News

2. DETAILS OF THE PROPOSED ACQUISITION

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  The Proposed Acquisition entails the purchase by Mega Methods of the entire issued and paid-up share capital held in Hochimex comprising 1,000,000 ordinary shares of Hong Kong Dollar ("HKD") 1 each ("Shares") for a total cash consideration of USD17 million, free from all encumbrances with all rights attached thereto.
  

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  Mega Methods is a company incorporated in Malaysia on 9 April 2008 with an authorised and paid-up share capital of RM100,000 and RM2 respectively. The principal activity of Mega Methods is investment holding.
  

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  (a) SVSB

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    SVSB is a company incorporated in Malaysia on 24 May 1982 with an authorised and paid-up share capital of RM1,000,000 and RM710,002 respectively. The principal activity of SVSB is investment holding.

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  (b) Sunway Property

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    Sunway Property is a company incorporated in Hong Kong on 15 July 1988 with an authorised and paid-up share capital of HKD1,000 respectively. The principal activity of Sunway Property is investment holding.

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  Hochimex is a company incorporated and domiciled in Hong Kong on 16 January 1992. Hochimex presently has an authorised and issued and paid-up share capital of HKD1,000,000 comprising 1,000,000 ordinary shares of HKD 1 each. The principal activity of Hochimex is investment holding.
  
  The shareholders of Hochimex are SVSB and Sunway Property.
  

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  SHHLLC is a liability limited company incorporated in Vietnam on 9 October 1992 and has a total investment capital of USD16.8 million. The principal activity of SHHLLC is the operation of Sunway Hotel Hanoi in Hanoi, Vietnam.
  
  Sunway Hotel Hanoi is a hotel with 142 rooms in a 10-storey building located at 19 Pham Dinh Ho Street, Hai Ba Trung District, Hanoi which offers principally food and beverage services, a business centre and the provision of fitness centre and conference room. The site of Sunway Hotel Hanoi comprises a land area of 872 square metres with a total floor area of 8,825 square metres (“Land”). The average occupancy rate of Sunway Hotel Hanoi for the year ended 31 December 2008 was approximately 74%.
  

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  The salient terms of the SPA include, inter-alia, the following:-
  
  (a) Upon execution of the SPA, Mega Methods shall pay USD1.7 million ("Deposit") to the Vendors by way of earnest money and as part payment of the Purchase Consideration.
  
  (b) The obligations of the parties to complete the sale and purchase of the Shares herein are conditional upon the following conditions being fulfilled, amongst others, on or before the expiry of the Conditions Fulfillment Period (as defined herein):-

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      (i) the approval of the shareholders of the respective Vendors in general meeting being obtained for the sale of the respective Shares by the respective Vendors pursuant to the terms of the SPA;
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      (ii) the approval of the shareholders of Sunway in general meeting being obtained for the sale of the Shares by the Vendors pursuant to the terms of the SPA;
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      (iii) the approval of the shareholder of the Purchaser in general meeting being obtained for the purchase of the Shares pursuant to the terms of the SPA;

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      (iv) the Purchaser being satisfied or being deemed satisfied with the results of a legal and financial due diligence audit carried out on Hochimex and SHHLLC; and
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      (v) the Vendors obtaining the land lease contract to be entered into between SHHLLC and Hanoi Department of Natural Resources, Environment and Housing for the lease of the Land for 45 years commencing from 9 October 1992.

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      (aa) 2 months from and excluding the date of the SPA or such later date as the parties may agree in writing for satisfaction of the condition in item 2.5(b)(iv) above; and
      
      (bb) 6 months from and excluding the date of the SPA or such later date as the parties may agree in writing for satisfaction of the conditions in item 2.5(b)(i), (ii), (iii) and (v) above.

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  (c) If any approval or consent referred to in item 2.5(b) is refused or any condition referred to in item 2.5(b) is not obtained or unfulfilled by the expiration of the Conditions Fulfillment Period, any party may terminate the SPA by giving written notice to the other party. Upon receipt of such notice by the other party, the SPA shall forthwith terminate. The Vendors shall return the Deposit without interest to the Purchaser within 14 business days from the termination notice and thereafter neither party shall have any further claim against the other pursuant to the SPA save for any antecedent breach.

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  The Purchase Consideration for the Proposed Acquisition of USD17 million was arrived at based on a willing-buyer and willing-seller basis after taking into consideration the market value of Sunway Hotel Hanoi as appraised by Colliers International (Vietnam) Limited (“Colliers”), an independent firm of registered professional valuers, as set out in their valuation report dated 9 June 2009.
  
  Colliers has determined the market value of Sunway Hotel Hanoi to be USD17 million on 9 June 2009 using the Discounted Cash Flow Approach and cross-checked by the Depreciated Replacement Cost Approach.
  

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  The original cost and date of investment of SVSB and Sunway Property in Hochimex are as follows:-
  
  (a) SVSB
  
  

  Date	Details	Amount HKD
  16 October 1996	990,000 ordinary shares of HKD1 each	4,944,396.60

  
  (b) Sunway Property
  
  

  Date	Details	Amount HKD
  17 December 1996	10,000 ordinary shares of HKD1 each	10,000

  
  Based on the latest audited consolidated financial statements of Sunway for the financial year ended 30 June 2008, the net book value of building of Sunway Hotel Hanoi was approximately RM20.65 million.
  

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  Save for the trade liabilities in Hochimex’s accounts, there are no other liabilities, including contingent liabilities and/or guarantees to be assumed by Mega Methods arising from the Proposed Acquisition.
  

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  SunCity which currently owns 5 hotel properties (4 hotels within Malaysia and 1 hotel in Cambodia), proposes to acquire Sunway Hotel Hanoi to expand the Group’s hospitality division to Vietnam.
  

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  Vietnam is a developing country that has attracted foreign direct investment amounting to USD60.2 billion and 4.3 million visitors in the year 2008.
  
  The Vietnam Government has allocated a demand stimulus package of USD6 billion to counter the current economic slowdown and maintain targeted growth rate of 6.5% for 2009 whilst implementing appropriate policies to curb soaring inflation.
  
  On the tourism front, the Vietnam National Administration of Tourism has launched several initiatives to boost domestic and international tourism. Further, the Foreign Ministry will be seeking UNESCO’s recognition of the central area of the Thang Long-Hanoi royal citadel as a world cultural heritage site.

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  (Source: Vietnam News Agency, Vietnam Economics News Online, Vietnam Institute of Tourism Development Research news, Vietnam Investment Review)

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  The risk associated with hospitality business would include but is not limited to changes in general economic conditions, outbreak of diseases that cause decline in travel, changes in wages, prices and maintenance costs that may result from inflation and the need for constant improvement and upgrade to remain competitive.
  
  As the Proposed Acquisition involves a property located in Vietnam, there will be risks associated with the country’s political and regulatory developments.

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  The Proposed Acquisition shall be funded through internally generated funds and bank borrowings.

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  The Proposed Acquisition will not have any effect on the share capital and substantial shareholders' shareholding of SunCity as the Proposed Acquisition will be fully satisfied in cash.
  

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  The Proposed Acquisition is not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of SunCity for the current financial period ending 31 December 2009. However, the Proposed Acquisition is expected to contribute positively to the future earnings of the SunCity Group.
  

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  The Proposed Acquisition does not require approval from the shareholders of SunCity or any government authorities.
  

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      (i) Being the director of SunCity and Sunway;
      (ii) Being the major shareholder of the SunCity Group and the Sunway Group;
      (iii) Having deemed interest in Mega Methods via SunCity; and
      (iv) Having deemed interest in Hochimex and SHHLLC via Sunway.
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      (i) Spouse of Tan Sri Cheah;
      (ii) Director of Sunway Management Sdn Bhd, a wholly-owned subsidiary of Sunway;
      (iii) Director of Sunway Lagoon Club Berhad, a 84% owned subsidiary of SunCity; and
      (iv) Major shareholder of the SunCity Group and the Sunway Group.
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      (i) Child of Tan Sri Cheah and Puan Sri Cheah;
      (ii) Director and alternate director in several subsidiaries of SunCity; and
      (iii) Major shareholder of the SunCity Group and the Sunway Group.
      
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      (i) Child of Tan Sri Cheah and Puan Sri Cheah;
      (ii) Director and alternate director in several subsidiaries of Sunway;
      (iii) Alternate director to Puan Sri Cheah in Sunway Lagoon Club Berhad; and
      (iv) Major shareholder of the Sunway Group.
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  Save as disclosed below, none of the other directors or major shareholders of SunCity or persons connected with them has any interest, direct or indirect, in the Proposed Acquisition:-
  
  (a) Tan Sri Dato’ Seri Dr Cheah Fook Ling (“Tan Sri Cheah”) is interested in the Proposed Acquisition by virtue of him:-
  
  (b) Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng (“Puan Sri Cheah”) is interested in the Proposed Acquisition by virtue of her being the:-
  
  (c) Sarena Cheah Yean Tih (“Sarena Cheah”) is interested in the Proposed Acquisition by virtue of her being the:- (d) Evan Cheah Yean Shin (“Evan Cheah”) is interested in the Proposed Acquisition by virtue of him being the:-
  
  (e) Sungei Way Corporation Sdn Bhd (“SWCSB”) is interested in the Proposed Acquisition by virtue of it being the major shareholder of the SunCity Group and the Sunway Group.
  
  (f) Timah Dunia Dredging Sdn Bhd (“Timah Dunia”) is interested in the Proposed Acquisition by virtue of it being the major shareholder of the SunCity Group and the Sunway Group by virtue of its substantial shareholding in SWCSB pursuant to Section 6A of the Companies Act, 1965. (g) Active Equity Sdn Bhd (“Active Equity”) is interested in the Proposed Acquisition by virtue of it being the major shareholder of the SunCity Group and the Sunway Group by virtue of its substantial shareholding in SWCSB pursuant to Section 6A of the Companies Act, 1965.
  
  Accordingly, the interested director, Tan Sri Cheah has abstained from board deliberation of SunCity and voting in respect of the Proposed Acquisition.
  

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  The Board (save for Tan Sri Cheah), having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is fair and reasonable and is in the best interests of the SunCity Group.
  

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  Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the end of 2009.
  

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  The SPA and the valuation report by Colliers will be made available for inspection at the registered office of the Company at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan during normal business hours (9.00 a.m. to 6.00 p.m.) from Monday to Friday (except public holidays) for a period of 3 months from the date of this announcement.