MELATI EHSAN HOLDINGS BERHAD (“MEHB” OR “COMPANY”)

PROPOSED ACQUISITION BY BAYU MELATI SDN BHD, A WHOLLY-OWNED SUBSIDIARY

OF MEHB, OF THREE (3) PARCELS OF LEASEHOLD LAND IDENTIFIED AS H.S.(D) 54886,
54887 AND 54888 FOR PT NO. 4505, 4506 AND 4507, MUKIM BANDAR SELAYANG,
DISTRICT GOMBAK, STATE OF SELANGOR FOR AN AGGREGATE CASH CONSIDERATION OF
APPROXIMATELY RM77.74 MILLION (“PROPOSED ACQUISITION”)

1. INTRODUCTION

On behalf of the Board of Directors of MEHB (“Board”), M&A Securities Sdn Bhd (“M&A
Securities”) is pleased to announce that Bayu Melati Sdn Bhd (“BMSB”), a wholly-owned
subsidiary of MEHB, had on 15 April 2016 entered into a conditional sale and purchase
agreement (“SPA”) with Aturan Utama Sdn Bhd (“AUSB” or “Vendor”) for the Proposed
Acquisition.

2. PROPOSED ACQUISITION

The Vendor is the registered owner of all the 3 parcels leasehold land held under H.S.(D)
54886, 54887 and 54888 for PT No. 4505, 4506 and 4507, Mukim Bandar Selayang, District
Gombak, State of Selangor (“Land”).

The agreed aggregate purchase price for the Land is RM77,735,849.00 (“Purchase Price”). In
the event that the requisite planning approval for BMSB‟s proposed commercial development
on the Land includes a condition requiring BMSB to build low cost and/or affordable homes
under whatever name known including under the affordable housing scheme currently known
as “Rumah SelangorKu”, the Purchase Price for the Land shall be reduced to RM70,000,000.00
only.

The payment schedule for the Proposed Acquisition is set out in Section 2.3(c) below.

2.1 Details of the Land

Further details of the Land are summarised below:

Title details : H.S.(D) 54886, 54887 and 54888 for PT No. 4505, 4506
and 4507, Mukim Bandar Selayang, District Gombak,
State of Selangor

Tenure : Leasehold (99 years expiring on 4 April 2104)

Land area : Combined land area of 37,078 square meters

Category of land use : Building

70M / 37078m2 = RM192psf
Express condition : H.S.(D) 54886, PT 4505 – “Bangunan perniagaan”
H.S.(D) 54887 and 54888, PT 4506 and 4507 –
“Bangunan kediaman”

Restriction-in-Interest : “Tanah yang diberi milik ini tidak boleh dipindah milik,
dipajak atau digadai melainkan dengan kebenaran Pihak
Berkuasa Negeri”

Encumbrances : Nil

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 Land cost : RM1.79 million based on the audited financial statements
of AUSB as at 31 December 2014

Existing and proposed : The Land is currently vacant and is proposed to be

use developed into a mixed development. The development
plans and gross development value is still not finalized as
it is still in the initial planning stage

Date of valuation : 10 March 2016

Method of valuation : Comparison method

Market value(1) : RM80 million

Note:

(1) The market value was arrived at based on the following assumptions:

(i) The Land comprises three (3) parcels of contiguous vacant commercial land
and has a total land area of 37,078 square metres;
(ii) H.S.(D) 54887 and 54888, PT 4506 and 4507 is have been converted to
commercial use with all relevant premium and charges paid;
(iii) The plot ratio of the Land is 1:6; and
(iv) There will not be any form of low costs and/or affordable homes
requirements for the development of the Land.

2.2 Basis of the Purchase Price

The Purchase Price was arrived based on a “willing buyer-willing seller” basis, after
taking into consideration, inter alia:

(a) The aggregate market value of RM80 million as appraised by C H Williams Talhar
& Wong (“Valuer”), an independent firm of registered valuers based on the
valuation letter dated 29 March 2016. In arriving at the market value, the Valuer
had adopted the comparison method; and

(b) the potential development prospects of the Land as set out in Section 5 of this
announcement.

2.3 Salient terms of the SPA

The salient terms of the SPA are as follows:

(a) The SPA

(i) In consideration of the initial deposit of RM7.60 million (“Initial Deposit”),

now paid by BMSB to the Vendor upon the execution of the SPA as deposit
and towards part payment of the Purchase Price in the event of completion
of the SPA, the Vendor agrees to sell and BMSB agrees to purchase the
Land free from all charges and encumbrances and with vacant possession
but subject to all conditions of title, whether express or implied, contained
in the issue document(s) of title to the Land at the Purchase Price subject to
the terms and conditions set out in the SPA.

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 (ii) In the event that requisite planning approval for BMSB‟s proposed
commercial development on the Land includes a condition requiring BMSB
to build low cost and/or affordable homes under whatever name known
including under the affordable housing scheme currently known as “Rumah
SelangorKu”, and BMSB accepts such condition and does not appeal against
it or if BMSB appeals against it but such appeal is unsuccessful, the
purchase price for the Land shall be reduced to RM70.00 million only.

(b) Conditions precedent

The completion of the sale and purchase of the Land is subject to and conditional
upon the following conditions precedent being fulfilled within six (6) months
(“Approval Period”) or the automatic extended period of twelve (12) months from
the expiry of the Approval Period or such other extensions thereof as shall be
agreed by the parties to the SPA (“Extended Approval Period”):

(i) the approval from the Economic Planning Unit being obtained by BMSB
(“EPU Approval”);

(ii) the state consent to transfer to be obtained by the Vendor at the Vendor‟s
sole cost and expense consenting to the transfer of the Land from the
Vendor to BMSB. For the avoidance of doubt, the Vendor shall only be able
to attend to the application for state consent to transfer after the title(s) in-
continuation to the Land are issued;

(iii) the „conversion‟ of the conditions of title to that of “ commercial” for those of
Land that are not “commercial” as at the date of the SPA to be obtained by
the Vendor at the Vendor‟s sole cost and expense and the evidence of the
Vendor‟s full payment of the premiums thereof (if any) to the relevant
authorities;

(iv) the written approval from the relevant authorities or such other written
evidence that the plot ratio for the development of the Land be 1:6 to be
obtained by the Vendor at the Vendor‟s sole cost and expense; and

(v) the approval of the shareholders of MEHB in a general meeting of the

shareholders authorising and approving the entering into the SPA by BMSB
and BMSB shall cause the general meeting to be convened within ninety
(90) days of the EPU Approval having been obtained;

In the event:-

(i) the application for any of the conditions precedent shall be rejected; or

(ii) any of the conditions precedent shall not be obtained or deemed not to
have been obtained within the Approval Period or the Extended Approval
Period, as the case may be;

then the Initial Deposit shall be refunded to BMSB within fourteen (14) days of
receipt of either BMSB‟s or the Vendor‟s written notification thereof. Against the
refund of the Initial Deposit, BMSB shall withdraw any caveat lodged by and/or on
behalf of BMSB and return to the Vendor, the Vendor‟s documents, if already
delivered to BMSB‟s solicitors and thereafter, the SPA shall be deemed to be
terminated and neither party shall have any claim whatsoever against the other
(save in respect of antecedent breaches (if any)).

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(c) The Purchase Price

(i) Subject to the fulfillment of all the conditions precedent, the payment of the
Purchase Price is as follows:

Scenario I The aggregate purchase price of RM77,735,849.00

Scenario II The aggregate purchase price is reduced to RM70,000,000.00 in

the event that the requisite planning approval for BMSB‟s
proposed commercial development on the Land includes a
condition requiring BMSB to build low cost and/or affordable
homes whatever name known including under the affordable
housing scheme currently known as “Rumah SelangorKu”.

Scenario I Scenario II
Timing Amount Amount
RM RM

Initial deposit upon signing of the SPA 7,600,000 7,600,000

Balance deposit to be paid within fourteen (14)
days from the date of fulfillment of all the
conditions precedent:
− paid to the Vendor 9,501,887 7,800,000
− paid to BMSB‟s solicitors as stakeholders 2,332,075 2,100,000
Balance purchase price to be paid (“Balance
Purchase Price”):
− within ninety (90) days from the date of 19,433,962 17,500,000
fulfillment of all the conditions precedent
− within twelve (12) months from the date of 19,433,962 17,500,000
fulfillment of all the conditions precedent
− within twenty four (24) months from the 19,433,963 17,500,000
date of fulfillment of all the conditions
precedent

Total 77,735,849 70,000,000

(ii) The Balance Purchase Price referred to above may be secured in favour of
the Vendor on or before the times stated by BMSB procuring and
delivering to the Vendor bank guarantees in the form and substance
acceptable by the Vendor to guarantee the payments of the Balance
Purchase Price in accordance with the terms of the SPA.

(iii) In the event BMSB fails to perform its obligation for payments of the
Balance Purchase Price at the times stated above, the Vendor shall be at
liberty to forthwith enforce and crystallise the security of the bank
guarantee towards payments of the full sums stated above in favour of
the Vendor and the SPA shall continue for due completion. Alternatively, if
BMSB shall pay the Balance Purchase Price or the relevant guaranteed
part thereof within the respective periods stated above, the Vendor shall
in exchange for the payment return the original of the respective bank
guarantee to BMSB for cancellation thereof.

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 (iv) In the event that BMSB shall be unable to pay any part of the Balance
Purchase Price within the stipulated periods stated above (whether
through direct cash payment(s) or the encashment of bank guarantee(s)),
the Vendor shall automatically grant to BMSB an extension of thirty (30)
days to pay or to deliver the bank guarantee in respect of such part
thereof that is due and payable provided always that BMSB shall pay to
the Vendor interest at 8% per annum on daily basis on such sum as shall
remain outstanding that is due and payable and calculated from the day
following the expiry of the period until the date of receipt by the Vendor
or the Vendor‟s solicitors (whether through the Vendor‟s direct cash
payment or encashment of the bank guarantee).

(d) BMSB‟s default / breach

(i) If BMSB fails to settle the balance deposit or the Balance Purchase Price or
breaches any of the terms and conditions of the SPA, and such breach,
capable of remedy, is not remedied within fourteen (14) days from the date
BMSB or BMSB‟s solicitors receives the Vendor‟s or the Vendor‟s solicitors‟
written notice to BMSB to remedy such breach, provided always that the
Vendor shall have duly complied with the terms and conditions of the SPA,
the Vendor shall be entitled to terminate the SPA.

(ii) Upon termination, the Vendor shall forfeit a sum equivalent to ten per cent
(10%) of the Purchase Price as agreed liquidated damages for breach of
contract. Within fourteen (14) days from the date of the termination notice
to BMSB from the Vendor, the Vendor shall refund to BMSB and/or BMSB‟s
financier, all other monies paid under or pursuant to the SPA towards
account of the Purchase Price, free of interest and net of any other sums
due and payable by BMSB to the Vendor under the terms of the SPA.

(e) Vendors default / breach

(i) If the Vendor fails, refuses or neglects to complete the sale of the Land to
BMSB or breaches any of the terms or conditions of the SPA and such
failure or breach, if capable of remedy, is not remedied by the Vendor
within fourteen (14) days from the date the Vendor or the Vendor‟s
solicitors receives BMSB‟s or BMSB‟s solicitors‟ written notice to the Vendor
to remedy such failure or breach, provided always that the BMSB shall have
duly complied with the terms and conditions of the SPA, BMSB shall be
entitled to seek remedy of specific performance and all relief flowing
therefrom or terminate the SPA.

(ii) In the event BMSB elects to terminate the SPA, the Vendor shall refund to
BMSB and/or BMSB‟s financier (as the case may be) free of interest and net
of any other sums due and payable by BMSB to the Vendor, the deposit and
all monies paid under or pursuant to the SPA towards account of the
Purchase Price (“Refund Monies”). In addition to the Refund Monies, the
Vendor shall pay to BMSB a sum equivalent to ten per centum (10%) of the
Purchase Price hereunder as agreed liquidated damages.

(f) Non completion of transfer

(i) If the transfer of the said Land in favour of BMSB cannot be registered for
any reason whatsoever, each party shall use its best endeavours:-

(aa) to ascertain the cause or reason;

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 (bb) to rectify, remedy and/or resolve such cause or reason; and
(cc) to cause the transfer instrument to be accepted for registration.

(ii) In the event any of the cause or reason mentioned above cannot be or is
not rectified, remedied and/or resolved within a period of thirty (30) days
from the date such non-acceptance or rejection or non-registration is made
known to BMSB and the Vendor, either party (and there were no default,
wilful neglect, omission or blameworthy conduct on the part of such party)
shall be entitled, within fourteen (14) days following the expiry of the
aforesaid thirty (30) day period, to terminate the SPA, by notice in writing
to the other party (“Non-Completion Termination Notice”) whereupon all
monies paid towards account of the Purchase Price by or on behalf of BMSB
to the Vendor or for the account of the Vendor and if any, the late interest
charges shall be refunded by the Vendor; free of interest to BMSB.

(g) Lodgement of caveat

BMSB is at liberty to lodge a private caveat on the Land as from the date the
title(s) in continuation in respect of the Land are issued provided always that
BMSB shall withdraw or procure to be withdrawn the said caveat immediately,
(whether such caveat is lodged by or on behalf of BMSB and/or BMSB‟s financier)
in the event that the SPA is terminated and that BMSB shall simultaneously with
the execution of the SPA, execute the relevant withdrawals of such private caveat
in-escrow and deposit the same together with the registration fees thereof with
the Vendor‟s solicitors for presentation for registration in the event of the lawful
termination of the SPA.

2.4 Source of funding

The Purchase Price is expected to be funded via a combination of internally-generated

funds and bank borrowings. The exact manner in which the Purchase Price will be
satisfied has not been finalised at this juncture.

2.5 Assumption of liabilities

Save for any potential bank borrowings that may arise from funding the Purchase Price,
there are no other liabilities, including contingent liabilities and guarantees to be
assumed by BMSB pursuant to the Proposed Acquisition.

2.6 Additional financial commitment

Save for the development costs to be incurred in relation to the proposed development
of the Land in the future, no other material additional financial commitment is expected
to be incurred by BMSB in relation to the Proposed Acquisition.

3. BACKGROUND INFORMATION ON THE VENDOR

3.1 Information on AUSB

AUSB was incorporated on 6 August 1997 under the Companies Act, 1965 (“Act”) as
a private limited company. The Vendor is principally involved in the setting up,
operation and ownership of higher educational institutions and to educate and train
in the fields of medicine, dentistry, pharmacy, nursing, allied health sciences,
engineering, business and accountancy.

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 As at the date of this announcement, AUSB is wholly-owned by Malaysian Allied
Health Sciences Academy Sdn Bhd (“MAHSA”). The directors of AUSB are Tan Sri Dr.
Haji Mohamed Haniffa Bin Abdullah and Puan Sri Dr. Selvarasi Veerappan @ Mumtaz
Begum.

As at the date of this announcement, AUSB has an authorised share capital of

RM5.00 million comprising 3,000,000 ordinary shares of RM1.00 each and 2,000,000
preference shares of RM1.00 each. The issued and paid-up share capital of AUSB is
RM2.00 million comprising 1,000 ordinary shares of RM1.00 each and 1,999,000
preference shares of RM1.00 each.

3.2 Information on MAHSA

MAHSA was incorporated on 1 June 2004 under the Act as a private limited company.
MAHSA‟s principal activity is its involvement in educational institutions that teaches all
disciplines of allied health sciences.

As at the date of this announcement, the shareholders of MAHSA are Dato‟ Shahril
Bin Mohamed Haniffa (50%) and Anitha Binti Mohamed Haniffa (50%). The directors
of MAHSA are Tan Sri Dr. Haji Mohamed Haniffa Bin Abdullah, Puan Sri Dr. Selvarasi
Veerappan @ Mumtaz Begum and Dato‟ Shahril Bin Mohamed Haniffa.

As at the date of this announcement, MAHSA has an authorised share capital of

RM50.00 million comprising 50,000,000 ordinary shares of RM1.00 each all of which
have been issued and fully paid-up.

4. RATIONALE

MEHB and its subsidiaries (“Group") are mainly involved as turnkey contractor and property
developer. The Proposed Acquisition will increase the Group‟s land bank for future potential
development.

The Land is situated strategically within Bandar Baru Selayang, Selangor. The Proposed
Acquisition is in line with the Group‟s intention to build up its land bank in strategic locations
with high development value. The Proposed Acquisition demonstrates the Board‟s initiative in
pursuing growth and sustainability in its business. The Board believes the Proposed Acquisition
will expand the Group‟s development activities in the future and contribute positively to the
Group‟s financial performance.

5. PROSPECTS

The Proposed Acquisition will enable the Group to add substantial land bank with good location
for township development to the Group.

Bandar Baru Selayang is an established suburb in Selangor. The Land is surrounded by an ideal
investment location with excellent accessibility and connectivity through Jalan Ipoh and
Gombak. Given the strategic location of the Land, the Board is optimistic that the development
of the Land will contribute positively to the Group‟s future financial performance.

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6. RISK FACTORS IN RELATION TO THE PROPOSED ACQUISITION

6.1 Financing risk

The Group may be seeking external financing to partially fund the Proposed Acquisition.
The Group‟s ability to arrange for external financing and the cost of such financing are
dependent on numerous factors, including general economic and capital market
conditions, interest rates, credit availability from banks or other lenders, or any
restrictions imposed by the Government of Malaysia and political, social and economic
conditions in Malaysia. The Group may also be exposed to fluctuations in interest rate
movements. Any future significant fluctuation of interest rates could have an effect on
the Group‟s cash flows and profitability. Besides increasing the gearing level, new bank
borrowings incurred could result in operating and financial covenants being imposed that
may affect its ability to pay dividends to shareholders.

The Group will seek to mitigate such financing risk by undertaking prudent capital
budgeting wherein all major financing decision would be made with the consultation and
approval from the Board. The Group will actively review its debt portfolio taking into
account the level, structure and nature of borrowings and seek to adopt appropriate cost
effective and optimal mix of financing options. The Group believes that its prudent cash
flow management will be able to address the financing and interest rate risk. While
efforts will be taken to ensure that no significant adverse effects would arise from the
interest/principal servicing commitments, there is no assurance that it will not have any
material impact on the Group‟s financial performance in the future.

6.2 Sensitivity to economic downturn and oversupply in the property market

The Proposed Acquisition will increase the Group‟s land bank for future potential
development. The demand for properties is dependent on the general economic,
business and credit conditions as well as the extent of supply in the market. Whilst the
Board believes that it is possible to address any fluctuations in the demand for properties
by planning meticulously in terms of innovative design, timing of launch, right type of
products/segment and pricing points relative to competitors, there can be no assurance
that the proposed development of the Land will be shielded from any adverse downturn
in the economy. The Group will leverage on its strength and experience as a property
developer to manage these risks closely.

6.3 Non-completion of the Proposed Acquisition

The Proposed Acquisition is subject to the terms and conditions of the SPA. In the event
the conditions precedent stated in the SPA, which include, amongst others, the approval
for the Proposed Acquisition from MEHB‟s shareholders, are not fulfilled, the SPA may be
terminated.

There is no assurance that the Proposed Acquisition will not be exposed to risks such as
inability by either party to the SPA to fulfill the terms and conditions of the SPA and/ or
obtain the relevant approvals from the relevant authorities. However, the Group will take
all reasonable steps that are within its control and to closely monitor the progress of all
other conditions precedent to be fulfilled by the Vendor to ensure that the conditions
precedent are fulfilled by the stipulated date and in accordance with the provisions of the
SPA.

7. APPROVALS REQUIRED

The Proposed Acquisition is conditional upon approvals being obtained from the following:

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 (a) shareholders of MEHB at an extraordinary general meeting to be convened for the
Proposed Acquisition;

(b) the Economic Planning Unit of Malaysia; and

(c) any other authorities/parties.

The Proposed Acquisition is not conditional upon any other corporate exercise undertaken by
MEHB.

The application to the authorities is expected to be made within two (2) months from the date
of this announcement.

8. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION

8.1 Share capital and substantial shareholders‟ shareholdings

The Proposed Acquisition will not have any effect on the issued and paid-up share capital
and substantial shareholders‟ shareholdings of the Company as the Purchase Price is to
be satisfied wholly by cash and does not involve any issuance of securities.

8.2 Net assets („NA”) and gearing

The Proposed Acquisition will not have a material effect on the NA of the Group for the
financial year ending 31 August 2016. As set out in Section 2.4, the Proposed Acquisition
will be funded through a combination of internally generated funds and bank borrowings
of which the final composition of the funding will be determined at a later stage.

For illustrative purposes, assuming that 50% of the Purchase Price which amounts to
approximately RM38.87 million is funded by bank borrowings and that the Proposed
Acquisition had been completed as at 31 August 2015, the pro forma effects of the
Proposed Acquisition on the consolidated NA and gearing of the Group is as follows:

Adjusted for After the

Audited as at Proposed Proposed
31.08.2015 Acquisition Acquisition
RM RM RM

Share capital 60,000,217 - 60,000,217

Treasury shares (466,539) - (466,539)
Share premium 19,830,264 - 19,830,264
Reverse acquisition debit (34,450,921) - (34,450,921)
(1)
Retained earnings 136,765,978 (200,000) 136,565,978
Shareholders‟ funds 181,678,999 (200,000) 181,478,999

Number of ordinary shares in issue 120,000,434 - 120,000,434

NA per ordinary share (RM) 1.51 - 1.51
(2)
Borrowings 9,543,091 38,867,925 48,411,016
Gearing (times) 0.05 - 0.27

Notes:

(1) Estimated expenses for the Proposed Acquisition

(2) Assuming 50% of the Purchase Price amounting to RM38.87 million is funded by
bank borrowings and the balance is by cash.

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 8.3 Earnings

The Proposed Acquisition is not expected to have any material effect on the consolidated
earnings of the MEHB Group for the financial year ending 31 August 2016.

Save for the financing costs in relation to the bank borrowings to be incurred for the
Proposed Acquisition, the Proposed Acquisition is expected to contribute positively to the
earnings and earnings per share of the Group in the future years as and when the
development of the Land come on-stream.

8.4 Convertible securities

As at the date of this announcement, there are no outstanding convertible securities in

MEHB.

9. DIRECTORS‟ AND MAJOR SHAREHOLDERS‟ INTEREST

None of the Directors and/or major shareholders of the Company, if any, and persons
connected with them have any interests, direct and/or indirect, in the Proposed Acquisition.

10. ADVISER

M&A Securities has been appointed by MEHB as the Adviser in relation to the Proposed
Acquisition.

11. DIRECTORS‟ STATEMENT

After having considered all aspects of the Proposed Acquisition, including the rationale for the
Proposed Acquisition, the Board is of the opinion that the Proposed Acquisition is in the best
interest of Group.

12. HIGHEST PERCENTAGE RATIO

The highest percentage ratio applicable to the Proposed Acquisition pursuant to Paragraph
10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 42.8%
based on the Purchase Consideration and the latest audited consolidated NA of the Group.

13. ESTIMATED TIME FRAME FOR COMPLETION AND APPLICATIONS TO THE RELEVANT
AUTHORITIES

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed in

the second half of 2016.

14. DOCUMENTS FOR INSPECTION

A copy of the SPA and the valuation letter from the Valuer is available for inspection at the
registered office of MEHB during normal business hours from Monday to Friday (except public
holidays) at No. 5, Jalan Titiwangsa, 53200 Kuala Lumpur for a period of three (3) months
from the date of this announcement.

This announcement is dated 15 April 2016.

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