| Acquisition of shares in RR Industrial Packaging & Design Services Pte Ltd | |||||||||||||||||||||||||
| 19 Sep, 2003 | |||||||||||||||||||||||||
The Board of Directors of Inno-Pacific Holdings Ltd (the "Company") is pleased to announce that the Company has today entered into a sale and purchase agreement ("Sale and Purchase Agreement") to acquire 204,051 ordinary shares of $1.00 each ("Sale Shares"), representing 51% of the issued and paid-up share capital of RR Industrial Packaging & Design Services Pte Ltd ("RR Industrial"), from Mr Lim Cheng Yong (the "Vendor"). Purchase Consideration The total consideration for the acquisition of $3,000,000 was arrived on the basis that the prospective net profit after tax of RR Industrial, warranted and guarantee by the Vendor, will not be less than $1,200,000 for a continuous period of 12 months (the "Warranty Period"). The Warranty Period shall commence from any date after 7 March 2003 (being the date of incorporation of RR Industrial) as the Company may determine for a continuous period of 12 months but shall not end later than 31 December 2004. The total consideration of $3,000,000 will be satisfied by the Company by the allotment and issue of 60 million new ordinary shares of $0.01 each ("Consideration Shares") to the Vendor. In the event that the net profit after tax of RR Industrial for the Warranty Period is less than $1,200,000, the Company may, with the consent of the Vendor, either elect to require the Vendor to pay the shortfall to RR Industrial or adjust downwards the Consideration Shares (the "Adjusted Consideration Shares") accordingly. Subject to RR Industrial achieving the net profit after tax of $1,200,000, the Company will allot and issue the Consideration Shares or the Adjusted Consideration Shares, as the case may be, to the Vendor within 30 days from the date on which the audit of the financial statements of RR Industrial is completed. The purchase is subject to, inter alia, the Company being satisfied with the results of the due diligence to be carried out by the Company on the Sale Shares and RR Industrial, as well as the approval of SGX-ST for the listing and quotation of the Consideration Shares on the SGX-ST. Rationale RR Industrial is in the business of designing, manufacturing and marketing of Corrugated Paper Pallet and other paper packaging material. RR Industrial was incorporated in Singapore in March 2003 to facilitate attraction of investments to fund its growth and expansion. Prior to the incorporation of RR Industrial, the business was conducted as a sole proprietorship by one of its founder, Mr Roy Nathakumar. From March 2003 to July 2003, RR Industrial had sales of $266,000 and net profit before tax of $97,000 (unaudited). Mr Roy Natakumar has been in the design engineering, production and supply of packaging and pallets for more than 20 years. He has many proprietary designs of packaging and paper pallets and has patents pending on some of his designs, which he has transferred to RR Industrial. His standard paper pallet design is one of the most advanced in the market providing the highest payload of up to one tonne. The Vendor has over 10 years of business development and marketing experience. He has a proven track record in marketing across a wide range of industries ranging from trading, retail, financial services and telecommunications. In many of these industries, he was able to significantly increase sales for the respective companies. RR Industrial operations in Singapore include warehousing, technical support, R&D, sales and marketing whilst the manufacturing is sub-contracted in Indonesia. Most of the present productions are sold in Indonesia because of the factory's proximity to its customers. RR Industrial has received numerous enquiries from potential customers in the USA, China, Australia and Malaysia. Current manufacturing capacity and production is unable to meet the overwhelming orders and RR Industrial plan to establish its own manufacturing facility in Indonesia in order to satisfy more customers' needs. The acquisition of RR Industrial will enable the Company to participate in the expected exponential growth of the corrugated paper pallets industry as wood pallets are being substituted in the years ahead. Legislation and regulations in the US, Canada, the EU and many other countries are limiting the cross border mobility of wood pallets and wood packaging. These countries require wood and wood products (including wood pallets) to be heat-treated, fumigated or treated with preservatives before crossing into their borders. This will result in higher cost and inconveniences. Some countries are also imposing inspection fees and surcharges for wood pallets. Corrugated Paper Pallets not only meet all the regulatory conditions imposed on wood pallets, they also have many other advantages over wood pallets. Corrugated Paper Pallets are lighter, easier to handle, environmentally friendly, free from insect infestation and lower freight cost. Currently, paper pallets account for less than 1% of the US$30 billion global pallet market and its market share is expected to increase exponentially as it substitute and replace wood pallets. A shift in market demand for Corrugated Paper Pallets from wood pallets is expected. Available statistics indicate that about 20 million pieces of wood pallets are used annually with a turnover of several hundred million Singapore dollars. Singapore exporters to the US, Canada, the EC and other affected countries will have to meet the requirements of these markets and are looking for a solution. The demand for Corrugated Paper Pallets will increase. The Company has been seeking new opportunities to broaden its earnings base in profitable businesses with high growth potentials. The acquisition of RR Industrial fits these criteria. Financial Effects For illustrative purposes, the pro forma financial effects of the acquisition set out below are prepared using the Company's audited consolidated financial statements ended 31 December 2002 assuming that RR Industrial achieves the net profit after tax of $1,200,000 and the Consideration Shares are issued at a deemed value of S$0.05 per share: Net tangible assets as at 31 December 2002
Loss per share for the year ended 31 December 2002
Directors and substantial shareholders' interest None of the Directors or substantial shareholders of the Company has any interest, direct or indirect, in the acquisition. BY ORDER OF THE BOARD INNO-PACIFIC HOLDINGS LTD |
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