OCEAN Capital Bhd is embarking on a major restructuring exercise which will see the injection of supermarket chain Pasaraya Hiong Kong into the group and a new company assuming its listing status on the KLSE main board.
As part of the exercise, the company has proposed that its entire paid-up share capital of RM39.9mil be cancelled to partly offset its accumulated losses of over RM59mil.
Its shareholders, meanwhile, will be offered shares in Premium Acre Sdn Bhd (PASB), a special purpose vehicle that will acquire Pasaraya Hiong Kong and eventually assume Oceans listing status, on the basis of 1 new PASB share for every five Ocean shares cancelled.
The supermarket cum departmental store operator, which joined the KLSEs affected issuer list under Practice Note 4/2001 on Tuesday when it announced a shareholders deficit of RM3.854mil, said it had entered into a restructuring agreement with PASB and Pasaraya Hiong Kong Sdn Bhds parent company Tat Seng Fatt Holding Sdn Bhd to restore the group's financial health.
In its results for the first quarter ended March 2003, Ocean reported a pre-tax loss of RM7.3mil, more than double the RM3.4mil loss in the corresponding period last year.
The agreement signed on Tuesday puts into effect a far-reaching restructuring scheme for Ocean that includes a capital reconstruction, warrants exchange, sale of non-core assets, a rights issue with warrants, an offer for sale, and transfer of Oceans listing status.
The company said, however, that a creditors scheme of arrangement will not be included in this exercise.
Crucial to the restructuring is the injection of Pasaraya Hiong Kong, which currently operates five supermarket outlets in the Klang Valley and Selangor.
The target company, in its results to March 2002, posted pre- and after-tax profits of RM11.8mil and RM8.1mil respectively on the back of revenues of RM206.6mil.
Its net tangible assets stood at RM34.9mil.
Oceans advisors Hwang DBS Securities Bhd said PASB has signed a conditional share sale agreement to purchase the entire equity interest of 20 million RM1 ordinary shares in Pasaraya Hiong Kong from Tat Seng Fatt for RM106.25mil.
This is to be satisfied by the issuance of 106.25 million PASB shares at RM1 each, which will make Tat Seng Fatt the single largest shareholder in PASB.
According to Hwang DBS, the proposed acquisition of Pasaraya Hiong Kong by PASB would enable Ocean shareholders to continue their investment in a viable business concern which was similar to Ocean's.
It added that there were synergies to be derived by the acquisition, particularly in Tat Seng Fatt's vast experience in the retail market which is expected to help turnaround Oceans ailing supermarket outlets.
Other integral parts of the scheme include:
·Cancelling of Oceans entire issued and share capital of RM39.9mil in its capital reconstruction exercise.
A part of this balance (RM31.92mil) together with the companys share premium of RM18.121mil will be set off against accumulated losses of RM59.327mil, reducing it to RM9.286mil.
·The remaining credit from the cancelled capital of RM7.98mil will be used for the allotment of 7.98 million new Ocean shares to PASB that will be exchanged for a similar number of PASB shares.
The latter will be issued and allotted to Ocean shareholders on the basis of 1 new PASB share for every 5 Ocean shares cancelled.
·Holders of the 11.563 million Ocean warrants 2000/2005, which have an exercise price of RM3.10, will be issued new PASB warrants 2003/2005 with similar terms and conditions on a 1-for-1 basis.
·A divestment programme of non-core and peripheral assets and businesses will be initiated to streamline and rationalise operations.
The group will concentrate its efforts in supermarket and departmental store retailing.
·Premium will offer 11.97 million shares in a rights issue at RM1 each to its shareholders after the capital reconstruction exercise on the basis of 3 renounceable rights shares with three free detachable warrants for every two PASB shares held.
Most of the proceeds from the rights issue will be used for working capital purposes.
·After acquiring Pasaraya Hiong Kong, Tat Seng Fatt, which will be holding an over 90% stake in PASB, will undertake an offer for sale of PASB shares to enable it to meet the minimum public shareholding requirement of 25%.
The scheme, which is subject to the approval of shareholders, warrant-holders and all relevant authorities, is expected to be completed within one year.