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Announcement Details :
1. INTRODUCTION
The Board of Directors of VCB ("Board") wishes to announce that the Company proposes to undertake the purchase of its own ordinary shares of RM0.10 each ("Shares") of up to ten percent (10%) of its issued and paid-up share capital ("Proposed Share Buy-Back").
2. DETAILS OF THE PROPOSED SHARE BUY-BACK
The Company proposes to seek the approval from the shareholders of the Company to purchase and/or hold its own Shares of up to a maximum of ten percent (10%) of the issued and paid-up share capital of the Company at any point in time subject to compliance with Section 67A of the Companies Act, 1965 ("Act"), Part IIIA of the Companies Regulations 1966, the Listing Requirements of Bursa Malaysia Securities Berhad for the MESDAQ Market ("MMLR") and any prevailing laws, rules, regulations, orders, guidelines and requirements issued by the relevant authorities. The purchase of the Company's own Shares will be carried out on Bursa Malaysia Securities Berhad ("Bursa Securities") through appointed stockbroker(s).
As at to-date, VCB has yet to grant any Employees' Share Option Scheme (ESOS) option to the eligible Directors and employees of the Company and its subsidiaries ("VCB Group" or the"Group").
Based on the issued and paid-up share capital of VCB as at 25 September 2008, the number of Shares which may be purchased by the Company pursuant to the Proposed Share Buy-Back ("Purchased Shares") are set out in Table 1 attached.
2.1 Funding for the Proposed Share Buy-Back
The maximum funds to be utilised for the Proposed Share Buy-Back shall not exceed the aggregate of the retained profits and/or share premium accounts of the Company.
The Proposed Share Buy-Back will be financed from both internally generated funds of the VCB Group and/or external borrowings, the portion of which to be utilised will depend on the actual number of Shares to be purchased, the price of the Shares and the availability of funds at the time of the purchase(s).
2.2 Status and Treatment of the Purchased Shares
The Shares purchased by the Company may be dealt with by the Board in accordance with Section 67A of the Act, in the following manner:-
(a) To cancel the Shares so purchased; or
(b) To retain the Shares so purchased as treasury shares for distribution as dividends to the shareholders of the Company and/or resale on Bursa Securities in accordance with the relevant rules of Bursa Securities and/or cancellation subsequently; or
(c) To retain part of the Shares so purchased as treasury shares and cancel the remainder; or
(d) A combination of (a), (b) and/or (c) above.
2.3 Pricing
Pursuant to the MMLR, VCB may only purchase its own Shares on Bursa Securities at a price which is not more than fifteen percent (15%) above the weighted average market price of the Shares for the past five (5) market days immediately preceding the date(s) of any purchase(s).
VCB may only resell its treasury shares on Bursa Securities at:-
(a) a price which is not less than the weighted average market price for the Shares for the five (5) market days immediately prior to the resale; or
(b) a discounted price of not more than five percent (5%) to the weighted average market price for the Shares for the five (5) market days immediately prior to the resale provided that:-
(i) The resale takes place no earlier than thirty (30) days from the date of purchase; and
The resale price is not less than the cost of purchase of the Shares being resold.
2.4 Regulatory Requirements
The Board undertakes that the Proposed Share Buy-Back will be conducted in accordance with the laws and regulations prevailing at the time of the purchase including compliance with the twenty-five percent (25%) public shareholding spread as required by the MMLR and ensuring that the issued and paid-up share capital of the Company does not fall below the prescribed minimum share capital requirements of the MMLR.
2.5 Implications Relating to the Malaysian Code on Take-Overs and Mergers, 1998 ("Code")
Part II and Practice Note 2.7 of the Code state that if a person, together with persons acting in concert with him (if any), holding more than thirty three percent (33%) but less than fifty percent (50%) of the voting shares of a company, who as a result of a purchase by the company of its own voting shares, increases his holding in any period of six (6) months by an additional two percent (2%) or more of the voting shares of the company, there is an obligation to extend a mandatory take-over offer to acquire the remaining shares not already held by the said person and persons acting in concert with him ("Mandatory Offer").
The Board does not intend to undertake the Proposed Share Buy-Back such that it will trigger any obligation to undertake a Mandatory Offer pursuant to the Code. However, in the event an obligation to undertake a Mandatory Offer is expected to arise with respect to any parties resulting from the Proposed Share Buy-Back, which is an action outside its direct participation, the relevant parties shall make the necessary application to the Securities Commission for an exemption from undertaking the Mandatory Offer under Practice Note 2.9.10 of the Code prior to any buy-back of the Shares.
2.6 Rationale for the Proposed Share Buy-Back
The Proposed Share Buy-Back will enable the Company to utilise its financial resources not immediately required for use, to purchase its own Shares. The Proposed Share Buy-Back may enhance the earnings per Share ("EPS") which may have a positive impact on the market price of the Shares of the Company. Other potential advantages of the Proposed Share Buy-Back to the Company and its shareholders are as follows:-
(a) To allow the Company to take preventive measures against speculation particularly when its Shares are undervalued which would in turn stabilise the market price of the Shares and hence, enhance investors' confidence;
(b) To allow the Company flexibility in achieving the desired capital structure, in terms of the debt and equity composition, and the size of equity; and (c) The Purchased Shares may be held as treasury shares and distributed to shareholders as dividends and/or resold in the open market with the intention of realising a potential capital gain if the Purchased Shares are resold at price(s) higher than their purchase price(s).
3. EFFECTS OF THE PROPOSED SHARE BUY-BACK
The effects of the Proposed Share-Buy-Back are as follows:-
3.1 Share Capital
The effects of the Proposed Share Buy-Back on the issued and paid-up share capital of the Company are set out in Table 2 attached.
If the Purchased Shares are retained as treasury shares, the Proposed Share Buy-Back will not have any effect on the issued and paid-up share capital of the Company. However, the rights attached to them in relation to voting, dividends and participation in any other distribution or otherwise will be suspended and the treasury shares shall not be taken into account in calculating the number or percentage of Shares or of a class of shares for any purposes including, without limiting the generality of Section 67A of the Act, the provisions of any law or requirements of the Company's Articles of Association or the MMLR on major shareholding, take-overs, notices, the requisitioning of meetings, the quorum for a meeting and the result of a vote on the resolution at a meeting.
3.2 Earnings
The effect of the Proposed Share Buy-Back on the earnings and EPS of the Group will depend on, inter alia, the purchase prices of the Shares, the number of Shares purchased, the effective funding cost to the Group to finance the purchase of Shares or any loss in interest income to the Group and the proposed treatment of the Purchased Shares.
If the Purchased Shares are to be retained as treasury shares or cancelled subsequently, the number of Shares applied in the computation of the EPS will be reduced, and accordingly, all other things being equal, the Proposed Share Buy-Back will have a positive impact on the EPS of the Group.
In the event the Purchased Shares are resold subsequently, depending on the price at which the said Shares are resold, the Proposed Share Buy-Back may have a positive effect on the EPS of the Group if there is a gain on the disposal and vice-versa.
3.3 Net Assets, Working Capital and Gearing
The effect of the Proposed Share Buy-Back on the net assets and net assets per Share of the Group will depend on the purchase prices of the Shares, the number of Shares purchased and the effective funding cost to the Group to finance the purchase of Shares or any loss in interest income to the Group.
The Proposed Share Buy-Back will reduce the net assets per Share of the Group if the purchase price exceeds the net assets per Share at the time of the purchase, and vice versa.
In the event the treasury shares are resold on Bursa Securities, the net assets per Share will increase if the Company realises a gain from the resale, and vice versa. If the treasury shares are distributed as share dividends, the net assets per Share will decrease by the cost of the treasury shares.
The Proposed Share Buy-Back will reduce the working capital and cash flow of the Group, the quantum of which will depend on the purchase prices of the Shares and the number of Shares purchased.
For the Purchased Shares which are kept as treasury shares, upon their resale, the working capital and cash flow of the Group will increase upon the receipt of the proceeds of the resale. The quantum of such increase will depend on the actual selling price(s) of the treasury shares and the number of treasury shares resold.
The effect of the Proposed Share Buy-Back on the gearing of the VCB Group will depend on the proportion of borrowings utilised to fund any purchase of Shares. The utilisation of any borrowings to fund the purchase of any Shares will serve to increase the gearing of the VCB Group.
3.4 Substantial Shareholders' Interests
The Purchased Shares that are to be retained as treasury shares and/or cancelled will result in a proportionate increase in the percentage shareholdings of the Directors and substantial shareholders of the Company. The effects of the Proposed Share Buy-Back on the Directors' and substantial shareholders' percentage of shareholdings in the Company are set out in Table 3 attached.
3.5 Dividends
The Proposed Share Buy-Back is not expected to have any material effect on the dividends to be declared by the Company, if any, for the financial year ending 31 December 2008. The level of dividends to be declared in the future would be determined by the Board after taking into consideration the performance of the Group and the prevailing economic conditions.
However, as stated in Sections 2.2 and 2.6 above, the Board may distribute future dividends in the form of the treasury shares purchased pursuant to the Proposed Share Buy-Back.
4. APPROVALS REQUIRED
The Proposed Share Buy-Back is subject to the approvals of the following parties:-
(a) The shareholders of VCB at an Extraordinary General Meeting to be convened; and (b) Any other relevant authorities (where applicable).
5. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTERESTS
Save for the consequential increase in the percentage of shareholdings and/or voting rights of the shareholders of VCB as a result of the Proposed Share Buy-Back, none of the Directors and/or substantial shareholders and/or persons connected to the Directors and/or substantial shareholders of VCB has any interest, either direct or indirect, in the Proposed Share Buy-Back.
6. DIRECTORS' RECOMMENDATION
After having considered all aspects of the Proposed Share Buy-Back, the Board is of the opinion that the Proposed Share Buy-Back is in the best interest of the Company.
This announcement is dated 9 October 2008.
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