DANCOMECH HOLDINGS BERHAD (“DANCOMECH” OR “COMPANY”)

- PROPOSED ACQUISITION OF 55% EQUITY INTEREST IN UTC ENGINEERING SDN BHD

1. INTRODUCTION

The Board of Directors of Dancomech (“Board”) wishes to announce that Dancomech has, on
28 December 2020, entered into a share acquisition agreement (“SAA”) with Yew Teik Choon
and Yew Seok Li (each, a “Vendor” and collectively, “Vendors”) to acquire 82,500 ordinary
shares (“Sale Shares”) representing 55% equity interest in UTC Engineering Sdn Bhd (“UTC”), for
a purchase consideration of RM2,750,000 (“Purchase Consideration”), subject to the terms and
conditions in the SAA (“Proposed Acquisition”).

Further details on the Proposed Acquisition are set out in the ensuing sections of this
announcement.

2. DETAILS OF THE PROPOSED ACQUISITION

2.1 Proposed Acquisition

The Proposed Acquisition entails the proposed acquisition of the Sale Shares by the Company
from the Vendors at the Purchase Consideration and upon the terms and conditions in the SAA.

2.2 Information on Dancomech

Dancomech was incorporated in Malaysia as a public limited company on 17 June 2013. It was
listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”) on 21 July
2016. Dancomech is principally involved in investment holding while its subsidiaries are
principally involved in the trading and distribution of process control equipment and
measurement instruments, manufacture of all types of industrial machinery, provision of
material handling system solutions, and production of metal stamping parts and components
and design and manufacture of tools and dies.

2.3 Information on UTC and the Vendors

UTC was incorporated in Malaysia as a private limited company on 11 February 2008. UTC is
principally involved in the electrical, electronic and instrumentation engineering business, in
particular the wholesale of machinery for use in industry, trade and navigation and other
services. UTC does not have any subsidiary company.

As at the date of this announcement, UTC has a share capital of RM150,000 comprising 150,000
ordinary shares. The shareholding structure of UTC before and upon completion of the
Proposed Acquisition is as follows:
As at the date of this Upon completion of the
announcement Proposed Acquisition
No. of ordinary No. of ordinary
Shareholder shares held % held shares held % held
Yew Teik Choon 135,000 90.0 67,500 45.0
Yew Seok Li 15,000 10.0 - -
Dancomech - - 82,500 55.0
Total 150,000 100.0 150,000 100.0

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 As at the date of this announcement, the directors of UTC are Yew Teik Choon and Yew Seok Li,
who are brother and sister.

UTC has recorded an audited profit after tax of RM149,898 for the financial year ended 31
March 2019 and an audited loss after tax of RM265,751 for the financial year ended 31 March
2020. Its audited net assets as at 31 March 2020 stood at RM1,128,345.

2.4 Basis of Arriving at the Purchase Consideration

The Purchase Consideration was arrived at on a “willing buyer willing seller” basis after taking
into consideration the following:

(i) The future earnings potential of UTC; and

(ii) The profit guarantee by the Vendors that UTC shall achieve an accumulated audited profit
after tax of at least RM5,000,000 for the period beginning from the completion date up
to 31 December 2026 (“Accumulated Guaranteed PAT”).

2.5 Mode of Satisfaction

The Purchase Consideration shall be satisfied entirely by cash in the following manner:

(i) On the completion date, RM550,000 shall be paid by the Company to the Vendors; and

(ii) The balance of RM2,200,000 (“Balance Purchase Consideration”) shall be paid by the
Company to the Company’s solicitors, i.e. Messrs Enolil Loo, who shall place the amount
into a fixed deposit account (“Deposited Amount”) and hold the same as stakeholders,
and to release the same to the Vendors by way of deferred payment, as follows:

(a) For the period from the completion date to 31 December 2021, and each of the
financial years ending 31 December 2022, 2023, 2024, 2025 and 2026 (“Periods of
Accumulated Guaranteed PAT”), the Company’s solicitors shall, within 7 days upon
receiving an instruction from the Company, release the Yearly Payment (as defined
below) from the Deposited Amount (including any interest accrued thereon) to the
Vendors.

(b) Upon expiry of the Periods of Accumulated Guaranteed PAT, the Company’s
solicitors shall, within 7 days upon receiving an instruction from the Company,
return to the Company any balance amount remaining in the Deposited Amount.

“Yearly Payment” shall refer to the sum calculated based on 44% of the audited profit after tax
achieved by UTC for the relevant financial period/year within the Periods of Accumulated
Guaranteed PAT.

In the event that UTC incurs an audited loss after tax in any of the Periods of Accumulated
Guaranteed PAT, the Vendors shall pay in cash the amount of audited loss after tax to UTC (“Loss
Payment”). The Yearly Payment or the Loss Payment, as the case may be, is to be paid within
14 calendar days upon the availability of the audited financial statements of UTC for the
respective financial period/years.

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 For the avoidance of doubt, the Company’s obligation for the Yearly Payment shall expire/have
been fulfilled upon the Balance Purchase Consideration being fully paid or upon the expiry of
the Periods of Accumulated Guaranteed PAT, whichever is the earlier. Similarly, the Vendors’
obligation for the Accumulated Guaranteed PAT and Loss Payment shall expire/have been
fulfilled upon the Accumulated Guaranteed PAT being met or upon the expiry of the Periods of
Accumulated Guaranteed PAT, whichever is the earlier.

2.6 Source of Funding

The Purchase Consideration will be funded via the internally-generated funds of the Dancomech
Group (i.e. Dancomech and its subsidiaries).

2.7 Liabilities to be Assumed and Additional Financial Commitment

There are no other liabilities to be assumed by the Company pursuant to the Proposed
Acquisition. UTC will settle its liabilities, as and when due, in its ordinary course of business.

There is no additional financial commitment required from the Company in respect of the
Proposed Acquisition.

3. RATIONALE FOR THE PROPOSED ACQUISITION

The Proposed Acquisition provides an opportunity for the Dancomech Group to venture into
the business undertaken by UTC and, barring any unforeseen circumstances, the Proposed
Acquisition is expected to contribute positively to the Dancomech Group’s earnings moving
forward. In addition, the payment for the Balance Purchase Consideration is tied to the audited
profit after tax to be achieved by UTC during the Periods of Accumulated Guaranteed PAT.

4. SALIENT TERMS OF THE SAA

The completion of the sale and purchase of the Sale Shares is conditional upon the following
conditions being satisfied within a period of three (3) months from the date of the SAA or within
such further period as may be mutually agreed upon by the parties in writing, namely:

(i) the written approval or consent of the financiers of UTC (if any) in respect of the change
in shareholdings contemplated under the SAA in accordance with the terms of any
banking or financing facilities granted to UTC;

(ii) the approval or consent of any third party to the sale and purchase of the Sale Shares (if
required) in accordance with the terms of any contract or agreement of a material nature
entered into between UTC and such third party;

(iii) the approval or waiver of any regulatory requirement by any other relevant authorities,
if required; and

(iv) resolution of any issues arising from the findings of the due diligence (conducted by the
Company and communicated to the Vendors) to the reasonable satisfaction of the
Company.

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 Although it is intended that the sale and purchase of the Sale Shares will only be completed
upon all the relevant conditions stated above being satisfied, the parties acknowledge that the
relevant conditions are stipulated for the benefits of the Company and therefore the Company
shall be entitled at its sole discretion and to the extent permissible by law, to waive any of the
said conditions which are not satisfied.

5. RISK FACTORS

The Dancomech Group does not foresee any exceptional risks in connection with the Proposed
Acquisition other than the normal operational risks associated with UTC’s business. The
Proposed Acquisition is also subject to the risk of non-completion of the SAA.

Dancomech and the Vendors will take the necessary steps to address and mitigate the risks.

6. EFFECTS OF THE PROPOSED ACQUISITION

6.1 Share Capital, Substantial Shareholders’ Shareholdings, and Convertible Securities

The Proposed Acquisition will not have any effects on the share capital, substantial
shareholders’ shareholdings, and convertible securities (i.e. warrants) of Dancomech as it is
satisfied entirely by cash.

6.2 Earnings, Earnings per Share (“EPS”), and Net Assets

Barring any unforeseen circumstances, the Proposed Acquisition is expected to contribute

positively to the earnings, EPS and net assets of the Dancomech Group for the financial year
ending 31 December 2021 onwards.

6.3 Gearing

The Proposed Acquisition is not expected to have a material effect on the gearing of the
Dancomech Group.

7. APPROVALS REQUIRED

The Proposed Acquisition is not subject to the approval of the shareholders of Dancomech or
any relevant authorities.

8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED

None of the directors and/or major shareholders of Dancomech and/or persons connected with
them has any interest, direct or indirect, in the Proposed Acquisition.

9. DIRECTORS’ STATEMENT

The Board, having considered all aspects of the Proposed Acquisition, is of the opinion that the
Proposed Acquisition is in the best interest of the Dancomech Group.

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10. ESTIMATED TIMEFRAME FOR COMPLETION

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed

within the first quarter of 2021.

11. PERCENTAGE RATIOS APPLICABLE TO THE PROPOSED ACQUISITION PURSUANT TO

PARAGRAPH 10.02(g) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA SECURITIES

The highest percentage ratio applicable to the Proposed Acquisition pursuant to paragraph
10.02(g) of the Main Market Listing Requirements of Bursa Securities is 4.54%, calculated based
on the total assets of UTC as at 31 March 2020 (latest available audited financial statements)
vis-à-vis the total assets of the Dancomech Group as at 31 December 2019 (latest available
audited financial statements).

This announcement is dated 28 December 2020.