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Automotive Suspension Business In Indonesia
| Type | Announcement |
| Subject | Automotive Suspension Business in Indonesia |
Contents :
Introduction
The Company informs that on 20 December 2006, the APM Group via its wholly-owned subsidiary, Auto Parts Holdings Sdn Bhd ("APH") has entered into a joint-venture agreement ("JVA") with P.T. Mekar Armada Jaya ("MAJ") to carry on a business of manufacturing and sale of automobile coil springs and multi leaf springs in Indonesia for domestic and export markets.
Information on joint-venture company
The new joint-venture company, to be named P.T. APM Armada Suspension ("JV Co."), will be a company incorporated pursuant to the provisions of the Indonesian Foreign Investment Law No. 1/1967 as amended as a foreign investment company and shall be a limited liability company subject to Law No. 1 of 1995.
JV Co. will have an authorized share capital of USD15,000,000 made up of 15,000,000 ordinary shares of par value USD1.00 each. The initial issued and paid-up capital of USD3,750,000 will be increased to USD7,000,000. APH will hold 60% equity interest in the JV Co.. MAJ holds the remaining 40%.
Information on MAJ
MAJ was established on 16 January 1981 as a limited liability company under the laws of the Republic of Indonesia and is in the business of auto body manufacturing and related businesses.
The MAJ Group started commercial operation from 1982 in the auto body manufacturing of minibus, medium and big busses in Magelang, Central Java. Its business expanded over the years and today it supplies to Mitsubishi, Suzuki, Toyota and Isuzu, amongst others. Apart from auto body manufacturing the MAJ Group is also in car seat, interior and accessories manufacturing.
The new joint-venture is APM Group’s second business relationship with MAJ. The first and current business which started in September 2001 under PT APM Armada Autoparts is a 50:50 joint-venture in the manufacture and distribution of automotive seats in Jakarta.
Capital and investment outlay/financing
The total capital and investment outlay of the APM Group will be approximately USD 4.2 million which will be financed by internal funds.
Rationale, prospects and risks factors involved in undertaking the venture
The automotive suspension business has been one of APM Group’s core businesses in Malaysia for more than 20 years. With our knowledge and experience acquired over the years and our already existing presence in Indonesia, the Group sees in the Indonesian domestic market a good potential for further expansion overseas.
We view the risks in this joint-venture from both industry specific and external factors. Industry risks would include current competitors located in Indonesia. External factors are mainly fears of tight credit control policy, high interest rates and high petroleum prices.
However, the future of Indonesia’s automotive market is poised to grow after many years of stagnated economic growth. After careful analysis and a thorough feasibility study, we believe that it is the right time to set up this joint-venture in order to capture the opportunities ahead. Our planned capacity for both coil and leaf spring lines will allow reasonable expansion in line with the growth of the Indonesian automotive industry.
The manufacturing plant housing both the coil and leaf spring facilities will be built on a site near Jakarta. Construction of the factory building is scheduled for completion in the fourth quarter of 2007. The start of production of the coil spring operation is expected at the end of the fourth quarter, whilst the start of production of the leaf spring operation is expected in the first quarter of 2008.
The coil spring production line will have a maximum production capacity of 150,000 pieces per month while the maximum production capacity of the leaf spring production line is 500 ton per month. The subsidiaries of APM Group will provide technical assistance and support for the new plant.
Salient terms of the JVA
1. Business
The business of JV Co. is the manufacturing and sale of automobile coil springs and multi leaf springs for Indonesian domestic and export markets under the APM brand name.
2. Capital and Equity Structure
JV Co. will have an authorized share capital of USD15,000,000 made up of 15,000,000 ordinary shares of par value USD1.00 each with APH and MAJ holding equity interest in the ratio of 60:40 respectively.
APH and MAJ each will subscribe for such number of ordinary shares for cash at par value as follows:
 |
Number of ordinary shares of par value USD 1.00 each
|
||
|
APH (60%)
|
MAJ (40%)
|
Total
|
| Initial subscription |
2,250,000
|
1,500,000
|
3,750,000
|
| Subsequent subscription |
1,950,000
|
1,300,000
|
3,250,000
|
| Total ordinary shares subscribed |
4,200,000
|
2,800,000
|
7,000,000
|
3. Management
JV Co. will be managed by a Board of Directors (BoD) and a Board of Commissioners (BoC).
The BoD is responsible for the day-to-day management whilst the BoC supervises and oversees the activities of the BoD in managing the JV Co..
4. Conditions precedent
The joint-venture is conditional upon the following conditions being met and fulfilled
i) the Capital Investment Coordinating Board of the Republic of Indonesia approving the joint venture upon terms and conditions acceptable to APH and MAJ;
ii) Such other approvals, licenses including the Manufacturing License, and permits as may be necessary for the commencement of the joint-venture and the establishment and operation of JV Co. including but not limited to the approval of the Minister of Law and Human Rights, registration of the Deed of Establishment in the Company Registry and the publication of JV Co. in the State Gazette of the Republic of Indonesia; and
iii) Approval from Bank Negara Malaysia.
5. Duration
The JVA is effective from the date of its execution and to continue in effect so long as APH and MAJ or their permitted transferees hold not less than five percent of the issued and paid-up ordinary shares in the capital of JV Co.. The joint venture shall become unconditional and be effective when the last relevant approval is received and its conditions accepted.
Approval/s required
As APM Group’s investment in this joint-venture exceeds RM10 million, the approval of Bank Negara Malaysia will be required. An application has been made and is pending a decision.
Other approvals of the relevant regulatory authorities of the Indonesian government as mentioned in item 4 of the salient terms of the JVA above will be made at the latest, within one month from the date of execution of the JVA.
Financial impact
APM Group’s investment in the joint-venture is expected to produce reasonable returns for the Group in the longer term but will have no material effect on the earnings and net tangible assets of the Group for the financial year-ending 31 December 2006.
Directors’ and substantial shareholders’ interests
None of the directors and substantial shareholders of the Company have any interest, direct or indirect, in the joint-venture.
Directors’ statement
The Directors of the Company are of the opinion that the joint-venture is in the interest of the APM Group.
Announcement Info
| Company Name | APM AUTOMOTIVE HOLDINGS BERHAD |
| Stock Name | APM |
| Date Announced | 20 Dec 2006 |
| Category | General Announcement |
| Reference No | AA-061220-42991 |