- Information Memorandum - BTS Group Holdings Public Company Limited (BTS) (Previously named "Tanayong Public Company Limited") 14th Floor, TST Tower Head Office 21 Soi Choei Phuang Viphavadi-Rangsit Rd. Jompol, Jatujak, Bangkok 10900 Tel 0-2273-8511-5 Fax 0-2273-8516 Website www.tanayong.co.th Currently the Company is in the process of changing the website name to www.btsgroup.co.th, which is expected to be completed within 21 May 2010. No. of common shares: 35,781,271,787 shares Listing Securities Par value per share: Baht 1 Total value: Baht 35,781,271,787 As of May 4, 2010 Capital Registered Capital Common Shares Baht 65,142,190,902 Preferred Shares Baht - Paid-up Capital Common Shares Baht 35,781,271,787 Preferred Shares Baht - Secondary Market SET Green Shoe Option - None - Company Background BTS Group Holdings Public Company Limited (previously named "Tanayong Public Company Limited") (the "Company") is a Thai property development company established for more than 40 years. The Company launched its first property development project, "Thana City", which consists of single-detached houses, townhouses, condominiums and vacant land plots. Presently, the Company has expanded into other businesses, such as hotel, hospitality and property management, and project management. The Company was listed on the Stock Exchange of Thailand in 1991 with trading symbol "TYONG" At present, the main projects under the Company's operation include Thana City Bangna, U Chiang Mai (managed by Absolute Hotel Service Co., Ltd. under the brand "U"), The Royal Place and The Grand serviced apartment. Furthermore, the Company also manages the construction of the low-cost residential housing projects as well as Four Points by Sheraton (a four-star, 32-storey hotel with 437 rooms) on a turnkey basis including designing and construction. The Four Points by Sheraton is located in Bangkok's central business district on Sathorn Road, adjacent to Surasak BTS skytrain station. The project value is approximately Baht 2,200 million and the project is expected to be completed in 2011. The Company foresees the opportunities to enhance the company's competitiveness in the real estate business from the acquisition of ordinary shares of Bangkok Mass Transit Public Company Limited ("BTSC"), which is a skytrain operator and, recently, expands its business to property development along the skytrain route. In addition to the opportunities to enhance the company's competitiveness by cooperating with BTSC in property development business, BTSC has strong business performance and BTSC is a good investment opportunity. The BTSC share acquisition shall enlarge the Company's market capitalization which may lead to the increase in the liquidity of the shares of the Company and should benefits shareholders of the Company. Hence, the Company entered into Share Purchase Agreement and Entire Business Transfer with BTSC shareholders. Consequently, the Company has acquired a total of 15,022,335,992 BTSC ordinary shares, with the par value of Baht one per share, or equivalent to 94.60 % of total issued shares of BTSC (At present, BTSC has 15,879,516,393 total issued shares). The Extraordinary General Meeting of the Company No. 1/2010 held on April 29, 2010 has approved a resolution for the Company to acquire ordinary shares of BTSC. The Company purchased BTSC ordinary shares at the price of Baht 2.665 per BTSC shares, in a total consideration of Baht 40,034,525,418.68 ("BTSC Share Acquisition"). The Company made partial payment for such consideration in the form of cash equal to Baht 20,655,711,989.69 (equal to 51.59% of the total consideration). For the remaining 1 consideration of Baht 19,378,813,428.99 (equal to 48.41% of the total consideration), the Company made payment by issuing 28,166,879,984 new ordinary shares, with the par value of Baht one per share, at the offering price of Baht 0.688 per share. In this regard, the proportion of the payment of consideration in the form of cash and newly issued ordinary shares paid to each seller of BTSC ordinary shares is in the same proportion. Details of the BTSC Share Acquisition from BTSC shareholders are summarized as follows: 1) Purchase of BTSC shares in the aggregate amount of 6,656,535,992 shares at Baht 2.665 per BTSC share as follows; 1.1 Purchase of 5,748,127,269 BTSC shares from Siam Capital Developments (Hong Kong) Limited ("Siam Capital") for Baht 7,903,674,995.13 in cash and 10,777,738,629 newly issued ordinary shares of the Company Siam Capital is established in Hong Kong with Siam Capital Developments Limited, a company established in British Virgin Islands, as a shareholder holding all shares in Siam Capital. The shareholding structure of Siam Capital Developments Limited (as of June 30, 2009) is: Various Funds managed by Ashmore Investment Management Limited (and / or its affiliates and subsidiaries or under common control) (the "Ashmore Funds") as a legal and beneficial holder, directly and indirectly holding 27.5% of all issued shares of Siam Capital Developments Limited; Various Funds managed by Farallon Capital Management, L.L.C. (the "Farallon Funds"), as a legal and beneficial holder, directly and indirectly holding 22.5% of all issued shares of Siam Capital Developments Limited; and Worldex Holdings Limited, as a legal and beneficial holder, directly and indirectly, holding 50% of all issued shares of Siam Capital Developments Limited. 1.2 Purchase of 508,408,723 BTSC shares from Keen Leader Investments Limited ("Keen Leader") for Baht 699,061,994.56 in cash and 953,266,355 newly issued ordinary shares of the Company Mr. Kavin Kanjanapas ("Mr. Kavin") holds all shares in Keen Leader 1.3 Purchase of 400,000,000 BTSC shares from Mr. Keeree Kanjanapas ("Mr. Keeree") for Baht 550,000,000 in cash and 750,000,000 newly issued ordinary shares of the Company; (collectively, the "Purchase of BTSC Shares"). 2) Entire Business Transfer from Siam Rail Transport and Infrastructure Company Limited ("Siam Rail"), whose entire business transferred consisting of 8,365,800,000 BTSC shares, to the Company for Baht 11,502,975,000 in cash and 15,685,875,000 newly issued ordinary shares of the Company. The Company assumed the indebtedness of Siam Rail, and has deducted the cash payment by the same amount equal to such indebtedness (the "EBT"). The BTSC shares received from Siam Rail will be recorded in the accounts of the Company at the following tax cost base which will be the cost base used for the tax calculation if the Company sells these portions of shares in the future: Number of BTSC Tax Cost (Baht per share) assumed shares by the Company from Siam Rail 6,985,800,000 1.00 1,380,000,000 1.60 On May 4, 2010, Siam Rail has Baht 250,100,000 registered capital with Mr. Keeree,Mr. Kavin and Siam Infrastructure Ltd. ("Siam Infrastructure") holding 50.90%, 0.10% and 49.00% of the registered capital in Siam Rail respectively. 2 Siam Infrastructure is a company established in Hong Kong, and 100% of its shares are owned by Asian Transport and Infrastructure Limited, a company established in the Cayman Islands. In respect of the ownership of Asian Transport and Infrastructure Limited, as of 30 June 2009: The Ashmore Funds, as a legal and beneficial holder, directly and indirectly holding 55.0% of all issued shares of Asian Transport and Infrastructure Limited and The Farallon Funds, as a legal and beneficial holder, directly and indirectly holding 45.0% of all issued shares of Asian Transport and Infrastructure Limited In addition, Mr. Keeree purchased 2,730,000,000 ordinary shares of the Company from Siam Infrastructure which was completed on 4 May 2010, after the Company had completed its purchase of BTSC shares. Such shares are part of the newly issued ordinary shares of the Company which Siam Rail received as a consideration from the EBT, and Siam Infrastructure received from the liquidation of Siam Rail. Furthermore, Mr. Kavin purchased 953,266,355 ordinary shares of the Company from Keen Leader which was completed on 4 May 2010 after the acquisition of BTSC ordinary shares by the Company. After the acquisition of BTSC ordinary shares on May 4, 2010, the mass transit business of BTSC will become the main revenue driver for the Company and the group in the future. Therefore, in order to reflect the change in its main business, the Company has changed its name from "Tanayong Public Company Limited" to "BTS Group Holdings Public Company Limited" and changed its trading sign from "TYONG" to "BTS". Type of Business Operation and Nature of Operation After the BTSC Share Acquisition, the Company engages in 4 main businesses namely (1) Mass Transit Business such as BTS skytrain and Bus Rapid Transit (BRT) (2) Advertising Business (3) Property development business such as real estates along the BTS route, non-BTS route, hotels and serviced apartments (4) Services business such as hotel management business, smartcard business, project management business and golf course business. Business Characteristics 1. Mass Transit Business Mass Transit Busines is operated by BTSC, which is the sole operator of the BTS SkyTrain System as the exclusive concessionaire under the Bangkok Mass Transit System Concession Agreement between the Bangkok Metropolitan Administration ("BMA") and BTSC (the "Concession Agreement"). The concession life is 30 years, ending December 5, 2029. According to the Concession Agreement, BTSC has to transfer the ownership of the civil works to BMA after the completion of the construction. BTSC has already transferred the ownership in November 1999. As for the Electrical and Mechanical System, including sky trains, BTSC is obligated to transfer the ownership to BMA at the end of the concession. The BTS SkyTrain System is the first electric railway system in Thailand. Its paths cover significant trade and business districts in Bangkok. At present, the BTS SkyTrain System operates 35 trains, which service the 23 stations on two separate lines with a combined track length of 23.5 km. The Sukhumvit line consists of 17 stations and runs 17 km northwards and eastwards from the central business district in the Siam Square area, connecting Mo Chit and On Nut. The Silom line consists of 7 stations and runs westwards and southwards for 6.5 km, connecting National Stadium and Taksin Bridge. Furthermore, BTSC is engaged by the BMA to operate the 2.2 km Silom Line Extension under the Operating and Maintenance Agreement. BTSC collects fares for the BTS Syktrain System ("Effective Fare") based upon distance traveled. The Effective Fare must be less than the ceiling of the Authorized Fare determined under the Concession Agreement. The Effective Fare can be changed every 18 months by notifying BMA and public. Subject to approval from BMA, BTSC may increase the ceiling of the Authorized Fare rate if Customer Price Index for Bangkok ("Index") exceeds level determined in the Concession Agreement. BTSC or BMA may also adjust the increase the ceiling of the Authorized Fare rate under special cased determined in the Concession Agreement. BTSC is entitled to collect fares from passengers of the original 23.5 km BTS SkyTrain System with no sharing to BMA. For the 2.2 km Silom Line Extension which is connected with the BTSC system, BMA has hired BTSC to provide operation and maintenance services in accordance with the Operational and 3 Maintenance Service Agreement made by and between Krungthep Thanakom Co., Ltd. (Enterprise Bangkok) and BTSC ("Service Agreement"). BTSC will receive fees as specified in the Service Agreement. With respect to the fares incurred from traveling between the two systems (BTSC system and 2.2 km extension system), BMA and BTSC will allocate the fares between the parties in accordance with the calculation method as specified in Memorandum of Agreement regarding allocation of revenues according to the rights between BMA and BTSC which will be split according to actual distance passengers travel under each system. Skytrain business is BTSC's primary business. In the fiscal year ended 31 March 2009, BTS provided service to more than 136 million passengers, accounting for the compounded annual growth rate of 11.0% since the start of its first full year operation in the fiscal year ending 31 Mar 2001. And since the Silom extension commenced operation on 15 May 2009, the average daily passengers increases to 448,362 per weekday in the period of June-December 2009 from 424,661 per weekday in the same period of 2008 On February 10, 2010, Krungthep Thanakom, a wholly owned subsidiary of BMA, engaged BTSC to operate and procure buses for the Bus Rapid Transit Project (BRT) between Chong Nonsi and Ratchapreuk. Contract period is 7 years for bus operation and maintenance fee of Baht 535 million Baht. BRT route is 15 km long with 12 stations starting at Chong Nonsi, passing Naratiwas Ratchanakharin Rd and Bangkok Bridge, and ending at Ratchapreuk. BRT's Chong Nonsi station connects to BTSC's Chong Nonsi station. BRT can provide more expedite service than conventional bus since BRT has a dedicated bus lane. BMA invested in all civil works of BRT, including BRT lanes and stations. The construction progress of the BRT lanes and stations are almost complete. The BRT is expected to commence operation in on May 15, 2010. 2. Advertising Business The advertising business is managed by VGI Global Media Company Limited and its subsidiaries ("VGI Group"). BTSC acquired a 100% stake of VGI Global Media Company Limited on 30 September 2009. Presently, the VGI Group manages the advertising space for internal and external areas of the train body and the merchandising and advertising space on the BTS stations. Furthermore, the VGI Group has expanded beyond managing the advertising space on trains and BTS stations to advertising in leading superstores such as management of advertising space and LCD in Tesco Lotus and Tesco Express and management of advertising space in Big C Supercentre and Carrefour. VGI Group also expanded to management of advertising space in office building and entertainment venues, such as movie theaters and restaurants through the acquisition of Point of View Media Group Co. Ltd. VGI Group has exclusive contracts to manage advertising and retail space with BTS and exclusive contracts to manage advertising space with leading superstores in areas that the stores do not manage by themselves. 3. Property Development Business 3.1 Thana City Project on Bangna-Trad Road Km. 14 The Thana City project located on Bangna-Trad Road Km. 14. The project location offers convenient access to Bangna-Trad road, the expressway, On-Nuch road, and Bangkok-Chonburi Motorway. The project also offers easy access to many facilities such as shopping complexes, universities, hospitals, Suvarnabhumi Airport and the Airport Link, which will facilitate access to the city in the future. The total project area of more than 1,600 rais has been developed with comprehensive utilities and infrastructure in the midst of green space. Residents can become a member of the sports club, which consists of tennis courts, swimming pool, badminton courts, basketball courts, sauna, play area for kids, fitness and aerobic rooms. Furthermore, residents can become the member of the golf club, which has an 18 hole golf course, par 72 as well as a golf driving range located within the project area. Thana City is a large project that can serves the needs of all types of clients. The Company has developed various types of property to fulfill clients' demand, including Single detached houses with land, Townhouses, Condominiums and Land for Sales. Parts of the project such as Prestige House 1, which is a single detached house project with land of 400 sq.wah and above, is already completed and sold out. As of 31 March 2010, there are property development projects within Thana City for all types of clients as follows: 4 Single detached houses with land Projects include Prestige House II, Prestige House III (Habitat) and Thana Place King Kaew. The Company has already sold all Prestige House I with land plots sized at 400 sq. wah and above. As of 31 March 2010, Prestige House II, Prestige House III and Thana Place King Kaew have 43, 84 and 90 units available for sale respectively. Townhouse The townhouse project beside the lake and garden emphasizes a design with a large utility space under a resort concept. 54 units of this Baht 188.1 million project were sold, with only 18 units remaining. Townhouse (Habitat) emphasizes the multi-function utility space and is suitable as a commercial townhouse. The 20 units developed have value of Baht 24.7 million, of which 4 are sold. Condominium Prestige Condominium is a larger unit and is priced at Baht 15 million per unit. 340 units were developed and currently, only 2 are available for sale. While Nouvelle Condominium is priced at a lower price of Baht 1.2 - 7.9 million. Of the 905 units built, 804 units were already sold and transferred and 2 units are rent out. Finally, King Kaew Condominium is the lowest price of the condominium projects the Company developed. Priced at Baht 0.8 - 1.3 million, 99 units out of 456 units are available for sale. Land for Sales Land plots are allocated for both sale and build-to-order to serve client's demand. The Company has various sizes of land plot to suit the need of each client group such as Prestige Prime Land with land plot of approximately 250 sq.wah. at approximately 35,000 baht per sq.wah. Californian projects comprise land plots with approximately an area of 80 sq.wah at approximately 35,000 baht per sq.wah. 3.2 Hotel and Service Apartment U Chiang Mai Hotel U Chiang Mai Hotel is under the hotel chain "U Hotels & Resorts", opened on June 1, 2008. It is a 4 star boutique hotel with Lanna architecture on Rachadamnern Road in the city center of Chiang Mai near the famous walking street 'Ratchadamnern Road'. The hotel offers 41 rooms of luxurious accommodation, targeted at Thai and international tourists and business travelers. The Royal Place 2 and the Grand Service Apartment The Royal Place 2 and The Grand are residential apartments for long-term lease of 30 years that were opened in 1993 and already completed project sale. The remaining units are fully furnished units for short-term lease of longer than 1 year. There are also some commercial spaces available for rent on the ground floor for rental terms of 3 years with options to extend. 3.3 Office Building TST Tower is located on Viphavadi-Rangsit road opposite the head office of Thai Airways International Public Company Limited. It is a 24-storey building with a total rental area of 15,875.5 sq.m., comprising of a 15-storey office and a 8-storey car park. Present occupancy rate is 96 percent. TST Tower is a part of the security assets under the business rehabilitation plan which the Court ordered the auction sales of the asset and the proceeds will be shared among creditors, pro rata to their debt proportion. The Company held the auction and a winning bidder was awarded on May 14, 2009. Furthermore, the Company has entered into a contract with the winning bidder to purchase TST Tower back. However, the Company has not been transferred the ownership of such assets as it is still pending of the process of the Central Bankruptcy Court. 3.4 BTSC's Property Projects Developing real estate along the BTS Skytrain route has been a long term objective of BTSC. BTSC has been actively reviewing real estate development opportunities for many years. After successfully issuing new shares and raising capital in accordance to the conditions under the rehabilitation plan, BTSC purchased five plots of land which BTSC have been studying and reviewing during the rehabilitation process. 5 BTSC believes that it is in an advantageous position for the development and management of land and various property projects, either now or in the future, located along the SkyTrain route and nearby BTS SkyTrain stations (both existing and future stations) as BTSC could enhance the competitiveness of such projects over other projects. In addition, the real-estate development business could increase the number of passengers of the BTS SkyTrain System. BTSC has policy to invest only in real-estate development projects which are located along the BTS SkyTrain System routes so that BTSC could maximize the benefits from these projects. BTSC's real estate investment policies are different from those of other real-estate developers who invest in real estate in general. (more)