| Proposed Acquisition of a Subsidiary for Business Expansion in the People’s Republic of China |
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1. INTRODUCTION Further to the announcement dated 22 March 2006 in relation to a Memorandum of Understanding, on behalf of the Board of Directors of Nextnation ("Board"), Public Merchant Bank Berhad ("PMBB") is pleased to announce that the Company had on 12 April 2006 entered into a Heads of Agreement ("Heads of Agreement") with Beijing Himo Tech Co., Ltd ("Beijing Himo"), Jumpstart Investments Limited ("Jumpstart") and Often Reach Investments Limited ("Often Reach") in respect of the Company’s investment in research, development and the provision of mobile communication, wireless technologies, wireless value added services, Internet and related software and business ancillary thereto ("Subject Activities") in the People’s Republic of China ("PRC").
2. DETAILS OF THE PROPOSED ACQUISITION The Proposed Acquisition will involve the subscription by Nextnation (or its affiliate) of a combination of ordinary shares and preference shares of Often Reach of up to RMB20,000,000 (equivalent to approximately RM9,175,000 based on the exchange rate of RM1.00 : RMB2.18) at par. Nextnation (or its affiliate) will hold 50% of the enlarged issued and paid-up ordinary share capital of Often Reach and the Board of Directors of Often Reach will comprise four (4) representatives of Nextnation (or its affiliate) and three (3) representatives of Jumpstart. Often Reach will establish a wholly-owned foreign entity ("WOFE") in the PRC to undertake the Subject Activities. The Board of Directors of WOFE will consist of four (4) representatives of Nextnation (or its affiliate) and three (3) representatives of Jumpstart. 2.2. Salient terms of the Heads of Agreement Upon the establishment of WOFE, WOFE and Beijing Himo shall execute the following agreements:- 2.3 Liabilities to be assumed Nextnation and its subsidiaries ("Nextnation Group") will not assume any additional liabilities arising from the Proposed Acquisition.
The Proposed Acquisition will be financed from the internally generated funds of the Nextnation Group.
Beijing Himo is one of the few service providers in the PRC which was granted the national operation permit to operate mobile value added services, and has been granted three (3) years of tax exemption and subsequent three (3) years of fifty percent (50%) tax exemption.
The Proposed Acquisition will enable the Nextnation Group to penetrate the fast-growing wireless value-added services market and the related industry in the PRC, and this is in line with the Nextnation Group’s overseas market expansion strategies to diversify and grow its revenue base. 6. EFFECTS OF PROPOSED ACQUISITION 6.1 Share Capital and Substantial Shareholders’ Shareholdings The Proposed Acquisition will not have any effect on the issued and paid-up share capital and the substantial shareholders’ shareholdings of the Company as the Proposed Acquisition does not involve the issuance of new shares in Nextnation.
The Proposed Acquisition is expected to be completed in the 2nd quarter of 2006 and to contribute positively to the future earnings of the Nextnation Group. 6.3 Net Assets The Proposed Acquisition is not expected to have any material effect on the net assets of the Nextnation Group.
The Subject Activities are subject to various risk factors inherent in the telecommunications industry, in particular the wireless value-added services market in the PRC. These include but are not limited to factors such as economic and industry conditions, competition with other service providers, changes in government legislation and policies including the regulatory and licensing environment. In addition, as most of the Subject Activities will be carried out via the PRC Telcos, any loss or deterioration in relationship with the PRC Telcos may result in severe disruptions to the business operations of Beijing Himo and WOFE. To mitigate some of the risk factors as set out above, Beijing Himo and WOFE will constantly monitor the development of the industry and develop products and services that are in line with the technology and market trends and in compliance with government policies and requirements. In addition, good working relationships with the PRC Telcos will always be maintained.
8. APPROVAL REQUIRED The Proposed Acquisition does not require the approval of shareholders of Nextnation or any government authorities in Malaysia.
9. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTERESTS None of the Directors and substantial shareholders of Nextnation and persons connected to them has any interest, direct or indirect, in the Proposed Acquisition.
The Board is of the opinion that the Proposed Acquisition is in the best interests of Nextnation.
11. ESTIMATED TIME FRAME FOR COMPLETION OF THE PROPOSED Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the 2nd quarter of 2006.
The Proposed Acquisition does not depart from the SC’s Policies and Guidelines on Issue/Offer of Securities. 13. ADVISER AND SPONSOR The Company has appointed PMBB, who is also the Sponsor of the Company, as the Adviser for the Proposed Acquisition.
The Heads of Agreement is available for inspection at the registered office of Nextnation at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur during normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement. The Information Circular, which will contain the details of the Proposed Acquisition, will be issued to the shareholders of Nextnation in due course. No action would be required to be taken on the part of the shareholders of Nextnation.
This announcement is dated 13 April 2006. |
