Sale of Malim Sawit Palm Oil Mill - Premium Nutrients, whither?

The sale (details below) was meant to be completed by the 31/01/08. The proceeds are 22m. 18m is to be used to pay down debt. Usually for a listed company if they have finally completed the sale, they should announce it, otherwise shareholders would have no idea of what is going on.

I hope this goes through, as I have mentioned before, anything that reduces Premium's debt levels is always welcome.

I had a look at Revenue Direction Sdn Bhd. I am a bit sceptical whether they have the financial resources to complete this purchase but they are taking financing to buy the asset rather than using internal resources. Well I hope this gets done or is already done.

I believe Malim Sawit (Premium's subsidiary) went into refining/milling in 2004. Now it has decided to get out of it since it is loss-making.


General Announcement
Reference No CP-071026-60904
Company Name : PREMIUM NUTRIENTS BERHAD
Stock Name : PREMIUM
Date Announced : 26/10/2007
Type : Announcement
Subject : PREMIUM NUTRIENTS BERHAD ("PREMIUM")PROPOSED DISPOSAL OF OIL PALM MILL ASSETS

Contents :

1. INTRODUCTION

Premium Nutrients Berhad (“Premium”) would like to announce that its wholly-owned subsidiary Malim Sawit Sdn. Bhd.( Company No. 47109-H ) (“MSSB”) has on October 26, 2007 entered into a conditional Sale and Purchase Agreement (“Conditional S&P”) with Revenue Direction Sdn Bhd ( Company No. 717067-K ) (“RDSB”)for the proposed disposal of a palm oil mill together with the subdivided plots of land where the palm oil mill is situated and certain machineries and stocks (full particulars whereof are set out in the Conditional S&P) and hereinafter the aforesaid are collectively referred to as “the Sale Subdivided Plots and Sale Assets” free from all encumbrances whatsoever but subject to whatever restriction-in-interest category of land use and conditions whether express implied in the documents of title affecting the Sale Subdivided Plots for a total sale consideration of RM22,000,000.00 (Ringgit Malaysia: Twenty Two Million only) (“Proposed Disposal”).

The Sale Subdivided Plots together with the remaining subdivided plots to be retained by MSSB (“Retained Subdivided Plots) subsequent to demarcation and subdivision presently constitute the six (6) pieces of lands owned by MSSB held under H.S.(M) 649 No P.T. PTD 3471, H.S.(M) 651 No P.T. PTD 3472, H.S.(M) 652 No P.T. PTD 3460, H.S.(M) 658 No P.T. PTD 3425, H.S.(M) 662 No P.T. PTD 3494 and H.S.(M) 692 No P.T. PTD 3445 all in the Tempat Sungai Sayong, Mukim of Layang Layang, Daerah Kluang, Negeri Johor (collectively, “the said Lands”). The said Lands are presently charged to Malaysian Trustees Berhad (Co. No. 21666-V) (“Master Chargee”) vide charge presentation No 1262/2004 and Debenture dated March 31, 2004 (“the Charges”) as security for a bond issue raised by Premium (“MUNIF/ IMTN Facility”).


2. DETAILS OF THE PROPOSED DISPOSAL

2.1 Salient Terms of the Conditional S&P

The Conditional S&P shall be subject to and conditional upon the fulfilment of the following within six (6) months from the date of the Conditional S&P or such other extendedperiod as may be mutually agreed between the parties:-

(1) MSSB obtaining and delivering the Master Chargee’s redemption statement cum undertakings confirming the redemption sum for the Sale Subdivided Plots and the Sale Assets (which in any event shall not exceed RM19.8 million, being the balance purchase price payable to MSSB) and that, subject to the Master Chargee’s receipt of the redemption sum, the Master Chargee covenants and undertakes, inter alia, the following:-

(a) that the Master Chargee consents to the amalgamation and subdivision application in respect of the said Lands (“Amalgamation & Subdivision”) by the parties;

(b) that the Master Chargee shall consent, upon request by RDSB or RDSB’s financier to the transfer by MSSB to RDSB of the undivided shares of the Sale Subdivided Plots and the creation of a legal charge over the undivided shares of Sale Subdivided Plots in favour of RDSB’s financier in any of the following events:-

(aa) failure of the parties to apply and/or obtain the approval of the Amalgamation & Subdivision within six (6) years from the date of the Conditional S&P (including appeals after any rejection by the appropriate authorities); or

(bb) the successful sale to any third party arising from any auction or foreclosure proceedings by the Master Chargee on the subdivided plots retained by MSSB,

(c) that the Master Chargee agrees to endorse its written consent on the deed of assignment executed by RDSB assigning all RDSB’s rights, title, interest and benefits to the said Sale Subdivided Plots and under the Conditional S&P to RDSB’s financier;

(d) that the Master Chargee consents to MSSB creating and registering a lease on the portion of the said Land representing the Sale Subdivided Plots in favour of RDSB under the provisions of the National Land Code 1965 upon the terms and conditions set out in the lease to be entered into between MSSB and RDSB (“the Lease”) and to the creation of a charge of the Lease to RDSB’s financier and an undertaking to deliver the original issue documents of titles to the said Lands to facilitate the aforesaid;

(e) that the Master Chargee consents to MSSB executing and giving an irrevocable Power of Attorney to RDSB in authorising dealings in respect of the Sale Subdivided Plots and application for Amalgamation & Subdivision only in respect of the said Lands upon the terms and conditions contained in the Power of Attorney granted by MSSB in favour of RDSB; and

(f) to refund the redemption sum to RDSB’s financier in the event that:-

(aa) the Lease cannot be registered for any reason attributable to the Master Chargee; and

(bb) upon issuance of the subdivided titles to the Sale Subdivided Plots and the Retained Subdivided Plots, the discharge of the Charges on the Sale Subdivided Titles cannot be registered for any reason attributable to the Master Chargee,

(the Master Chargee’s redemption statement cum undertakings aforesaid are hereinafter referred to as “the Master Chargee’s Redemption Statement cum Undertakings”).

In the event MSSB fails to deliver to RDSB’s solicitors the Master Chargee’s Redemption Statement cum Undertakings within thirty (30) days from the date of the Conditional S&P (“the Confirmation Period”), the Completion Period (as herein defined) for the payment of the Balance Purchase Price (as herein defined) shall be extended in accordance with the number of days delayed by MSSB free of interest calculated from the expiry of the Confirmation Period until the Master Chargee’s Redemption Statement cum Undertakings are duly received by RDSB’s solicitors;

(2) RDSB with the assistance of MSSB, obtaining the written consent and approval from the relevant authorities for the licences presently held by MSSB (the particulars whereof are set out in the Conditional S&P) to be issued to RDSB;

(3) RDSB informing and/or notifying the Foreign Investment Committee (hereinafter called “the FIC”) of the sale and purchase transaction and if applicable, the approval of the FIC being obtained, in accordance with the relevant FIC guidelines; and

(4) RDSB successfully obtaining a loan from RDSB’s financier to finance the purchase of the Sale Subdivided Plots and Sale Assets based on the collateral and/or security afforded under the Conditional S&P, the Lease and the Master Chargee’s Redemption Statement Cum Undertakings, (collectively, “the Conditions Precedent”).

Upon the execution of the Conditional S&P, RRDSB shall make a deposit payment of RM2,200,000.00 (“Deposit”) to MSSB.

Subject to the Conditions Precedent being first achieved, the balance of the sale consideration of RM19,800,000.00 (“Balance Purchase Price”) shall be deposited by RDSB with the MSSB’s solicitors as stakeholders, within a period of three (3) months from the date of the Conditional S&P and any extension attributable to any delay of the Confirmation Period (“Completion Period”) with an automatic extension of 2 months “Extended Completion Period”) provided that RDSB shall pay interest charged and calculated at the rate of eight per centum (8%) per annum on the total outstanding sum on a daily basis from the expiry of the Completion Period to the date of full payment of the Balance Purchase Price.

The date of payment of the Balance Purchase Price and late payment interest (if any) to MSSB’s solicitors within the Completion Period or Extended Completion Period, as the case may be, shall hereinafter be called the “Completion Date”.In the event that RDSB shall for any reason whatsoever breach or fail to comply with or complete this sale and purchase herein in accordance with the Conditional S&P after the Conditions Precedent have been met or otherwise waived, MSSB shall be entitled to forfeit the Deposit as agreed liquidated damages and the balance (if any) of all other monies paid by RDSB under the Conditional S&P, shall be refunded by MSSB to RDSB free of interest within fourteen (14) days of termination, failing which interest for delayed payment shall be chargeable at the rate of eight per centum (8%) per annum on the amount outstanding calculated from its due date until refund (whether before or after judgment) and upon such refund being made the Conditional S&P shall thereafter become null and void and be of no further effect and neither party hereto shall have any further claims, action or proceedings against the other in respect of or arising out of the Conditional S&P and MSSB shall be entitled to sell or deal in anyway with the said Lands thereafter.

The Parties hereby mutually agree that upon the Completion Date:-

(a) the employees seconded under the existing License Agreement dated December 31, 2005 (“License Agreement”) will be employed by RDSB and MSSB shall, undertake all applicable procedures for the retirement and/or retrenchment and/or termination of the seconded employees prior to the Completion Date to enable such seconded employees to be properly employed by RDSB upon the Completion Date; and

(b) the parties shall proceed with the application for Amalgamation & Subdivision to cause the issuance of the subdivided titles to the Sale Subdivided Plots and the Retained Subdivided Plots respectively with all costs and expenses incurred in respect thereof to be apportioned proportionately between MSSB and RDSB according to their respective interests in the subdivided plots.

Pending the delivery of legal possession of the Sale Subdivided Plots and the Sale Assets to RDSB in accordance with the Conditional S&P, the License Agreement shall remain valid and subsisting to regulate the operation of the Palm Oil Mill by RDSB and the License Agreement shall subject to Clause 7.4 of the Conditional S&P, be deemed terminated by the parties’ mutual consent upon the Completion Date, without prejudice to the rights of the parties accrued prior thereof or in respect of antecedent breaches, as the case may be.

2.2 Background Information on Purchaser
Revenue Direction Sdn Bhd (Co. No. 717067-K ) was incorporated in Malaysia under the Act on December 5, 2005. The principal activities of the Company are that of processing, extracting and manufacturing of crude palm oil from oil palm fresh fruit bunches.

2.3 Background Information on MSSB
MSSB was incorporated in Malaysia under the Act on May 4, 1979. The principal activities of MSSB are processing of oil palm fruits, refining of palm oil and sale of refined products along with its by products.

2.4 Basis for arriving at the Disposal Consideration
The disposal consideration of RM 22,000,000.00 was arrived at a “willing buyer, willing seller” basis.

2.5 Proposed Utilisation of Proceeds
Repayment of loan 18.0m
Working capital 4.0m

2.6 Original Cost of Investment
Palm oil mill RM21,908,273.00 ( Net Book Value: RM18.0 Million )
CPO feedstock RM4,000,000.00

2.7 Liabilities to be Assumed
Nil

3 RATIONALE FOR THE PROPOSED DISPOSAL

The proposed disposal of the Oil Palm mill is to discontinue with non core operations and mitigate losses. The significant portion of MSSB`s revenue is derived by producing edible oils utilized by related companies.

The Oil palm mill has continued to report losses and the rationale of the proposed disposal is ensure the reported losses are minimized for the current financial year.

With the proposed disposal, Premium will be able to achieve a cost saving of RM1.8million comprising bank loan interest and depreciation

The proceeds arising from the Proposed Disposal will be used to repay borrowings and thereby strengthening the Group’s financial position and profitability through 2007.

4. EFFECTS OF THE PROPOSED DISPOSAL

4.1 Share Capital
The proposed disposal will not have any effect on the issued and paid-up capital of Premium Nutrients Berhad /Malim Sawit Sdn Bhd

4.2 NTA
Based on the audited consolidated balance sheet of Premium as at December 31, 2006 and on the assumption that the Proposed Disposal had been effected on December 31, 2006, the Proposed disposal is expected to increase the NTA of the Premium Group from approximately RM 141.0 million to approximately RM 143.0million as shown in Table 1 of the appendix of the announcement.

4.3 Substantial Shareholders’ Shareholdings
The Proposed Disposal will not have any effect on the shareholdings of the substantial shareholders in Premium.

4.4 Earnings
Based on the audited accounts of Premium Group for the financial year ended 31 December 2006 and on the assumption that the Proposed Disposal had been effected on that date, the Proposed Disposal is expected to give rise to a net loss on disposal of approximately RM25,000.00 at Premium Group level, after taking into account the estimated expenses of approximately RM20,000.00 relating to the Proposed Disposal.

5. CONDITIONS TO THE PROPOSED DISPOSAL

The Proposed Disposal is subject to the approval of the following:-a) the Foreign Investment Committee

DEPARTURE FROM THE POLICIES AND GUIDELINES ON THE ISSUE/OFFER OF SECURITIES OF THE SECURITIES COMMISSION (“SC GUIDELINES”)

To the best knowledge of the Board of Directors of Premium (“Board”), the Proposed Disposal does not depart from the SC Guidelines.

6. DIECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the directors and major shareholders of Premium as well persons connected with them have any interest, direct and/or indirect, in the Proposed Disposal.

7. DIRECTORS’ STATEMENT
Having considered the rationale and effects of the Proposed Disposal, the Board is of the opinion that the Proposed Disposal is in the best interest of the Premium Group.

8. ESTIMATED TIME FRAME FOR COMPLETION
Barring unforeseen circumstances, the Proposed Disposal is expected to be completed by January 31, 2008.

9. DOCUMENTS FOR INSPECTION
The Conditional S&P and the Valuation letter dated August 15, 2007 will be available for inspection at the registered office of Premium at Level 27, Wisma Tun Sambanthan, Jalan Sultan Sulaiman, Kuala Lumpur during normal business hours from Monday to Friday (except public holidays) for three (3) months from the date of this announcement.This announcement is dated 26 October 2007