Contents :
Introduction:
Pursuant to Paragraph 9.04(f) of the Kuala Lumpur Stock Exchange Listing Requirements (“KLSE LR”), Telekom Malaysia Berhad (“TM”) wishes to inform the Exchange on the following:
Background:
In 1995, TM acquired 5,000,000 PSCI shares through private placement representing 12.64% of the share capital of Penang Shipbuilding and Construction Industries Berhad (“PSCI”).
On 20 February 1997, TM and Business Focus Sdn. Bhd. (“BFSB”) entered into an agreement (“ Principal Agreement”) whereby BFSB had agreed to procure a third party to purchase the 5,000,000 shares in PSCI held by TM (“Said Shares)” within twelve (12) months from the date of the Principal Agreement. In the event that BFSB fails to procure a purchaser, BFSB agreed to purchase the Said Shares on or before 29 December 1997 (“the Completion Date”) for RM165,000,000.00 (“Consideration”).
On 1 December 1997, TM has agreed to extend the Completion Date to 29 June 1998 through a Supplemental Agreement entered between the parties (“the Supplemental Agreement”). Under the Supplemental Agreement, the parties principally agreed that the purchase Consideration of the Said Shares be executed in the following manner:
- To settle the First Tranche of 1,515,151 PSCI shares via transfer of rubber and oil palm estate in Pedas to TM at RM50,000,000.00.
- To settle the Second Tranche of 973,170 PSCI shares via transfer of commercial property in Johor Bharu to TM at RM32,114,600.00.
- To settle the Third Tranche of 2,511,679 PSCI shares via cash settlement of RM82,885,400 on the extended Completion Date on 29 June 1998.
[The above PSCI shares were not adjusted pursuant to the 1 for 1 Bonus Issue implemented in June 1998) Up to the expiry of the extended Completion Date of the Supplemental Agreement, the parties implemented and executed the First Tranche Consideration. In respect of the remaining tranches, TM on 12 October 2000, at the request of BFSB further agreed to extend the Completion Date of the remaining tranches to 31 December 2000. Upon the expiry of the above stated date, BFSB was unable to honour its commitment to fulfill the remaining balance of the Consideration and therefore, leading to this legal action taken against BFSB. Course of action taken by TM : On 10 June 2002, TM through its solicitor issued a Notice of Demand for the outstanding payment of RM174,683,517.04. The above outstanding payment includes the balance of the Consideration of RM115,000,000.00 together with interest charges and other associated costs, in accordance with the Supplemental Agreement. On 23 October 2002, TM has served a sealed copy of Writ of Summons and Statement of Claim to BFSB to demand a liquidated sum of the above mentioned amount together with interest and other costs until the date of realisation. Subsequently, BFSB filed their Statement of Defense and Counter Claim and the hearing date for the said action will be duly notified by the High Court. Potential effect of the action to TM TM classifies its investment in PSCI shares as its short-term marketable securities and is stated at the lower of cost and market value in accordance with TM’s current Accounting Policy. As such, TM’s Management is of the view that the legal suit against BFSB will not potentially give any material adverse impact to the financial position of TM and its Group. TM will announce further development of the above at the appropriate time.