W’s Board of Directors has resolved to approve Domino Asia Pacific Company Limited, subsidiary of the company, to enter into transactions for the acquisition of DOMINO’S PIZZA business in Thailand with Dominos (Thailand) Company Limited and FC Commissary Company Limited, and to enter into the Master Franchise Agreement with Domino’s Pizza International Franchising Inc. as a transferee with the exclusive right to open, administer and develop the pizza restaurant business under the tradename DOMINO’S PIZZA, at the total value of 400 million baht with an interest rate of 10 percent per annum (but not exceeding 26.6 million baht), plus an investment fund for opening new branches at an approximate value of 351 million baht. The total transaction value is approximately 777.6 million baht. A partial fund will be raised from the rights offering of newly issued shares in accordance with the resolution of the annual general shareholders’ meeting held on 11 May 2020, which approved the capital increase and the rights offering under the general mandate basis.  

W’s Board of Directors has scheduled the record date of the list of the eligible shareholders for the rights offering on 10 August 2020 at the allocation ratio of 1 existing share to 0.30 new share at the offer price of 0.12 baht. The subscription and payment period is set between 25 August 2020 and 4 September 2020.  

W has made a deposit to Domino’s (Thailand) in the form of a loan of 100 million baht without interest. After the business acquisition agreement is signed, W will make an additional deposit of 40 million baht. However, if the business acquisition transaction is not executed, the loan money will be due for repayment to W within 31 December 2020.

W’s Board of Directors and the Audit Committee view that the aforesaid investment complies with the company’s investment policy framework as laid out by the Board, and that it has been considered carefully and reasonably. Despite exposure to several risk factors, the investment is manageable. In addition, if the business operation is proceeded according to the proposed business plan, the operating results will be significantly improved. W will seek an approval for the business acquisition transactions at the extraordinary shareholders’ meeting to be held on 24 August 2020.

In this regard, however, IFA is of the opinion that W shareholders should not approve the company’s acquisition transactions of DOMINO’S PIZZA business because the total value is inappropriate. The fair value for the acquisition as assessed by IFA is between 139.58 – 344.92 million baht, which is lower than 400 million baht to be paid by the company. Besides, the payment conditions and the interest calculation are considered unfair because W made a deposit in the form of a 100-million-baht loan without interest while the transferrer set an interest rate of  10 percent per annum of the acquisition value, which is higher than W’s average loan cost of 6.92 percent per annum during 2018-2019. In addition, if the acquisition is not executed, W may have to wait until 31 December 2020 to take the money back even though any acquiring party can normally demand a prompt return of deposit. Besides, once the business acquisition agreement is signed, W must pay an additional deposit of 40 million baht, resulting in the total deposit of 140 million baht or 32.8 percent of the acquisition value. This is deemed a significantly high amount of deposit before execution of transactions.  

SEC therefore urges W’s shareholders to study details of this matter very carefully and thoroughly before considering subscription for the newly issued shares under the rights offering.

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