Submitting Merchant Bank
K & N KENANGA BHD
MEMORANDUM OF UNDERSTANDING BETWEEN REXIT BERHAD ("REXIT" OR THE "COMPANY") AND MARUBENI CORPORATION OF JAPAN ("MARUBENI") FOR THE FORMATION OF A JOINT VENTURE TO MARKET AND PROMOTE REXIT'S PRODUCTS AND SERVICES OUTSIDE OF MALAYSIA.
On behalf of the Board of Directors of Rexit, K&N Kenanga Bhd is pleased to announce that the Company had on 24 May 2006 entered into a memorandum of understanding ("MOU") with Marubeni to collaborate to market, promote and supply Rexit's software products and services to customers outside Malaysia ("Business Joint Venture").
2. Salient terms of the MOU
The salient terms of the MOU are as follows:
2.1 Rexit and Marubeni ("Parties") have agreed to enter into the MOU to set out the principal terms and conditions of the incorporated joint venture to be established.
2.2 Mutual Commitments
In consideration of their respective commitments and covenants contained in the MOU, the Parties agree:
2.2.1 to work, co-operate, negotiate and discuss with each other exclusively to promote, market and sell Rexit's software products and services to potential customers in the international markets except Malaysia; and
2.2.2 to negotiate with a view to agreeing and executing a joint venture agreement ("Joint Venture Agreement") for the purpose of incorporating the joint venture company ("JV Company") before the expiry of 31 December 2006.
2.3 Participation in Rexit
2.3.1 Marubeni, subject to the receipt of necessary corporate approval and applicable law, intends to purchase 10% of the issued paid up capital of Rexit. Rexit further agrees that upon Marubeni attaining and holding at least 10% of the issued paid up capital of Rexit after the execution of the Joint Venture Agreement and incorporation of the JV Company, it will promptly provide for and have elected, subject to Marubeni's request, a nominee of Marubeni to the board of Rexit.
2.4 Joint Venture Agreement and JV Company
2.4.1 The Joint Venture Agreement shall be subject to the following principal terms:-
(a) the Business Joint Venture shall be undertaken via an incorporated limited liability company under the laws of Malaysia or any other country that may be mutually agreed to be incorporated by the Parties jointly;
(b) the major shareholding of the JV Company shall held by Rexit;
(c) the amount of the authorised and initial paid-up capital of the JV Company shall be decided later by the Parties and provided by the Parties in accordance with the shareholding ratios. The initial paid-up capital will be from the Parties' internally generated funds; and
(d) the Joint Venture Agreement is subject to the necessary corporate approvals of Rexit and Marubeni respectively.
2.5 Formation of a Japan subsidiary
2.5.1 the parties agree that a subsidiary be incorporated in Japan ("Japan Subsidiary"), the majority shareholding of the Japan Subsidiary shall be held by the JV Company and the minority shareholding shall be held by Marubeni.
2.6 Transfer of Indonesian Joint Venture
2.6.1 Rexit agrees that Rexit's share and interest in PT Rexit Indonesia shall be assigned or transferred to and held by the JV Company on such terms and conditions as the Parties may mutually agree subject to the consent and agreement of PT Swadayanusa Kencana Raharja.
3. Information on Marubeni Corporation
Marubeni is a large conglomerate with diversified business interests and investment interests. Marubeni was founded in 1858 and incorporated on 1 December 1949. Marubeni is listed on the stock exchanges of Tokyo, Nagoya and Osaka.
As at 31 March 2006, Marubeni's total paid-in capital and total number of shares issued and outstanding stand at Japanese Yen (¥)262,685,964,870 (RM8,327,145,086) and 1,683,953,165 shares (comprising common stock of 1,607,218,514 shares and Class I preferred shares of 75,500,000 shares), respectively. Based on the audited financial statements of Marubeni and its subsidiaries ("Marubeni Group") for the financial year ended 31 March 2006, the net income and shareholders' equity of Marubeni Group is ¥73,801 million (RM2.34 billion) and ¥663,787 million (RM21.04 billion) respectively.
(Foreign exchange rate conversion at ¥1 = RM0.0317)
Marubeni Group's major business segments comprise agri-marine products; textile; forest products and general merchandise; chemicals; energy; metals and mineral resources; transportation & industrial machinery; power projects; plant, ship & infrastructure projects; information & communication; development and construction; and finance, logistics & new business.
The MOU and the prospective formation of the Business Joint Venture is a major development in Rexit's plan to accelerate its international sales growth and provides it with a strong platform to penetrate global markets. Rexit will be able to leverage on Marubeni's established global networks and marketing systems for the distribution of Rexit's products. The Business Joint Venture is expected to contribute positively to the future earnings of Rexit and its subsidiaries ("Rexit Group").
5. Financial Effects
5.1 Share capital
The MOU will not have any effect on the issued and paid-up share capital of Rexit.
5.2 Substantial Shareholders' Shareholdings
As stated in Section 2.3 above, Marubeni intends to purchase 10% of the issued and paid-up share capital of Rexit. Should the intended purchase take place, Marubeni will emerge as a substantial shareholder of Rexit.
The full effects of the MOU on the substantial shareholders' shareholding of Rexit may only be illustrated after the parties for the transfer of Rexit shares to Marubeni have been identified.
The MOU is not expected to have a material impact on the earnings of Rexit for the financial year ending 30 June 2006 but is expected to contribute positively to the future overseas sales and earnings of the Rexit Group.
5.4 Net assets
The MOU is not expected to materially affect the net assets of Rexit Group.
The financial effects of the Business Joint Venture can only be determined upon the execution of the Joint Venture Agreement.
6. Approvals required
The MOU is not subject to any approvals being obtained by Rexit. The approvals required for the Business Joint Venture can only be determined upon the execution of the Joint Venture Agreement.
7. Interest of Directors and Substantial Shareholders
None of the Directors or substantial shareholders of Rexit or persons connected to them have any interest, direct or indirect, in the MOU.
8. Directors' Recommendation
The Board of Directors of Rexit having considered all the relevant factors in respect of the MOU is of the opinion that the MOU is in the best interest of Rexit.
9. Advisers and Sponsor
Newfields Advisors Sdn Bhd and Kenanga have been appointed as advisers to Rexit in relation to the Business Joint Venture. Kenanga is also the sponsor to Rexit.
This announcement is dated 25 May 2006.
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