1. INTRODUCTION
The Board of Directors of IAB (“Board”) wishes to announce that its wholly-owned subsidiary, Infortech Software Sdn. Bhd. (“ISSB”), had on 11 March 2014 entered into a joint venture agreement (“JVA”) with SWT International Sdn. Bhd. (“SWTSB”) for the purpose of undertaking the development, management, operation and implementation of medical waste treatment in Malaysia (“the Treatment”), and for the purposes of the necessary transfer of technology in the area of the Treatment and to develop the necessary expertise surrounding the Treatment, a joint venture company (“JVC”) would be formed.
2. DETAILS OF THE JOINT VENTURE
2.1 Information on ISSB and SWTSB
2.1.1 ISSB
ISSB was incorporated in Malaysia on 22 October 1990 under the Companies Act, 1965 (“the Act”) as a private limited company and having its registered address at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan, and place of business at Unit A-32-06, Three Two Square, 2, Jalan 19/1, 46300 Petaling Jaya, Selangor Darul Ehsan.
It has an authorised share capital of RM1,000,000.00 comprising 1,000,000 ordinary shares of RM1.00 each and an issued and paid-up share capital of RM1,000,000.00 comprising 1,000,000 ordinary shares of RM1.00 each.
ISSB is involved in the business of software development and providing marketing support, system integration and network solutions. However, its current operations are minimal and with the entry into the JVA, it is intended for ISSB to diversify into the Treatment.
2.1.2 SWTSB
SWTSB was incorporated in Malaysia on 16 March 2010 under the Act as a private limited company and having its registered address at No. 29-2, Jalan 46A/26, Taman Sri Rampai, 53300 Kuala Lumpur, Wilayah Persekutuan, and place of business at Suite B-23-1, Level 1, Jaya One, No. 72A, Jalan Universiti, 46200 Petaling Jaya, Selangor Darul Ehsan.
It has an authorised share capital of RM5,000,000.00 comprising 5,000,000 ordinary shares of RM1.00 each and an issued and paid-up share capital of RM3,500,000.00 comprising 3,500,000 ordinary shares of RM1.00 each.
SWTSB is engaged in planning, research and development, management, consultation, project contracting, supply and operation of incinerators to process solid, industrial and medical waste in an economic manner while producing steam for power generation and heating.
2.2 Salient terms of the JVA
The salient terms and conditions of the JVA are as follows:-
2.2.1 The JVA is conditional upon the following conditions precedents being fulfilled or obtained on or before the expiry of the period of 180 days from the date of the JVA or such later date as the parties shall mutually agree in writing (“Approval Period”):-
(i) the results of the financial, technical and legal due diligence audits of each parties (i.e., ISSB and SWTSB referred to as “Party”, individually) is being acceptable and satisfactory to the other Party;
(ii) each Party shall within the Approval Period present to the other Party original copies of approvals from the authorities to conduct the Treatment;
(iii) each Party shall within the Approval Period present to the other Party all licenses granted by the relevant authorities in relation to the conduct of the Treatment;
(iv) ISSB shall within the Approval Period procure all approvals from the relevant authorities necessary for the incorporation of the JVC;
(v) SWTSB shall within the Approval Period present to ISSB the full technical specifications, characteristics and method statement for the “Pyrolysis Treatment Technology” including the hardware and software for the advanced computer frequency conversion control adopted in the system;
(vi) the approval of the shareholders and/or board of directors of SWTSB and ISSB to enter into the JVA; and
(vii) incorporation of the JVC.
2.2.2 Upon the execution of the JVA and no later than the date of the expiry of the Approval Period, the Parties shall procure the formation of the JVC to the intent and effect that the shareholding in the JVC shall be as follows:-
Name of shareholder | Number of ordinary shares of RM1.00 each in the JVC | Percentage (%) of equity interest held in the JVC |
SWTSB | 49,000 | 49 |
ISSB | 51,000 | 51 |
Total | 100,000 | 100 |
2.2.3 Breakdown of total capital and investment outlay in the joint venture is as follows:-
Upon the entry into the JVA, the initial investment outlay in the formation of the JVC is RM51,000.00 being ISSB’s 51% equity interest in the JVC. IAB is unable to determine the actual total investment outlay in the joint venture at this juncture and its preliminary estimates are as follows:-
Item | Estimated amount |
Estimated total incidental expenses in relation to preliminary financial, technical and legal due diligence audits | Not more than RM50,000.00 |
Initial investment outlay in the formation of the JVC | RM51,000.00 |
Total | Not more than RM101,000.00 |
2.2.4 Source(s) of funds for financing the investment in the JVC and the breakdown are as follows:-
The above-mentioned preliminary estimates as set out in Section 2.2.3 of this announcement shall be funded by way of internally-generated funds of IAB and its subsidiaries (collectively referred to as “IAB Group” or “Group”).
3. RATIONALE FOR THE JOINT VENTURE
IAB had on 10 December 2013 completed the acquisition of Jaring Metal Industries Sdn. Bhd. (“JMI”) and this has enabled the IAB Group to diversify into a new profitable business namely that of JMI’s. JMI is a one-stop total waste management (“TWM”) solution provider with a complete range of facilities to its suppliers. JMI is able to offer both partial recovery services (i.e., sorting and dismantling) as well as full recovery services (i.e., sorting, dismantling and refining of scheduled waste). While its core competence lies in scheduled waste, JMI is also able to recycle other scheduled and non-scheduled wastes such as acid, alkaline, sludge, metal, wood, plastic and to handle domestic waste.
The entry into the JVA is expected to be synergistic as it would enable the IAB Group to expand its TWM solution services to include the Treatment segment via the JVC. While the Treatment is a relatively new segment for the Group, the JVA would enable the necessary transfer of technology in this segment and to develop the necessary expertise surrounding the Treatment industry via the JVC.
As such, the Board expects the collaboration via the JVC will enhance the Group’s earning base and contribute positively to the Group’s earnings in the future.
The joint venture is in line with the Parties’ objectives as follows:-
(i) to undertake the Treatment;
(ii) to promote the principal activity of the JVC in the Treatment; and
(iii) to keep abreast of and if necessary, explore, acquire and exploit the latest technology and know-how relating to the “Pyrolysis Treatment Technology” or such related technology.
4. RISKS FACTORS
The IAB Group is involved in the business of providing TWM solutions thus the entry into the joint venture would, in essence, subject the Group to similar business risks that the Group is currently exposed to. Such risks include but are not limited to, changes in general economic conditions, government regulations, inability to obtain and/or loss or non-renewal of the licenses to handle certain wastes, inflation and fluctuation of material cost and labour cost.
To mitigate the above, the Group will closely monitor and address the risks involved in a timely manner based on its experience and expertise in the TWM industry. In addition, the JVC is intended to enable the necessary transfer of technology as well as the development of the necessary expertise surrounding the Treatment. This would provide the necessary guidance for the Group to mitigate and/or manage new risk(s) which could arise from the Treatment. Notwithstanding the efforts to be made, there can be no assurance that any change of the above-mentioned risks would not have certain material adverse effects on the Group’s business.
5. FINANCIAL EFFECT
The joint venture is not expected to have any material impact on the earnings, net assets per share and gearing of the Company and Group for the financial year ending 31 December 2014.
6. ESTIMATED TIME FRAME FOR COMPLETION
Barring any unforeseen circumstances, the JVC shall be formed no later than the date of the expiry of the Approval Period.
7. DIRECTORS’ RECOMMENDATION
The directors of IAB are of the opinion that the terms of the JVA are fair and reasonable and that the entry in to the joint venture is in the best interests of the Company.
8. DIRECTORS AND MAJOR SHAREHOLDERS' INTERESTS
None of the directors and/or major shareholders of the Company has any interest, direct or indirect in the joint venture.
9. APPROVAL REQUIRED
The JVA is not subject to the approval of the shareholders of IAB and/or any regulatory authorities.
10. DOCUMENTS FOR INSPECTION
The JVA is available for inspection during normal business hours from Mondays to Fridays (except public holidays) at the registered office of ISSB at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan for a period of three (3) months from the date of this announcement.
This announcement is dated 11 March 2014.
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