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DISPOSAL OF INTEREST IN NORWEST CHEMICALS PTE LTD

 

Hwa Hong Corporation Limited (the “Company”) wishes to announce that Norwest Holdings Pte Ltd (“Norwest Holdings”), a company in which the Company’s wholly-owned subsidiary, Hwa Hong Edible Oil Industries Pte. Ltd. (“Hwa Hong Edible Oil”), has a 49.5% equity interest, has today entered into a conditional agreement (“Agreement”) with Asset Backed Holdings Limited (“ABK”) and David Argyle, a director of both Norwest Holdings and ABK, for the disposal of its 100% equity interest in Norwest Chemicals Pte Ltd (“Norwest Chemicals”), comprising two (2) ordinary shares of S$1.00 each in the capital of Norwest Chemicals, to ABK (“Proposed Transaction”).  ABK is a corporation incorporated in Australia and listed on the Australian Stock Exchange Limited (“ASX”).

 

Norwest Chemicals has a wholly-owned subsidiary, Sichuan Mianzhu Norwest Phosphate Chemical Company Limited (“Sichuan Mianzhu”), a company incorporated in The People’s Republic of China which carries on the principal business of manufacturing, refining, distributing and marketing premium grade value-added phosphate chemicals (collectively, Norwest Holdings, Norwest Chemicals and Sichuan Mianzhu are hereinafter referred to as the “Norwest Group”).

 

The consideration payable by ABK under the Agreement will be satisfied as follows:

 

(i)

payment by ABK to Norwest Holdings of a cash consideration of AUD2,120,000 (“Cash Consideration”); and

 

(ii)

the allotment and issue by ABK of an aggregate of 21,400,000 new ordinary shares in the capital of ABK (“Consideration Shares”), representing approximately 29.61% of the enlarged issued share capital of ABK immediately after completion of the Proposed Transaction, comprising:

 

(a)

1,700,416 Consideration Shares to be allotted and issued to Hwa Hong Edible Oil as part payment of debts owing to it by the Norwest Group;

 

(b)

1,799,584 Consideration Shares to be allotted and issued to David Argyle as payment in full of debts owing to him by the Norwest Group;

 

(c)

400,000 Consideration Shares to be allotted and issued to Strategic Alliance Capital Pte Ltd as part payment of debts owing to it by the Norwest Group; and

 

(d)

17,500,000 Consideration Shares to be allotted and issued to Norwest Holdings (or as it may direct).

 

The last traded price of ABK shares on the ASX on 2 April 2004 was AUD0.19 per share.

 

The purchase consideration for the Proposed Transaction was arrived at on a willing buyer-willing seller basis, taking into account, inter alia, the adjusted unaudited consolidated net asset value of Norwest Chemicals as at 29 February 2004.

 

The Proposed Transaction is conditional upon the satisfaction (or waiver, as the case may be) of, inter alia, the following conditions:

 

(a)

ABK completing its due diligence investigations on Norwest Chemicals within 42 days after the date of the Agreement and the results of ABK’s due diligence investigations on Norwest Chemicals being satisfactory to ABK in all material respects, and Norwest Holdings completing its due diligence investigations on ABK within 28 days after the date of the Agreement and the results of Norwest Holding’s due diligence investigations on ABK being satisfactory to Norwest Holdings in all material respects;

 

(b)

the approval of the shareholders of ABK and Norwest Holdings respectively for the Proposed Transaction having been obtained and such approvals having been obtained, not being varied, revoked or withdrawn;

 

(c)

ABK obtaining all necessary regulatory approvals (including the approval of the ASX for the listing and quotation of the Consideration Shares on the ASX to the extent that no ASX escrow restrictions apply and, if the ASX does impose escrow restrictions on any of the Consideration Shares, that these restrictions are acceptable to Norwest Holdings and, if imposed, are imposed for a period not exceeding 24 months from the date of completion of the Proposed Transaction) and other approvals required to complete the Proposed Transaction, and such approvals having been obtained, not being varied, revoked and withdrawn, and if such approvals are granted subject to conditions, such conditions being acceptable to Norwest Holdings;

 

(d)

there not being any order, ruling or directive from the Australian Securities & Investments Commission or any other regulatory body that Norwest Holdings, its shareholders or any of their related corporations are required to make a takeover bid for ABK as a consequence of the issue of the Consideration Shares on completion of the Proposed Transaction;

 

(e)

the execution of an agreement between Norwest Holdings, its shareholders and certain creditors of the Norwest Group in relation to, inter alia, the use of part of the Cash Consideration by Norwest Holdings to repay certain debts owing to such creditors on the terms therein (“Debt Payment Agreement”);

 

(f)

Norwest Holdings and the Company having received evidence satisfactory to them of the release and discharge of all guarantees, securities, undertakings or other obligations given by Norwest Holdings, the Company and/or any of their respective related corporations (save for Norwest Chemicals and Sichuan Mianzhu) in respect of any indebtedness, liability or obligation of Norwest Chemicals or Sichuan Mianzhu (including but not limited to a corporate guarantee given by the Company (“Hwa Hong Guarantee”));

 

(g)

the trading of ABK’s shares on the ASX not being or having been suspended for a period of 30 consecutive days or longer; and

 

(h)

the volume weighted average share price of ABK’s shares traded on the ASX during a period of 30 days prior to the date of completion of the Proposed Transaction not being less than AUD0.10 per share.

 

Completion of the Proposed Transaction is to take place within 7 days after satisfaction or waiver of all the conditions precedent set out in the Agreement. If any of the conditions precedent are not satisfied or waived by the date falling 90 days from the date of the Agreement or such later date as the parties may agree (“Cut-off Date”), the Agreement shall be deemed to be terminated.

 

Within 7 days after the date of the Agreement, ABK shall pay a sum of AUD250,000 as a deposit to be held in escrow and which is to be released to Norwest Holdings as part payment of the Cash Consideration on completion of the Proposed Transaction.  In the event that completion does not occur within 120 days from the date of the Agreement or the conditions precedent are not satisfied or waived by the Cut-off Date, the deposit will be returned to ABK.

 

The audited net carrying value of Hwa Hong Group’s equity interest in Norwest Holdings was approximately S$0.886 million as at 31 December 2003.  The release and discharge of the Hwa Hong Guarantee contemplated under the Agreement is expected to give rise to a writeback of provision for corporate guarantee of approximately S$0.8 million for the Company, and the repayment in cash of certain debts owing by the Norwest Group to Hwa Hong Edible Oil contemplated under the proposed Debt Payment Agreement is expected to result in a writeback of provision for doubtful debts of approximately S$2.4 million for Hwa Hong Edible Oil.

 

Effect on net tangible assets (“NTA”) per share

 

Based on the audited consolidated results of the Hwa Hong Group for the financial year ended 31 December 2003, and assuming that the Proposed Transaction had been completed as at 31 December 2003, the Proposed Transaction would have increased the consolidated NTA per share of the Hwa Hong Group as at 31 December 2003 from 64.98 cents to 65.47 cents.

 

Effect on earnings per share

 

Based on the audited consolidated results of the Hwa Hong Group for the financial year ended 31 December 2003, and assuming that the Proposed Transaction had been completed as at 1 January 2003, the Proposed Transaction would have increased the consolidated earnings per share of the Hwa Hong Group for the financial year ended 31 December 2003 from 2.08 cents to 2.57 cents.

 

None of the Directors of the Company has any interest, direct or indirect, in the Proposed Transaction.  The Directors of the Company are not aware of any substantial shareholder of the Company having any interest, direct or indirect, in the Proposed Transaction.

 

 

By Order of the Board

 

 

 

Ong Bee Leem

Company Secretary

 

 

5 April 2004

 

 

 

Submitted by Ong Bee Leem, Company Secretary on 05/04/2004 to the SGX