568,808 is expected from the Disposal


(g) Relative figures computed on the bases set out in Rule 1006 of the Listing Manual

Rule 1006 sets out the computation for relative figures for which Shareholders’ approval is required if any of the relative figures exceeds twenty percent (20%) and such a transaction is classified as a “major transaction”. The relative figures computed based on the relevant bases are as follows:

(a) Net book value of assets to be disposed compared with the Group’s net asset value 5.7%
(b) The net profits attributable to the assets disposed of compared with the group's net profits. N.M.
(c) The aggregate value of the consideration given or received compared with the issuer's market capitalization:

- before adjusting for escrow shares
- after adjusting for escrow shares


61.3%
53.6%
(d) The number of equity securities issued by the issuer as consideration for an acquisition, compared with the number of equity securities previously in issue. N. A.
N.M = Not meaningful

(h) Material condition(s) attached to the transaction

Completion of the Disposal of Assets is conditional upon, inter alia, the following:-

1. all representations and warranties contained in the Asset Purchase Agreements shall be true and correct as at the date of the Asset Purchase Agreements and as of the Closing Date, except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms thereof, and the parties have performed and satisfied all material agreements and covenants required to be performed by them prior to or on the Closing Date;

2. Shareholders of the Company representing at least a majority of a quorum have consented to, approved and adopted the Asset Purchase Agreements and the transactions contemplated thereby;

3. all permits and waivers necessary to the consummation of the transactions contemplated under the Asset Purchase Agreements, including all required third party consents (to the extent not waived), have been obtained;

4. no action by any governmental authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated and which could reasonably be expected to (i) materially affect the right or ability of Purchasers to own, operate, possess or transfer the Sale Assets after the Closing, or (ii) materially damage the Sellers if the transactions contemplated are consummated. There shall not be any statute, rule or regulation that makes the purchase and sale of the business or the Sale Assets contemplated illegal or otherwise prohibited;

5. The Franchisee Litigation shall have been settled, concurrently with the Closing. Such settlement shall include releases of the Sellers, the Company, the Purchasers and their respective affiliates (including, without limitation, officers, directors and shareholders) in form and substance acceptable to the Sellers and the Purchasers from and against all known and unknown claims by the plaintiffs from the beginning of time to the present, whether or not asserted to date in the Franchisee Litigation, arising out of or relating to the franchise system and any franchise agreements between any such franchisees and Sellers.


BY ORDER OF THE BOARD
INNO-PACIFIC HOLDINGS LTD

Wong Chin Yong
Managing Director & Chief Executive Officer


>> View in pdf format

Submitted by Jennifer Lee, Company Secretary on 05/07/2004 to the SGX