Proposed Capital Repayment Of RM0.75 Per Ordinary Share Of RM1.00 Each In Digi (Digi Share) To The Shareholders Of Digi Via A Reduction Of The Share Capital Of Digi Pursuant To Section 64 Of The Companies Act, 1965 (Act) (Proposed Capital Repayment). Proposed Amendments To The Memorandum And Articles of Association Of Digi (Proposed Amendments) (Collectively Referred To As Proposals)

Back Oct 26, 2005

Type

Announcement

Subject

DiGi.Com Berhad (DiGi or the Company)
· Proposed capital repayment of RM0.75 per ordinary share of RM1.00 each in DiGi (DiGi Share) to the shareholders of DiGi via a reduction of the share capital of DiGi pursuant to Section 64 of the Companies Act, 1965 (Act) (Proposed Capital Repayment)
· Proposed amendments to the Memorandum and Articles of Association of DiGi (Proposed Amendments)
(collectively referred to as Proposals)

Contents :

1. Introduction

On behalf of the Board of Directors of DiGi (DiGi Board), Southern Investment Bank Berhad (SIBB) is pleased to announce that the Company is proposing to undertake a capital repayment of RM0.75 for every DiGi Share to be satisfied wholly in cash to its shareholders. The Proposed Capital Repayment will be carried out via a reduction of the share capital of DiGi pursuant to Section 64 of the Act. The Memorandum and Articles of Association of the Company are also proposed to be amended to facilitate the implementation of the Proposed Capital Repayment.

2. Information on the Proposals

2.1 Information on the Proposed Capital Repayment

The Proposed Capital Repayment involves a capital repayment of RM0.75 for every DiGi Share to the Entitled Shareholders (as defined below), in cash, via a reduction of the share capital of DiGi pursuant to Section 64 of the Act. Upon the completion of the Proposed Capital Repayment, the par value of the ordinary shares in the Company will be reduced from RM1.00 to RM0.25 each.

Based on the Company’s issued and paid-up share capital of RM750,000,000 comprising 750,000,000 DiGi Shares as at 30 September 2005, the maximum amount to be distributed to the Entitled Shareholders will be approximately RM562.5 million.

The Proposed Capital Repayment will be funded via internally generated funds and/or available finance facilities and is expected to be completed by the second quarter of 2006.

The cash will be paid to the shareholders of the Company whose names appear on the Record of Depositors of Bursa Malaysia Depository Sdn Bhd on the entitlement date (Entitled Shareholders). The entitlement date will be determined later by the DiGi Board after the necessary approvals for the Proposed Capital Repayment have been obtained.

2.2 Information on the Proposed Amendments


It is proposed that amendments to the Memorandum and Articles of Association of the Company be made to alter the par value of the ordinary shares in the Company from RM1.00 to RM0.25 each pursuant to the Proposed Capital Repayment. This is to facilitate the implementation of the Proposed Capital Repayment due to the reduction in the par value of the ordinary shares in the Company.

3. Rationale for the Proposals

In recent years, DiGi’s business performance has strongly improved whereby the Company has achieved a healthy balance sheet. As a result, the Company is at a timely stage to provide guidance on its overall strategic direction to the investment community. The DiGi Board is of the view that an efficient capital structure must be in place to optimise shareholders’ expected rates of return and the overall market value of the Company.

Therefore, as an integral part of DiGi’s proactive capital management initiative to achieve an efficient capital structure to increase the Company’s value and consequently, shareholders’ value, DiGi is proposing to implement its first initiative in the form of the Proposed Capital Repayment.

Since its listing on the Main Board of Bursa Malaysia Securities Berhad (Bursa Securities) on 18 December 1997, DiGi has yet to declare dividends to its shareholders. As such, the Proposed Capital Repayment represents the Company’s immediate initiative to reward its shareholders for their continuous support of the Company. The quantum of the Proposed Capital Repayment has also taken into account the long-term dividend policy of DiGi and the implementation of the Proposed Capital Repayment is not expected to have an impact on the said policy.

The financial position of the Group is expected to remain robust notwithstanding the Proposed Capital Repayment in view of the substantial income stream generated by the DiGi group of companies which had been buoyed by the continuing growth of the telco industry in Malaysia and the brand recognition awareness that DiGi has established in the local market.

Further, DiGi Telecommunications Sdn Bhd, a wholly-owned subsidiary of the Company, has put in place a Commercial Papers and Medium Term Notes with an aggregate value of up to RM700 million which is now pending the approval from Securities Commission. The availability of such facilities is expected to accord further financial flexibility to the Company. Accordingly, the DiGi Board is of the view that the Company is in a position to return part of the shareholders’ investment in DiGi, having taken into consideration the future operating requirements and the future financial obligations of the DiGi Group.

The Proposed Amendments are intended to facilitate the implementation of the Proposed Capital Repayment.


4. Effects of the Proposals

The Proposed Amendments will not have any effect on the share capital, net tangible assets (NTA), earnings, major shareholding structure, dividends and return on equity (ROE) of DiGi.

The effects of the Proposed Capital Repayment are set out below.


(i) Share Capital

The proforma effects of the Proposed Capital Repayment on the share capital of DiGi are set out below:

(ii) NTA

The proforma effects of the Proposed Capital Repayment on the NTA of the DiGi Group based on the audited consolidated balance sheet of DiGi as at 31 December 2004 are set out below:

The proforma effects of the Proposed Capital Repayment on the NTA of the DiGi Group based on the unaudited nine (9) months financial results of DiGi for the period ended 30 September 2005 are set out below:

(iii) Earnings

The Proposed Capital Repayment will not have any material effect on the earnings of DiGi Group for the current financial year ending 31 December 2005 as the Proposed Capital Repayment is expected to be completed by the second quarter of 2006.


(iv) Major Shareholding Structure

The Proposed Capital Repayment will not have any effect on the shareholdings of the major shareholders of DiGi as the reduction of DiGi’s share capital will be effected via a proportionate reduction of the par value of all ordinary shares of DiGi from RM1.00 to RM0.25 each.

(v) Dividends

The Proposed Capital Repayment is not expected to have any adverse effect on the long-term dividend policy of the Company.

(vi) ROE

The Proposed Capital Repayment is expected to have a positive impact on the ROE of DiGi Group. Based on the audited consolidated balance sheet of DiGi as at 31 December 2004, the proforma effects of the Proposed Capital Repayment on the ROE of DiGi Group are set out below:


Based on the unaudited nine (9) months financial results of DiGi for the period ended 30 September 2005, the proforma effects of the Proposed Capital Repayment on the ROE of DiGi Group are set out below:


5. Approvals required

The Proposals are conditional upon the following being obtained:

(i) the approval of the shareholders of DiGi at an extraordinary general meeting to be convened;

(ii) the order of the High Court of Malaya confirming the Proposed Capital Repayment pursuant to Section 64 of the Act; and

(iii) the approval/consent of any other relevant authorities and/or parties, if required.


6. Adviser

SIBB has been appointed as the corporate adviser to DiGi for the Proposals.

7. Directors’ and major shareholders’ Interests

None of the Directors or major shareholders of the Company and/or persons connected to them as defined in the Listing Requirements of Bursa Securities has any interests, direct or indirect, in the Proposals, save for their respective entitlements as shareholders pursuant to the Proposed Capital Repayment, which is also available to all other Entitled Shareholders of the Company.

8. Directors’ Statement

The DiGi Board is of the view that the Proposals are in the best interests of the Company and its shareholders.

9. Circular to Shareholders

A circular to shareholders on the Proposals will be despatched to shareholders in due course.

This announcement is dated 26 October 2005.


Announcement Info

Company Name

DIGI.COM BERHAD  

Stock Name

DIGI    

Date Announced

26 Oct 2005  

Category

General Announcement

Reference No

MI-051026-52461