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OTHERS LEE SWEE KIAT GROUP BERHAD [200301005163 (607583-T)] ("LEESK" or "THE COMPANY") DEED OF SETTLEMENT IN RELATION TO THE SHORTFALL OF PROFIT GUARANTEE IN RESPECT OF THE ACQUISITION OF THE GOODWILL AND ASSETS CONCERNING FURNITURE RETAIL SHOWROOM BUSINESS FROM THE MATTRESS HOUSE SDN BHD ("TMH") AND AMOS ITALSOFA HOUSE SDN BHD ("AIH") BY LSK ITALHOUSE SDN BHD ("LSKIH"), AN INDIRECT SUBSIDIARY OF LEE SWEE KIAT GROUP BERHAD (HEREIN REFERRED TO AS "ACQUISITIONS")

LEE SWEE KIAT GROUP BERHAD

Type Announcement
Subject OTHERS
Description
LEE SWEE KIAT GROUP BERHAD [200301005163 (607583-T)] ("LEESK" or "THE COMPANY")
DEED OF SETTLEMENT IN RELATION TO THE SHORTFALL OF PROFIT GUARANTEE IN RESPECT OF THE ACQUISITION OF THE GOODWILL AND ASSETS CONCERNING FURNITURE RETAIL SHOWROOM BUSINESS FROM THE MATTRESS HOUSE SDN BHD ("TMH") AND AMOS ITALSOFA HOUSE SDN BHD ("AIH") BY LSK ITALHOUSE SDN BHD ("LSKIH"), AN INDIRECT SUBSIDIARY OF LEE SWEE KIAT GROUP BERHAD (HEREIN REFERRED TO AS "ACQUISITIONS")

1. INTRODUCTION

 

Reference is made to the Company’s announcement dated 27 June 2019 in relation to the Acquisitions. The terms used herein, unless the context otherwise stated, bear the same meaning as those defined in the earlier announcement in relation to the Acquisitions.

 

The Board of Directors of LEESK wishes to announce that, LSKIH had on 18 July 2022 entered into a Deed of Settlement with YKT, being the Vendor to the Acquisition, for purpose of resolving and settling all outstanding matters arising from the Acquisitions including the unfulfillment of the profit guarantee from YKT pursuant to the terms and conditions as stipulated in the Agreement in relation to the Acquisitions.

 

2. SALIENT TERMS OF THE DEED OF SETTLEMENT

 

2.1       The Parties agreed and acknowledged that pursuant to the Agreement for the Acquisitions, LSKIH acquired TMH’s and AIH’s right, title and interest in and to the Business together with the Assets subject to the terms and conditions and the fulfillment of the conditions precedent as stipulated in the Agreement, which amongst others, include the following:-

 

(i)          YKT is to provide Profit Guarantee to LSKIH, i.e. a profit after tax of RM1.0 million for the first year of operation (details as defined in the Agreement). In the event of the unfulfillment of the profit guarantee, LSKIH shall have the right to withhold the instalment purchase price and LSKIH reserves the rights to offset any shortfall of Profit Guarantee against any amount due to YKT which shall include but not limited to the Purchase Price Instalments, allowance, claims, salaries, fees or accrual to YKT.

 

(ii)          TMH and AIH are to irrevocably and unconditionally assign all intellectual property relating to the Business and Assets to LSKIH.

 

(iii)         The Directors of TMH and AIH provided an undertaking that it shall not carry on the furniture retail showroom business within Malaysia (“Restriction on Directors”).

 

2.2       As at the date of Deed of Settlement, there was an amount of RM2,409,578.00  owing by LSKIH to YKT, TMH and AIH (“Debt owing by LSKIH”) being the balance of the Final Purchase Price upon the verification of the full asset list for showrooms and incidental assets and latest list of stock as at the Cut-off Date as stipulated in the Agreement in relation to the Acquisitions, and an amount of RM573,823.00 owing by YKT, TMH and AIH to LSKIH (“Debt owing to LSKIH”) being the trade receivables for supply of goods to YKT, TMH and AIH.  

 

2.3       Pursuant to the Deed of Settlement, the Parties agreed on the following:-

 

(i)         YKT will transfer his 30% shareholding in LSKIH to LSKH for a consideration of RM10.00.

 

(ii)        In consideration of Section 2.3(i) above, the balance Final Purchase Price for the Acquisition of RM2,409,578.00 is deemed settled and waived to the satisfaction of LSKIH as the Buyer and TMH and AIH as the Sellers with YKT as controlling shareholder of TMH and AIH;

 

(iii)       YKT shall be released from its obligations under the Profit Guarantee;

 

(iv)       TMH and AIH shall irrevocably and unconditionally assign all intellectual property relating to the Business and Assets to LSKIH. For avoidance of doubt, such intellectual property shall include but is not limited to:

 

  1. The brand name “Italhouse” and its application for registration of trademark;
  2. All goodwill arising from the “Italhouse” mark, the Business and Assets;
  3. All accounts (whether online or otherwise including accounts maintained on social media) relating to the Business, Assets and “Italhouse” mark;
  4. All domain names utilized as part of the Business, Assets and relating to the “Italhouse” mark;
  5. All technology or know-how or industry specific knowledge in relation to the Business, Assets and products made / manufactured / licensed / sold pursuant to the Business;
  6. All records, reports and results relating to the Business, Assets, “Italhouse mark” and the products made / manufactured / licensed / sold pursuant to the Business;

 

(v)        The Directors of TMH and AIH are hereby released from the Restriction on Directors; and

 

(vi)       The Debt owing by LSKIH and Debt owing to LSKIH shall be irrevocably waived by the respective creditor.

 

(vii)      Upon completion of all obligations stipulated in Section 2.3 above, the Parties shall have no further recourse against each other in relation to the Acquisitions.

 

3.         RATIONALE AND JUSTIFICATION FOR THE PROPOSED SETTLEMENT

 

The rationale and justifications for the Deed of Settlement are as follows:

 

(1)        The Profit Guarantee was determined based on business-as-usual assumptions at the point of the Acquisitions. In the past two years, LSKIH faced unpredictable and unprecedented challenges due to the outbreak of COVID-19 pandemic, which had disrupted the business operations following the various Movement Control Orders imposed by the Malaysian Government. Operation suspension had adversely affected the financial performance of LSKIH as it continued to incur its fixed overhead costs such as staff costs and rental expenses during such period. The closure of Singapore-Malaysia border has also affected the sales of LSKIH which targets the Singaporean consumer group as well as local workers working in Singapore.

 

(2)          LSKIH has not been given management control of the Business by the Sellers as certain conditions of the Agreement were not fulfilled. Accordingly, LSKIH has not been consolidated in the Company and its subsidiaries (“the Group”)’s financial statements. With the Proposed Settlement, the Sellers irrevocably and unconditionally assign all intellectual property relating to the Business and Assets to LSKIH, and YKT will also transfer his 30% shareholding in LSKIH to LSKH. LSKIH will become an indirect wholly-owned subsidiary of the Company which may allow the Group to benefit from the unabsorbed tax losses from LSKIH.

 

(3)          Following the post COVID-19 recovery, the Company intends to reset the business strategies and build resilience in the future business plan of LSKIH.

 

4.         RISK FACTORS OF THE PROPOSED SETTLEMENT

 

The Board does not foresee any specific risk/ risk factors arising from the Proposed Settlement which could materially or adversely affect the financial and operating condition of the Company.

 

5.         FINANCIAL IMPACT

 

The Proposed Settlement does not have any material effect on the earnings per share, net assets and gearing of the Company for the financial year ending 31 December 2022.

 

6.         STATEMENT BY THE BOARD

           

The Board of LEESK having considered all aspects of the Deed of Settlement, is of the view that the Proposed Settlement is in the best interest of the Company.






Announcement Info

Company Name LEE SWEE KIAT GROUP BERHAD
Stock Name LEESK
Date Announced 20 Jul 2022
Category General Announcement for PLC
Reference Number GA1-19072022-00039




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