General Announcement

Reference No MM-031027-61767

Submitting Merchant Bank	:	AMMERCHANT BANK BERHAD (FORMERLY KNOWN AS ARAB-MALAYSIAN MERCHANT BANK BERHAD)
Company Name	:	PARK MAY BERHAD
Stock Name	:	PARKMAY
Date Announced	:	27/10/2003


Type	:	Announcement
Subject	:	PARK MAY BERHAD (“PARK MAY” OR “COMPANY”) PROPOSED DISPOSAL OF 364 BUSES OWNED BY CITYLINER SDN BHD (“CITYLINER”), AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF PARK MAY, AND LEN CHEE OMNIBUS COMPANY SDN BHD (“LEN CHEE”), AN INDIRECT 85.4%-OWNED SUBSIDIARY OF PARK MAY, TO SYARIKAT PRASARANA NEGARA BERHAD (“SPNB”), A WHOLLY-OWNED SUBSIDIARY OF THE MINISTRY OF FINANCE (INCORPORATED) (“MOF Inc.”), FOR A TOTAL CASH CONSIDERATION OF RM14,841,012 (“PROPOSED DISPOSAL”)

Contents :

1. INTRODUCTION

On behalf of the Company, AmMerchant Bank Berhad

(“AmMerchant Bank”)

, would like to announce that Cityliner, an indirect wholly-owned subsidiary of Park May, and Len Chee, an indirect 85.4%-owned subsidiary of Park May, (collectively to be referred to as “

Vendors

”) have on 27 October 2003 entered into a conditional asset sale and purchase agreement (“

Conditional ASA

”) for the proposed disposal of 321 buses and 43 buses owned by Cityliner and Len Chee respectively (“

Assets

”) to SPNB, a wholly-owned subsidiary of MOF Inc., for a total cash consideration of RM14,841,012 (“

Sale Price

”).

At the request of SPNB, Park May, as the holding company of the Vendors, has agreed to issue a corporate guarantee, undertaking and indemnity (“

Corporate Guarantee

”) to SPNB, the salient terms of which are set out in Section 3 of this announcement. However, the Corporate Guarantee is subject to the approval of the shareholders of the Company.

2. DETAILS OF THE PROPOSED DISPOSAL

2.1 Background Information On Cityliner

Cityliner was incorporated in Malaysia under the Companies Act, 1965

(“Act”)

as a private limited company on 30 August 1994. Its authorised share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each

(“Shares”)

, of which 100,000 Shares have been issued and fully paid-up. Cityliner is principally involved in the operation of public bus transport services.

2.2 Background Information On Len Chee

Len Chee was incorporated in Malaysia under the Act as a private limited company on 29 December 1937. Its authorised share capital is RM50,000 comprising 500 Shares of RM100 each, of which 100 Shares have been issued and fully paid-up. Len Chee is principally involved in the operation of public bus transport services.

2.3 Background Information On SPNB

SPNB was incorporated in Malaysia under the Act as a public limited company on 11 August 1998. Its authorised share capital is RM3,000,000,000 comprising 3,000,000,000 Shares, of which 2,278,552,634 Shares have been issued and fully paid-up. SPNB’s principal activity is to facilitate, coordinate, undertake and expedite the implementation of infrastructure projects approved by the Government of Malaysia.

SPNB is currently the operator of Starline and Putraline LRTs.

2.4 Background Information On the Assets

The Assets represent the entire fleet of buses currently owned by the Vendors for the purposes of their operations.

The Assets are secured through a debenture dated 30 May 2002 against a RM120.0 million Commercial Paper / Medium Term Notes (“

CP/MTN

”) Programme entered into between Park May and Affin Discount Berhad on 23 January 2002. Malaysian Trustees Berhad (“

MTB

”) acts as trustee for the CP/MTN. The amount of CP/MTN outstanding under the programme based on the audited financial statements of Park May for the financial year ended 31 December 2002 is RM115.0 million.

2.5 Salient Terms Of The Conditional ASA

The salient terms of the Conditional ASA are as follows :-

(a) Subject to the terms and conditions of the Conditional ASA, SPNB agrees to acquire the Assets from the Vendors with full title guarantee and free from all encumbrances, with all rights, title and entitlements attaching thereto and upon the terms therein, such sale is to be effected on Completion Date (as defined in the Conditional ASA);

(b) The parties mutually agree that on Completion Date, full legal title and beneficial ownership of the Assets shall pass to and vest in SPNB free from encumbrances whatsoever including without limitation any interest or equity of any person (including any right to acquire, option or right to pre-emption), or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest (including any created by law), title retention, rental, hire purchase, credit sale or other agreement for payment on deferred terms, right of set-off or any other security interest, agreement or arrangement whatsoever, howsoever created or arising;

(i) within 5 business days after the date of the Conditional ASA, SPNB shall pay a refundable deposit of RM1,484,101 equivalent to ten percent (10%) of the Sale Price (“

Deposit

”) to the Vendors in the proportions set out in Table 1 of the Appendix of this announcement; and

(ii) the balance of the Sale Price of RM13,356,911 (“

Balance Purchase Price

”) shall be paid by SPNB on Completion Date to Messrs. Nik Saghir & Ismail (“

Escrow Agent

”) appointed to act as the stakeholder for the Balance Purchase Price and to deal with the Balance Purchase Price in accordance with the terms of the Conditional ASA. The Balance Purchase Price is subject to adjustment arising from the physical stock count to determine whether the Assets actually comprise 364 buses (“

Final Verification

”) and warranty claims;

(d) the Deposit shall be refunded (“

Refund

”) by the Vendors where the Conditional ASA is terminated due to non-fulfilment of the conditions precedent as set out in item (e) hereunder, termination of the Conditional ASA by written consent of all parties or termination of the Conditional ASA by a party due to a default or breach by another party. The Refund shall be made either in cash or in kind by transferring to SPNB or its nominee(s) such number of buses which equal in value the Deposit based on the following principles :-

(i) the value of a bus is based on the purchase price as set out in the list of assets of the relevant Vendor as at the date of the Conditional ASA; and

(ii) SPNB has the right to select which bus is to be transferred to SPNB or its nominee(s).

The Refund shall remain a debt due and owing by the Vendors to SPNB until such time as it is fully paid.

(e) the Proposed Disposal is subject to and conditional upon the fulfillment and/or procurement of the following on or before the date falling on the expiry of three (3) months after the date of the Conditional ASA which shall be automatically extended for a further three (3) months or such other later date as may be mutually agreed upon in writing between the parties if any of the approvals are still pending (“

Compliance Date

”) :-

(i) the approvals as set out in Section 6 of this announcement;

(ii) the issue of an approval letter in favour of SPNB from MTB;

(iii) the issue of the Corporate Guarantee;

(iv) the written acceptance by the Escrow Agent of the letter of instructions from the Vendors and SPNB to formalise the terms and conditions of the appointment and duties of the Escrow Agent;

(v) SPNB submitting the report on the physical inspection and technical assessment of the Assets for the purposes of determining whether each bus is in road going condition (as defined in the Conditional ASA) (“

Road Going Condition

”) to the Vendors in accordance with the terms of the Conditional ASA;

(vi) the signing of the agreement to be entered into between the Vendors, or any one of the Vendors, and SPNB for the operations and maintenance of the Assets by the Vendors, or any one of the Vendors, on terms and conditions to be mutually negotiated and agreed upon in accordance with the terms of the Conditional ASA provided that such condition may at any time be waived by SPNB at its discretion; and

(vii) written confirmation by SPNB’s solicitors that the conditions precedents set out in items (i) to (vi) above have been duly fulfilled.

Where all conditions precedent except for item (vi) have been fulfilled, the Compliance Date shall be automatically extended until such date as the agreement to be entered into between SPNB and such person identified by SPNB to undertake the operations and maintenance of the Assets comes into effect;

(f) Based on the report issued pursuant to the Final Verification, if more than 35% of the Assets are subject to Downtime Maintenance i.e. not operational and/or is stationary at the Company’s workshop for purposes of service, repair and maintenance works necessary to ensure that such bus is in a Road Going Condition (“

Unsatisfactory Buses

”), SPNB will have the following options :-

(i) terminate the Conditional ASA; or

(ii) proceed to completion subject to the following :-

(1) SPNB will pay the Balance Purchase Price to the Escrow Agent subject to deducting and withholding therefrom an amount (“

Retention Sum

”) which will act as security for the Vendors’ obligation to undertake all action necessary to ensure that the Unsatisfactory Buses are in a Road Going Condition and not subject to Downtime Maintenance (“

Final Repairs

”);

(2) The Retention Sum will be equal to the corresponding unit price for the Unsatisfactory Buses, adjusted such that the value to be applied is not the unit price for the actual number of Unsatisfactory Buses but the highest unit price for a corresponding number of buses which are subject to Downtime Maintenance.

(g) SPNB will accept delivery and transfer of any Unsatisfactory Bus in respect of which the Final Repairs are completed within 30 days after the Completion Date (“

Final Deadline

”). After which, SPNB will release the Retention Sum to the Vendors in respect of the corresponding Unsatisfactory Bus;

(h) Where the Final Repairs in respect of any Unsatisfactory Bus are not completed by the Final Deadline, the Vendors will retain the title to that Unsatisfactory Bus and the Retention Sum corresponding to that Unsatisfactory Bus will be forfeited by the Vendors and retained by SPNB as agreed liquidated damages for breach of contract in respect of the Unsatisfactory Buses only;

(i) In respect of those buses which cannot be produced by Cityliner or Len Chee for the Final Verification because such bus is lost or has been stolen, has been damaged by fire or accident and/or is beyond economic repair, as determined by SPNB (“

Rejected Buses

”), the corresponding unit price for that bus shall be deducted from the Balance Purchase Price prior to payment by SPNB;

(j) On Completion Date, the Vendors warrant that :-

(a) the total cost of repair and maintenance works required to ensure that all the buses which are subject to Downtime Maintenance (less the Unsatisfactory Buses and Rejected Buses) will be in a Road Going condition (“

Catch-Up R&M Costs

”) will not exceed RM2,080,000; and

(b) the percentage of buses under Downtime Maintenance will not exceed 35% of the Assets.

(Items (a) and (b) to be collectively referred to as “

Completion Warranties

”)

(k) The amount that SPNB may claim from the Vendors in respect of any breach of the Completion Warranties is limited to the Catch-Up R&M Costs which are in excess of RM2,080,000 (“

Excess Amount

”). The Excess Amount will be released by the Escrow Agent to SPNB before releasing the remainder of the Balance Purchase Price to the Vendors;

(l) Amongst others, SPNB is entitled to either terminate the Conditional ASA or proceed with completion, subject to a revision of the Sale Price based upon the Final Verification, where there is material and adverse change in the nature of or circumstances surrounding the Assets that results in the acquisition being no longer feasible economically, notwithstanding that the Conditional ASA has become unconditional or in the event it becomes apparent to SPNB that either Cityliner or Len Chee is in breach of any of the warranties or any other term of the Conditional ASA on or before the Completion Date; and

(m) The Vendors shall procure Park May to issue the Corporate Guarantee, the salient terms of which are set out in Section 3 of this announcement.

2.6 Original Cost Of Investment

Cityliner’s original cost of investment in respect of the 321 buses owned is approximately RM73,680,770 which was incurred between 1992 to 1998.

Len Chee’s original cost of investment in respect of the 43 buses owned is approximately RM9,071,259 which was incurred between 1993 to 1996.

Based on the audited financial statements of the Park May Group for the financial year ended 31 December 2002, the audited net book value (“

NBV

”) of the Assets is approximately RM30.89 million. However, based on the latest management accounts of the Park May Group as at 31 August 2003, the NBV of the Assets is approximately RM25.2 million.

2.7 Proposed Utilisation Of Proceeds

As Cityliner is a wholly-owned subsidiary and Len Chee is a 85.4%-owned subsidiary of Park May, RM14,676,649 out of the total proceeds of RM14,841,012 will accrue to Park May which is expected to be utilised in the manner set out in Table 2 of the Appendix of this announcement.

2.8 Basis Of Arriving At The Sale Price

The Sale Price was arrived at on a willing buyer-willing seller basis after taking into consideration the NBV of the Assets, the historical and current financial position of the Vendors, and also the physical state of condition of the Assets.

The Sale Price represents a discount of approximately RM16.05 million or 51.95% to the audited NBV of the Assets as at 31 December 2002. The Sale Price represents a discount of approximately RM10.36 million or 41.11% to the NBV of the Assets as at 31 August 2003.

2.9 Liabilities To Be Assumed

SPNB shall not assume or have any liability or obligation in respect of the Assets which is not specifically assumed by SPNB under the Conditional ASA. Accordingly, the Vendors agree to indemnify SPNB and hold SPNB harmless against any obligation or liability of the Vendors in respect of the Assets not specifically assumed by SPNB under the Conditional ASA.

3. SALIENT TERMS OF THE CORPORATE GUARANTEE

The salient terms of the Corporate Guarantee are as follows :-

(a) Park May irrevocably and unconditionally guarantee to SPNB, as the principal obligor and debtor and not merely as surety, on demand, the due, prompt and punctual payment by the Vendors of any sums of monies which may at any time after the date of the Corporate Guarantee become due, owing or otherwise payable under the terms and conditions of the Conditional ASA to SPNB, and Park May further irrevocably and unconditionally guarantees to SPNB the due, prompt and punctual performance and observance of all contractual obligations of the Vendors under the Conditional ASA;

(b) Park May further undertakes to indemnify SPNB and keep SPNB indemnified and hold SPNB harmless from and against all losses, liabilities, obligations, damages, judgments, deficiencies, claims, demands, suits, proceedings, arbitration, assessments, costs and expenses incurred or suffered by SPNB directly or indirectly as a result or arising out or as a consequence of any breach by the Vendors of any provision of the Conditional ASA, including but not limited to failure to make any payment or to observe any of its obligations under the Conditional ASA;

(c) the liability of Park May under the Corporate Guarantee shall subsist whether or not SPNB has availed itself of its legal remedies against the Vendors;

(d) any amount not paid by the Vendors to SPNB and not recoverable from Park May on the basis of a guarantee shall nevertheless be recoverable from Park May on the basis of an indemnity;

(e) the Corporate Guarantee shall remain in force and effect until all obligations of the Vendors have been discharged in full;

(f) a default by Park May in adhering to its obligations under the Corporate Guarantee shall render it liable to legal proceedings being commenced against it by SPNB for the recovery of all amounts due and owing by the Vendors;

(g) no claim shall be brought by SPNB against Park May in respect of any breach of the warranties stipulated under the Conditional ASA unless notice in writing of such claim has been given to Park May not later than the expiry of a period of 1 year after the Completion Date. Any such claim shall be deemed to have been withdrawn at the expiry of 2 years after the Completion Date unless litigation proceedings in respect of it have commenced against Park May; and

(h) save for the Refund and any breach of the Completion Warranties, Park May shall only be liable in respect of all and any claims brought by SPNB if the amount of all such claims exceeds in RM50,000 whereby Park May shall be liable for excess only. In any event, the total liability of Park May to SPNB arising pursuant to the provisions of the Corporate Guarantee shall not exceed 50% of the Sale Price and the liability of Park May to SPNB in respect of Cityliner or Len Chee shall not exceed 50% of the Sale Price payable to either Cityliner or Len Chee.

4. RATIONALE FOR THE PROPOSED DISPOSAL

The Company is currently an affected listed issuer under Practice Note No. 4/2001 of the Listing Requirements of the Kuala Lumpur Stock Exchange (“

KLSE

”). As at 31 December 2002, the Park May group of companies (“

Park May Group

” or “

Group

”) has a negative shareholders’ funds of approximately RM25.4 million with total borrowings of the Group amounting to approximately RM116 million. In mitigating the Group’s decelerating performance under the prevailing difficult environment, the Group has to-date undertaken cost containment measures including divestment of non-core assets.

The stage bus operation in the Klang Valley has always been the mainstay of the Group and is the largest contributor to the Group in terms of revenue. However, it is also the main reason behind the significant losses incurred by the Group to-date. The Company’s stage bus operation in the Klang Valley is not expected to turn around in the immediate term due to difficult operating conditions, namely price regulation, increasing costs of repairs and declining number of passengers. As such, it may not be commercially viable for the Company to continue with the stage bus operation based on the current organisational set-up.

It is expected that upon completion of the Proposed Disposal, Park May will focus on its express buses operation which is still a viable business, reduce the Group’s debts to a more manageable level and more importantly, the Proposed Disposal together with the proposed disposals of the Company’s non-core assets announced to-date, will assist the Park May Group in formulating a restructuring scheme which will help turnaround and place the restructured Group on a stronger financial footing.

The Proposed Disposal will enable Park May to raise cash expeditiously to further reduce its borrowings which will result in annual interest savings of approximately RM0.807 million based on an average interest rate of 6.0% per annum.

5. EFFECTS OF THE PROPOSED DISPOSAL

5.1 Share Capital

The Proposed Disposal will not have any effect on the issued and paid-up share capital of Park May.

5.2 Earnings

Based on the audited NBV of the Assets as at 31 December 2002, the Proposed Disposal is expected to give rise to a net loss on disposal of approximately RM17.43 million at Group level after deducting minority interests of approximately RM0.164 million and estimated incidental expenses relating to the Proposed Disposal of RM1.22 million.

As already mentioned in Section 2.7 of this announcement, approximately RM13.46 million will be utilised to partly redeem the outstanding CP/MTN. This is expected to result in annual interest savings of approximately RM0.807 million based on an average interest rate of 6.0% per annum.

5.3 Net Tangible Liabilities (“NTL”)

Based on the audited balance sheets of the Park May Group as at 31 December 2002 and on the assumption that the Proposed Disposal had been effected on that date, the proforma effects of the Proposed Disposal on the Group’s NTL are set out in Table 3 of the Appendix of this announcement.

5.4 Substantial Shareholders’ Shareholdings

The Proposed Disposal will not have any effect on the substantial shareholders’ shareholdings.

6. APPROVALS REQUIRED FOR THE PROPOSED DISPOSAL

The Proposed Disposal is subject to,

inter-alia

, the following approvals being obtained:-

(a) the Securities Commission (“

”), if required;

(b) the shareholders of Park May at an extraordinary general meeting (“

EGM

”) to be convened (including the approval for the Corporate Guarantee);

(d) all other approvals necessary.

7. DEPARTURE FROM SC’S POLICIES AND GUIDELINES ON THE ISSUE / OFFER OF SECURITIES (“SC GUIDELINES”)

To the best knowledge of the Board of Directors, the Proposed Disposal does not depart from the SC Guidelines.

8. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

(i)

Substantial Shareholders’ Interests

Renong Berhad (“

Renong

”) is a substantial shareholder of Park May. Renong is a 48.7% associated company of United Engineers (Malaysia) Berhad which in turn is wholly-owned by Syarikat Danasaham Sdn Bhd which in turn is wholly-owned by Khazanah Nasional Berhad (“

Khazanah

”) and ultimately, wholly-owned by MOF Inc.. By virtue of this, Renong is deemed a person connected with MOF Inc. and as such, Renong is deemed interested in the Proposed Disposal. Accordingly, Renong will abstain from voting on the Proposed Disposal in respect of its direct and / or indirect shareholdings in Park May, if any, on the resolution pertaining to the Proposed Disposal at an EGM to be convened.

(ii)

Directors’ Interests

Adnan Mohammad, YBhg. Dato’ Mohd Nor Idrus and Mr Chong Yoon Fatt, the current Managing Director and Directors of Park May respectively, are nominee Directors of Renong. Mr Yeo Keng Un, a Director of Park May, is a nominee Director of Khazanah. As such, these Directors are deemed interested in the Proposed Disposal (“

Interested Directors

”). The Interested Directors have abstained and will continue to abstain from deliberating and voting on the Proposed Disposal at the Board meetings of the Company and will abstain from voting in respect of their direct and / or indirect shareholdings in Park May, if any, on the resolution pertaining to the Proposed Disposal at an EGM to be convened.

Save as disclosed above and as far as the Company is aware, none of the Directors and substantial shareholders of the Park May Group as well as persons connected with them have any interest, direct and/or indirect, in the Proposed Disposal.

9. DIRECTORS’ RECOMMENDATION

Having considered the weak financial position of the Park May Group, the rationale and effects of the Proposed Disposal, and after careful deliberation, the Board of Directors is of the opinion that the Proposed Disposal is in the long-term interest of the Park May Group.

10. ADVISER

AmMerchant Bank has been appointed as Adviser to Park May for the Proposed Disposal.

In view of the interests of the Interested Directors and substantial shareholder as mentioned in Section 8 of this announcement and in compliance with Chapter 10 of the Listing Requirements of the KLSE, PM Securities Sdn Bhd has been appointed to act as the Independent Adviser to the independent directors and minority shareholders of Park May.

11. ESTIMATED TIME FRAME FOR APPLICATION TO RELEVANT AUTHORITIES AND COMPLETION

Pursuant to paragraph 12.05(a)(iii) of Chapter 12 of the SC Guidelines, the Proposed Disposal would give rise to a significant change in the business direction of the Park May Group and accordingly, the SC’s approval is required for the Proposed Disposal. However, the Company will seek a waiver from having to seek the SC’s approval for the Proposed Disposal pursuant to paragraph 8 of Guidance Note 12 of the SC Guidelines.

The Proposed Disposal is expected to be completed in the first quarter of 2004.

12. DOCUMENTS AVAILABLE FOR INSPECTION

The Conditional ASA and Corporate Guarantee will be made available for inspection at the registered office of Park May at Lot 18115, Batu 5, Jalan Kelang Lama, 58100 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.

This announcement is dated 27 October 2003.