TH HEAVY ENGINEERING BERHAD (“THHE” OR THE “COMPANY”) · 2013-03-13 · TH HEAVY ENGINEERING BERHAD (“THHE” OR THE “COMPANY”) ... barge with heavy-lift and pipelay

TH HEAVY ENGINEERING BERHAD (“THHE” OR THE “COMPANY”)

PROPOSED ACQUISITION OF 30% EQUITY INTEREST IN BERLIAN MCDERMOTT SDN BHD (“BMD”);

PROPOSED DISPOSAL OF 30% EQUITY INTEREST IN THHE FABRICATORS SDN BHD (“THF”); AND

PROPOSED JOINT VENTURE

(For the purpose of this announcement, “USD” refers to United States Dollar and “RM” refers to Ringgit Malaysia. The exchange rate of USD1.00:RM3.06 is used throughout this Announcement.)

1. INTRODUCTION

1.1 On behalf of the Board of Directors of THHE (“Board”), AmInvestment Bank Berhad

(“AmInvestment Bank”) wishes to announce that the Company has on 21 December 2012 entered into the following agreements: (i) a share purchase agreement (“SPA”) with McDermott Holdings (M) Sdn Bhd

(formerly known as Note Encoder Sdn Bhd) (“MDHSB”) for the proposed acquisition by THHE of such number of ordinary shares of RM1.00 each in BMD (“BMD Sale Shares”), representing 30% equity interest in BMD from MDHSB, for an indicative RM cash consideration equivalent to USD25.466 million (RM77.926 million) (“BMD SPA”) (“Proposed Acquisition of BMD”);and

(ii) an SPA with McDermott Capital Malaysia Sdn Bhd (“MDC”), for the proposed disposal by THHE of such number of ordinary shares of RM1.00 each in THF, representing 30% equity interest in THF (“THF Sale Shares”) to MDC, for an indicative RM cash consideration equivalent to USD25.466 million (RM77.926 million) (“THF SPA”) (“Proposed Disposal of THF”).

1.2 THHE will enter into the following joint venture agreements (“JVAs”) upon the completion of

the Proposed Acquisition of BMD and Proposed Disposal of THF for the purpose of the establishment of joint ventures (“Proposed JV”): (i) a JVA with MDHSB, J. Ray McDermott, S.A. (“JRMSA”) (both MDHSB and JRMSA

are collectively referred to as “McDermott”) and BMD for the purpose of setting out mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of BMD as a joint venture between McDermott and THHE on a 70:30 basis (“BMD JVA”) (“Proposed JV of BMD”);

(ii) a JVA with MDC and THF for the purpose of setting out mutually agreed rights,

duties, liabilities and obligation vis-à-vis each other in relation to the operation of THF as a joint venture between THHE and MDC on a 70:30 basis (“THF JVA”) (“Proposed JV of THF”);

(iii) a JVA with JRMSA and a company to be incorporated at a later date, the primary

objective of which is to engage in the provision of front-end engineering and design, construction and installation services (“Engineering Newco”), for the purpose of setting out mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of Engineering Newco as a joint venture between THHE and JRMSA on a 50:50 basis (“Engineering JVA”) (“Proposed Engineering JV”); and

(iv) a JVA with JRMSA and a company to be incorporated at a later date, the primary objective of which is to engage in the provision of procurement and project management services (“PMT Newco”), for the purpose of setting out mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of PMT Newco as a joint venture between THHE and JRMSA on a 50:50 basis (“PMT JVA”) (“Proposed PMT JV”).

TH HEAVY ENGINEERING BERHAD PROPOSALS Page 2 of 33

The Proposed Acquisition of BMD, the Proposed Disposal of THF and the Proposed JV are collectively referred to as the “Proposals”.

2. DETAILS OF THE PROPOSED ACQUISITION OF BMD

The Proposed Acquisition of BMD will entail the acquisition by THHE of 30% equity interest in BMD, for an indicative RM cash consideration equivalent to USD25.466 million (RM77.926 million) (“BMD Purchase Consideration”), subject to the terms and conditions of the BMD SPA. As part of the conditions precedent to be fulfilled by MDHSB under the BMD SPA, BMD will undertake to dispose a mid-size combination barge (“DB 26”) which is currently owned by Berlian McDermott (L) Limited (“BMDL”), a wholly-owned subsidiary of BMD, and acquire a derrick/lay barge with heavy-lift and pipelay capabilities (“DB 30”) prior to the completion of the BMD SPA. 2.1 BMD Purchase Consideration

The BMD Purchase Consideration was arrived at on a willing seller-willing buyer basis based on 30% of the estimated adjusted net asset (“NA”) value of BMD and its subsidiary (“BMD Group”) as at 31 December 2012 of RM259.75 million after adjusting for, amongst others, the agreed value of the DB30

1, estimated unabsorbed tax loss carry forward not yet

recorded on the balance sheets of BMD Group, estimated 2013 profit after tax (“PAT”) earned /to be earned on projects in backlog as of 31 December 2012 and/or specified projects, estimated 2013 expenses recorded by BMD Group (comprising largely of the idle cost and marine support direct operating expenses in respect of DB30) and estimated bid support costs incurred for the benefit of the Proposed JV (“Adjusted 2012 BMD Net Equity”).

The BMD Purchase Consideration is payable upon the completion of the BMD SPA. Subsequent to the completion of the BMD SPA, the BMD Purchase Consideration may be further adjusted as follows:

BMD Adjusted Consideration

= BMD Purchase Consideration + (30% of 2013 BMD Net Equity2 –

30% of Adjusted 2012 BMD Net Equity)

The BMD Purchase Consideration shall be adjusted within five (5) business days of the final determination of the 2013 BMD Net Equity

2 in the following manner:

(i) if the BMD Adjusted Consideration exceeds the amount of the BMD Purchase

Consideration, THHE shall pay MDHSB the difference between the BMD Adjusted Consideration and the BMD Purchase Consideration; and

(ii) if the BMD Adjusted Consideration is less than the amount of the BMD Purchase Consideration, MDHSB shall pay THHE the difference between the BMD Purchase Consideration and the BMD Adjusted Consideration.

1 Based on a discount of 5% to the market value appraised by Dufour, Laskay & Strouse, Inc, a registered marine surveyor on 5 September 2012 of USD58.12 million (or equivalent to RM177.85 million)

2 Calculated in accordance to the BMD SPA based on the audited financial statements of BMD Group as at the completion date of the BMD SPA and after adjusting for the actual amount of unabsorbed tax loss carry forward not yet recorded, actual 2013 PAT earned on projects in backlog as of 31 December 2012 and/or specified projects, actual 2013 expenses recorded by BMDL Group and actual bid support costs incurred for the benefit of the Proposed JV


In determining the BMD Purchase Consideration, the Board has taken into account factors which include the following: (i) the market value of DB30 to be acquired as appraised by the Dufour, Laskay &

Strouse, Inc, a registered marine surveyor;

(ii) PAT earned / to be earned by BMD Group on projects in backlog as of 31 December 2012 and that these backlog projects would be completed in 2013. As at 31 December 2012, BMD has no other secured contracts; and

(iii) potential benefits to accrue from the Proposed JV, details of which are set out in

Section 6.

2.2 Information on BMD

BMD was incorporated as a private limited company on 28 April 2000 as Mutual Faith Unity Sdn Bhd. The company changed its name to Barmada McDermott Sdn Bhd on 13 February 2001 and assumed its present name on 3 August 2011. BMD is principally involved in the provision of construction and installation of offshore pipeline and structures. BMD holds a Petroliam Nasional Berhad‟s (“PETRONAS”) license for offshore facilities construction, pipeline and associated services. As at 21 December 2012, BMD has two (2) backlog projects comprising: (i) a subsea contract for the execution of a deepwater engineering, procurement,

construction, installation and commissioning (“EPCIC”) of the Siakap North – Petai Development Project; and

(ii) provision of transportation and installation of substructure for Kebabangan Northern

Hub Development project. The above-mentioned projects are expected to complete within FYE 31 December 2013. As at 21 December 2012, the authorised share capital of BMD is RM5,100,000 comprising 5,000,000 ordinary shares of RM1.00 each (“BMD Shares”) and 100,000 redeemable cumulative participating preference shares of RM1.00 each (“BMD RCPPS”), all of which have been issued and are fully paid-up. As at 21 December 2012, the substantial shareholders of BMD and their respective shareholdings in BMD are as follows:

As at 21 December 2012 As at 21 December 2012

Direct Indirect Direct Indirect

Name

No. of BMD

Shares („000) %

No. of BMD

Shares („000) %

No. of BMD

RCPPS („000) %

No. of BMD

RCPPS („000) %

MDHSB 3,750 75.0 - - - - - -

JRMSA 1,250 25.0 - - 100 100.0 - -

McDermott International, inc

- - (1)

1,250 25.0 (1)

100 100.0

Note: (1) Deemed interested by virtue of its shareholdings in JRMSA.


As at 21 December 2012, the directors of BMD and their respective shareholdings in BMD are as follows:

Direct Indirect

Name Designation Nationality

No. of BMD Shares

(„000) %

No. of BMD Shares

(„000) %

Shaharudin Bin Mat Saleh

Director Malaysian - - (1)

3,750 75.0

Scott Vincent Cummins

Director Australian - - - -

Mazita Binti Mahusin Director Malaysian - - - -

Note: (1) Deemed interested by virtue of his shareholdings in MDHSB.

As at 21 December 2012, BMD has (1) one wholly-owned subsidiary company, namely BMDL which was incorporated on 8 May 2002 as a private limited company under the Labuan Companies Act 1990. The principal activities of BMDL is chartering of marine vessels. BMDL holds a leasing license and currently owns DB26. BMD does not have any associated companies. Based on the audited financial statements of BMD Group for FYE 31 December 2011, the consolidated loss after tax (“LAT”) and consolidated net assets (“NA”) of the BMD Group is RM13.0 million and RM7.4 million respectively. Please refer to Appendix I for further financial information of BMD.

2.3 Source of Funding

The BMD Purchase Consideration to be paid by THHE will be completely set off against the THF Disposal Consideration to be received by THHE. In the event the BMD Adjusted Consideration exceeds the amount of the BMD Purchase Consideration, the excess amount to be paid by THHE will be funded by internally generated funds and/or bank borrowings, the proportion of which will be determined at a later stage.

2.4 Liabilities to be assumed

There are plans to upgrade the DB30 to be acquired by BMD after the completion of the Proposed Acquisition of BMD. The total amount of upgrading cost is expected to be USD71.41 million (RM218.51 million), of which USD30.27 million (RM92.62 million) has already been committed by Hydro Marine Services (“HMS”), a company related to JRMSA. Subsequent to the completion of the Proposed Acquisition of BMD, the BMD Group intends to obtain borrowings to finance the entire USD71.41 million (RM218.51 million) of upgrades upon which the amount of USD30.27 million (RM92.62 million) will be repaid to HMS. Apart from the above, there are no liabilities, including contingent liabilities and guarantees to be assumed by THHE as a result of the Proposed Acquisition of BMD.

2.5 Estimated Additional Financial Commitments

Other than the amounts stated in Section 2.4 above, there are no additional financial commitments required for DB30.


2.6 Original Date and Cost of Investment

The original cost of investment of MDHSB in BMD was approximately RM2,250,000, which was incurred on 11 August 2011.

2.7 Information on MDHSB

MDHSB was incorporated as a private limited company in Malaysia on 20 Apr 2011 under the name of Note Encoder Sdn Bhd and assumed its current name on 19 December 2012. The principal activity of MDHSB is investment holding. As at 21 December 2012, the authorised share capital of MDHSB is RM100,000 comprising 100,000 ordinary shares of RM1.00 each (“MDHSB Shares”) and 100 MDHSB Shares have been issued and are fully paid-up. As at 21 December 2012, the shareholders of MDHSB and their respective shareholdings in MDHSB are as follows:

Direct Indirect

Name No. of MDHSB

Shares % No. of MDHSB

Shares %

Shaharudin Bin Mat Saleh 99 99.0 - -

Malmac Sdn Bhd 1 1.0 - -

As at 21 December 2012, the directors of MDHSB and their respective shareholdings in MDHSB are as follows:

Direct Indirect

Name Designation No. of MDHSB

Shares % No. of MDHSB

Shares %

Shaharudin Bin Mat Saleh

Director 99 99.0 - -

Rockne Locke Moseley

Director

- - - -

Dolina Binti Daud Director - - - -

As at 21 December 2012, the subsidiaries of MDHSB are as follows:

Name Date/Place of Incorporation

Effective Equity Interest (%) Principal Activities

BMD 28 April 2000/ Malaysia

70.0 Provision of construction and installation of offshore pipeline and structures

BMDL 8 May 2002/ Labuan

100.0 Chartering of marine vessels

MDC 12 December 2012/ Malaysia

52.0 Investment holdings

2.8 Salient terms of the BMD SPA

Please refer to Appendix III of this Announcement for the salient terms of the BMD SPA.


3. DETAILS OF THE PROPOSED DISPOSAL OF THF

The Proposed Disposal of THF will entail the disposal by THHE of 30% equity interest in THF, for an indicative cash consideration of RM77.926 million (“THF Disposal Consideration”), subject to the terms and conditions of the THF SPA. 3.1 THF Disposal Consideration

The THF Disposal Consideration was arrived at on a willing seller-willing buyer basis based on 30% of the estimated adjusted NA value of THF as at 31 December 2012 of RM259.75 million after adjusting for, amongst others, the agreed value of the Pulau Indah Fabrication Yard (“Yard”)

1, estimated unabsorbed tax loss carry forward not yet recorded on the

balance sheets of THF, estimated 2013 PAT earned / to be earned on projects in backlog as of 31 December 2012 and/or specified projects and estimated bid support costs incurred for the benefit of the Proposed JV (“Adjusted 2012 THF Net Equity”).

The THF Disposal Consideration is payable upon the completion of the THF SPA. Subsequent to the completion of the THF SPA, the THF Disposal Consideration may be further adjusted as follows:

THF Adjusted Consideration

= THF Disposal Consideration + (30% of 2013 THF Net Equity2 –

30% of Adjusted 2012 THF Net Equity)

The THF Disposal Consideration shall be adjusted within five (5) business days of the final determination of the 2013 THF Net Equity

2 in the following manner:

(i) if the THF Adjusted Consideration exceeds the amount of the THF Disposal

Consideration, MDC shall pay THHE the difference between the THF Adjusted Consideration and the THF Disposal Consideration; and

(ii) if the THF Adjusted Consideration is less than the amount of the THF Disposal Consideration, THHE shall pay MDC the difference between the THF Disposal Consideration and the THF Adjusted Consideration.

In determining the THF Disposal Consideration, the Board has taken into account factors which include the following: (i) the market value of the Yard as ascribed by Irhamy & Co, the independent valuers

appointed by THHE;

(ii) PAT earned / to be earned by THF on projects in backlog as of 31 December 2012; and

(iii) potential benefits to accrue from the Proposed JV, details of which are set out in

Section 6.

1Based on a discount of 5% to the market value ascribed by Irhamy & Co., the independent valuers appointed by THHE on 7

December 2012 of RM121.6 million. 2 Calculated in accordance to the THF SPA based on the audited financial statements of THF as at the completion date of the THF

SPA and after adjusting for the actual amount of unabsorbed tax loss carry forward not yet recorded, actual 2013 PAT earned on projects in backlog as of 31 December 2012 and/or specified projects, actual bid support costs incurred for the benefit of the Proposed JV less any amount recorded in the balance sheet with respect to the litigation suit filed by THF against a contractor.


3.2 Information on THF

THF was incorporated as a private limited company on 17 January 2001 under the Act under the name Growplex Sdn Bhd and changed its name to Ramunia Fabricators Sdn Bhd on 8 February 2001. THF assumed its current name on 19 July 2012. The authorised share capital of THF is RM500,000,000 comprising 500,000,000 ordinary shares of RM1.00 each (“THF Shares”), of which 300,000,000 THF Shares have been issued and are fully paid-up. THF is principally involved in the business of fabrication of offshore oil and gas related structure and other related civil works. As at 21 December 2012, the directors of THF and their respective shareholdings in THF are as follows:

Direct Indirect

Name Designation Nationality No. of THF

Shares („000) % No. of THF

Shares („000) %

Dato‟ Md Zahari bin Md. Zin

Director Malaysian - - - -

Nor Badli Munawir bin Mohamad Alias Lafti


Kamarozman bin Ahmad


As at 21 December 2012, THF is a wholly-owned subsidiary of THHE. THF does not have any subsidiary or associated companies. Based on the audited financial statements of THF for FYE 31 December 2011, the LAT and NA of the THF is RM9.03 million and RM66.6 million respectively. Please refer to Appendix II for further financial information.

3.3 Utilisation of Proceeds

The THF Disposal Consideration to be received by THHE will be set off completely against the BMD Purchase Consideration to be paid by THHE. In the event the THF Adjusted Consideration exceeds the amount of the THF Disposal Consideration, the excess amount to be received by THHE will be utilised for working capital purposes.

3.4 Liabilities to be Assumed

There are no liabilities, including contingent liabilities and guarantees to be assumed by MDC as a result of the Proposed Disposal of THF.

3.5 Original Date and Cost of Investment

The original cost of investment of THHE in THF was approximately RM395,000,000, which was incurred in 31 December 2004, 23 October 2008 and 29 October 2010.


3.6 Information on MDC

MDC was incorporated as a private limited company in Malaysia on 12 December 2012 under the Act. As at 21 December 2012, the authorised share capital of MDC is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each (“MDC Shares”), and the total issued and paid-up share capital of MDC is RM1,000 comprising 1,000 MDC Shares. MDC is an investment holdings company. As at 21 December 2012, MDC does not have any subsidiary and associated companies. As at 21 December 2012, the substantial shareholders of MDC and their respective shareholdings in MDC are as follows:

Direct Indirect

Name No. of MDC

Shares % No. of MDC

Shares %

MDHSB 520 52.0 - -

JRMSA 480 48.0 - -

Shaharudin bin Mat Saleh - - 520 (1)

52.0

Note: (1) Deemed interested by virtue of his shareholdings in MDHSB.

3.7 Salient terms of the THF SPA

Please refer to Appendix III of this Announcement for the salient terms of the THF SPA. 4. DETAILS OF THE PROPOSED JV

Pursuant to the BMD SPA and THF SPA, THHE will enter into various JVAs upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF for the purpose of establishment of a joint venture. 4.1 Proposed JV of BMD

Upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, THHE will enter into a JVA with McDermott and BMD for the purpose of setting out mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of BMD as a joint venture between McDermott and THHE on a 70:30 basis. 4.1.1 The indicative salient terms of the BMD JVA

Please refer to Appendix III of this Announcement for the indicative salient terms of the BMD JVA.

4.1.2 Information of the Joint Venture Partners for the Proposed JV of BMD

(i) MDHSB

Please refer to Section 2.7 of this Announcement for information on MDHSB.


(ii) JRMSA

JRMSA was incorporated as a private company in the Republic of Panama on 22 March 1994 under the laws of the Republic of Panama. As at 21 December 2012, the authorised share capital of JRMSA is 500 ordinary shares (“JRMSA Shares”), all of which have been issued and are fully paid-up. JRMSA is principally involved in the engineering, procurement, construction and installation of complex oil and gas projects worldwide. As at 21 December 2012, the substantial shareholders of JRMSA and their respective shareholdings in JRMSA are as follows:

Direct Indirect

Name No. of JRMSA

Shares % No. of JRMSA

Shares %

McDermott International, inc

500 100.0 - -

As at 21 December 2012, the directors of JRMSA and their respective shareholdings in JRMSA are as follows:

Direct Indirect

Name Designation No. of JRMSA

Shares % No. of JRMSA

Shares %

Stephen M. Johnson Director - - - -

Perry L. Elders Director - - - -

Liane K. Hinrichs Director - - - -

John T. McCormack Director - - - -

4.2 Proposed JV of THF

Upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, THHE will enter into a JVA with MDC and THF for the purpose of setting out mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of THF as a joint venture between THHE and MDC on a 70:30 basis. 4.2.1 The indicative salient terms of the THF JVA

Please refer to Appendix III of this Announcement for the indicative salient terms of the THF JVA.

4.2.2 Information of the Joint Venture Partners for the Proposed JV of THF

(i) MDC

Please refer to Section 3.6 of this Announcement for information on MDC.


4.3 Proposed Engineering JV

Upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, THHE will enter into a JVA with JRMSA and the Engineering Newco for the purpose of setting out their mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of Engineering Newco as a joint venture between THHE and MDC on a 50:50 basis. The primary objective of Engineering Newco is to engage in the provision of front-end engineering and design, construction and installation services. 4.3.1 The indicative salient terms of the Engineering JVA

Please refer to Appendix III of this Announcement for the indicative salient terms of the Engineering JVA.

4.3.2 Information of the Joint Venture Partners for the Proposed Engineering JV

(i) JRMSA

Please refer to Section 4.1.2(ii) of this Announcement for information on JRMSA.

4.4 Proposed PMT JV

Upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, THHE will enter into a JVA with JRMSA and the PMT Newco for the purpose of setting out their mutually agreed rights, duties, liabilities and obligation vis-à-vis each other in relation to the operation of PMT Newco as a joint venture between THHE and JRMSA on a 50:50 basis. The primary objective of PMT Newco is to engage in the provision of procurement and project management services. 4.4.1 The indicative salient terms of the PMT JVA

Please refer to Appendix III of this Announcement for the indicative salient terms of the PMT JVA.

4.4.2 Information of the Joint Venture Partners for the Proposed PMT JV

(i) JRMSA

Please refer to Section 4.1.2(ii) of this Announcement for information on JRMSA.

4.5 Source of Funding

The source of funding of the Proposed JV is not determined at this juncture as the Proposed JV will only be entered upon the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF. In any event, the Proposed JV will be funded by internally generated funds, bank borrowings and/or fund raising exercises, the proportion of which is to be determined at a later stage.


5. CORPORATE STRUCTURE

The illustration of the corporate structure upon completion of the Proposals is as follows:

THHE

THFBMD

25% 45%

MDC

70%30%

Engineering Newco PMT Newco

50% 50%

MDHSBJRMSA

30%

6. RATIONALE FOR THE PROPOSALS

McDermott International, Inc (“MDI”) is a amongst the largest Engineering, Procurement, Construction and Installation (“EPCI”) players in the world with 2011 annual turnover of approximately USD3.4 billion and a market capitalisation of approximately USD2.6 billion as at 21 December 2012. The company focuses on designing and executing from concept through to commissioning, complex offshore oil and gas projects and offers EPCI services for offshore oil and gas field developments, including fixed and floating production facilities, pipelines and subsea systems. The company‟s customers include integrated and national oil and gas companies, and it has had an established presence in Malaysia for over 30 years. At present, it operates a diversified fleet of marine vessels, fabrication facilities and engineering offices across more than 20 countries. The Proposals will enhance THHE‟s service offerings from the existing fabrication construction services to create a fully integrated EPCI services company. Upon completion of the Proposals, THHE will be able to offer a one stop end-to-end EPCI service solution, enter into a higher value added business sector, cross selling of additional services to existing customer base and embark on higher margin integrated EPCI jobs with PETRONAS and other oil majors and thus elevate THHE into a Tier 1 player in the oil and gas sector in Malaysia. The Proposals are expected to provide an opportunity for THHE and its subsidiaries (“THHE Group”) to actively pursue local and international potential projects and diversify its client base by providing more complex, larger scale and higher value conventional, floating and subsea, umbilicals, risers and flow lines (“SURF”) related solutions within the upstream offshore oil and gas markets.


7. INDUSTRY OVERVIEW AND FUTURE PROSPECT Prospects of the industry in which BMD operates Oil and gas industry through its upstream and downstream activities is a significant contributor to economic growth. In 2009, the sector contributed a total of RM68.3 billion or 13.1% of GDP, of which upstream activities including petroleum and gas represented RM39.5 billion or 7.6% of GDP and downstream activities including petrochemical industry contributed RM28.8 billion or 5.5% of GDP. Given the rise in global energy demand and economic growth, the contribution from the oil and gas industry is expected to increase by approximately 20% over the next 5 years to reach RM81.9 billion or 11.1% of GDP in 2015. Upstream activities are expected to contribute RM43.0 billion or 5.8% of GDP whereas downstream activities are expected to contribute RM39.8 billion or 5.3% of GDP in 2015.

(Source: 10

th Malaysia Plan, The Economic Planning Unit, Prime Minister’s Department, Putrajaya, 10 June

2010)

According to the Economic Transformation Plan (“ETP”), the oil, gas and energy industry is projected to increase to RM241 billion in 2020 contributing approximately 19% of Malaysia‟s total gross national income. On the local front, PETRONAS is expected to invest in capital expenditure, annually between RM50 to RM55 billion, over the next five (5) years in order to sustain growth of the oil and gas industry and replace its aging assets. (Source: ETP) Over the next few months, AmResearch Sdn Bhd expects, the rollout of new fabrication contracts by PETRONAS, which temporarily slowed down in the second half of 2012, will start to regain momentum from second quarter of 2013 onwards. PETRONAS and its production-sharing contractors are currently holding an open Pan-Malaysian tender for hook-up, construction and commissioning works potentially worth RM8 billion to RM10 billion. Next year, the rollout of the second phase of the North Malay basin gas cluster project, which will involve a large central processing platform at the Bergading field and multiple satellite well-head platform, should sustain the momentum. This will be supported by further newsflows at the RM60 million RAPID project in Pengerang and tank terminal projects in Southern Johor together with massive gas cluster projects off Sabah and Sarawak which are tied into the expansion of the Bintulu LNG complex in 2015. (Source: Oil & Gas, 30 November 2012, AmResearch Sdn Bhd) Prospects and future plans of the enlarged THHE Group With the completion of the Proposals, the THHE Group will be able to operate as a fully integrated EPCI company providing a one-stop solution for offshore services. The Proposals are expected to elevate the THHE Group to a Tier 1 player in the oil and gas industry and will provide an opportunity for the THHE Group to actively pursue local and international onshore and offshore projects and to diversify its client base to include clients requiring conventional, floating and SURF related solutions within the upstream offshore oil and gas markets. However, the prospects of the THHE Group are expected to be highly linked to the dynamics in the oil and gas industry in the region. The THHE Group expects many new oil and gas contracts to be rolled out in the near future with the promotion of the ETP especially relating to the oil and gas sector, the replacement of ageing oil production assets for PETRONAS and projected development of more marginal oil fields to sustain and/or increase the level of production to meet the anticipated growth in demand for oil and gas in Malaysia. The THHE Group expects to benefit from the greater demand for design engineering, fabrication (incorporating equipment procurement) and installation work as a result of increased Exploration and Production (“E&P”) activity in the oil and gas sector in the region. Based on the above, the Board is of the view that the prospects of the enlarged Group going forward would be positive.


8. RISK FACTORS

(i) Dependence on contracts

The profit contribution from the Proposed Acquisition of BMD including the DB30 vessel is highly dependent on the THHE Group securing value-adding EPCI and Transport and Installation (“T&I”) contracts. Hence, the THHE Group has to continuously compete with its competitors to secure high value contracts with appropriate margins that reflect the inherent risks and complexities associated with these types of work. Any delay in or inability to secure license(s) and qualification could have a knock on effect to the volume and timing of any contracts bid and won, which could have a material adverse effect on the business, prospects, results of operations, cash flow and financial conditions of the THHE Group. Nevertheless, the THHE Group is confident that it will secure both the requisite licensing and related contracts based on, amongst others, the following reasons:

(a) there is an increasing number of prospective EPC/EPCI and EPCIC projects both

within Malaysia and Asia Pacific;

(b) domestic EPC-related capacity and capability is currently constrained and expected to remain so for foreseeable near term;

(c) the newly formed Group will have the end-to-end EPCIC capabilities under a single

“roof” required to secure a license and to be invited to bid for future EPC-related projects;

(d) the THHE Group will leverage the combined knowledge and experience of THHE

and MDI to design and provide cost effective, winning solutions for client projects; and

(e) the THHE Group is currently targeting and pursuing a number of specific EPC-

related and T&I projects across its target markets. (ii) Completion risks

In the event the Proposed Acquisition of BMD and the Proposed Disposal of THF fail to be completed by the completion date, or the conditions precedent, as set out in Section 1.3 and Section 2.3 of Appendix III of this Announcement respectively, have not been fulfilled or waived, or there is a breach of warranties in the BMD SPA and THF SPA, the BMD SPA and THF SPA may be terminated. THHE will monitor the status and progress of the Proposed Acquisition of BMD and the Proposed Disposal of THF and endeavour to meet and fulfill all the conditions precedent pursuant to the BMD SPA and THF SPA.

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(iii) Competition

The THHE Group will face competition from other oil and gas service providers in the EPCIC business. Other competitors in the industry may have proven track record, greater resources and market presence as compared to the THHE Group and therefore, may in some instances, be better positioned than the THHE Group to compete and win contract.

There can be no assurance that the THHE Group will be able to withstand competition from other competitors in the market and gain market share. Given the high barriers of entry inherent in the industry which include high capital costs, extensive licensing and experience-related requirements and the overall inherent complexity and risk of the EPCIC business, the THHE Group will take all reasonable steps to ensure it remains competitive and successful.

(iv) Investment risk

The Proposals will further enhance the THHE Group‟s involvement in offshore oil and gas industry. However, it will also expose the THHE Group to risks in the conventional, floating and SURF sector. There is no assurance that the Proposals will enable the THHE Group to maintain or improve its financial performance.

There is also no assurance that the anticipated benefits of the Proposals will be realized. Furthermore, the duration required for positive impact on its financial performance to materialize could be longer than anticipated arising from, amongst others, the number and value of contracts to be secured.

To mitigate these risks, the THHE Group proposes to increase its presence by participating in regional and local bids.

(v) Operation risks on the joint venture companies

Upon completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, THHE will enter into joint venture agreements with BMD, JRMSA, MDHSB, MDC, Engineering Newco and PMT Newco in relation to the operation of BMD, THF, Engineering Newco and PMT Newco. Pursuant to the completion of the Proposed Acquisition of BMD and Proposed Disposal of THF, the Company will be bound by the terms of the JVAs. Whilst there are significant operational risks associated with the EPCI sector, the THHE Group is confident that these risks will be mitigated through access and use of the JV partners‟ capabilities in project management.

(vi) Business risks

The profitability of the THHE Group will depend on the level of activity in the exploration, development and production of oil and natural gas, including the level of capital spending in the offshore oil and gas industry in Malaysia and Asia Pacific. Such activities are affected by factors such as volatility in demand for and supply of oil, fluctuations in current and future oil prices, the number, size and locations of oil fields, changes in capital expenditure in the offshore oil and gas industry and general economic, social and political conditions.

In the event that there is deterioration in the offshore oil and gas industry and offshore support services industry, or in global and regional economic conditions, oil and gas companies may curtail or reduce their planned expenditure, which may in turn reduce the demand for EPCI. There can be no assurance that the activity levels will remain the same or increase.


(vii) Foreign operations risks

The THHE Group may participate in bids and/or expand its operations in foreign countries. As such, the THHE Group may be exposed to foreign operations risks such as, country risks, regulatory risks, foreign exchange risks and political risks which are entirely out of the THHE Group‟s control and there is no assurance that these risks will not have any material adverse effects on the THHE Group‟s operations and profitability.

Unfavourable developments in political, economic, government control and regulatory framework of these overseas markets may affect the THHE Group‟s business in other countries.

9. FINANCIAL EFFECTS FROM THE PROPOSALS

9.1 Share Capital and Substantial Shareholders‟ Shareholdings

The Proposals are not expected to have any effect on the share capital and substantial shareholders‟ shareholdings of THHE as there is no issuance of new ordinary shares of RM0.25 in THHE (“THHE Shares”).

9.2 Earnings and EPS

The Proposals is not expected to have a material effect on the earnings and EPS of the THHE Group for FYE 31 December 2012 as the Proposals are only expected to be completed in the first half of 2013. The THHE Group is expected to realise an estimated one-off gain on disposal of approximately RM34.89 million upon completion of the Proposed Disposal of THF. Any impact on earnings and EPS of the THHE Group for FYE 31 December 2013 will depend on the THHE Group securing EPCI contracts and commencement of work on those contracts. The THHE Group expects that many EPCI contracts will be announced in the near future and the Proposed Acquisition of BMD including DB30 will provide the THHE Group opportunities to bid for contracts in other sectors of the oil and gas industry other than fabrication business and offshore maintenance services. The securing of contracts is crucial for purposes of the THHE Group‟s plan to improve its financial condition. As such, the Proposals are expected to contribute positively to the future earnings of the THHE Group.



9.3 NA and Gearing

The proforma effects of the Proposals on the NA and gearing of the THHE Group based on its audited consolidated financial statements for the FYE 31 December 2011 are set out as follows:

(I) (II)

Audited as at 31 December

2011

(1) After

subsequent events

After (I) and the Proposed Acquisition of BMD and Proposed

Disposal of THF

(RM „000) (RM „000) (RM „000)

Share capital 331,420 231,994 231,994

Share premium 97,528 39,770 39,770

(Accumulated losses)/ Retained earnings (275,395) (14,157) (2) 18,595

Total equity attributable to the owners of the Company/ NA

153,553 257,607 290,359

No. of THHE shares in issue („000) 662,840 927,976 927,976

NA per share (RM) 0.23 0.28 0.31

Total borrowings 196,652 196,652 196,652

Gearing (times) 1.28 0.76 0.68 Notes: (1) After taking into consideration the following corporate proposals completed in FYE 2012:

Capital reconstruction involving a reduction of the entire share premium account of THHE and change of issued and paid-up capital of THHE involving the cancellation of RM0.25 of the par value of the then existing ordinary Shares, which was completed on 20 June 2012.

The issuance of 265,135,810 THHE Shares pursuant to the rights issue, which was completed on 10 August 2012.

Acquisition of the Yard for the purchase consideration of RM83.8 million, which was fully satisfied via cash consideration. The Acquisition of the Yard was completed on 10 August 2012.

(2) After taking into consideration of an estimated one-off gain on disposal of approximately RM34.89 million and the estimated expenses of approximately RM2.14 million for the Proposals.



10. APPROVALS REQUIRED

The Proposals are conditional upon the approvals being obtained from the following: (i) the board of directors of THHE for the Proposals which was obtained on 21 December

2012; (ii) the shareholders of THHE respectively at an extraordinary general meeting (“EGM”) to be

convened for the Proposals; (iii) the passing by the Board of MDI of a resolution including by unanimous written consent

approving the BMD SPA and THF SPA; (iv) the passing by the shareholders of MDHSB of a resolution approving the BMD SPA which

was obtained on 20 December 2012;

(v) the passing by the shareholders of MDC of a resolution approving the THF SPA which was obtained on 18 December 2012; and

(vi) any other relevant parties and/or authorities, if required.

The Proposed Acquisition of BMD and the Proposed Disposal of THF are inter-conditional. The Proposed JV is conditional upon the completion of the Proposed Acquisition of BMD and the Proposed Disposal of THF. The Proposals are not conditional upon any other corporate exercise undertaken or to be undertaken by the Company.

11. MAJOR SHAREHOLDERS‟ AND DIRECTORS‟ INTEREST

None of the major shareholders and Directors of THHE and/or persons connected with them have any interest, direct or indirect in the Proposals.

12. STATEMENT BY DIRECTORS

The Board, after having considered all aspects of the Proposals, is of the opinion that the Proposals are in the best interest of the Company.

13. ADVISER

AmInvestment Bank has been appointed by the Company as the Principal Adviser for the Proposals.

14. PERCENTAGE RATIOS UNDER PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS

The highest aggregated percentage ratio for the Proposals pursuant to Paragraph 10.02 (g) of the Listing Requirements is 119.6% based on the aggregated consideration divided by the audited NA of the THHE Group.

15. ESTIMATE COMPLETION DATE

The Proposals are expected to be completed by the first half of 2013.


16. DOCUMENTS FOR INSPECTION

The following documents are available for inspection at the registered office of THHE 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: (i) BMD SPA; and (ii) THF SPA.

This Announcement is dated 21 December 2012.


APPENDIX I - SUMMARY FINANCIAL INFORMATION OF BMD

A summary of the financial information of BMD Group based on its consolidated audited financial results for the past three (3) FYE 31 December 2009 to 2011 are as follows:

Audited FYE 31 December

2009 2010 2011

RM („000) RM („000) RM („000)

Revenue 495,670 141,742 28,124

Profit before tax (“PBT”) / (Loss before tax (“LBT”)) 140,550 (13,592) (13,114)

Taxation (54,703) 1,851 123

PAT / (LAT) 85,847 (11,741) (12,991)

Share capital 5,000 5,000 5,000

Foreign currency translation reserve (718) (4,591) (4,355)

Retained earnings 41,937 19,802 6,796

NA/ Shareholder‟s funds 46,219 20,211 7,441

No. of BMD Shares in issue („000) 5,000 5,000 5,000

NA per BMD Share (RM) 9.24 4.04 1.49

Borrowings - - -

Gearing ratio (times) - - -

Gross EPS/ (loss per share (“LPS”)) (RM) 28.11 (2.72) (2.62)

Net EPS/ (LPS) (RM) 17.17 (2.35) (2.60)

Financial commentaries FYE 31 December 2009 BMD Group‟s revenue declined by RM74.2 million or approximately 13.0% from RM569.9 million for the FYE 31 December 2008 to RM495.7 million for the FYE 31 December 2009. This is mainly due to the reduced scope of work due to cancellation of certain work scope by a client in FYE 31 December 2009. BMD Group recorded a PBT for the FYE 31 December 2009 of RM140.6 million as compared the LBT for the FYE 31 December 2008 of RM1.2 million, mainly due to improved productivity in the final year of the three (3) year Transportation & Installation programme plus finalisation of all change orders.


APPENDIX I - SUMMARY FINANCIAL INFORMATION OF BMD (Cont’d)

FYE 31 December 2010 BMD Group‟s revenue declined by RM354.0 million or approximately 71.4% from RM495.7 million for the FYE 31 December 2009 to RM141.7 million for the FYE 31 December 2010, mainly due the completion of a three (3) year construction contract in 2009, while in 2010 BMD only managed to secure two (2) charter contracts for the financial year. BMD Group recorded an LBT for the FYE 31 December 2010 of RM13.6 million compared to the PBT for the FYE 31 December 2009 of RM140.6 million mainly due to idle costs relating to the DB26 which was idle for the entire year of FYE 31 December 2010. FYE 31 December 2011 BMD Group‟s revenue declined by RM113.6 million or approximately 80.2% from RM141.7 million for the FYE 31 December 2010 to RM28.1 million for the FYE 31 December 2011. This is mainly due to a small portion of installation works for new contracts awarded in FYE 31 December 2011 being carried out in the same financial year. The BMD Group recorded LBT for the FYE 31 December 2011 of RM13.1 million, representing an improvement of approximately 3.7% as compared to the LBT for the FYE 31 December 2010 of RM13.6 million. This is mainly due to idle costs associated with the DB26 and a slight improvement in its utilisation rate compared to the previous financial year.



APPENDIX II - SUMMARY FINANCIAL INFORMATION OF THF

A summary of the financial information of THF based on its consolidated audited financial results for the FYE 31 October 2009, FYE 31 October 2010 and fourteen (14)-months FPE 31 December 2011 is as follows:

Audited

FYE 31 October 2009 FYE 31 October 2010

14-months FPE 31 December 2011

(1)

RM („000) RM („000) RM („000)

Revenue 284,181 29,944 21,651

PBT/ (LBT) (78,092) 25,202 (2,980)

Taxation (11,488) - (6,052)

PAT/ (LAT) (89,580) 25,202 (9,032)

Share capital 250,000 300,000 300,000

Accumulated losses (249,527) (224,326) (233,357)

NA/ Shareholder‟s funds 473 75,674 66,643

No. of THF Shares in issue („000) 250,000 300,000 300,000

NA per THF Share (sen) 0.19 25.22 22.21

Borrowings 99,399 - -

Gearing ratio (times) 210.1 - -

Gross EPS/ (LPS) (RM) (0.31) 0.08 (0.01)

Net EPS/ (LPS) (RM) (0.36) 0.08 (0.03)

Note: (1) THF changed its financial year end from 31 October to 31 December.

Financial commentaries FYE 31 October 2009 THF‟s revenue declined by RM73.5 or approximately 20.5% from RM357.7 million for the FYE 31 October 2008 to RM284.2 million for the FYE 31 October 2009. Despite the decrease in revenue, THF registered a significant improvement in its LBT from RM269.6 million in the FYE 31 October 2008 to RM78.1 million mainly due to improvement in projects overhead as compared to the previous financial year.


APPENDIX II - SUMMARY FINANCIAL INFORMATION OF THF (Cont’d)

FYE 31 October 2010 THF‟s revenue declined by RM254.3 million or 89.5% from RM284.2 million for the FYE 31 October 2009 to RM29.9 million for the FYE 31 October 2010. The reduction in revenue was mainly due to THF existing projects being at their tail end. However, THF registered a PBT of RM25.2 million from LBT of RM78.1 million in the preceding financial year mainly due to lower operating costs as well as income generated from the discount received from the creditors pursuant to the scheme of arrangement under Section 176 (1) of the Act. Fourteen (14)-months FPE 31 December 2011 Based on our audited financial statements for the fourteen (14) months financial period ended 31 December 2011, THF‟s revenue was RM21.7 million and LBT was RM3.0 million. Pursuant to the change of financial year end from 31 October to 31 December, no comparatives can be presented. The LAT of RM9.0 million was mainly due to the high operating expenses incurred during the period and partial write down of deferred tax previously recognised amounting to RM6.0 million.



APPENDIX III – SALIENT TERMS OF THE AGREEMENTS

1. Salient terms of the BMD SPA The salient terms of the BMD SPA include, inter-alia, the following:

1.1 Sale of shares

Subject to terms of the BMD SPA, MDHSB shall sell as legal and beneficial owner and THHE shall purchase free from all encumbrances and together with all rights attaching thereto as at the completion date, including all dividends and distributions declared, made or paid on or after the completion date of the BMD Sale Shares.

1.2 BMD Purchase Consideration

Subject to BMD Adjustment Consideration, the consideration for the BMD Sale Shares shall be the RM equivalent of USD25.466 million for all of the BMD Sale Shares and shall be payable by THHE to MDHSB on the completion date pursuant to the BMD SPA.

1.3 Conditions precedent

The BMD SPA is conditional upon:

(a) the THF SPA becoming unconditional in pursuant to the terms of the THF SPA;

(b) the passing by the shareholders of MDHSB of a resolution approving the

BMD SPA; (c) the passing by the board of directors of MDI of a resolution, including by

unanimous written consent approving the BMD SPA; (d) the passing by the shareholders of THHE in a general meeting of a resolution

approving the Proposed Acquisition of BMD; (e) the passing by the directors of THHE of a resolution approving the BMD SPA; (f) the full settlement of all outstanding receivables or indebtedness (i) due from

MDHSB, its related corporations and/or its associated companies to the BMD Group; or (ii) due by the BMD Group to MDHSB, its related corporations and/or its associated companies except any outstanding receivables or indebtedness due and owing by the BMD Group associated with the design and upgrading of the DB30 in accordance with the DB30 approved capital expenditure plan, as approved by JRMSA;

(g) the disposal of the DB26 and the transfer of ownership of the DB30 into

BMDL free of encumbrances; (h) the issuance of the audited accounts of BMD and BMDL for the period ending

31 December 2012; and

(i) the redemption of the BMDL RCPPS held by JRMSA.


APPENDIX III – SALIENT TERMS OF THE AGREEMENTS (Cont’d)

1.4 Cut-off date/Unconditional date/ Completion date

1.4.1 In the event that the conditions precedent shall not have been fulfilled, have

been refused, rejected and appeals to the relevant authorities or persons against such refusal have not been successful or waived pursuant to the BMD SPA at any time prior to the date of expiry of a period of six (6) months following the date of the BMD SPA (or such later date agreed in writing by the parties) ("BMD Cut-Off Date") then the parties shall not be bound to proceed with the sale and purchase of the BMD Sale Shares and the BMD SPA shall cease to be of any effect except the effective clauses which shall remain in force and save in respect of claims arising out of any antecedent breach of the BMD SPA.

1.4.2 The BMD SPA will become unconditional on the day upon which the last of

the conditions precedent are fulfilled or is deemed to be fulfilled or is waived in accordance with the provisions of the BMD JVA ("BMD Unconditional Date")

1.4.3 The completion date of the BMD SPA shall be the seventh (7th) Business

Day following the BMD Unconditional Date (or such other date as the parties may agree in writing).

1.5 THHE‟s rights of termination

Notwithstanding any other provision in the BMD SPA, the parties agree and undertake that in the event: (a) of a material breach of any obligations, undertakings or covenants in the BMD

SPA by any party at any time prior to completion, and in the case of a breach capable of being remedied, which remains unresolved or unremedied following a period of thirty (30) days from the receipt of notice from the non-defaulting party giving particulars of the breach; or

(b) at any time prior to completion, MDHSB expresses its inability and/ or

unwillingness to give effect to the sale and purchase of the BMD Sale Shares, the non-defaulting party shall be entitled at its discretion (and in addition to and without prejudice to all other rights or remedies available to it under the BMD SPA and at law) to elect either of the following:

(i) to claim for specific performance against the defaulting party of its obligations

hereunder; or (ii) to terminate the BMD SPA without liability on the part of the non-defaulting

party and without prejudice to all rights of the non-defaulting party in respect of claims arising from antecedent breach of BMD SPA.



2. Salient terms of the THF SPA

The salient terms of the THF SPA include, inter-alia, the following:

2.1 Sale of shares Subject to terms of the THF SPA, THHE shall sell as legal and beneficial owner and MDC shall purchase free from all encumbrances and together with all rights now or attaching thereto as at the completion date including all dividends and distributions declared, made or paid on or after the completion date the THF Sale Shares.

2.2 THF Disposal Consideration

Subject to THF Adjustment Consideration, the consideration for the THF Sale Shares shall be the RM equivalent of USD25.466 million for all of the THF Sale Shares and shall be payable by MDC to THHE on the completion date pursuant to the THF SPA.

2.3 Conditions Precedent (a) the BMD SPA becoming unconditional pursuant to the terms of the BMD

SPA; (b) the passing by the shareholders of THHE in a general meeting of a resolution

approving the Proposed Disposal of THF; (c) the passing by the directors of THHE of a resolution approving the THF SPA;

(d) the passing by the shareholders of MDC of a resolution approving the THF

SPA; (e) the passing by the board of directors of MDI of a resolution including by

unanimous written consent approving the THF SPA; (f) the full settlement of all outstanding receivables or indebtedness (i) due from

the THHE, its related corporations and/or its associated companies to the group; or (ii) due by THF to THHE, its related corporations and/or its associated companies;

(g) completion of the transfer of the Pulau Indah Land from Oilfab Sdn Bhd to

THF and the registration of THF as the registered proprietor of the Pulau Indah Land and the transfer or reissuance of all necessary permits currently issued by the Oilfab Sdn Bhd for the operation of the Yard including:

(i) the issuance of the approval by the Royal Malaysian Customs

Department to THF to load and unload goods to and from the THF‟s private jetty located at the Yard ("Yard Jetty"); and

(ii) the issuance of a certificate of registration by the Malaysian Energy

Commission to THF in respect of a high voltage installation (Installation No. ST(TKL)634775D/PIDH/0001-P) located at the Yard;

(h) issuance of a temporary occupation licence by the District and Land Office of

Klang to THF for the occupation of the land on which Yard Jetty is located;



(i) the issuance of a private jetty permit from the Port Klang Authority to THF for the operation of the Yard Jetty;

(j) notification to / approval of the Department of Environment of Selangor for

the expansion and increase in capacity of the Yard; (k) removal of all encumbrances on or over or to which the Yard and Pulau Indah

Land is subject to; (l) notification to the Ministry of International Trade and Industry of Malaysia of

the acquisition of the THF Sale Shares by MDC and the resulting change in the shareholders of THF; and

(m) the entry into by THF in the approved form of an arm‟s length subcontract or

service agreement or similar arrangement with Oil & Gas Works Sdn. Bhd. for its use of the Yard.

2.4 Cut-off date/Unconditional date/ Completion date

2.4.1 In the event that the conditions precedent shall not have been fulfilled have been refused, rejected and appeals to the relevant authorities or persons against such refusal have not been successful (or waived pursuant to THF SPA at any time prior to the date of expiry of a period of six (6) months following the date of THF SPA (or such later date agreed in writing by the parties) (“THF Cut-Off Date”) then the parties shall not be bound to proceed with the sale and purchase of the THF Sale Shares and the THF SPA shall cease to be of any effect except the effective clauses which shall remain in force and save in respect of claims arising out of any antecedent breach of the THF SPA.

2.4.2 The THF SPA will become unconditional on the day upon which the last of the conditions precedent are fulfilled or is deemed to be fulfilled or is waived in accordance with the provisions of the THF SPA ("THF Unconditional Date").

2.4.3 The completion date of the THF SPA shall be the seventh (7th) Business Day

following the THF Unconditional Date (or such other date as the parties may agree in writing).

2.5 MDC‟s rights of termination

Notwithstanding any other provision in the THF SPA, the parties agree and undertake that in the event:

(a) of a material breach of any obligations, undertakings or covenants in the THF

SPA by any party at any time prior to completion, and in the case of a breach capable of being remedied, which remains unresolved or unremedied following a period of thirty (30) days from the receipt of notice from the non-defaulting party giving particulars of the breach; or

(b) at any time prior to completion, THHE expresses its inability and/ or

unwillingness to give effect to the sale and purchase of the THF Sale Shares,



the non-defaulting party shall be entitled at its discretion (and in addition to and without prejudice to all other rights or remedies available to it under the THF SPA and at law) to elect either of the following:

(i) to claim for specific performance against the defaulting party of its obligations hereunder; or

(ii) to terminate the THF SPA without liability on the part of the non-defaulting party and without prejudice to all rights of the non-defaulting party in respect of claims arising from antecedent breach of THF SPA.

3. Indicative salient terms of the BMD JVA

3.1 Right of first refusal

(a) In the event any shareholder of the BMD JVA (“BMD JV Partners”) shall be

desirous of selling or transferring for value any or all of its shares ("BMD Transfer Shares") in BMD, such BMD JV Partners ("BMD Offeror") shall make an offer in writing to sell the BMD Transfer Shares to the other BMD JV Partners ("BMD Offeree").

(b) Every offer for sale of the BMD Transfer Shares to the BMD Offeree shall

state the number of the BMD Transfer Shares and the terms of the sale ("BMD Sale Terms"). The purchase price for the BMD Transfer Shares shall be:

(i) in the case where a bona fide sale to a third party unrelated to the

BMD Offeror is contemplated, the price offered by such third party; or

(ii) in the case where there is no such third party, the price then agreed to between the BMD JV Partners in writing, provided that in the event the BMD JV Partners are unable to agree on the price within thirty (30) days of the date of the initial offer (or within such other period as the BMD JV Partners may agree to in writing), then the BMD JV Partners shall appoint the valuers to determine the fair value of the BMD Transfer Shares and the purchase price shall be taken to be the fair value of the BMD Transfer Shares.

(c) It shall be a condition of any BMD third party sale that:

(i) the BMD third party purchaser does not hold a similar PETRONAS‟

licence to any then currently held by BMD ("Common Licence") or agrees to relinquish the Common Licence prior to the completion of the BMD third party sale;

(ii) the BMD third party sale does not result in the revocation, cancellation or non-renewal of any licences, permits or approvals held by the BMD by the relevant authorities;

(iii) the BMD third party sale does not result in a dilution of the Bumiputera or Malaysian equity of BMD;

(iv) the BMD third party sale does not contravene any applicable laws or regulations or obligations of BMD under any contracts or agreements; and



(v) the BMD third party purchaser first enters into an accession agreement to be bound by the terms of the BMD JVA.

3.2 Moratorium on Transfer

Each BMD JV Partners agrees not to sell, transfer or otherwise dispose of any of its shares in BMD, or any interest therein for a period of two (2) years from the effective date.

3.3 Funding principles

(a) Finance for the business or other requirements of BMD shall be provided in such manner and on such terms as the board of BMD may unanimously decide.

(b) Subject the BMD JVA setting out the funding principles of the DB30 upgrading works, as far as possible, financing for BMD shall be obtained from the following sources and in the following order of priority: (i) financing from banks or financial institutions on the most favourable

terms reasonable obtainable as to the financier‟s interest rate, repayment and security, but without allowing a prospective financier a right to participate in the share capital of BMD as a condition to making available the financing;

(ii) loans/advances from the shareholders or their related corporations in the ratio that is reflective of their respective shareholding proportions in the form of cash and/or the subscription for preference shares or convertible securities of BMD; and

(iii) the issuance of ordinary shares in or further contributions to the

share capital of BMD.

3.4 Composition of the Board of Directors of BMD

Save as disclosed in the BMD JVA, the BMD board shall consist of six (6) members, as follows: (a) two (2) nominees of THHE; and

(b) four (4) nominees of McDermott.



4. Indicative salient terms of the THF JVA

4.1 Right of first refusal (a) In the event any shareholder of THF (“THF JV Partners”) shall be desirous of

selling or transferring for value any or all of its shares ("THF Transfer Shares") in THF, such THF JV Partners ("THF Offeror") shall make an offer in writing to sell the THF Transfer Shares to the other THF JV Partners ("THF Offeree").

(b) Every offer for sale of the THF Transfer Shares to the Offeree shall state the

number of the THF Transfer Shares and the terms of the sale ("THF Sale Terms"). The purchase price for the THF Transfer Shares shall be:


THF Offeror is contemplated, the price offered by such third party; or (ii) in the case where there is no such third party, the price then agreed to

between the THF JV Partners in writing, provided that in the event the THF JV Partners are unable to agree on the price within thirty (30) days of the date of the initial offer (or within such other period as the THF JV Partners may agree to in writing), then the THF JV Partners shall appoint the valuers to determine the fair value of the THF Transfer Shares and the purchase price shall be taken to be the fair value of the THF Transfer Shares.

(c) It shall be a condition of any THF third party sale that:

(i) the THF third party purchaser does not hold a similar Petronas‟

licence to any then currently held by THF ("THF Common Licence") or agrees to relinquish the THF Common Licence prior to the completion of the THF third party sale;

(ii) the THF third party sale does not result in the revocation,

cancellation or non-renewal of any licences, permits or approvals held by THF by the relevant authorities;

(iii) the THF third party sale does not result in a dilution of the

Bumiputera or Malaysian equity of THF; and (iv) the THF third party sale does not contravene any applicable laws or

regulations or obligations of THF under any contracts or agreements; and

(v) the THF third party purchaser first enters into an accession

agreement (in or substantially in the agreed form) to be bound by the terms of the THF JVA.


Each THF JV Partners agrees not to sell, transfer or otherwise dispose of any of its shares in THF, or any interest therein for a period of two (2) years from the effective date.




(a) Finance for the business or other requirements of THF shall be provided in such manner and on such terms as the board of THF may unanimously decide.

(b) As far as possible, financing for THF shall be obtained from the following sources and in the following order of priority:

(i) financing from banks or financial institutions on the most favourable

terms reasonable obtainable as to the financier‟s interest rate, repayment and security, but without allowing a prospective financier a right to participate in the share capital of THF as a condition to making available the financing;

(ii) loans/advances from the shareholders or their related corporations in the ratio that is reflective of their respective shareholding proportions in the form of cash and/or the subscription for preference shares or convertible securities of THF; and

(iii) the issuance of ordinary shares in or further contributions to the

share capital of THF.

4.4 Composition of the Board of Directors of THF

Save as disclosed in the THF JVA, the THF board shall consist of six (6) members, as follows: (a) two (2) nominees of MDC; and (b) four (4) nominees of THHE.

5. Indicative salient terms of the Engineering JVA

5.1 Right of first refusal (a) In the event any shareholder of the Engineering Newco (“Engineering JVA

Partners”) shall be desirous of selling or transferring for value any or all of its shares ("Engineering Newco Transfer Shares") in Engineering Newco, such Engineering JVA Partners ("Engineering Newco Offeror") shall make an offer in writing to sell the Engineering Newco Transfer Shares to the other Engineering JVA Partners ("Engineering Newco Offeree").

(b) Every offer for sale of the Engineering Newco Transfer Shares to the

Engineering Newco Offeree shall state the number of the Engineering Newco Transfer Shares and the terms of the sale ("Engineering Newco Sale Terms"). The purchase price for the Engineering Newco Transfer Shares shall be:


Engineering Newco Offeror is contemplated, the price offered by such third party; or



(ii) in the case where there is no such third party, the price then agreed to between the Engineering JVA Partners in writing, provided that in the event the Engineering JVA Partners are unable to agree on the price within thirty (30) days of the date of the initial offer (or within such other period as the Engineering JVA Partners may agree to in writing), then the Engineering JVA Partners shall appoint the valuers to determine the fair value of the Engineering Newco Transfer Shares and the purchase price shall be taken to be the fair value of the Engineering Newco Transfer Shares.

(c) It shall be condition of any Engineering Newco third party sale that:

(i) the Engineering Newco third party purchaser does not hold a similar

Petronas‟ licence to any then currently held by Engineering Newco ("Engineering Newco Common Licence") or agrees to relinquish the Engineering Newco Common Licence prior to the completion of the Engineering Newco third party sale;

(ii) the Engineering Newco third party sale does not contravene any of

the requirements of the Registration of Engineers Act, 1967 or any other conditions or policies prescribed by the Malaysian Board of Engineers or any other applicable laws or regulations or obligations of Engineering Newco or result in the revocation, cancellation or non-renewal of any licences, permits or approvals held by Engineering Newco by the relevant authorities;

(iii) the Engineering Newco third party sale does not result in a dilution of

the Bumiputera or Malaysian equity of Engineering Newco; and (iv) the Engineering Newco third party sale does not contravene any

applicable laws or regulations or obligations of Engineering Newco under any contracts or agreements; and

(v) the Engineering Newco third party purchaser first enters into an

accession agreement (in or substantially in the agreed form) to be bound by the terms of the Engineering Newco JVA.


Each Engineering JVA Partners agrees not to sell, transfer or otherwise dispose of any of its shares in the Engineering Newco, or any interest therein for a period of two (2) years from the effective date.


(a) Finance for the business or other requirements of Engineering Newco shall be provided in such manner and on such terms as the board of Engineering Newco may unanimously decide.



(b) As far as possible, financing for Engineering Newco shall be obtained from the following sources and in the following order of priority:

(i) financing from banks or financial institutions on the most favourable terms reasonable obtainable as to the financier‟s interest rate, repayment and security, but without allowing a prospective financier a right to participate in the share capital of Engineering Newco as a condition to making available the financing;

(ii) loans/advances from the shareholders or their related corporations in the ratio that is reflective of their respective shareholding proportions in the form of cash and/or the subscription for preference shares or convertible securities of Engineering Newco; and

(iii) the issuance of ordinary shares in or further contributions to the share capital of Engineering Newco.

5.4 Composition of the Board of Directors of Engineering Newco

Save as disclosed in the Engineering JVA, the board Engineering Newco shall consist of two (2) members, as follows: (i) one (1) nominee of JRMSA; and (ii) one (1) nominee of THHE.

6. Indicative salient terms of the PMT JVA

6.1 Right of first refusal (a) In the event any shareholder of the PMT Newco (“PMT JVA Partners”) shall

be desirous of selling or transferring for value any or all of its shares ("PMT Newco Transfer Shares") in PMT Newco, such PMT JVA Partners ("PMT Newco Offeror") shall make an offer in writing to sell the PMT Newco Transfer Shares to the other PMT JVA Partners ("PMT Newco Offeree").

(b) Every offer for sale of the PMT Newco Transfer Shares to the PMT Newco

Offeree shall state the number of the PMT Newco Transfer Shares and the terms of the sale ("PMT Newco Sale Terms"). The purchase price for the PMT Newco Transfer Shares shall be:


PMT Newco Offeror is contemplated, the price offered by such third party; or

(ii) in the case where there is no such third party, the price then agreed to

between the PMT JVA Partners in writing, provided that in the event the PMT JVA Partners are unable to agree on the price within thirty (30) days of the date of the initial offer (or within such other period as the PMT JVA Partners may agree to in writing), then the PMT JVA Partners shall appoint the valuers to determine the fair value of the PMT Newco Transfer Shares and the purchase price shall be taken to be the fair value of the PMT Newco Transfer Shares.



(c) It shall be condition of any PMT Newco third party sale that:

(i) the PMT Newco third party purchaser does not hold a similar Petronas‟ licence to any then currently held by PMT Newco ("PMT Newco Common Licence") or agrees to relinquish the PMT Newco Common Licence prior to the completion of the PMT third party sale;

(ii) the PMT Newco third party sale does not result in a dilution of the Bumiputera or Malaysian equity of PMT Newco; and

(iii) the PMT Newco third party sale does not contravene any applicable laws or regulations or obligations of PMT Newco under any contracts or agreements; and

(iv) the PMT Newco third party purchaser first enters into an accession agreement (in or substantially in the agreed form) to be bound by the terms of the PMT JVA.


Each PMT JVA Partners agrees not to sell, transfer or otherwise dispose of any of its shares in the PMT Newco, or any interest therein for a period of two (2) years from the effective date.


(a) Finance for the business or other requirements of PMT Newco shall be provided in such manner and on such terms as the board of PMT Newco may unanimously decide.

(b) As far as possible, financing for PMT Newco shall be obtained from the following sources and in the following order of priority:

(i) financing from banks or financial institutions on the most favourable terms reasonable obtainable as to the financier‟s interest rate, repayment and security, but without allowing a prospective financier a right to participate in the share capital of PMT Newco as a condition to making available the financing;

(ii) loans/advances from the shareholders or their related corporations in the ratio that is reflective of their respective shareholding proportions in the form of cash and/or the subscription for preference shares or convertible securities of PMT Newco; and

(iii) the issuance of ordinary shares in or further contributions to the share capital of PMT Newco.

6.4 Composition of the Board of Directors of PMT Newco

Save as disclosed in the PMT JVA, the PMT Newco board shall consist of two (2) members, as follows: (i) one (1) nominee of McDermott; and (ii) one (1) nominee of THHE.

Documents

TH HEAVY ENGINEERING BERHAD (“THHE” OR THE “COMPANY”) · 2013-03-13 · TH HEAVY ENGINEERING BERHAD (“THHE” OR THE “COMPANY”) ... barge with heavy-lift and pipelay