Information Memorandum concerning the Issuance and Offering of the Newly-issued Ordinary Shares
According to Board of Director’s meeting No. 7/2017 of Thai Rubber Latex Corporation (Thailand) Company Limited (the “Company” or “TRUBB”) on November 10, 2017, they have a resolution to consider and approve the acquisition of entire business transfer of Thai Rubber Latex Group Company Limited (“THAITEX”), the subsidiary whose 99.99 percent of the shares held by the Company, by conducting the acquisition of entire business transfer (“EBT”) in accordance with Royal Decree issued under the Revenue Code Governing the Exemption from Revenue Tax (No. 542) B.E. 2555 and ministerial regulation No. 291 (B.E. 2555) issued under the Revenue Code Governing the Exemption for Revenue Tax and Notification of the Director-General of Revenue subject: Rules, procedures, and conditions for amalgamation or entire business transfer of a public limited company or a limited company for the exemption of revenue taxes (No.3) dated 19 October 2555 (“Regulation of EBT for Tax Exemption”) for the purpose of utmost tax benefits. In this regard, the Company would acquire all assets, liabilities, rights, duty, and obligations of THAITEX including all investment of THAITEX in Thai Rubber Latex Group Co., Ltd. (Shanghai) (“TRLG Shanghai”), in the amount of 555,500 US Dollar or 55 percent of all investment. Under the Regulation of EBT for Tax Exemption, the Company will increase registered capital and issue not exceeding 1,200,000,000 newly ordinary shares with a par value of Baht 1.00 per share under the private placement to THAITEX at the offering price of Baht 1.00 per share, totaling Baht not exceeding 1,200,000,000 in consideration of entire business transfer of THAITEX to the Company instead of payment by cash (“EBT and Allocation of Newly-issued Ordinary Shares”). After transferring the entire business to the Company, THAITEX will register for the dissolution and liquidation with Department of Business Development, Ministry of Commerce pursuant to the Regulation of EBT for Tax Exemption. In this regard, the Company forecasts the entire business transfer and the capital increment will be completed within year 2017.
1. Restructuring Plan
The Company will acquire the entire business of THAITEX which is a subsidiary of the Company holding at 99 percent of its total ordinary shares. In this regard, only the Company will undertake the business of latex and THAITEX will be dissolved in accordance with the Regulation of EBT for Tax Exemption.
1.1 Current structure
1.2 Net value of business and newly issued ordinary shares as consideration of business
The net value of THAIT will have net value not exceeding Baht 1,200,000,000. Hence, TRUBB will propose the shareholder’s meeting to approve the newly issued ordinary shares and allotment the said shares to a specific person (Private Placement) to THAITEX as a consideration of entire business at not exceeding 1,200,000,000 shares at the offering price of Baht 1 per shares, totaling not exceeding 1,200,000,000 Baht in consideration of entire business transfer of THAITEX to the Company instead of payment by cash
1.3 Dissolution of THAITEX and request of waiver on making a tender offer
THAITEX will be dissolve in accordance with the Regulation of EBT for Tax Exemption.
However, the newly issued ordinary shares and allotment under the private placement to THAITEX will constitute the temporary cross-shareholding until the liquidation is completed around 6-12 months.
1.4 THAITEX will be liquidated and return the investment to the Company who is its shareholder and the Company will subsequently decrease its capital on proportion of TRUBB in an amount not exceeding Baht 1,200,000,000
1.5 After restructure
2. Details of issuing newly ordinary shares under the private placement
The Company has to issue newly ordinary shares as the consideration of the entire business transfer of THAITEX instead of cash pursuant to Regulation of EBT for Tax Exemption in order to obtain the utmost tax benefits such as personal income tax, corporate income tax, value-added tax, and specific business tax. The issuance of newly ordinary shares to THAITEX is considered an allocation of newly issued ordinary shares to a specific person under the private placement scheme. As a result of issuance of those shares, THAITEX will become the majority shareholder of the Company, approximately holding shares totaling 63.16 percent of the paid-up capital of the Company (after the registration of the increase registered capital). The said issuance will constitute a temporary cross-shareholding between the Company, the listed company, and THAITEX, a subsidiary whose more than 50 percent of the shares held by the Company, which is against the rules on listed company status in the stock exchange pursuant Regulation of the Stock Exchange of Thailand Re: Listing of Ordinary Shares or Preferred Shares as Listed Securities B.E. 2558 (2015) and Notification of the Capital Market Supervisory Board No. TorChor 39/2559 RE: Application for and Approval of offer for Sale of Newly Issued Shares. Hence, the said issuance of newly ordinary shares has to obtain a permission from Securities and Exchange Commission and Stock Exchange of Thailand.
The Company stipulated the price of the newly issued ordinary shares to THAITEX at Baht 1.00 per share which is considered an allocation of newly issued ordinary shares to a specific person under the private placement scheme which has been stipulated the fixed price at the offering price with a discount more than 10 percent of market price pursuant to the Notification TorJor. 72/2558. The market price means the weighted average method of the Company’s shares on 7 consecutive business days prior to the date on which the Board of Directors resolves to propose that Extraordinary General Meeting of Shareholders No. 1/2017. The said price is calculated on dated 1 November 2017 to 9 November 2017 which is equal to Baht 2.09. In this regard, such allocation is required approval from the shareholders’ meeting by affirmative votes of not less than three-fourths of the total votes of the shareholders who attend the meeting and are eligible to vote and there must be no any shareholders at total 10 percent of the total votes of the shareholders who attend the meeting and eligible to veto the offering price of newly issued ordinary shares, together with the permission of the SEC for such allocation and offering newly issued- ordinary shares in advance before the allocation and offering of the newly issued ordinary shares of the Company to the proposed buyer.
3. Criteria of allocation the newly issued ordinary shares under the Private Placement
The corporate restructure under EBT scheme will reduce the cost and the related party transactions between both companies and the said restructure will make a benefit to the Company’s overview as both companies are under the group of latex of THAITEX Company Group and there is potential increase in demand and price of latex. In this regard, THAITEX is not a connected person pursuant to the Notification of the Capital Market Supervisory Board No. TorChor. 21/2551 Re: Rules on Connected Transactions, and Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure and Other Acts of Listed Companies on Connected Transactions, B.E. 2546.
Shareholding’s structure before and after the allocation the newly issued ordinary shares under the Private Placement
| As of 14 March 2017
|| After increment of capital under the Private Placement
| Amount of shares
|| Amount of shares
||Mrs. Thipphawan Suthathipkul
||Mr. Vorathep Wongsasuthikul
||Mr. Prawit Vorapratip
||Mr. Prakit Vorapratip
||Miss Amornrat Limwannawong
||Mr. Atran Temritikulchai
||THAI NVDR Co., Ltd.
||Mrs. Nuamruedee Krittayanukool
||Mrs. Kansinan Phongnarueson
||Mr. Witphol Sincharoenkul
||Mrs. Suporn Vorapratip
||Mr. Prachnon Temritikulchai
||Mr. Veerasith Sinchareonkul
||Mrs. Ruedee Khankaew
||Mr. Natthaphat Rangsan
||Mr. Wirat Banyongkhanant
||Mr. Paiboon Waraprateep
||Mr. Anan Akkharaphutthiphon
||Mr. Prawit Jarungphihaksakul
||Thai Rubber Latex Group Company Limited
4. Objectives of issuance of newly ordinary shares under the Private Placement
The allocation of the newly-issued ordinary shares in an amount of not exceeding 1,200,000,000 shares with a par value of Baht 1 per shares under the private placement is calculated the total value not exceeding Baht 1,200,000,000. It is the objective for a consideration of entire business transfer of THAITEX. As a result of completed business transfer, THAITEX is still a subsidiary of the Company and the majority shareholder who holds shares at 63.8 percent of the paid-up capital of the Company. However, the issuance of newly issued ordinary shares is only the procedure of acquisition of entire business transfer so as to granting the tax incentive pursuant to Royal Decree issued under the Revenue Code Governing the Exemption from Revenue Tax (No. 542) B.E. 2555 and ministerial regulation No. 291 (B.E. 2555) issued under the Revenue Code Governing the Exemption for Revenue Tax and Notification of the Director-General of Revenue subject: Rules, procedures, and conditions for amalgamation or entire business transfer of a public limited company or a limited company for the exemption of revenue taxes (No.3) dated 19 October 2555 (“Regulation of EBT for Tax Exemption”). After the EBT is investigated by Revenue Department, the Company will decrease its registered capital on only proportion of THAITEX.
5. The effect to existing shareholders from allocation of newly-issued shares under the private placement
THAITEX who is allocated those shares
The increment of capital for private placement will affect the right of voting of existing shareholder which reduce to at 63.78%. However, accordingly, the said ordinary shares will be issued under the condition of Regulation of EBT for Tax Exemption. Hence, THAITEX as shareholders from the said increment of capital will not use its right to vote for any resolution in the shareholder’s meeting.
2. Price Dilution
NOTE***: THE CALCULATION OF PRICE DILUTION IS FOLLOWED BY THE RULE. HOWEVER, IN TERM OF ENTIRE BUSINESS TRANSFER, THE AMOUNT OF NEW SHARES ISSUED FOR THAITEX, HELD BY TRUBB 100%, WILL HAVE NO RIGHT TO VOTE FOR ANY RESOLUTION IN THE SHAREHOLDER’S MEETING AND ALSO NOT TO RECEIVE DIVIDEND. THE NEW OFFERING SHARES, 1.2 BILLION SHARES, SHALL NOT BE CALCULATED IN EARNING PER SHARE. THE FORMULA WILL ONLY CALCULATE WITH 681,479,688 SHARES; THEREFORE, IT HAS NO PRICE DILUTION OR 0 SATANG.
The Board of directors of the Company views that the allocation and the offering newly ordinary shares to THAITEX make the benefit to shareholders rather than an affectation of price dilution because the Company will acquire the business of THAITEX which will reduce the cost and related party transaction. This will increase the efficiency of manufacturing latex. The Company expects that after the business restructuring and the potential a massive demand of latex, the Company will have more profit in the future.
6. Opinion of the Board of Directors
a. Background of the determination of selling price and the suitable price of ordinary shares which offers to THAITEX
The background of the determination of pricing and the offering newly-issued ordinary shares to the buyer at baht 1.00 per share is the price which results by mutual agreement between the Company and THAITEX and this price is equal to the par value of the Company. However, the said issuance is subject to Regulation of EBT for Tax Exemption. Therefore, After the EBT is completed and investigated by Revenue Department, the company subsequently decrease its register capital. Hence, the Board of Directors has viewed that even though this is a price lower than market price but it is a reasonable price.
5.2 The reasonable increment of capital
The issuance of newly-issued ordinary shares of the Company which will sell to THAITEX under the EBT will issue equal to the net value of the business of THAITEX. The net value of the business is calculated from the formula as follows:
Therefore, the value of the business = not exceeding Baht 1, 200,000,000
b. Warranty of Directors
The Board of Directors certifies that the Board of Directors has performed its duty honestly and diligently to preserve the benefits of the Company in relation to the capital increase. However, in the case of any damage occurring to the Company as a result of the Board’s performance, the shareholders may file a lawsuit against such director on behalf of the Company for damages, according to Section 85 of the Securities and Exchanges Act. B.E. 2535 (1992). In addition, if such performance of the Board of Directors allow any director or his/her related persons to obtain undue benefits; the shareholders may file a lawsuit to claim for such benefits from such director on behalf of the Company, according to section 89/18 of the Securities and Exchange B.E. 2535 (1992). The Board of Directors further certifies that the Board of Directors has used due care in consider and examine the information of the Purchaser and viewed that the Purchaser has potentiality and capacity to invest in the Company.
c. Worthiness of benefits comparing with discounted offering price by taking into account the effect on the Company’s expense and financial position pursuant to the financial reporting standard on the share-based payments
The accounting standard relating ti the Share-based Payment rule stated that the Company which offer for sale shares at the price below a fair value requires to record the different result between the offered price and the market price and plus with the number of offer for sale shares as the expense in the profit and loss statement and record the premium on shares from the Share-based Payment rule in the financial statement of the Company. In this regard, the fair value will be occurred from Market Price at the offering date-the offering date means the date of shareholder’s meeting to approve the Company offer for sale shares.
In this regard, the allocation and offering of the Company newly ordinary shares to the buyer at THB 1.00 per shares will affect to the Company’s accounting because the accounting standard relating to the Share-based Payment rule. Such rule will make the Company has the expense in the profits and loss statement and the premium on shares from the Share-based Payment rule in the financial statement of the Company as follows;
In the case of reference to the market price by applying the weighted average price of the trading price of shares in 7-15 days before Board of Directors meeting as the market price at the offering date, the approximate effect to the accounting may equivalent to 0.33 per shares or equivalent Baht 396,000,000. However, this effect which will be happened in the future may be high or below the expected amount. The effect in the financial statement of the Company will be subject to the market price at the offering date which is the date of shareholder’s meeting to approve the Company issue for sale shares.
In this regard, the effect of those expense may give a result to in the profits and loss statement in the period when the Company enters into the transaction and make the loss in financial statement in the case of the Company has expense from Share-based payment and more than the profits from the Company normal operation as well as the ability to distribute its dividend.
Please be informed accordingly
(Mr. Vorathep Wongsasuthikul)
Chief Executive Officer