EVERGREEN FIBREBOARD BERHAD ("EFB") ~ ACQUISITION OF 133,333,327 ORDINARY SHARES REPRESENTING 99.99% IN GRE ENERGY CO. LTD., A COMPANY INCORPORATED IN THAILAND

General Announcement Reference No CI-070213-7F0BA

Company Name	:	EVERGREEN FIBREBOARD BERHAD
Stock Name	:	EVERGRN
Date Announced	:	13/02/2007

 

Type	:	Announcement
Subject	:	EVERGREEN FIBREBOARD BERHAD ("EFB") ~ ACQUISITION OF133,333,327 ORDINARY SHARES REPRESENTING 99.99% IN GRE ENERGY CO. LTD., A COMPANY INCORPORATED IN THAILAND

Contents :

1. INTRODUCTION

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  The Board of Directors of EFB is pleased to announce that EFB had on 13th February 2007 entered into a Sale and Purchase Agreement ("SPA") with Sung Hsien Chih - Passport No: S2193407J ("the Vendor").

2. DETAILS OF THE ACQUISITION

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  This acquisition is to acquire 1,333,327 ordinary shares of BAHT 100 each in GRE Energy Co. Ltd. - Co. No. 0905549001341 ("GRE") representing 99.99% of the issued and paid- up share capital of GRE for a total purchase consideration of BAHT 138 Million approximately RM13.7 Million ("the Acquisition"). With this acquisition of shares, GRE will become a subsidiary of EFB.

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  The different nature of business which is cogeneration of electricity, steam and heat using biomass from plantation wood waste, sawmill, medium density fibreboard and particle board waste is mainly for the supply to EFB's subsidiary and associate company in Hat Yai, Thailand.

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  The total cost of this project is estimated to be BAHT 400 Million upon its completion by end of 2007 whereby the sale of electricity and steam generated shall commence in January 2008.
  

2.1 Salient Terms of the Acquisition

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      The salient terms and conditions of the Acquisition as contained in the SPA are as follows: -

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      i) The payment for the total purchase consideration on the Acquisition of shares shall be payable to the Vendor in cash.

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          a) Payment of Two Million Eight Hundred Ninety Thousand Four Hundred Thai Baht (BAHT 2,890,400) as a refundable deposit within 7 (seven) days from signing of the SPA.

          b) The balance purchase price shall be paid in full on the Completion Date of the SPA.

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          a) The share certificates to the sale of shares together with valid and registerable instruments of transfer thereto duly executed by the Vendor in favor of the EFB;

          b) A copy, certified as true and correct by the director or secretary of the GRE, of a resolution of the Board of Directors of GRE approving the transfer of the Sale of Shares to EFB.

      ii) The Purchase sum shall be payable by EFB to the Vendor as follows: - iii) Completion of the Acquisition shall take place fourteen (14) days from the execution of the SPA ("the Completion Date") at such place as the Vendor and EFB may agree in the manner set out in SPA. On the Completion Date, the Vendor shall deliver or cause to be delivered to EFB the following: -

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  2.2 Basis of arriving at the purchase consideration and mode of satisfaction

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      The purchase consideration of BAHT 138 Million approximately RM13.7 million which will be satisfied in cash was arrived on a willing-buyer willing-seller basis after taking into consideration the following: -

(a) the par value of share in GRE;

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      (b) the advantages on approvals obtain and tax exemptions acquired by GRE; and
      (c) the saving potential in subsidiary and associate company arising from the new business to be acquired.

2.3 Liabilities to be assumed

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      EFB will not assume any additional liabilities arising from the Acquisition.
  
  2.4 Source of Funds

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      The Acquisition will be financed from the Group's internally generated funds.
  
  2.5 Original cost of investment

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      The original cost of investment is BAHT 133,333,300 approximately RM13.3 Million for GRE paid up capital.

2.6 Background information on GRE

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      GRE is a company incorporated in Thailand on the 12th June 2006 with it registered office at 128, Moo 8, Phunnakun Rd, Tambol Khohong Amphur, Hat Yai, Songkhla 90110.
      
      Presently, the authorized and issued share capital of GRE is BAHT 133,333,300 comprising of 1,333,333 ordinary shares of BAHT 100 each.

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      Principal activity of GRE is Cogeneration of Electricity for an approved capacity of 9.6 megawatts of electricity and 20 tons of Steam at 13 bar using biomass from plantation wood waste, sawmill, Medium Density Fibreboard and Particle Board waste for heat energy required for the production of Medium Density Fibreboard. Necessary approvals needed from the government authorities has been obtained for GRE including the plant which is located on a 9.2 acres land adjacent to EFB's subsidiary - Siam Fibreboard Co. Ltd. located in Hat Yai, Thailand.

3. RATIONALE FOR THE PROPOSED ACQUISITION

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  As electricity is integral to EFB Group's production, continuous quality electricity supply is inevitable as to achieve maximum productivity. Furthermore, with escalating cost of electricity in Thailand, generating own supply of electricity will be an advantage for a higher cost reduction.

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  As an integrated business activity which is promoted by the Board of Investment in Thailand, GRE was granted tax exemption for eight (8) years ending in 2014. This tax exemption will definitely benefit the Group in terms of its profit margin.

4. PROSPECTS AND RISK FACTORS

4.1 Prospects

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      The Acquisition is intended to control the supply of energy and the Board of Directors of EFB are of the opinion that there is a necessity in having a energy generation plant to support its subsidiary and associate company as to enable them to have a cost effective production with a constant quality supply of electricity.

4.2 Risk factors

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      The business of GRE is subject to risk inherent in foreign investment, including foreign regulation and foreign exchange fluctuations. Nevertheless, the Management will endeavor to mitigate the risk through closely monitoring on government regulations and legislature.

5. FINANCIAL EFFECTS

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  There will be no change to the share capital and shareholding of the substantial shareholders of EFB as the Acquisition does not involve any issuance of EFB shares.

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  The Acquisition will not have any effect on the earnings of the EFB Group for the financial year ending 31 December 2007 as it is expected to be completed by the January 2008. However, the Board of Directors of EFB expects the Acquisition to contribute positively to the future earnings of the EFB Group.
  

6. APPROVALS REQUIRED

The Acquisition is not subject to the approval of the shareholders of EFB.

7. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST

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          Barring any unforeseen circumstances, the Acquisition is expected to be completed by the end of February 2007.
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          The Acquisition does not depart from the Securities Commission's Guidelines on Issue/Offer of Securities.
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          The SPA will be available for inspection following the date of this announcement for a period of two (2) weeks at EFB's Registered Office at Suite 6.1A, Level 6, Menara Pelangi, Jalan Kuning, Taman Pelangi, 80400 Johor Bahru, Johor, Malaysia between Mondays to Fridays during the hours of 9.00 a.m. to 5.00 p.m. except for on public holidays.
      The Board of Directors of EFB, having taken into consideration all aspects of the Acquisition and is of the opinion that the Acquisition is in the best interest of the Company and its shareholders. 9. ESTIMATED TIME FRAME FOR COMPLETION 10. SECURITIES COMMISSION'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES
      11. DOCUMENTS FOR INSPECTION
      
      This announcement is dated 13th February 2007.
  None of the Directors or substantial shareholders of EFB or persons connected to them have any interest, direct or indirect, in the Acquisition. 8. STATEMENT BY THE BOARD OF DIRECTORS