22/11/2005 08:59
AHC : The Acquisition of Asset
Ref.0640/1148
December 21, 2005
Subject : Information memorandum on Acquisition of Asset
To : Vice President of Listing and Disclosure Department
The Stock Exchange of Thailand.
The Board of the Directors Meeting No.227 of Aikchol
Hospital Public Company Limited ("AHC 1") held on 21 November 2005 approved
for AHC1 to acquire the land with the title deeds nos. 86187, 86185, 86285,
10139, 86196, 3834, 16076, 3815 and 86186 Samed Sub-district, Muang District,
Chonburi Province 20130, buildings and constructions of Eastern Seaboard
Hospital located at No. 31/2 Moo 3, Ban Samed-Ang Sila Road, Samed Sub-district,
Muang District, Chonburi Province together with all component parts, medical
equipment and assets forfeited in a court case at Chonburi Provincial Court,
Red Case No. 98/2004 from Suphamit Vejchakarn Company Limited.
This transaction concern to the Notification of the Stock Exchange of Thailand
("SET") concerning rules, procedures and disclosure of the acquisition or
disposal of assets of listed companies dated October 29,2004.
Details are as follows:
1. Date of the transaction
Upon the approval of the extraordinary shareholders' meeting which will
be held on 23 December 2005 at auditorium 3rd floor Aikchol Hospital
Prayasatja Rd., Bansuan Sub-district, Muang District, Chonburi Province.
2. Parties involved
Acquirer : Aikchol Hospital Public Company Limited.
Seller : Suphamit Vejchakarn Company Limited.
is not related with " AHC1 "
Suphamit Vejchakarn Company Limited ("the Company")
was established on 19 July 1993 to engage in medical care business under
the name of Eastern Seaboard Hospital located at No. 31/2 Moo 3
Samed-Ang Sila Road, Samed Sub-district, Muang District, Chonburi Province.
20130 The Eastern Seaboard Hospital operate the business for providing medical
care , full range of diagnostic and has 250 licensed bed to accommodate
patients with services opening for 24 hours for target group of customer
at Muang District, Phanusnicom District and Banbueng District in Chonburi
Province and nearby provinces. Due to the sluggish economic condition, the
Company closed down Eastern Seaboard Hospital on 31 December 2004 and
moved its office to Chonburi Diagnostic, M.R.I and Computer Center located at
No. 77 Moo 1, Chonburi-Bypass Road, Huay Kapi Sub-district, Muang District,
Chonburi Province. At present Chonburi Diagnostic, M.R.I and Computer Center
provide service full range of x-ray machines and general medical examination
service outside the hospital.
3. Nature , type and size of the transaction
3.1 Nature of the transaction
a. Aikchol Hospital Public Company Limited ("AHC1") will
acquire the land with title deeds no. 86187, 86185, 86285, 10139, 86196, 3834,
16076, 3815 and 86186 located in Samed Sub-district, Muang District,
Chonburi Province 20130, buildings and constructions of Eastern Seaboard
Hospital located at No. 31/2 Moo 3, Ban Samed-Ang Sila Road,
Samed Sub-district, Muang District, Chonburi Province 20130 together
with all component parts, medical equipment and assets stated
in the forfeiture account of a court case at Chonburi Provincial Court,
Red Case No. 98/2004 from Suphamit Vejchakarn Company Limited
in the amount of not over Baht 310,000,000 (three hundred and
ten million baht only).
b. Nature of Assets and Commitments
Assets Commitments
1. Land
Total area of 15 rai (6,000 sq. Pledged as collateral to Bangkok Bank
wah or 24,000 sq. m.) in Public Company Limited and
Samed Sub-district, Muang commitment on dated 22 September 1995
District, Chonburi Province 20130
2. Buildings and constructions
of Eastern Seaboard Hospital
together with all component
parts
One nine-storey hospital building Pledged as collateral to Bangkok Bank
(About 100% of the construction Public Company Limited and commitment
of the 1st-4 th and About 95% of on dated 22 September 1995
the construction of the 5th-9th
floors were completed, except
surface work and toilet decoration),
and one four-storey service building
located at No. 31/2 Moo 3 Ban
Samed-Ang Sila Road, Samed
Sub-district, Muang District,
Chonburi Province 20130
3. Medical machinery/equipment Forfeited in a court case at Chonburi
93 items of medical machinery / Provincial Court, Red Case No. 98/2004
equipment
Location of Assets
No. 31/2 Eastern Seaboard Hospital, Ban Samed-Ang Sila Road
(Highway 3134), Samed Sub-district, Muang District, Chonburi Province 20130 ,
located far from AHC 1 about 8 kilometers and most of surrounding areas
consist of housing estates.
Condition and Possession of Assets
One nine-storey hospital building (About 100% of the construction of the
1st-4 th and About 95% of the construction of the 5th-9th floors were
completed, except surface work and toilet decoration), and one four-storey
service building . The Hospital buildings which were closed down about
8 months ago and currently have no users.
Ownership of Assets
Suphamit Vejchakarn Company Limited
Laws with Impacts on the Assets
- Forfeiture according to the letter of the Legal Execution Office,
Chonburi Province, No. YorTor. 0513.04(01) / 30992 dated 2 September 1995
and No. YorTor 0513.04(01) / special dated 20 May 2004, Red Case No. 98/2004
which can be discharged within one day.
- The land title deed No. 86187 is under servitude to the land title
deeds No. 86185, 86285, 10139, 3834, 16076, 3815, 86186 and 86195 with
the exception of land title deed No. 86196. Therefore, prior to any juristic
acts, it is essential to check whether the land title deed No. 86187 is subject
to servitude to the land title deed No.86195 or 86196 . However, after checking
with The Land Office Chonburi Province. The land servitude registration's
recording of title deed was incorrect, but it has already been corrected.
Therefore, the land title deed No.86187 is under servitude to the land title
deed No.86196, not 86195
3.2 Size of the transaction
The transaction is calculated taking into account the value of
consideration, and using the latest reviewed financial statements as of
30 September 2005. The size of the transaction equivalent to 53.76%, which is
greater than 50% but less than 100%, falls under Category 1 under the SET
Notification regarding disclosure of information and acts of listed companies
concerning acquisition or disposal of assets B.E. 2547 dated 29 October 2004.
According to such notification, approval of the transaction that falls into
Category 1 must be given by the shareholders with a vote of not less than
three-fourths of the total number of votes of the shareholders or their proxies
(if any) who attend the meeting and have the right to vote, excluding the
shareholders with vested interest.
The size of the transaction can be calculated as follows:
Amount of payment or receipt x 100 / total assets of the company1/
= 310,000,000 x 100 / 576,637,000 = 53.76%
1/ Total assets as per the company's financial statements as of 30 September
2005
With the size of this transaction, AHC1 must disclose the
transaction to the SET and have a shareholders' meeting held. Approval of the
transaction must be given by the shareholders' meeting by a vote of not less
than three-fourths of the total number of votes of the shareholders who attend
the meeting and have the right to vote, excluding the shareholders with vested
interest.
4. Nature of Assets
To acquire the assets from Suphamit Vejchakarn Company Limited,
AHC1 has appointed N & A Appraisal Company Limited, an independent
appraiser approved by the Securities and Exchange Commission (SEC) to
appraise the value of all the assets. The appraised value is used to support
consideration of the fair price of the fixed assets. According to the appraisal
report No. 05-9148 dated 7 October 2005 prepared by N & A Appraisal
Company Limited, the total value of fixed assets is approximately Baht 397.84
million. The appraisal was conducted on 7 October 2005.
Details of the assets that AHC1 will acquire from Suphamit Vejchakarn Company
are as follows:
No Description Appraisal Method Value (Baht)
1. Land title deeds Nos. Market Approach 48,000,000
86187, 86185, 86285, 10139,
86196, 3834, 16076, 3815 and
86186 Samed Sub-district,
Muang District, Chonburi
Province
2. Buildings and
construction of Eastern Depreciated 334,500,000
Seaboard Hospital, Replacement
No. 31/2 Moo 3 Ban Samed-Ang Cost (DRC)
Sila Road, Samed Sub-district,
Muang District, Chonburi
Province 20130 together with
all component parts
3. Medical equipment and Depreciated 15,340,000
assets in the forfeiture case at Replacement
Chonburi Provincial Court, Red Cost (DRC)
Case No. 98/2004 (machinery)
Total appraised value 397,840,000
(Details in valuation report by independent appraiser )
Remark. 1. Market Approach Method for land valuation means valuation
method by compared with the acquisition-disposition price and selling price
of land in the nearby area which has similar characteristics or is comparable
2. Depreciated Replacement Cost Method for buildings
valuation means valuation by based on the cost of construction, using the costs
of materials, labor, and assembly or construction technique at present to
generate the current construction cost or replacement cost. The amount then is
depreciated according the period of use or condition deemed proper by the
appraiser.
3. Depreciated Replacement Cost Method for machineries and
equipment valuation means valuation by using the replacement cost calculated
based on the cost of materials, labor, manufacturing method and modernity at
present, including cost of installation and parts. The result is then
depreciated taking into account the maintenance and obsolescence.
However no. 1 and 2 assets are still under mortgage to
Bangkok Bank Public Company Limited while No. 3 is in the forfeiture case at
Chonburi Provincial Court, Red Case No. 98/2004.
AHC1 will improve the assets acquired from Suphamit
Vejchakarn Company Limited for its hospital business. It hired specialized
system engineers to assess condition of the hospital systems and
projected investment cost thereof, on 25 September 2005, as detailed below:
No. Item Value (Baht)
1. Air Conditioning &Ventilation
System 1,200,000.00
2. Medical Gases System 50,000.00
3. Bed & Passenger / Dum / Dum
Waiter Lift 450,000.00
4. Water treatment project 844,770.00
5. Fire Pump 850,000.00
6. Jockey Pump 65,000.00
7. Transfer Pump
- Cold Water Pump 150,000.00
- Control for CWP 60,000.00
8. Booster Pump 225,000.00
Total (including VAT 7%) 4,167,403.90
Nonetheless in the initial stage, only four floors (9-storey building) of
AHC 2 will be opened to service. Full service is expected to be available
within quarter 2 in 2006. For 5th-9th floor will consider suitable of time
for expanding later.
5. Value of Consideration
AHC 1 will acquire the assets from Suphamit Vejchakarn Company
Limited at the amount of not over Baht 310 million (three hundred and ten
million baht only). Payment will be made from borrowings from
Finance Institution in the amount of Baht 300 million or 97% and
remaining of Baht 10 million will come from the working capital of AHC1.
6. Value of Assets
Not over Baht 310 million (three hundred and ten million baht only).
7. The basis used to determine the value of consideration
The transaction is calculated taking into account the value of
consideration , and using the latest reviewed financial statements as of
30 September 2005. The size of the transaction equivalent to 53.76%, which
is greater than 50% but less than 100%, falls under Category 1 under the SET
Notification regarding disclosure of information and acts of listed
companies concerning acquisition or disposal of assets B.E. 2547 dated
29 October 2004. According to such notification, approval of the transaction
that falls into Category 1 must be given by the shareholders with a vote of
not less than three-fourths of the total number of votes of the shareholders
or their proxies (if any) who attend the meeting and have the right to vote,
excluding the shareholders with vested interest.
8. Benefits of the transaction
Marketing benefits and competitiveness
1. Leading medical care service provider in Chonburi and nearby
provinces
After the acquisition of the assets, AHC Group will become the leading
medical care service provider in Chonburi Province and nearby provinces.
The OPD and IPD patient turnover rate is projected to increase approximately
42 % and 8.5 % respectively in 2006 when compare with 2005 . (The growth
rate based on assumption AHC 1 will focus on patients with illness in
specialized areas while AHC 2 will focus on social security customers, new group
of general customers who have satisfy with doctors and new group of patients
who stay nearby areas.)
2. Response to economic and population growth in Chonburi Province
The acquisition of AHC 2 will help make AHC ready to serve
medical care demand which will increase in line with the population and
economic growth of Chonburi Province. The average income of the people
in this province has grown from approximately Baht 237,060 in 2001 to
Baht 290,342 in 2005 and the population rate moved up from 288,888 in
2003 to 835,640 in 2005 (Source:
www.chonburi.go.th). This acquisition
will thus enable AHC to accommodate such growth.
3. Expansion of service areas
Each year, AHC1 has a large number of customers. However, because
of the space limit, it is unable to expand its business to cover all areas of
medical care. The acquisition of AHC 2 will solve this problem and AHC Group
can use the increased areas to improve the existing services to better meet its
customers' demand.
4. Broader customer base
Medical care business of these two hospitals (AHC1 and AHC2) will
be similar, focusing on customers in Chonburi and nearby provinces.
However, the target group profile will be different. AHC 1 will cater for
general customers with focus on patients with illness in specialized areas
while AHC 2 will serve both general customers and social security customers.
5. Optimization
AHC1 and the new hospital (AHC2) engages in the same business
and thus can optimize their resources including procurement of tools and
equipment, medicines and medical supplies as well as sharing of personnel.
6. Bargaining power
With the same medical care business, AHC1 and AHC2 will have
more bargaining power in their purchase of tools and equipment, medicines,
medical supplies, human resources management and access to new
customers.
7. Enhancement of Entry Barriers
Taking into account the experience in the hospital business for
over 27 years and the future plan to expand the business through acquisition of
AHC 2 , AHC Group will have several advantages over other entrepreneurs in
Chonburi Province and nearby areas. Details are as follows:
7.1 Cost barrier
AHC 1's business expansion through acquisition of AHC 2
will enhance the economy of scale and lower the operating costs. AHC Group
can also take advantage from learning curve effect which reflects that AHC's
long experience will lead to higher operational efficiency than that of
newcomers in the industry.
7.2 Image and loyalty barrier
Being in the medical care business for over 27 years, AHC 1
has developed a favorable image and loyalty among people in Chonburi
Province and nearby areas. The business expansion through acquisition of
AHC 2 will even fortify this barrier.
7.3 Capital barrier
Hospital business requires a large amount of investment.
Experience in this business for over 27 years gives AHC1 the advantage of lower
operating costs. Compared with investment in new hospital establishment by
other newcomers, requirement of investments for the acquisition of AHC2 is
considerably lower. In addition, AHC1 and AHC2 can share medical supplies,
tools and equipment as well as personnel, hence diminishing the costs of
operation and management.
Operational performance and financial status
1. Long-term income stability
The acquisition of the assets of Suphamit Vejchakarn Company
Limited for use as hospital in Ang Sila District (AHC2) will help enhance
income stability in the long run. In the present location of the hospital
(AHC2), there are no rival hospitals. In addition, the surrounding areas are
abundant with housing estates, accommodating over ten thousand residents
with middle-level income or higher. The area is not so far from Suwannaphum
Airport. After the opening of Suwannaphum Airport, it will be convenient for
people in aviation business to use the services. These groups of customers
will be a key factor of long-term income growth.
After the acquisition of the assets from Suphamit Vejchakarn
Company Limited, AHC Group will operate its hospital business as usual but will
transfer its social security customers to the new hospital (AHC2). AHC2 in the
initial stage will focus on social security customers because income from this
group is stable and the costs are controllable. In addition to AHC 2 will serve
general patients both Chonburi provinces and nearby provinces. AHC 1 will
provide services to general patients with focus on patients with illness in
specialized areas. More specialized clinics will also be established, e.g.
kidney clinic, orthopedic clinic, etc. Moreover, "Home Health Care" will be set
up to target customers who live in housing estates and dignitaries of Chonburi
Province.
2. Long-term operating expense reduction
In the initial stage of the operation of AHC2, manpower in
specialized fields will be allocated from AHC1. More specialized physicians
and related personnel will be recruited. AHC1 expects to control cost and lower
operational expenses in the long run due to the economy of scale and
bargaining power with suppliers following such business expansion. Although
the acquisition of the assets will cause AHC1 to shoulder interest burden from
long-term borrowing in the amount of Baht 20 million per annum, it is expected
that the cash flow from operation will be adequate to cover annual interest and
principal repayments.
9. Sources of funds
AHC1 will utilize borrowings from Finance Institution in the amount of
Baht 300 million. The remaining Baht 10 million will come from
working capital of AHC1.
10. Conditions of Transaction
Acquisition of the assets of Suphamit Vejchakarn Company Limited
will be completed on the conditions that all conditions significant or related
to the acquisition are fulfilled. The condition of the transaction will be
stated in the Memorandum of Understanding with details as follows:
Summary of Memorandum of Understanding (MOU)
As the above mentioned assets to be acquired from Suphamit Vejchakarn
Company Limited are under mortgage to Bangkok Bank Public Company Limited
and some are forfeited according to the Red Case No. 98/2004, AHC1's
acquisition of the assets from Suphamit Vejchakarn Company Limited is
subject to approval by Bangkok Bank Public Company Limited and Power
Builder Group Company Limited (external creditor). All the four parties have
agreed to enter into an MoU.
Disposition of assets by Bangkok Public Company Limited will be in
accordance with the debt restructuring plan of Suphamit Vejchakarn Company
Limited.
The salient points of the MoU are as follows:
Details
1. Four parties of the 1. Aikchol Hospital Public Company
MoU Limited by Mr. Apirag Vanich,
located at No. 68/3 Moo 2,
Prayasatja Road, Ban Suan
Sub-district, Muang District,
Chonburi Province 20000,
herein referred to as
"Acquirer".
2.Suphamit Vejchakarn Company
Limited by Dr. Anurat Yodsri and
Mr. Boonchai Phalitwanond,
located at No. 31/2 Moo 3 Samed
Sub-district, Muang District,
Chonburi Province 20130, herein
referred to as "Seller"
3. Bangkok Bank Public Company
Limited by Mr. Taveesak
Tanadsang, located at No. 333
Silom Road, Silom Sub-district,
Bangrak District, Bangkok
10500, herein referred to as
"The Bank"
4.Power Builder Group Company
Limited by Mr. Bancha Banchasit,
located at No. 2278,
Phattanakarn Road,
Suanluang Sub-district,
Bangkok 10250, herein referred
to as "External Creditor"
2. Salient Points
1.Assets to be 1. Land under 9 title deeds No.
acquired 86187, 86185, 86285, 10139, 86196,
3834, 16076, 3815, 86186
located in Samed Sub-district,
Chonburi Province 20130
2. Buildings and construction
of Eastern Seaboard Hospital
located at No. 31/2 Moo 3,
Ban Samed-Ang Sila
Road, Samed Sub-district,
Chonburi Province 20130
together with all component
parts.
3. Medical equipment and assets
stated in the forfeiture case at
Chonburi Provincial Court,
Red Case No. 98/2004
(Details of these assets are
mentioned in Item 4 and the
appraisal report of the
independent appraiser.)
2. Value of acquisition Not over Baht 310 million
(three hundred and ten million
baht only)
3.Conditions 1. Ownership of all assets shall
belong solely to the Seller and
be free from any obligations,
eviction, rights over the assets
and expropriation. The Seller
shall not do any acts to create
obligations or commitments
over the assets.
2. The Acquirer shall
make payment to the Seller
by 30 December 2005.
3. Transfer fee, taxes
and other relevant
expenses incurred shall be
borne by the Acquirer.
4. For the transfer of
ownership and handing
over of assets under the
case at Chonburi
Provincial Court, Red Case
No. 98/2004, all fees and
expenses in the release of
the forfeiture shall be borne
by the Seller.
Nonetheless, apart from the conditions mentioned in the MoU,
the acquisition of assets from Suphamit Vejchakarn Company Limited
will be completed on the condition that the shareholders have approved
the transaction with the approval vote of no less than three-fourths of the
of total votes of shareholders who attend the meeting and have voting
rights, excluding shareholders with vested interest.
11. Opinion of the Board of Directors and The Audit Committee
The number of [9] directors at the Board of Directors' Meeting
No.227 and The Audit Committee held on 21 November 2005 passed
a unanimous resolution approving AHC1's acquisition of assets,
viewing that such transaction is reasonable and generates optimum
benefits to the Company.
The said acquisition of asset is subject to approval by the
shareholder meeting.
Signature ____________________ Authorized director
( Mrs.Phortchana Manoch )
Position Vice-Chairman
