Opinion of the Independent Financial Advisor Regarding Asset Acquisition

75 Pages·2015·1.48 MB·English

(Translation)
Opinion of the Independent Financial Advisor
Regarding Asset Acquisition

of

Superblock Public Company Limited

Prepared by

Sage Capital

Sage Capital Limited
March 19, 2015
Superblock Public Company Limited

Table of Contents

Page
Executive Summary 7
Opinion on Acquisition of Assets 12
1. Characteristics and Details of Asset Acquisition 12
1.1 Characteristics of Asset Acquisition Transaction 12
1.2 Date of Transaction 15
1.3 Type and Size of Transaction 16
1.4 Details of the Assets Being Acquired 18
1.5 Shareholding Structure and Management Structure 22
1.6 Shareholding and Management Structure of the Company after Entering into the 25
Transaction
1.7 Financial Information of Millennium Act Co., Ltd. and its Subsidiaries 26
1.8 Summary of Agreements Relating to the Transaction 31
2. Profile of the Company 34
2.1 Company Structure 34
2.2 Business Overview of the Company 36
2.3 Revenue Structure 37
2.4 Industry Overview 38
2.5 Shareholder Structure 46
2.6 Board of Directors 48
2.7 Summary of Financial Position and Operating Results 48
3. Opinion of the Independent Financial Advisor on Reasonableness of the Asset 57
Acquisition
3.1 Reasonableness of the Transaction and Benefits to Listed Company 57
3.2 Strengths and Weaknesses of Entering into the Transaction 58
3.3 Sources of Funds for the Asset Acquisition 61
3.4 Fairness of Price and Conditions for the Transaction 61
3.5 Conclusion of the IFA’s Opinion on Appropriateness of the Asset Acquisition 73

Opinion of the Independent Financial Advisor Regarding the Transaction Page 2
Superblock Public Company Limited

Sage Capital

No. 07/2558 March 19, 2015

Subject Opinion of the Independent Financial Advisor Regarding Asset Acquisition
of Superblock Public Company Limited

To Board of Directors and Shareholders
Superblock Public Company Limited

The Meeting of the Board of Directors of Superblock Public Company Limited (“the Company” or
“SUPER”) No. 3/2015 held on February 27, 2015 resolved to give approval for Super Solar Energy Company
Limited ("SSE"), a subsidiary in which the Company indirectly holds 100.00% of paid-up shares through Super
Energy Group Company Limited (“ENERGY”), a subsidiary in which the Company directly holds 100.00% of
paid-up shares, to acquire ordinary shares of Millennium Act Company Limited ("MIL”), in an amount of 9,999
shares or 100% of total issued and paid-up shares of MIL at the price of Baht 100.00 per share, totaling Baht
0.99 million, and to make capital increase in MIL by another Baht 1,999 million, whereby MIL will use such
capital for further capital increase in its four subsidiaries in order to serve as funding source for investment in
solar power plant projects of the four subsidiaries. MIL’s shareholding in the four subsidiaries is as follows:
Total Number of Number of Shares Shareholding
Name of Company Shares Held by MIL Proportion (%)
17 Anyawee Co., Ltd. (“17AYH”) 210,000 209,998 100.00
Health Planet Management (Thailand) Co., Ltd. (“HPM”) 10,000 9,998 99.98
Electrica Asia Power Co., Ltd. (“ELT”) 480,000 479,998 100.00
Media Mark Co., Ltd. (“MM”) 35,000 24,500 70.00*
* The rest 30.00% of total issued and paid-up shares of MM are held by Saturn Power Consultant Co., Ltd. (“STERN”) and
Tell Solution (Thailand) Co., Ltd. (“TELL”), representing 26.00% and 4.00% of total issued and paid-up shares respectively,
both of which are not connected persons of the Company.

All above subsidiaries of MIL have filed an application for sales of electricity from a solar farm and
will conclude a power purchase agreement (“PPA”) with the Provincial Electricity Authority (“PEA”) under a
total of 20 projects with a combined installed capacity of 131.60 MW. Details of each project are as follows:
Estimated Project Estimated Project Value
Installed Capacity Value, Excl. Land Pro Rata with Shareholding
Company Name Number of Projects (MW) (Baht Million) (Baht Million)
17AYH 10 60 3,420 3,420
Opinion of the Independent Financial Advisor Regarding the Transaction Page 3
Superblock Public Company Limited

Estimated Project Estimated Project Value
Installed Capacity Value, Excl. Land Pro Rata with Shareholding
Company Name Number of Projects (MW) (Baht Million) (Baht Million)
HPM 5 40 2,280 2,280
ELT 1 8 456 456
MM 4 23.6 1,344 940.8
Total 20 131.6 7,500 7,096.8
* Total project value including land and land improvement value is Baht 8,158 million. The total value of land and land
improvement are Baht 658 million. Some of the land used for the aforementioned projects valuing Baht 500 million are already
passed the shareholders’ resolution in the EGM No.1/2015 on February 19, 2015. An additional Baht 158 million of land will be
further acquired by the Company.

All above projects will be eligible for a feed-in tariff (“FiT”), which is charged at a fixed rate of Baht
5.66 per unit throughout the project life of 25 years for the generated electricity not over Capacity Factor of
16% and Base Rate plus Ft (average wholesale rate) will be applied for the electricity generated over
Capacity Factor of 16%, and will be required to commence power supply to PEA’s distribution system by the
end of December 2015.

If the Company obtains approval for entering into the transaction, MIL will become a subsidiary of
SSE. The shareholding structure of SUPER Group before and after entry into the transaction is as follows:

Shareholding structure of SUPER Group before entry into the transaction

Opinion of the Independent Financial Advisor Regarding the Transaction Page 4
Superblock Public Company Limited

Shareholding structure of SUPER Group after entry the transaction

The acquisition of shares in MIL mentioned above is considered as an acquisition or transfer of
business from other company in accordance with Section 107 of the Public Limited Companies Act B.E. 2535
(and subsequent amendments), and as an asset acquisition transaction in accordance with the Notification of
the Capital Market Supervisory Board No. ThorChor. 20/2551 Re: Rules on Entering into Material Transactions
Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock
Exchange of Thailand (“SET”) regarding Disclosure of Information and Other Acts of Listed Companies
Concerning the Acquisition and Disposition of Assets B.E. 2547, dated October 29, 2004, and the
amendments thereto (collectively called “the SET Notification on Asset Acquisition or Disposal”). From
calculation, it is found that the size of such transaction is equal to 162.83% of the Company’s total assets.
Combined with the asset acquisition transactions entered into by the Company in the past six months, the
total size of the transaction is 196.71%. Therefore, the said asset acquisition is classified as Category 4
transaction. Nonetheless, the entry into the above transaction is not deemed as the case where the Company
is subject to relisting application from the SET on the grounds that the transaction has met all conditions as
follows:
Opinion of the Independent Financial Advisor Regarding the Transaction Page 5
Superblock Public Company Limited

Conditions for Waiver from Relisting
Application under Asset Acquisition Ground for Waiver
Transaction
1). The business being acquired is of the Under this transaction, the Company will expand the business
type similar or supplemental to the in production and distribution of solar power, which is the
Company’s business. same type of business as the Company’s current core
activity.
2). The Company has no policy to materially After completion of the asset acquisition transaction, the
change its core activity. Company will continue, and will not change, the policy to
engage in the solar power production and distribution
business.
3). The group of companies that will emerge The solar power plant business is proper to be listed
as a result of the asset acquisition company in the Stock Exchange of Thailand (“SET”) as it
transaction is qualified for listing on the yields benefits to social and the country.
SET.
4). There will be no material change in the After completion of this transaction, the Company’s
Company’s board of directors and in its management structure and business administration will
control authority or shareholder who has entirely remain the same as that before entry into the
control authority in the Company. transaction.

In this respect, the Company is obligated to proceed with the following:
(1) Promptly prepare a report and disclose the asset acquisition transaction to the SET, presenting
therein the information at least as required by the SET.
(2) Hold a shareholders’ meeting to approve the entry into such transaction with a required
affirmative vote of not less than three-fourths of the total number of votes of the shareholders or
their proxies attending the meeting and having the right to vote, excluding shareholders with
vested interest. In this connection, the Board of Directors already set April 29, 2015 as the date
for holding the Annual General Meeting of Shareholders 2015 to seek approval for entry into the
said transaction.

Therefore, the Company will seek a resolution from the Annual General Meeting of Shareholders
2015, to be held on April 29, 2015, to grant approval for its entering into the transaction.

The Company has accordingly appointed Sage Capital Ltd. as an independent financial advisor
(“IFA” or “We”) to render opinion to the Company’s shareholders concerning the said acquisition of assets. In
Opinion of the Independent Financial Advisor Regarding the Transaction Page 6
Superblock Public Company Limited

providing our opinion, we have considered the publicly available information and documents such as the
annual registration statement (Form 56-1), annual report and financial statements of the Company, the
documents, information and financial statements, the property valuation report prepared by an independent
appraiser, etc., including the information and documents obtained from the Company and its target company
such as assumptions for financial projection preparation, information derived from interviews with the
Company’s management, and so on.

We have rendered opinion under the assumption that the information, assumptions and documents
obtained are reliable, complete and accurate and have not been amended or revised after being made
available to us. As such, we may not certify or guarantee the accuracy or completeness of the information
obtained from the Company and concerned parties. In addition, we have considered the economic situation
and information perceivable at the time of preparing this study only. Therefore, if there is any material change
in these factors, it could subsequently cause an alteration in our opinion and also in the appropriate share
price contemplated herein.

Executive Summary
 Description of Transaction
The Meeting of the Board of Directors of Superblock Public Company Limited (“the Company” or
“SUPER”) No. 3/2015 held on February 27, 2015 resolved to give approval for Super Solar Energy Company
Limited ("SSE"), a subsidiary in which the Company indirectly holds 100.00% of paid-up shares through Super
Energy Group Company Limited (“ENERGY”), a subsidiary in which the Company directly holds 100.00% of
paid-up shares, to acquire ordinary shares of Millennium Act Company Limited ("MIL”), in an amount of 9,999
shares or 100% of total issued and paid-up shares of MIL at the price of Baht 100.00 per share, totaling Baht
0.99 million, and to make capital increase in MIL by another Baht 1,999 million.
MIL will use such newly injected capital of Baht 1,999 million for the following purposes:
1). Making capital increase in its four subsidiaries in proportion to its shareholding in each entity, in
an aggregate amount of Baht 1,560.87 million, in order to serve as funding source for the four
subsidiaries to invest in solar power plant projects;
2). Repaying the creditor’s advance paid for acquisition of shares in the four subsidiaries of MIL
totaling Baht 312.25 million;
3). Repaying loans from directors of MIL of Baht 1.34 million; and
4). Using as working capital of MIL of Baht 124.55 million.

The creditor that made advance payment for acquisition of shares in the four subsidiaries of MIL is
SSE, which made such advance payment for MIL to pay for shares in the four subsidiaries of MIL in
Opinion of the Independent Financial Advisor Regarding the Transaction Page 7
Superblock Public Company Limited

accordance with the conditions specified in the memorandum of understanding on equity investment
(“MOU”). The four subsidiaries of MIL include:
Total Number of Number of Shares Shareholding
Name of Company Shares Held by MIL Proportion (%)
17 Anyawee Co., Ltd. (“17AYH”) 210,000 209,998 100.00
Health Planet Management (Thailand) Co., Ltd. (“HPM”) 10,000 9,998 99.98
Electrica Asia Power Co., Ltd. (“ELT”) 480,000 479,998 100.00
Media Mark Co., Ltd. (“MM”) 35,000 24,500 70.00*
* The rest 30.00% of total issued and paid-up shares of MM are held by Saturn Power Consultant Co., Ltd. (“STERN”) and
Tell Solution (Thailand) Co., Ltd. (“TELL”), representing 26.00% and 4.00% of total issued and paid-up shares respectively,
both of which are not connected persons of the Company.

All above subsidiaries of MIL have filed an application for sales of electricity from a solar farm and
will conclude a power purchase agreement (“PPA”) with the Provincial Electricity Authority (“PEA”) under a
total of 20 projects with a combined installed capacity of 131.60 MW and involving a total project value of
approximately Baht 7,500 million. All projects will be eligible for a feed-in tariff (“FiT”), which is charged at a
fixed rate of Baht 5.66 per unit throughout the project life of 25 years for the generated electricity not over
Capacity Factor of 16% and Base Rate plus Ft (average wholesale rate) will be applied for the electricity
generated over Capacity Factor of 16%, and will be required to commence power supply to PEA’s distribution
system by the end of December 2015.

Funding sources for solar farm project development of the four subsidiaries of MIL are as follows:
(Baht Million)
Estimated total project value (excl. land) 7,500
- Capital increase from MIL with equity contribution from SSE 1,561
- Capital increase from other shareholders of MM 92
- Loan from SSE 136
- Estimated loans from financial institutions 5,711

The Company will use its working capital to fund this transaction. According to information from its
audited consolidated financial statements as at December 31, 2014, the Company has cash and cash
equivalent, including short-term investments in the form of fixed deposits, totaling Baht 1,662.81 million. It will
also receive cash from offering of newly issued shares to existing shareholders and specific investors,
pursuant to resolution of the Extraordinary General Meeting of Shareholders (“EGM”) No. 1/2015 on February
19, 2015 approving a capital increase of Baht 502,238,798 through issuance of 5,022,387,980 ordinary
shares with a par value of Baht 0.10 per share, of which 1,007,462,660 shares will be offered to existing
Opinion of the Independent Financial Advisor Regarding the Transaction Page 8
Superblock Public Company Limited

shareholders at an offer price of Baht 1.70 per share and 2,000,000,000 shares to specific investors at an
offer price of Baht 2.50 per share. Given a success in the said offering of 3,007,462,660 shares to existing
shareholders and specific investors (excluding new shares issued to accommodate the exercise of SUPER-
W3), the Company will then obtain proceeds from such new shares offering of Baht 6,712.69 million, the
raised fund as mentioned above will be utilized in this transaction and other future projects.

The capital raising through Private Placement (“PP”) according to the shareholders’ resolution in
EGM No.1/2015 on February 19, 2015 will cause dilution effects to the existing shareholders: Control Dilution
of 6.38% to 35.68% (depending on the portion that existing shareholders exercise their right on Right
Offering), Earning Dilution of 36.00% and Price Dilution of (0.22%) to 11.09% (depending on the portion that
existing shareholders exercise their right on Right Offering and the number of the Company’s warrants to be
exercised)

The Company has thus far paid Baht 292.88 million to MIL (with unpaid balance of Baht 19.37 million)
in order for MIL to acquire shares in 17AYH, HPM, ELT and MM pursuant to the conditions specified in the
memorandum of understanding on equity investment. In the event that the Company fails to obtain approval
from the shareholders’ meeting to enter into this transaction, MIL agrees to refund to the Company all
amounts received from the Company and agrees not to claim any damages.

 Type and Size of Transaction
The size of transaction in acquisition of ordinary shares of MIL is equal to 162.83% and, when
aggregating with total size of other asset acquisition transactions taking place during the past six months, will
become 196.71%, which exceeds 100%. The said asset acquisition is therefore considered as Category 4
transaction in accordance with the Notification of the Capital Market Supervisory Board No. ThorChor.
20/2551 Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and
the Notification of the Board of Governors of the Stock Exchange of Thailand (“SET”) regarding Disclosure of
Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets B.E.
2547, dated October 29, 2004, and the amendments thereto (collectively called “the SET Notification on Asset
Acquisition or Disposal”). Nonetheless, the entry into the above transaction is not deemed as the case where
the Company is subject to relisting application since this is an expansion of solar power production and
distribution business which is the type of business similar to the Company’s current core activity and the
Company has no policy to materially change its core activity after entry into this transaction. Besides, there
will be no material change in the Company’s board of directors and in its control authority or shareholder who
has control authority in the Company.

Opinion of the Independent Financial Advisor Regarding the Transaction Page 9
Superblock Public Company Limited

In this relation, the Company is obligated to promptly prepare a report and disclose the said asset
acquisition transaction to the SET, by presenting therein the information at least as required by the SET, and
to hold a shareholders’ meeting to approve the entry into such transaction with a required affirmative vote of
not less than three-fourths of the total number of votes of the shareholders or their proxies attending the
meeting and having the right to vote. The Company plans to propose the said transaction for approval from
the Annual General Meeting of Shareholders 2015 that will be held on April 29, 2015.

 Conclusion of the IFA’s Opinion on Reasonableness of the Asset Acquisition
The strengths of entering into the transaction are that it will help to strengthen income earning ability
and income stability, boost profits and increase dividend payment ability of the Company in material aspect.
This is because the solar farm projects operated by the four subsidiaries of MIL have a combined generating
capacity of as high as 131.60 MW, versus the installed capacity of just 13.82 MW of the Company’s existing
solar farms. The transaction will also help to create economies of scale due to an ability to more efficiently
utilize existing resources and personnel of the Company.

Regarding the weaknesses of entering into the transaction, the Company will bear higher debt and
interest burden. The Company’s current D/E Ratio is 0.23 time and the ratio will rise to 1.58 time after entering
into this transaction which is still low compared with those of other listed entities operating a similar type of
business. However, if the Company achieve the capital raising plan passed the shareholders’ resolution in the
EGM No.1/2015 on February 19, 2015, its D/E Ratio will fall to only 0.61 time. Moreover, some of the solar farm
projects of the four subsidiaries of MIL remain uncertain and make no headway with the application for PPA
from the relevant authority. As such, there is risk incidental to these projects failing to be awarded the PPA
and the Company will then risk losing the funds that it has invested in the solar farm project development of
the four subsidiaries of MIL. The Company has provided financial support in the form of advance payment to
these four subsidiaries of MIL as its management deemed it necessary to give the said financial support
because, if they wait until the PPA is awarded, they may fail to finish the project development by the deadline
specified by the relevant authority, which will result in the PPA being canceled. As a consequence, the
Company will lose the opportunity to generate income from power distribution and will lose the funds it
already invested in such project development before the PPA cancellation. The Company is also in the risk of
losing its investment in the 1,688 rais of land using for the solar farm projects under the subsidiaries of MIL
which already acquired by ENERGY, according to the shareholders’ resolution in the EGM No.1/2015 on
February 19, 2015, valuing Baht 500 million in the case that the shareholders’ meeting does not pass the
resolution to enter into this transaction.

Opinion of the Independent Financial Advisor Regarding the Transaction Page 10