RHM.L Regulatory News (RHM)

For immediate release 18 October 2013

Resource Holding Management Limited

('RHM' or the 'Company')

Proposed Disposal of Red Media Asia Ltd, Notice of Extraordinary General Meeting ("EGM") and Notice of Annual General Meeting ("AGM")

The board of RHM (AIM: RHM) is pleased to announce that it has today posted a circular ("Circular") (incorporating a notice of Extraordinary General Meeting ("EGM")) to its shareholders in connection with, inter alia, the proposed disposal of the entire issued share capital of Red Media Asia Ltd ("RMA") to PUC Founder (MSC) Berhad ("PUCF") (together the "Disposal").

The Disposal will result in the RMA Group, which consists of all of RHM's operating subsidiaries, becoming wholly-owned subsidiaries of PUCF. The Disposal constitutes a fundamental change of business for RHM under Rule 15 of the AIM Rules for Companies which requires the approval of its shareholders in a general meeting. Accordingly, a resolution to approve the Disposal will be put to shareholders of RHM at an EGM to be held at Lot T5, 3rd Floor, Bangsar Shopping Centre, No. 285, Jalan Maarof, Bukit Bandaraya, 59000, Kuala Lumpur, Malaysia at 6:30 p.m. (Malaysian time) on 6 November 2013.

The Company also announces that its Annual General Meeting ("AGM") will be held at 6:00 p.m. (Malaysian time) on 6 November 2013.

Copies of the Circular, notice of EGM and notice of AGM, as well as the respective forms of proxy, will be available shortly on the company's website (http://www.redhot.asia/ ) in accordance with Rule 26 of the AIM Rules for Companies.

Edited extracts from the Circular are included below. The same definitions apply throughout this announcement as are applied in the Circular.

For further information please contact: 

1. Introduction

On 16 November 2010, RHM announced that the Company had entered into a conditional SSA with PUCF over the disposal of their entire equity interest in RMA, consisting of RHM's operating subsidiaries, for a total consideration of RM95,000,000 to be satisfied via the issuance to RHM of 950,000,000 new shares in PUCF.

PUCF is listed on the ACE Market and is principally engaged in two broad strategic business units, being its biometric division and its electronic publishing system and management information system division. Further information on PUCF is contained in paragraph 3 of Part I of the Circular.

On 23 February 2012 RHM announced that they had entered into the First Supplemental SSA with PUCF to vary and amend certain of the terms of the SSA. Subsequently, on 14 November 2012, RHM announced that they had entered into the Second Supplemental SSA with PUCF to further vary certain terms of the SSA including the revision of the purchase consideration for the Disposal from RM95,000,000 to RM90,000,000 and the revision of the issue price of the PUCF shares to be issued as consideration for the Disposal from RM0.10 per PUCF Share to RM0.12 per PUCF Share. The value of the 750,000,000 Consideration Shares at the Issue Price is approximately £17.75 million.

On 24 April 2013 it was announced by both PUCF and RHM that Bursa Securities had resolved to approve the proposals subject to certain conditions.

PUCF has today published a circular which has been sent to its shareholders convening an extraordinary general meeting of PUCF to be held on 6 November 2013 to approve the Proposals and detailing information concerning PUCF, the Disposal and the plans that PUCF has for its business in the future. Subject to shareholders of PUCF approving the proposals at this extraordinary general meeting of PUCF shareholders it is expected that completion of the transaction for PUCF under the rules of Bursa Securities will take place by the end of December 2013. It is the intention of the board of PUCF to retain the listing status of PUCF on the ACE Market and to continue with the existing business operations of PUCF following completion of the Disposal. The proposals constitute a reverse takeover for PUCF under the rules of Bursa Securities. The PUCF Circular will be available to be downloaded from the Company's website (www.redhot.asia) with effect from today.

Immediately following completion of the Disposal, and the associated proposals outlined in the Circular, it is expected that RHM will hold approximately 68.54 per cent. of the share capital of PUCF and thereby, indirectly, RMA. The Disposal will result in the RMA Group, which consists of all of RHM's operating subsidiaries, becoming wholly-owned subsidiaries of PUCF. It is expected that Completion will take place by the end of December 2013.

Under Rule 15 of the AIM Rules for Companies the Disposal constitutes a fundamental change in the business for RHM which requires the approval of Shareholders. Accordingly, a resolution to approve the Disposal will be put to shareholders at the Extraordinary General Meeting which has been convened for 6:30 p.m. (Malaysian time) on 6 November 2013, notice of which is set out at the end of the Circular.

The principal purpose of the Circular is to set out the reasons for, and details of, the Disposal, to explain why the Directors consider that it is in the best interests of the Company and its Shareholders as a whole, and to recommend that you vote in favour of the Resolutions set out in the EGM Notice.

2. Information on RHM

RHM is a Cayman Islands incorporated holding company. Its primary activity is that of a media broking group, including an innovative barter sales trading activity, in Malaysia and the major cities of the People's Republic of China, namely Shanghai, Beijing and Guangzhou. RHM listed on AIM in September 2008.

RMA is a wholly-owned subsidiary of RHM and the RMA Group comprises the RMG Group, the RH Media Group and the Ausscar Group as outlined below:

The RMA Group is involved mainly in media brokerage whereby the RMA Group renders services to fulfil its customers (i.e. advertisers) advertising needs through any form of media, such as newspapers, magazines, television, radio, billboards and digital media.

The RMA Group provides advertising media service for companies in Malaysia and the PRC which contributed approximately 49.31% and 46.87% respectively to the Group's total revenue for FYE 2012, and 28.95% and 67.40% respectively to the Group's total revenue for FPE 2013, whilst at the same time using its network of contacts to place products, which includes white goods, electronic equipment and related services, amongst others.

The RMA Group, through its three principal subsidiaries: (i) RMG Group - Malaysian media and advertising; (ii) RH Media Group - media and advertising in the PRC; and (iii) the Ausscar Group - Malaysian financial services, operates in four principal markets, i.e. media, advertising, merchandising and insurance-financial services. The RMG Group is principally involved in the media brokerage as well as the distribution of merchandise in Malaysia whilst the RH Media Group is principally involved in the media brokerage in the PRC. The Ausscar Group is mainly involved in the distribution of financial products in Malaysia.

The RMA Group calls its media and advertising services AxChange. Within AxChange, the RMA Group has an extended advertising-based model where the advertisers are given an option to market and distribute their products through RMA Group's own network of customers (business-to-consumers channel) or resellers (business-to-business). The RMA Group's network consists of advertisers ranging from information and communication technologies, telecommunications to electrical white goods, property and financial services, including amongst others electrical appliances, mobile devices, automotive, insurance and financial services. The value of the advertiser's products eligible for this distribution services by the RMA Group is equivalent to the value of the advertisement contract between the advertiser and the RMA Group.

The summary of the key pro-forma financial information of the RMA Group for the past three (3) FYE 2010 to FYE 2012 based on the financial statements of the respective companies within the RMA Group are as set out below:

3. Information on PUCF

PUCF is listed on the ACE Market and is principally engaged in the following two broad strategic business units:

i) Biometrics Division - devices and applications incorporating fingerprint verification technology for commercial usage in areas such as user verification for security control, physical access control and time attendance technology; and

ii) Electronic Publishing Systems and Management Information Systems Division - information technology solutions provider of electronic publishing systems and management information systems to the Chinese language publishing industry.

For the year ended 31 December 2012, PUCF generated revenues of RM19.29 million (equivalent to £3.80 million) and a profit before tax of RM2.08 million (equivalent to £0.41 million). Net assets of PUCF as at 31 December 2012 were RM15.28 million (equivalent to £3.01 million). Based on the 5-Market Day volume weighted average share price of PUCF up to 31 July 2013 of RM0.18 per PUCF Share the average market capitalisation of PUCF was RM17.11 million (equivalent to £3.37 million). The mid-market price of a PUCF share on 17 October 2013, the latest practicable date prior to the publication of the Circular was RM0.245.

The Directors of PUCF remain optimistic over the prospects of PUCF's existing biometrics and electronic publishing system and management information system business. However the board of PUCF recognises that its business has been achieving an average revenue and profit before tax of approximately RM16.94 million and RM1.79 million respectively from FYE 2010 to FYE 2012. The board of PUCF had therefore resolved to diversify its revenue base to generate further growth for the PUCF Group by acquiring the RMA Group.

PUCF's parent company is the Founder Group. The Founder Group was created by Peking University in 1986. The Founder Group owns 6 public companies listed on the stock exchanges of Shanghai, Shenzhen, Hong Kong and Malaysia, and over 80 sole funded enterprises and joint ventures with nearly 30,000 employees.

Following completion of the Disposal the business activities of PUCF shall continue alongside RHM's existing business.

4. Principal Terms of the Disposal

Pursuant to the SSA, PUCF shall acquire the entire equity interest in RMA for the Consideration, subject to the terms and conditions of the SSA, the key terms of which are set out below. Completion of the proposed transaction is conditional upon, inter alia, the approval of the Disposal by Shareholders, approval of the proposed transaction by PUCF shareholders, the listing of the Consideration Shares on the ACE Market and regulatory approvals from the Bursa Securities.

The consideration payable to RHM for the Disposal will be fully satisfied by the issuance of 750,000,000 new shares in PUCF to RHM. At the Issue Price of RM0.12 per PUCF Share, the Consideration Shares being issued to RHM are valued at RM90,000,000 (equivalent to £17.75 million). Pursuant to the terms and conditions of the SSA in relation to the treatment of the Convertible Securities within the RMA Group, and the arrangements between RHM and the Introducers who facilitated the preliminary discussions of the Disposal, RHM is required to transfer part of the Consideration Shares as settlement as follows:

* Holder of RH Media RCCPS A

**Holder of RMG RCPS

*** Introducer

Immediately following completion of the Disposal and settlement of the Convertible Securities and introducer fees detailed above, it is expected that RHM will hold approximately 68.54% of the share capital of PUCF and thereby, indirectly, RMA.

To enable PUCF to meet the public spread requirements of the ACE Market (which stipulates that at least 25% of the total number of PUCF Shares in issue are in the hands of public shareholders), RHM proposes to reserve a total of 66,000,000 of the Consideration Shares to be part of a vendor offer for sale to be placed with investors to be identified at a later date. On completion of the offer for sale, RHM's interest in PUCF would be reduced to 513,201,002 PUCF Shares representing 60.73% of PUCF's issued share capital on completion of the Proposals. At the Issue Price the 513,201,002 Consideration Shares held by RHM following the vendor offer for sale would be valued at RM61,584,120 (equivalent to £12.15 million).

Further information on the treatment of the convertible securities is set out in paragraph 6 of this Part I of the Circular and further information on the Introducers is set out in paragraph 7 of this Part I of the Circular.

Shareholders should be aware that following completion of the Disposal RHM will hold shares in an ACE Market listed company and there is no guarantee that these shares will appreciate in value. It is expected that RHM will hold approximately 68.54 per cent. of PUCF immediately following completion of the Disposal and settlement of the Convertible Securities and introducer fees. Save for the vendor offer for sale detailed above RHM intend to retain the 579,201,002 Consideration Shares they will retain following completion of the Disposal and settlement of the Convertible Securities and the introducer fees. RHM will be the controlling shareholder of PUCF.

The Board expects RHM to have significant influence on PUCF but it will not have board control on Completion and will not, therefore, be able to control operational decisions. Further details on the board structure of PUCF following the Disposal is contained in section 8 of part I of the Circular. PUCF do not have the right to appoint any directors to the Board of RHM under the terms and conditions of the Disposal and there will be no changes to the board of RHM pursuant to the Proposals.

5. Background to and reasons for the Disposal

The Board of RHM believe the Disposal and the issue of the Consideration Shares will benefit the Company in its business expansion and growth in the long term thereby creating increased shareholder value. The Board of RHM also believe that the Disposal will be advantageous to the Company in the following principle ways:-

· Enhanced financial performance by way of an enlarged asset base and increased profit contributions from the consolidation of PUCF's assets and earnings;

· Being an Asian-based business the Board of RHM believe they will have a better opportunity to access the local Malaysian capital markets where the investor community as a whole has a better understanding and awareness of the existing RHM business. This should provide increased, prospective opportunities for new investment into RHM's business from Asian-based investors which in turn the Board of RHM believe should provide greater opportunities for the realisation of shareholder value;

· Enable strategic leverage on the PUCF Group's significant shareholder base and business network in China which includes a Peking University-backed conglomerate operating in Greater China with business investments worldwide and a reported revenue of US$9.76 billion and US$5.15 billion in net assets in 2012;

· Recognised business affiliation through the PUCF Group's strong branding and reputation throughout China;

· Potential of advertising income as a result of the PUCF Group's positioning as the second largest IT manufacturer and one of the largest healthcare and pharmaceutical enterprises in China;

· Media network penetration via PUCF Group's established business network as a supplier of Chinese printing and publishing systems which account for 85% of China's domestic market and 90% of the international market; and

· Other business opportunities for the growth and development of the Company's AxChange business via PUCF Group's businesses in IT manufacturing, IT service, data operations and healthcare & pharmaceuticals.

6. Treatment of Convertible Securities Issued within the RMA Group

Within the RMA Group, the following convertible securities have been issued by its subsidiaries comprising the following:-

1,000,000 Class A redeemable convertible cumulative preference shares of RM0.10 each in RH Media, a wholly-owned subsidiary of RMA, with subscription value of RM3,497,940 and outstanding value as at the LPD of RM4.22 million;

2,000,000 redeemable convertible preference shares of RM1.00 each in RMG, a wholly-owned subsidiary of RMA, with subscription value and outstanding value as at the date of the Circular of RM2.00 million;

156,000 convertible preference shares of USD1.00 each in AllChina, a wholly-owned subsidiary of RH Media, with subscription and outstanding value as at the date of the Circular of USD0.16 million;

(d) 822,800 convertible preference shares of RM1.00 each in Ausscar, a wholly-owned subsidiary of RMA, with subscription and outstanding value as at the date of the Circular of RM0.82 million; and

(e) 1,500,000 Class B redeemable convertible cumulative preference shares of RM0.10 each in RH Media, with subscription value of RM1,500,000 and outstanding value as at LPD of RM1.66 million.

Pursuant to the terms and conditions of the SSA, the Convertible Securities, save for the RH Media RCCPS B, shall be treated in the following manner:

With regards to the RH Media RCCPS B, it will remain within the RMA Group after the completion of the Proposals. Pursuant to KMP's letter dated 20 July 2012, KMP had agreed to the following in relation to KMP's right pursuant to their RH Media RCCPS B and the put option agreement:

(a) pending completion of the Proposals, there shall be a moratorium whereby there shall be no conversion of KMP's entire holding of RH Media RCCPS B and no exercise of put option by KMP pursuant to the put option agreement; and

(b) upon the completion of the Proposals, KMP shall irrevocably and unconditionally waive all rights to convert its holding of RH Media RCCPS B into ordinary shares in RH Media and all its right to exercise the put option pursuant to the put option agreement in consideration of and on the basis that RH Media shall be obligated to redeem all of KMP's RH Media RCCPS B for cash at anytime within six (6) months from the date of completion of the Proposals and that the Proposals be formalised within twelve (12) months from the date of this letter ("Pre-Agreed Redemption Period") at the existing redemption pricing of cost plus 14% annual return.

Subject to the completion of the Proposals and upon expiry of the Pre-Agreed Redemption Period, it is agreed that even if RH Media does not give notice to effect the aforesaid redemption, RH Media shall be automatically deemed to have elected to redeem all KMP's RH Media RCCPS B at the existing redemption pricing of cost plus 14% annual return calculated up to and including the last day of the Pre-Agreed Redemption Period and KMP shall have an immediate right upon expiry of the Pre-Agreed Redemption Period to claim and recover from RH Media the aforesaid redemption amount in cash.

Further to the above, KMP had, on 16 July 2013, agreed to further extend the Pre-Agreed Redemption Period where RH Media shall be obligated to redeem all of KMP's RH Media RCCPS B for cash at anytime within one month from the date of the completion of the Proposals and that the Proposals be formalised within four months from the date of KMP's letter dated 16 July 2013.

Save for the above, there are no other convertible securities issued within the RMA Group.

7. Information on the Introducers

Upon the issuance of the Consideration Shares, RHM will pay an amount of RM9,500,000 (equivalent to £1.87 million at the Issue Price) in the form of PUCF Shares to the Introducers who facilitated the preliminary discussions for the Disposal.

Details of the Introducers are as follows:

a) High Exquisite International Co Ltd

High Exquisite is a company incorporated in the Republic of Seychelles under the International Business Companies Act, 1994 as a private limited company. The principal activity for High Exquisite is investment holding. As at the LPD, High Exquisite has an authorised share capital of USD1,000,000 divided into 1,000,000 ordinary shares of par value USD1.00 each, while its issued and paid-up share capital is USD 1,000,000 comprising 1,000,000 shares. The directors and shareholders of High Exquisite together with their shareholdings are set out below:

Directors

Shareholders

Note:

(1) Victory Land is a company incorporated in the Hong Kong under the Companies Act Ordinance (Chapter 32), 1994 as a private limited company. As at LPD, Victory Land has an authorised share capital of HKD10,000 divided into 10,000 ordinary shares of par value HKD1.00 each, while its issued and paid-up share capital is HKD10,000 comprising 10,000 shares. Liu Dan Dan is the sole director and shareholder of Victory Land.

b) Gathered Vigor International Co Ltd

Gathered Vigor is a company incorporated in the Republic of Seychelles under the International Business Companies Act, 1994 as a private limited company. The principal activity for Gathered Vigor is investment holding. As at the LPD, Gathered Vigor has an authorised share capital of USD 5,000,000 divided into 5,000,000 ordinary shares of par value USD 1.00 each, while its issued and paid-up share capital is USD 5,000,000 comprising 5,000,000 shares. The director and shareholder of Gathered Vigor together with his shareholdings are set out below:

Director and Shareholder

c) Greater China Media Ltd

Greater China Media is a company incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004 as a private limited company. The principal activity for Greater China Media is investment holding. As at LPD, Greater China Media has an authorised share capital of USD50,000 divided into 50,000 ordinary shares, while its issued and paid-up share capital is USD2.00 comprising 2 shares. The director and shareholder of Greater China Media together with his shareholdings are set out below:

Director and Shareholder

8. Board, Management and Governance

There will be no changes to the board of RHM as part of the Proposals.

The Company will continue to operate its existing corporate governance practices and procedures, continue to hold regular Board and Board committee meetings and continue to comply with the AIM Rules for Companies and all other applicable regulations.

The Board of PUCF currently comprises of 2 executive directors and 4 non-executive directors.

Upon Completion, RHM is entitled to appoint directors to the board of PUCF. It is intended that Cheong Chia Chieh (Managing Director of RHM) and Liew Peng Chuen (Non-Executive Director of RHM) will both be appointed to the board of PUCF on completion of the transaction in the roles of Executive Director and Non-Executive Director respectively.

Furthermore, Tunku Afwida Malek and Y Bhg Dato' Othman Bin Jusoh will be appointed to the board of PUCF on completion of the transaction both of which shall be in the roles of Non-Executive Director.

As an Executive Director, and the proposed Managing Director of PUCF upon completion of the Disposal, Cheong Chia Chieh will be primarily responsible for spearheading the overall strategic directions of the enlarged group.

As Independent Non-Executive Directors of PUCF upon completion of the Disposal, the roles of Liew Peng Chuen, Tunku Afwida Malek and Y Bhg Dato' Othman Bin Jusoh will be to provide objective and independent judgement in counselling the Group on its strategic direction, performance and corporate responsibility.

9. Changes to RHM business on Completion

RHM will consolidate PUCF's existing operations under a separate arm. PUCF shall continue to run its own operations, to be managed and operated by the existing management team of PUCF.

Strategically, RHM will leverage on PUCF Group's network and business to improve its media business (see section 5 titled "Background to and Reasons for the Disposal"). This allows RHM to diversify its business operations into a new income stream. The Disposal is intended to provide RHM with a new profitable business operation and aims to diversify the income source of the enlarged group. RHM will be able to tap into the financial resources and competitive strengths of the PUCF Group to enhance RHM Group's financial and operational capabilities. Moving forward, PUCF will provide a new source of growth for the existing business of RHM and is expected to contribute positively to the future earnings and cash flow of RHM.

10. Extraordinary General Meeting

You will find at the end of the Circular a Notice of Extraordinary General Meeting to be held at Lot T5, 3rd Floor, Bangsar Shopping Centre, No. 285, Jalan Maarof, Bukit Bandaraya, 59000, Kuala Lumpur, Malaysiaat 6.30 p.m. (Malaysian time) on 6 November 2013.

An ordinary resolution will be proposed at the Extraordinary General Meeting to approve the disposal of the whole issued share capital of RMA, which constitutes a fundamental change of business for the Company under Rule 15 of the AIM Rules for Companies.

Should the Disposal be approved by shareholders of RHM at the Extraordinary General Meeting, and the proposals are approved by shareholders of PUCF in an extraordinary general meeting to be held on the same day, it is expected that the Disposal will remain subject to, and conditional only upon, approval from:

(i) the SC, for the Proposed Exemption; and

(ii) Bursa Securities, for the proposals and for the listing of the Consideration Shares on the ACE Market.

It is expected that Completion will take place by the end of December 2013.

11. Recommendation

The Directors consider that the passing of the Resolutions would be in the best interests of the Company and of the Shareholders and therefore unanimously recommend Shareholders to vote in favour of the Resolutions, as they intend to do or procure to be done in respect of their own legal and beneficial shareholdings, which in aggregate amount to 9,400,026 Ordinary Shares, representing approximately 22.6 per cent. of the issued share capital of the Company.

DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise:

In certain places within this announcement, where figures are denominated in Malaysian Ringgit these are translated into Sterling for illustration at an exchange rate of RM5.07 to £1.