Spritzer-circular 2011 2

8/3/2019 Spritzer-circular 2011 2

1/88

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the course of action to take, you should consult your stockbroker, solicitor, accountant, bankmanager or other professional adviser immediately.

Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to itsaccuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in relianceupon the whole or any part of the contents of this Circular.

SPRITZERBHD(Company No. 265348-V)

(Incorporated in Malaysia under the Companies Act, 1965)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE

I. PROPOSED BONUS ISSUE OF UP TO 32,664,667 WARRANTS IN SPRITZER BHD("SPRITZER") ("WARRANT(S)") ON THE BASIS OF ONE (1) FREE WARRANT FOREVERY FOUR (4) EXISTING ORDINARY SHARES OF RM0.50 EACH IN SPRITZER HELDON AN ENTITLEMENT DATE TO BE DETERMINED LATER ("PROPOSED BONUS ISSUEOF WARRANTS"); AND

II. PROPOSED ESTABLISHMENT OF AN EMPLOYEES' SHARE OPTION SCHEME OF UPTO 15% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF SPRITZER AT ANY POINTIN TIME AFTER THE PROPOSED BONUS ISSUE OF WARRANTS ("PROPOSED ESOS")

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Adviser

The Notice of the Extraordinary General Meeting ("EGM") of Spritzer Bhd ("Company") which is scheduled to be held at Crystal2, Impiana Hotel Ipoh, 18 Jalan Raja Dr. Nazrin Shah, 30250 Ipoh, Perak Darul Ridzuan on Thursday, 24 November 2011 at11.30 a.m. or immediately following the conclusion or adjournment of the Eighteenth Annual General Meeting ("AGM") of theCompany scheduled to be held at the same venue and on the same date at 11.00 a.m., whichever is later, together with theForm of Proxy are enclosed herein.

A member entitled to attend and vote at the EGM is entitled to appoint a proxy or proxies to attend and vote on his/ her behalf.In such event, the Form of Proxy should be lodged at the Registered Office of the Company at Lot 85, Jalan Portland, TasekIndustrial Estate, 31400 Ipoh, Perak Darul Ridzuan, not less than 48 hours before the time stipulated for holding the EGM or atany adjournment thereof, as indicated below. The lodging of the Form of Proxy shall not preclude you from attending and votingin person at the EGM should you subsequently wish to do so.

Last date and time for lodging the Form of Proxy . : Tuesday, 22 November 2011 at 11.30 a.m.

Date and time of the EGM .................................................. : Thursday, 24 November 2011 at 11.30 a.m. or immediately

following the conclusion or adjournment of the Eighteenth AGM,whichever is later

This Circular is dated 2 November 2011


2/88

DEFINITIONS

i

Except where the context otherwise requires, the following definitions shall apply throughout thisCircular:-

"Act" : The Companies Act, 1965

"AGM" : Annual General Meeting

"Board" : The Board of Directors of Spritzer

"Bursa Depository" or"Depository"

: Bursa Malaysia Depository Sdn Bhd

"Bursa Securities" : Bursa Malaysia Securities Berhad

"By-Laws" : The terms and conditions of the Proposed ESOS as amended, from timeto time

"Date of Offer" : The date on which an Offer is made by the ESOS Committee to anEligible Person in the manner as indicated in By-Law 8.0

"Deed Poll" : The deed poll to be executed by Spritzer, constituting the Warrants

"Director(s)" : The director(s) of Spritzer Group and shall have the meaning given inSection 4 of the Act

"Effective Date" : The effective date for the implementation of the Proposed ESOS in themanner as indicated in By-Law 11.1

"EGM" : Extraordinary General Meeting

"Eligible Person(s)" : Employees, executive Directors and non-executive Directors of Spritzerand its subsidiaries, which are not dormant, who meet the criteria ofeligibility in the manner as indicated in By-Law 3.0

"Entitlement Date" : The date as at the close of business (to be determined and announcedlater by the Board) on which shareholders of Spritzer must be registeredas a member and whose names appear in the Record of Depositors inorder to participate in the Proposed Bonus Issue of Warrants

"EPS" : Earnings per Share

"ESOS" : Employees' share option scheme, being the scheme for the granting of

ESOS Options to Eligible Persons to subscribe for new Spritzer Sharesupon the terms and conditions in the manner as indicated in the By-Laws

"ESOS Committee" : The committee appointed and duly authorised by the Board toadminister the Proposed ESOS in the manner as indicated in By-Law18.0

"ESOS Option(s)" or"Option(s)"

: The right of a Grantee which may be conditional or unconditional tosubscribe for new Spritzer Shares pursuant to the contract constitutedby the acceptance of an Offer by an Eligible Person in the manner asindicated in By-Law 8.0


3/88

DEFINITIONS (CONT'D)

ii

"ESOS Option Period" : In respect of each ESOS Option, a period commencing on the Date ofOffer relevant to such ESOS Option and expiring at the expiry of theProposed ESOS as may be determined in the manner as indicated in

By-Law 11.0, whichever is the earlier

"FPE" : Financial period ended

"FYE" : Financial year ended/ ending

"Grantee(s)" : An Eligible Person who has accepted an Offer in the manner asindicated in By-Law 8.2

"Listing Requirements" : Main Market Listing Requirements of Bursa Securities

"LPD" : 7 October 2011, being the latest practicable date prior to the printing anddespatch of this Circular

"Market Day(s)" : Any day between Monday to Friday (inclusive), excluding publicholidays, and a day on which Bursa Securities is open for trading ofsecurities

"NA" : Net assets

"Offer(s)" : A written offer made by the ESOS Committee to an Eligible Person inthe manner as indicated in By-Law 8.0

"OSK" or the "Adviser" : OSK Investment Bank Berhad

"Proposals" : The Proposed Bonus Issue of Warrants and the Proposed ESOS,

collectively

"Proposed Bonus Issueof Warrants"

: The proposed bonus issue of up to 32,664,667 Warrants on the basis ofone (1) free Warrant for every four (4) existing Spritzer Shares held onthe Entitlement Date

"Proposed ESOS" : The proposed establishment of an ESOS of up to 15% of the issued andpaid-up share capital of the Company at any point in time after theProposed Bonus Issue of Warrants

"Record of Depositors" : A record of depositors established by Bursa Depository under the Rulesof Depository

"RM" and "sen" : Ringgit Malaysia and sen, respectively

"Spritzer" or the"Company"

: Spritzer Bhd

"Spritzer Group" or the"Group"

: Spritzer and its subsidiaries

"Spritzer Share(s)" or"Share(s)"

: Ordinary share(s) of RM0.50 each in Spritzer

"Subscription Price" : The price at which the Grantee shall be entitled to subscribe for one (1)new Spritzer Share pursuant to the exercise of an ESOS Option in the

manner as indicated in By-Law 7.0


4/88

DEFINITIONS (CONT'D)

iii

"WAMP" : Weighted average market price

"Warrant(s)" : Up to 32,664,667 warrants in Spritzer to be issued pursuant to the

Proposed Bonus Issue of Warrants

Words incorporating the singular shall, where applicable, include the plural and vice versa. Wordsincorporating the masculine gender shall, where applicable, include the feminine and neuter gendersand vice versa. Any reference to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any enactment is a reference to that enactment as for the time beingamended or re-enacted. Any reference to a time of day in this Circular shall be a reference toMalaysian time, unless otherwise specified.

THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK


5/88

TABLE OF CONTENTS

iv

PAGE

LETTER TO THE SHAREHOLDERS OF SPRITZER CONTAINING:-

1. INTRODUCTION 1

2. DETAILS OF THE PROPOSALS 2

3. UTILISATION OF PROCEEDS 10

4. RATIONALE AND JUSTIFICATION FOR THE PROPOSALS 10

5. INDUSTRY OUTLOOK AND FUTURE PROSPECTS 11

6. EFFECTS OF THE PROPOSALS 13

7. HISTORICAL SHARE PRICES 23

8. APPROVALS REQUIRED/ OBTAINED 23

9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/ OR

PERSONS CONNECTED TO THEM

24

10. ESTIMATED TIMEFRAME FOR COMPLETION AND TENTATIVE TIMETABLE

FOR IMPLEMENTATION

27

11. PROPOSALS ANNOUNCED BUT PENDING COMPLETION 27

12. DIRECTORS' RECOMMENDATION 27

13. EGM 28

14. FURTHER INFORMATION 28

APPENDICES

I. REPORTING ACCOUNTANTS' LETTER ON THE PROFORMA

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 MAY

2011 OF SPRITZER GROUP IN RELATION TO THE PROPOSALS

29

II. DRAFT BY-LAWS OF THE PROPOSED ESOS 40

III. FURTHER INFORMATION 76

NOTICE OF EGM ENCLOSED

FORM OF PROXY ENCLOSED


6/88

1

SPRITZER BHD(Company No. 265348-V)

(Incorporated in Malaysia under the Companies Act, 1965)

Registered Office

Lot 85, Jalan PortlandTasek Industrial Estate

31400 IpohPerak Darul Ridzuan

2 November 2011

Board of Directors

Dato' Lim A Heng @ Lim Kok Cheong, JSM, DPMP, JP (Non-Independent Non-Executive Chairman)Lim Kok Boon (Managing Director)Dr. Chuah Chaw Teo (Executive Director)Lam Sang (Executive Director)Chok Hooa @ Chok Yin Fatt, PMP (Non-Independent Non-Executive Director)Dato' Ir. Nik Mohamad Pena bin Nik Mustapha, DIMP (Independent Non-Executive Director)Y.B. Mohd Adhan bin Kechik (Independent Non-Executive Director)Kuan Khian Leng (Independent Non-Executive Director)

To: The Shareholders of Spritzer Bhd

Dear Sir/ Madam,

I. PROPOSED BONUS ISSUE OF UP TO 32,664,667 WARRANTS IN SPRITZER BHD("SPRITZER") ("WARRANT(S)") ON THE BASIS OF ONE (1) FREE WARRANT FOREVERY FOUR (4) EXISTING ORDINARY SHARES OF RM0.50 EACH IN SPRITZER HELDON AN ENTITLEMENT DATE TO BE DETERMINED LATER ("PROPOSED BONUS ISSUEOF WARRANTS"); AND

II. PROPOSED ESTABLISHMENT OF AN EMPLOYEES' SHARE OPTION SCHEME OF UPTO 15% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF SPRITZER AT ANY POINTIN TIME AFTER THE PROPOSED BONUS ISSUE OF WARRANTS ("PROPOSED ESOS")

1. INTRODUCTION

On 30 September 2011, OSK had, on behalf of the Board, announced that the Companyproposes to undertake the following:-

i. A bonus issue of up to 32,664,667 warrants in Spritzer on the basis of one (1) freeWarrant for every four (4) existing Spritzer Shares held on an entitlement date to bedetermined later; and

ii. An establishment of an ESOS of up to 15% of the issued and paid-up share capital ofthe Company at any point in time after the Proposed Bonus Issue of Warrants.


7/88

2

On 27 October 2011, OSK also had, on behalf of the Board, announced that Bursa Securitieshad, vide its letter dated 25 October 2011, resolved to approve-in-principle the admission ofthe Warrants to the official list of Bursa Securities as well as for the listing of and quotation forthe Warrants and the new Spritzer Shares to be issued arising from the exercise of theWarrants and ESOS Options on the Main Market of Bursa Securities.

The purpose of this Circular is to provide the shareholders of Spritzer with the relevantinformation on the Proposals as well as to seek the approval from the shareholders of Spritzerfor the ordinary resolutions pertaining to the Proposals to be tabled at the forthcoming EGM ofthe Company. The notice of the forthcoming EGM and the Form of Proxy are enclosedtogether with this Circular.

SHAREHOLDERS OF SPRITZER ARE ADVISED TO READ AND CONSIDER CAREFULLYTHE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINEDHEREIN BEFORE VOTING ON THE ORDINARY RESOLUTIONS TO GIVE EFFECT TOTHE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM.

2. DETAILS OF THE PROPOSALS

2.1 Proposed Bonus Issue of Warrants

2.1.1 Basis and number of Warrants to be issued

The Proposed Bonus Issue of Warrants involves an issuance of up to32,664,667 Warrants on the basis of one (1) free Warrant for every four (4)existing Spritzer Shares held by the shareholders of Spritzer whose namesappear in the Record of Depositors on the Entitlement Date.

The actual number of Warrants to be issued pursuant to the Proposed BonusIssue of Warrants will depend on the issued and paid-up share capital of theCompany on the Entitlement Date, after taking into consideration the number

of Spritzer Shares held as treasury shares. The Spritzer Shares held astreasury shares will not be entitled to the Warrants to be issued pursuant tothe Proposed Bonus Issue of Warrants.

Based on the issued and paid-up share capital of Spritzer as at the LPD ofRM65,329,333 comprising 130,658,666 Spritzer Shares and assuming allexisting 24,000 treasury shares are resold on the open market, a total of32,664,667 free Warrants will be issued pursuant to the Proposed BonusIssue of Warrants.

Fractions of entitlements arising from the Proposed Bonus Issue of Warrants,if any, shall be dealt with by the Board in such manner at their absolutediscretion as they may deem fit and expedient and in the best interest of the

Company.

The Proposed Bonus Issue of Warrants will not be implemented in stagesover a period of time.


8/88

3

2.1.2 Ranking of the Warrants and new Spritzer Shares arising from theexercise of the Warrants

The holders of the Warrants will not be entitled to any voting right orparticipation in any form of distribution and/ or offer of further securities inSpritzer until and unless such holders of the Warrants exercise their Warrants

into new Spritzer Shares.

The new Spritzer Shares to be issued arising from the exercise of theWarrants will, upon allotment and issuance, rank pari passuin all aspectswith the then existing Spritzer Shares, save and except that the new SpritzerShares will not be entitled to any dividends, rights, allotment and/ or otherforms of distribution ("Distribution") that may be declared, made or paid forwhich the entitlement date for the Distribution precedes the date of allotmentand issuance of the new Spritzer Shares arising from the exercise of theWarrants. The new Spritzer Shares will be subject to all provisions of theMemorandum and Articles of Association of Spritzer and such amendmentsthereafter, if any.

2.1.3 Listing of and quotation for the Warrants and the new SpritzerSharesarising from the exercise of the Warrants

The approval-in-principle has been obtained from Bursa Securities vide itsletter dated 25 October 2011 for the admission of the Warrants to the officiallist of Bursa Securities as well as for the listing of and quotation for theWarrants and the new Spritzer Shares to be issued arising from the exerciseof the Warrants on the Main Market of Bursa Securities.

2.1.4 Basis of determining the issue price and exercise price of the Warrants

The Warrants will be issued at no cost to the shareholders of Spritzer.

The exercise price of the Warrants shall be determined and fixed by theBoard at a later date after receipt of all relevant approvals but before theEntitlement Date.

For illustrative purposes only, as disclosed in the announcement dated 30September 2011 ("Announcement"), the indicative exercise price of theWarrants is assumed at RM0.97 per Warrant, which represents a premium ofapproximately 20% to the five (5)-day WAMP of Spritzer Shares up to andincluding 23 September 2011, being the latest practicable date of theAnnouncement, of RM0.81 per Spritzer Share.

The final exercise price of the Warrants shall be determined and fixed by theBoard, after taking into consideration, amongst others, the following:-

i. The historical price movement of Spritzer Shares;

ii. The potential future earnings of Spritzer Group; and

iii. That the Warrants will be issued at no cost to the entitledshareholders of the Company.


9/88

4

2.1.5 Indicative salient terms of the Warrants

The indicative salient terms of the Warrants are set out below:-

Issue size : Up to 32,664,667 Warrants to subscribe for up to32,664,667 new Spritzer Shares

Form : The Warrants will be issued in registered form andconstituted by a deed poll to be executed by theCompany

Exercise period : The Warrants may be exercised at any time withinfive (5) years commencing on and including thedate of issuance of the Warrants. Warrants notexercised during the exercise period will thereafterlapse and cease to be valid

Exercise price : The exercise price of the Warrants shall bedetermined and fixed by the Board at a later date

after receipt of all relevant approvals but before theEntitlement Date

Exercise rights : Each Warrant carries the entitlement, at any timeduring the exercise period, to subscribe for one (1)new Spritzer Share at the exercise price, subject toadjustments in accordance with the provisions ofthe Deed Poll

Mode of exercise : The registered holder of a Warrant is required tolodge a subscription form, as set out in the DeedPoll, with the Company's registrar, duly completed,signed and stamped together with payment of the

exercise price by bankers' draft or cashier's orderdrawn on a bank operating in Malaysia or a moneyorder or postal order issued by a post office inMalaysia

Mode of transfer : The Warrants are transferable by an instrument oftransfer in the usual or common form or such otherform as the Board, Bursa Securities and/ or anyother relevant authorities may approve

Board lot : For the purpose of trading on Bursa Securities, one(1) board lot of Warrants shall comprise 100Warrants carrying the right to subscribe for 100 new

Spritzer Shares at any time during the exerciseperiod, or such other denomination as determinedby Bursa Securities

Adjustments in theexercise priceand/ or number ofWarrants

: The exercise price and/ or number of unexercisedWarrants shall be adjusted in the event of alterationto the share capital of the Company, capitaldistribution or issue of shares in accordance withthe provisions of the Deed Poll


10/88

5

Rights in the eventof winding-up,liquidation,compromise and/or arrangement

: Where a resolution has been passed for amembers' voluntary winding up of the Company orwhere there is a compromise or arrangement,whether or not for the purpose of or in connectionwith a scheme for the reconstruction of theCompany or the amalgamation of the Company with

one or more companies, then every warrantholdershall be entitled upon and subject to the provisionsof the Deed Poll at any time within six (6) weeksafter the passing of such resolution for a members'voluntary winding-up of the Company or six (6)weeks after the granting of the court orderapproving the compromise or arrangement, by theirrevocable surrender of his/ her Warrants to theCompany, elect to be treated as if he/ she hadimmediately prior to the commencement of suchwinding-up, compromise or arrangement exercisedthe exercise rights represented by his/ her Warrantsto the extent specified in the relevant exercise forms

and be entitled to receive out of the assets of theCompany which would be available in liquidation asif he/ she had on such date been the holder of thenew Spritzer Shares to which he/ she would havebeen entitled to pursuant to such exercise

Modification : Save for manifest error, any modification,amendment, deletion or addition to the Deed Pollshall require the approval of the warrantholderssanctioned by ordinary resolution and may beeffected only by the Deed Poll, executed by theCompany and expressed to be supplemental heretoand subject to the approval of the relevant

authorities, if necessary

Governing law : Laws and regulations of Malaysia

2.2 Proposed ESOS

2.2.1 Details of the Proposed ESOS

The Proposed ESOS involves the granting of ESOS Options to the EligiblePersons as set out in the By-Laws to subscribe for new Spritzer Shares atspecified prices to be determined in the manner set out in Section 2.2.2(v) ofthis Circular.

The Proposed ESOS will be administered by the ESOS Committee andgoverned by a set of by-laws, a copy of which is attached as Appendix II ofthis Circular.


11/88

6

2.2.2 Salient features of the Proposed ESOS

The salient features of the Proposed ESOS are set out below:-

i. Maximum number of Spritzer Shares available under theProposed ESOS

The total number of new Spritzer Shares, which may be allottedpursuant to the Proposed ESOS shall not exceed in aggregate 15%of the total issued and paid-up share capital of the Company(excluding treasury shares) at any point in time during the existenceof the Proposed ESOS.

ii. Basis of allotment and maximum allowable allotment

The maximum number of new Spritzer Shares that may be offered toan Eligible Person shall be determined at the discretion of the ESOSCommittee after taking into consideration, amongst others and whererelevant, the performance, contribution, employment grade, seniority

and length of service of the Eligible Persons, subject to the following:-

(a) The aggregate allocation to Directors and seniormanagement of Spritzer Group must not exceed 50% of thenew Spritzer Shares available under the Proposed ESOS;and

(b) The allocation to an Eligible Person, who either singly orcollectively, through persons connected to the EligiblePerson, holds 20% or more of the issued and paid-up sharecapital of Spritzer, must not exceed 10% of the new SpritzerShares available under the Proposed ESOS.

iii. Eligibility

Only employees, executive Directors and non-executive Directors ofSpritzer and its subsidiaries, which are not dormant, who meet thefollowing conditions as at the Date of Offer are eligible to participatein the Proposed ESOS:-

(a) Employees

i. be at least 18 years of age;

ii. confirmed in service in the Group;

iii. is employed for a continuous period of at least one(1) year in the Group; and

iv. be under such categories and complies with suchcriteria that the ESOS Committee may decide at itsabsolute discretion from time to time.

(b) Executive Director

An executive Director who has held office for at least one (1)year in the Group, whose entitlement under the ProposedESOS has been approved by shareholders of the Companyin a general meeting, and who is not prohibited or disallowed

by the relevant authorities from participating in the ProposedESOS.


12/88

7

(c) Non-executive Director

A non-executive Director who has held office for at least one(1) year in the Group, whose entitlement under the ProposedESOS has been approved by shareholders of the Companyin a general meeting, and who is not prohibited or disallowed

by the relevant authorities from participating in the ProposedESOS.

The selection of any Eligible Person to participate in the ProposedESOS shall be at the absolute discretion of the ESOS Committeeand the decision of the ESOS Committee shall be binding and final.

Save for the aforesaid eligibility conditions and in accordance withthe By-Laws, an Eligible Person is not subject to any other conditionsand/ or performance targets to be eligible for participation in theProposed ESOS.

iv. Duration

The Proposed ESOS, when implemented, shall be in force for aperiod of five (5) years from the Effective Date.

The Proposed ESOS may be extended for a further period of up tofive (5) years at the discretion of the Board upon recommendation ofthe ESOS Committee, subject always that the duration or tenure ofthe Proposed ESOS shall be not more than ten (10) years from theEffective Date.

v. Basis of determining the Subscription Price

Subject to any adjustments made under the By-Laws and pursuant to

the Listing Requirements, the Subscription Price shall be the higherof:-

(a) The five (5)-day WAMP of Spritzer Shares immediatelypreceding the Date of Offer, with a discount of not more than10% at the ESOS Committee's discretion; or

(b) The par value of Spritzer Shares.

vi. Acceptance

An Offer made by the ESOS Committee to an Eligible Person underthe Proposed ESOS shall be in writing. The Offer shall be open for

acceptance by the Eligible Person to whom it is made for at least 14calendar days from the Date of Offer.

The acceptance of the Offer shall be by a notice in writing addressedto the ESOS Committee in such form as prescribed by the ESOSCommittee accompanied by a non-refundable payment to theCompany of a sum of RM1.00 only as consideration for theacceptance of such Offer. Upon acceptance of the Offer, theCompany may at its discretion, issue to the Grantee an optioncertificate, which confirms the grant of the ESOS Option, the numberof new Spritzer Shares comprised in the ESOS Option, ESOS OptionPeriod and Subscription Price.


13/88

8

If the Offer is not accepted in the aforesaid manner, the Offer shallautomatically lapse upon the expiry of the prescribed offer period andshall no longer be capable of acceptance. In the event an Offer isaccepted as to part of the Spritzer Shares comprised therein, theOffer as regards to the balance of the Spritzer Shares not acceptedshall lapse forthwith.

vii. Amendments and/ or modifications

Subject to the compliance with the requirements of Bursa Securitiesand any other relevant authorities, the ESOS Committee may, at anytime and from time to time, recommend to the Board any additionsand amendments to or deletions of the By-Laws as it shall in itsdiscretion think fit and the Board shall have the power by resolutionto add to, amend or delete all of any of the By-Laws upon suchrecommendation provided that no additions or amendments to ordeletion of the By-Laws shall be made which will:-

(a) Prejudice any rights of the shareholders of the Company

without the prior approval of the shareholders of theCompany in a general meeting; or

(b) Alter to the advantage of any Eligible Person in respect ofany matters which are required to be contained in the By-Laws (or any amendments subsequent thereto) by virtue ofthe Listing Requirements, without the prior approval of theshareholders of the Company in a general meeting unlessotherwise allowed by the provisions of the ListingRequirements.

Where any amendments and/ or modifications are made to the By-Laws, the Company shall submit to Bursa Securities, the

amendments and/ or modifications to the By-Laws and a confirmationletter that the amendments and/ or modifications complies with theprovisions of the guidelines on ESOS stipulated under the ListingRequirements no later than five (5) Market Days from the effectivedate of the said amendments and/ or modifications.

viii. Alteration of share capital

In the event of any alteration in the capital structure of the Companyduring the ESOS Option Period, whether by way of capitalisation ofprofits or reserves, rights issue, bonus issue, reduction of capital,subdivision or consolidation of Spritzer Shares, or otherwisehowsoever arising, corresponding adjustments, if any, shall be made

either in the number of new Spritzer Shares comprised in the ESOSOptions not exercised and/ or the Subscription Price in such manneras the ESOS Committee may decide provided that:-

(a) The adjustment other than arising from a bonus issue mustbe confirmed in writing by the external auditors for the timebeing of the Company to be in their opinion (acting asexperts and not as arbitrators) fair and reasonable; and


14/88

9

(b) No adjustment to the Subscription Price shall be made whichwould result in the new Spritzer Shares being issued at adiscount to the par value of Spritzer Shares and if such anadjustment would but for this provision have so resulted, theSubscription Price payable for such new Spritzer Sharesshall be the par value of Spritzer Shares.

The aforesaid adjustments shall be made in accordance with theformulas as set out in First Schedule attached to the By-Laws and onthe day immediately following the books closure date for the eventgiving rise to the adjustments.

ix. Ranking of the ESOS Options and new Spritzer Shares arisingfrom the exercise of the ESOS Options

The Grantees will not be entitled to any voting right or participation inany form of distribution and/ or offer of further securities in Spritzeruntil and unless such Grantees exercise their ESOS Options into newSpritzer Shares.

The new Spritzer Shares arising from the exercise of the ESOSOptions shall, upon allotment and issuance, rank pari passuin allaspects with the then existing issued and paid-up Spritzer Shares,except that the new Spritzer Shares will not be entitled to anyDistribution declared, made or paid to shareholders, for which theentitlement date for the Distribution precedes the date of which thenew Spritzer Shares are credited into the Central Depository Systemaccount with Bursa Depository of the Grantees. The new SpritzerShares will be subject to all provisions of the Memorandum andArticles of Association of Spritzer and such amendments thereafter, ifany.

x. Holding of Spritzer Shares

Pursuant to the Listing Requirements, an eligible Director who is anon-executive Director shall not sell, transfer or assign the SpritzerShares obtained through the exercise of the ESOS Options offered tohim/ her within one (1) year from the Date of Offer.

Save for the non-executive Directors, the new Spritzer Sharesallotted and issued to the Grantees pursuant to the exercise of theESOS Options will not be subject to any holding period or restrictionon transfer, disposal and/ or assignment.

xi. Listing of and quotation for the new Spritzer Shares

The approval-in-principle has been obtained from Bursa Securitiesvide its letter dated 25 October 2011 for the listing of and quotationfor the new Spritzer Shares to be issued arising from the exercise ofthe ESOS Options on the Main Market of Bursa Securities.


15/88

10

3. UTILISATION OF PROCEEDS

The Proposed Bonus Issue of Warrants is not expected to raise any funds as the Warrantswill be issued at no cost to the entitled shareholders of Spritzer. However, the exact quantumof proceeds that may be raised by Spritzer pursuant to the exercise of the Warrants woulddepend upon the actual number of Warrants issued and exercised during the tenure of the

Warrants. Assuming full exercise of the Warrants, the maximum proceeds to be raised by theCompany is approximately RM31.68 million based on the indicative exercise price of RM0.97per Warrant.

The actual amount of proceeds to be raised from the Proposed ESOS will depend on thenumber of ESOS Options granted and exercised at the relevant point of time and theSubscription Price payable upon the exercise of the ESOS Options.

The proceeds arising from the exercise of the Warrants shall be utilised for the working capitalrequirements of Spritzer Group, as and when the Warrants are exercised, within the tenure ofthe Warrants. The proceeds arising from the exercise of the ESOS Options will be utilised forthe working capital requirements of Spritzer Group, as and when received. As such, the exacttimeframe for utilisation of the proceeds are not determinable at this juncture.

The proceeds for working capital will be utilised to finance the Group's day to day operations.These expenses include, amongst others, purchase of raw materials, maintenance charges,salary, repayment of creditors and general expenses such as travelling, utilities, staff trainingand staff welfare. The proceeds raised is expected to improve the Group's cash flow and tofund its operating expenses.

The estimated expenses for the Proposals amounts to approximately RM200,000.

4. RATIONALE AND JUSTIFICATION FOR THE PROPOSALS

4.1 Proposed Bonus Issue of Warrants

After due consideration, the Board is of the view that the Proposed Bonus Issue ofWarrants is the most appropriate avenue for rewarding the existing shareholders ofthe Company while potentially enhancing the Company's capital base as theProposed Bonus Issue of Warrants shall:-

i. Aim to reward the existing shareholders of the Company for their support byenabling them to participate in a derivative of the Company without incurringany cost;

ii. Allow the existing shareholders of the Company to further participate in thefuture growth of the Company and any potential capital appreciation arisingthereof as and when the Warrants are exercised; and

iii. Help to strengthen the capital base and market capitalisation of the Companyas and when the Warrants are exercised during the tenure of the Warrants,and potentially provide additional working capital to Spritzer Group as andwhen the Warrants are exercised.

The Proposed Bonus Issue of Warrants is preferred instead of a bonus issue ofordinary shares due to the following:-

i. A bonus issue of ordinary shares will create an immediate dilution in the EPSof Spritzer Group; and

ii. The Proposed Bonus Issue of Warrants potentially provides additional

working capital to Spritzer Group as and when the Warrants are exercised.


16/88

11

4.2 Proposed ESOS

The implementation of the Proposed ESOS primarily serves to align the interests ofthe Eligible Persons to the corporate goals of Spritzer Group. The Proposed ESOSwill provide the Eligible Persons with an opportunity to have equity participation in theCompany and help achieve the positive objectives as set out below:-

i. To recognise the contribution of the Eligible Persons whose services arevalued and considered vital to the operations and continued growth ofSpritzer Group;

ii. To motivate the Eligible Persons towards improved performance throughgreater productivity and loyalty;

iii. To inculcate a greater sense of belonging and dedication as the EligiblePersons are given the opportunity to participate directly in the equity of theCompany;

iv. To retain the Eligible Persons, hence ensuring that the loss of key personnel

is kept to a minimum level; and

v. To reward the Eligible Persons by allowing them to participate in the Group'sprofitability and eventually realise any capital gains arising from appreciationin the value of the Company's shares.

The Board is of the view that the non-executive Directors play a constructive role incontributing towards the growth and performance of the Group. Therefore, inrecognition of their contribution to Spritzer Group, the Proposed ESOS is alsoextended to the non-executive Directors to allow them to participate in the equity ofSpritzer as an incentive as they discharge important functions in providing strategicdirection and guidance for the Group, and their experience, services andcontributions are valued by the Group.

5. INDUSTRY OUTLOOK AND FUTURE PROSPECTS

5.1 Outlook on the bottled water industry

Following the strong performance in 2010, the Malaysian economy is projected togrow at 5 - 6% in 2011, supported mainly by continued expansion in domesticdemand.

Domestic demand is projected to register a strong expansion of 6.7% in 2011, drivenby robust private sector activity. In particular, private consumption is expected tocontinue to be a main contributor to growth supported mainly by the favourable labour

market conditions, rising disposable income and sustained consumer confidence.

(Source: Outlook and Policy in 2011, Bank Negara Malaysia Annual Report 2010)

The Malaysian bottled water industry can be broadly divided into two segments, i.e.the mineral water segment and the drinking water segment. The mineral watersegment has approximately ten (10) active producers with total number of brandsexceeding 100. Whereas the drinking water segment is highly fragmented and hasmore than 100 producers with hundreds of brands. It is common for bottled waterproducers to have multiple brands for their products.


17/88

12

Presently, Spritzer, Cactus, Desa, Sunsui, Summer and No Name are the brands ofbottled water produced by Spritzer Group. Based on the latest audited consolidatedfinancial statements of Spritzer Group for the FYE 31 May 2011, the revenue andprofit before taxation contributions from products of the Group are set out below:-

Revenue Profit before taxation

% %Mineral water 57.8 61.1Drinking water 20.8 10.0Others 21.4 28.9

100.0 100.0

Spritzers market share in both the mineral water and drinking water segments arenot readily available, but to the best knowledge and belief of the management ofSpritzer, the Group commanded approximately 33% of the market share in the bottledwater industry in Malaysia.

The key differentiating factor between mineral water and drinking water is the watersource. Mineral water sources must be from an underground aquifer source approvedby the Ministry of Health and the product must be packed at source. Drinking watersources can be drawn from the tap or from the ground which also have to beapproved by the Ministry of Health.

With many market participants in the industry, there are significant differencesamongst these producers in terms of investment cost and the level of sophistication inthe production processes. The smaller players have limited financial resources anduse simple processes in the production of bottled water. Whilst the best-in-classcompanies use sophisticated, state-of-the-art equipment and stringent productionprocesses to produce bottled water.

It is estimated the total market size of bottled water was about 240.5 million litres inyear 2010 (Source: Euromonitor). From a relatively small base, the bottled water industryhas been experiencing double digit sales growth in the past years. It is also reportedthat Spritzer has over one third (1/3) of the market share in 2010 (Source: Frost &Sullivan).

The bottled water industry is expected to sustain its growth momentum due mainly tofactors such as affordability, availability, convenience, quality, hygiene, health,lifestyle changes and affluent populace.

(Source: Management)

5.2 Prospects of Spritzer Group

Spritzer Group is principally involved in the production and sales of natural mineral

water, carbonated mineral water, distilled drinking water, drinking water, carbonatedflavoured water and non-carbonated flavoured water. Spritzer Group is also involvedin the manufacture and sales of polyethylene terephthalate ("PET") pre-form, PETbottles, caps, toothbrushes and other plastic products.

Spritzer Group has recorded a compounded annual growth rate of approximately12.4% in its revenue for the past ten (10) years. The Group currently has threebottling plants located in Taiping, Shah Alam and Yong Peng. Over the past two (2)years, the Group has installed two (2) fully automated high-speed filling lines in itsShah Alam plant to cater for the large bottled water market in the Klang Valley and itssurrounding areas. In early 2011, the Group has also added a high speed and fullyautomated PET Combi line in its natural mineral water plant in Taiping.


18/88

13

Premised on the growth of its bottled water products over the past years and with thecontinuous marketing and promotional efforts to nurture its key brands, Spritzer iscautiously optimistic that it will be able to sustain its revenue growth in theforeseeable future. The Board believes that the longer term prospect of the Groupremains positive.

(Source: Management)

6. EFFECTS OF THE PROPOSALS

For illustrative purposes only, the effects of the Proposals shall be based on two (2) scenariosas follows:-

Minimum Scenario : Assuming that all the existing 24,000 treasury shares purchased by theCompany are retained within the Company prior to the implementation ofthe Proposals

Maximum Scenario : Assuming that all the existing 24,000 treasury shares have been resold onthe open market at the respective acquisition prices prior to the

implementation of the Proposals

6.1 Issued and paid-up share capital

The proforma effects of the Proposals on the issued and paid-up share capital ofSpritzer are set out below:-

Minimum Scenario Maximum Scenario No. of

Shares RMNo. of

Shares RM'000 '000 '000 '000

Issued and paid-up sharecapital as at the LPD

130,659 65,329 130,659 65,329

Less: Treasury shares, at par (24) (12) - -

130,635 65,317 130,659 65,329

Shares to be issued assumingfull exercise of the Warrants

32,659 16,330 32,665 16,333

163,294 81,647 163,324 81,662

Shares to be issued assumingfull exercise of the ESOSOptions granted

*1

24,494 12,247 24,499 12,250

Enlarged issued and paid-up share capital

187,788 93,894 187,823 93,912

Note:-

*1Assuming that the number of ESOS Options granted amounts to 15% of the issued and paid-upshare capital of the Company


19/88

14

6.2 NA per Share and gearing

Based on the audited consolidated statements of financial position of Spritzer Groupas at 31 May 2011, the proforma effects of the Proposals on the NA per Share andgearing of Spritzer Group are set out below:-

Minimum Scenario

I II III

Audited as at31 May 2011

After theProposed Bonus

Issue of Warrants

After I andassuming full

exercise of theWarrants

After II andassuming full

exercise of theESOS Options

granted RM'000 RM'000 RM'000 RM'000Share capital 65,329 65,329 81,659 93,906

*5Share premium 16,549 14,481 31,699

37,333

Revaluation reserve 5,732 5,732 5,732

5,732Treasury shares (14) (14) (14)

(14)

Warrants reserve - 1,868 -

-Retained earnings 54,455 54,455 54,455

54,455

Shareholders' funds/ NA 142,051 141,851 173,531 191,412

Number of Sharesoutstanding (excludingtreasury shares) ('000)

130,635 130,635 163,294 187,788

NA per Share (RM) 1.09 1.09 1.06 1.02

Total borrowings (RM'000) 93,590 93,590 93,590 93,590

Gearing ratio (times) 0.66 0.66 0.54 0.49

Notes:-

*1Adjusted for the 24,000 treasury shares retained as at the LPD

*2 After deducting estimated expenses of RM200,000 incurred in relation to the Proposals andadjusting for the theoretical fair value of RM0.0572 per Warrant, which was arrived at using theBlack Scholes option pricing model for the creation of a warrants reserve account for theProposed Bonus Issue of Warrants pursuant to the applicable Financial Reporting Standards

*3Computed based on the theoretical fair value of RM0.0572 per Warrant and based on32,658,667 Warrants to be issued under the Minimum Scenario

*4Consists of the transfer of approximately RM1.87 million from the Warrants reserve account tothe share premium account and the increase in share premium of approximately RM15.35 million

pursuant to the indicative exercise price of the Warrants at RM0.97 per Warrant

*5Assuming that the number of ESOS Options granted amounts to 15% of the issued and paid-up

share capital of the Company, and the Subscription Price is RM0.73 per Option, whichrepresents a discount of approximately 10% to the five (5)-day WAMP of Spritzer Shares up toand including 23 September 2011, being the latest practicable date of the Announcement, ofRM0.81 per Spritzer Share


20/88

15

Maximum Scenario

I II III

Audited as at31 May 2011

Assuming allthe treasury

shares are resoldand after the

Proposed BonusIssue of Warrants

After I andassuming full

exercise of theWarrants

After II and

assuming fullexercise of theESOS Options

granted RM'000 RM'000 RM'000 RM'000Share capital 65,329 65,329 81,662 93,912Share premium 16,549 14,481 31,701

37,336

Capital reserve 5,732 5,732 5,732

5,732Treasury shares (14) - -

-

Warrants reserve - 1,868 -

-Retained earnings 54,455 54,455 54,455

54,455

Shareholders' funds/ NA 142,051 141,865 173,550 191,435

Number of Sharesoutstanding (excluding

treasury shares) ('000)

130,635 130,659 163,324 187,823

NA per Share (RM) 1.09 1.09 1.06 1.02

Total borrowings (RM'000) 93,590 93,590 93,590 93,590

Gearing ratio (times) 0.66 0.66 0.54 0.49

Notes:-

*1Adjusted for the 24,000 treasury shares retained as at the LPD

*2 After deducting estimated expenses of RM200,000 incurred in relation to the Proposals andadjusting for the theoretical fair value of RM0.0572 per Warrant, which was arrived at using theBlack Scholes option pricing model for the creation of a warrants reserve account for the

Proposed Bonus Issue of Warrants pursuant to the applicable Financial Reporting Standards

*3Computed based on the theoretical fair value of RM0.0572 per Warrant and based on32,664,667 Warrants to be issued under the Maximum Scenario

*4Consists of the transfer of approximately RM1.87 million from the Warrants reserve account tothe share premium account and the increase in share premium of approximately RM15.35 million

pursuant to the indicative exercise price of the Warrants at RM0.97 per Warrant

*5Assuming that the number of ESOS Options granted amounts to 15% of the issued and paid-upshare capital of the Company, and the Subscription Price is RM0.73 per Option, whichrepresents a discount of approximately 10% to the five (5)-day WAMP of Spritzer Shares up toand including 23 September 2011, being the latest practicable date of the Announcement, ofRM0.81 per Spritzer Share

6.3 Earnings and EPS

The Proposed Bonus Issue of Warrants is not expected to have any material effect onthe earnings of Spritzer Group for the FYE 31 May 2012. However, as and when theWarrants are exercised into new Spritzer Shares, it will result in a dilution in the EPSof Spritzer Group due to the increase in the number of Spritzer Shares issued.

The Proposed ESOS is not expected to have any material effect on the earnings ofSpritzer Group for the FYE 31 May 2012 save for the possible impact of the FinancialReporting Standards 2 ("FRS 2") on share-based payment. However, any potentialeffect on the EPS of Spritzer Group in the future would depend on the number ofESOS Options granted and exercised, and the Subscription Price payable upon theexercise of the ESOS Options as well as the impact of the FRS 2 on share-basedpayment.


21/88

16

Under the FRS 2 on the share-based payment effective 1 January 2006, the costarising from the issuance of the ESOS Options is measured by the fair value of theESOS Options, which is expected to vest at each Date of Offer and is recognised inthe income statement over the vesting period of the ESOS Options, thereby reducingthe earnings of Spritzer Group. The fair value of the ESOS Options is determinedafter taking into consideration, amongst others, the historical volatility of Spritzer

Shares, the risk free rate, the Subscription Price and time to maturity of the ESOSOptions from the vesting date of the ESOS Options. Hence, the potential effect on theEPS of Spritzer Group, as a consequence of the recognition of the said cost, cannotbe determined at this juncture.

Nevertheless, the Company has taken note of the potential impact of the FRS 2 onSpritzer Group's future earnings and shall take into consideration such impact on theallocation and granting of ESOS Options to the Eligible Persons.

6.4 Substantial shareholding structure

The Proposals will not have any effect on the shareholdings of the substantialshareholders of Spritzer. Any potential effect on the substantial shareholdings in

Spritzer will depend on the number of new Spritzer Shares to be issued arising fromthe exercise of the Warrants as well as on the number of ESOS Options granted andnew Spritzer Shares to be issued arising from the exercise of the ESOS Options atany point in time.

Based on the assumption that the number of ESOS Options granted amounts to 15%of the issued and paid-up share capital of Spritzer, the proforma effects of theProposals on the shareholdings of the substantial shareholders of the Company areset out in the ensuing pages.

THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK


22/88

17

MinimumScenario

I

Share

holdingsasattheLPD

AftertheProposedBonusIssueofWarrants

Substantialshareholders

No.ofShares

%

No.ofShares

%

No.ofShares

%

No.ofShares

%

Yee

Lee

Corporation

Bhd

("Yee

Lee

Corporation")

42,254,844

32.35

-

-

42,254,844

32.35

-

-

Yee

Lee

Holdings

Sdn

Bhd

("Yee

Lee

Holdings")

18,352,000

14.05

697,332

0.53

18,352,000

14.05

6

97,332

0.53

AmanahRaya

Trustees

Berhad

-

Skim

Amanah

Saham

Bumiputera

("AmanahRayaTrustees")

6,750,000

5.17

-

-

6,750,000

5.17

-

-

Dato'Lim

A

Heng@L

im

KokCheong

("Dato'Lim")

6,403,366

4.90

67,923,774*2

52.00

6,403,366

4.90

67,9

23,774*2

52.00

LimKokBoon

5,100,000

3.90

4,902,998

3.75

5,100,000

3.90

4,9

02,998

3.75

DatinChuaShokTim

@

ChuaSiokHoon

("DatinChua")

1,550,000

1.19

72,777,140

55.71

1,550,000

1.19

72,7

77,140

55.71

LaiYinLeng

133,332

0.10

9,869,666

7.56

133,332

0.10

9,8

69,666

7.56

Yee

Lee

Organization

Bhd

("Yee

Lee

Organization")

-

-

61,304,176

46.93

-

-

61,3

04,176

46.93

UnikamparCreditAndLeasingSdnBhd

("Unikampar")

-

-

61,304,176*7

46.93

-

-

61,3

04,176*7

46.93

UniyeleeSdnBhd("Uniyelee")

-

-

61,304,176

46.93

-

-

61,3

04,176

46.93

Yeleta

Holdings

Sdn

Bhd

("Yeleta

Holdings")

-

-

61,304,176

46.93

-

-

61,3

04,176

46.93

YoungWeiHoldingsSdnBhd("YoungWei

Holdings")

-

-

61,304,176

46.93

-

-

61,3

04,176

46.93


23/88

18

II

III

AfterIandassumingfullexerciseoftheWarrants

AfterIIandassumingfullexerciseoftheESOS

Optionsgranted

Substantialshareholders

No.ofShares

%

No.ofShares

%

No.ofShares

%

No.ofShares

%

YeeLeeCorporation

52,818,555

32.35

-

-

52,818,555

28.13

-

-

YeeLeeHoldings

22,940,000

14.05

871,665

0.53

22,940,000

12.22

8

71,665

0.46

AmanahRayaTrustees

8,437,500

5.17

-

-

8,437,500

4.49

-

-

Dato'Lim

8,004,208

4.90

84,904,718*2

52.00

8,004,208

4.26

84,9

04,718*2

45.21

LimKokBoon

6,375,000

3.90

6,128,748

3.75

6,375,000

3.39

6,1

28,748

3.26

DatinChua

1,937,500

1.19

90,971,425

55.71

1,937,500

1.03

90,9

71,425

48.44

LaiYinLeng

166,665

0.10

12,337,083

7.56

166,665

0.09

12,3

37,083

6.57

YeeLeeOrganization

-

-

76,630,220

46.93

-

-

76,6

30,220

40.81

Unikampar

-

-

76,630,220*7

46.93

-

-

76,6

30,220*7

40.81

Uniyelee

-

-

76,630,220

46.93

-

-

76,6

30,220

40.81

YeletaHoldings

-

-

76,630,220

46.93

-

-

76,6

30,220

40.81

YoungWeiHoldings

-

-

76,630,220

46.93

-

-

76,6

30,220

40.81


24/88

19

Notes:-

*1

DeemedinterestedbyvirtueofitsshareholdingsinTransworldCommodities(M)SdnBhd("TransworldCommodities")

*2

Deemedinterested

byvirtueofhisshareholdingsinChuanS

inResourcesSdnBhd("ChuanSinResources")andYoungWeiHoldings,andth

esharesheldbyhis

spouse,DatinChua

andhischildren,L

imEeYoungandLimE

eWaiintheCompany

*3

Deemedinterested

byvirtueofhisshareholdingsinChuan

SinResources,andthesharesheldbyhisspouse,

LaiYinLengandhischild,LimSengLeeinthe

Company

*4

Deemedinterested

byvirtueofhershareholdingsinYoungWeiHoldingsandindirectshareholdingsinChuanSinResources,andtheshares

heldbyherspouse,

Dato'Limandherchildren,

LimEeYoungandLimEeWaiintheCompany

*5

Deemedinterested

byvirtueofherindirectshareholdingsinC

huanSinResources,andthesharesheld

byherspouse,

LimKokBoonandherchild,

LimSengLeein

theCompany

*6

DeemedinterestedbyvirtueofitsshareholdingsinYeeLeeC

orporationandYeeLeeHoldingsandindirectshareholdingsinTransworldCommod

ities

*7

DeemedinterestedbyvirtueofitsshareholdingsinYeeLeeO

rganization

*8

DeemedinterestedbyvirtueofitsshareholdingsinUnikamparandUniyelee

*9

DeemedinterestedbyvirtueofitsshareholdingsinYeletaHoldings

THERESTOFTHIS

PAGE

HA

SBEEN

INTENTIONALLY

LEFT

BLANK


25/88

20

MaximumScenario

I

II

ShareholdingsasattheLPD

Assumingallthetreasuryshares

are

resold

AfterIandtheProposed

BonusIssueof

Warrants

Spritzer-circular 2011 2

Documents

Transcript of Spritzer-circular 2011 2