Asset Acquisitions and Disposals::Proposed Acquisition of a Majority Interest in the Broadband Business of MyRepublic Limited

STARHUB LTD

(Incorporated in the Republic of Singapore)

(Company Registration No. 199802208C)

ANNOUNCEMENT

PROPOSED ACQUISITION OF A MAJORITY INTEREST IN THE BROADBAND BUSINESS OF

MYREPUBLIC LIMITED

1. INTRODUCTION

1. Proposed Transaction. The Board of Directors (the "Board") of StarHub Ltd ("StarHub" or the "Company") wishes to announce that StarHub Online Pte. Ltd. (the "Purchaser"), a wholly- owned subsidiary of the Company, has on 21 September 2021 entered into a share purchase agreement (the "Share Purchase Agreement") with MyRepublic Group Limited ("MR GroupCo") and MyRepublic Holdings Ltd ("MR HoldCo"), to acquire a majority interest in the existing business and operations of MR HoldCo and its subsidiaries (the "MR Group") which provide broadband services in Singapore for residential and enterprise customers (the "MR Singapore Broadband Business").
   Pursuant to the Share Purchase Agreement, MR GroupCo has agreed to sell, and the Purchaser has agreed to purchase, such number of ordinary shares (the "Sale Shares") in the share capital of MyRepublic Broadband Pte. Ltd. ("NewCo"), representing approximately 50.1 per cent. of the issued share capital of NewCo (the "Proposed Transaction").
   The MR Singapore Broadband Business is currently a division of MyRepublic Limited ("MR SG"), a subsidiary of MR GroupCo. As a condition precedent to completion of the Proposed Transaction ("Completion"), the MR Singapore Broadband Business shall be transferred from MR SG to NewCo (the "Business Transfer") pursuant to the terms of a business transfer agreement to be entered into between MR SG, MR HoldCo, NewCo and the Purchaser.
2. Completion. Completion is subject to and conditional upon various conditions precedent ("Conditions"), including, inter alia, obtainment of the relevant approvals from the Infocomm Media Development Authority (the "IMDA") in relation to, inter alia, the Proposed Transaction and completion of the Business Transfer.
3. Bridge Loan and First Call Option. Concurrent with the entry into of the Share Purchase Agreement:
4. 1. the Purchaser has on 21 September 2021 entered into a bridge loan agreement (the "Bridge Loan Agreement") with MR HoldCo, pursuant to which the Purchaser will be extending a bridging loan of S$105 million (the "Bridge Loan") to MR HoldCo for the repayment of MR HoldCo's existing debt. MR HoldCo is the holding company of MR GroupCo and MR SG; and

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1. the Purchaser has on 21 September 2021 entered into a call option agreement (the "First Call Option Deed") with MR GroupCo, MR HoldCo, MR SG, NewCo and StarHub, pursuant to which MR GroupCo has granted the Purchaser a call option overshares in the capital of MR SG and NewCo held by MR GroupCo (the "First Call Option").

2. Information on the Parties

1. The Purchaser. The Purchaser is a company incorporated in Singapore on 11 February 2005. The Purchaser is a wholly-owned subsidiary of StarHub and is engaged in the businesses of telecommunication activities, including provision of voice over internet protocol services and provision of internet access, including ISPS activities.
   As at the date of this Announcement, the Purchaser has an issued and paid-up share capital of S$100,000 comprising 100,000 ordinary shares, which is held by StarHub.
2. MR HoldCo / Guarantor. MR HoldCo is an exempted company incorporated in the Cayman Islands. As at the date of this Agreement, MR HoldCo is the holding company of MR GroupCo and MR SG. The MR Group is engaged in the provision of fibre broadband and mobile telecommunications services.
3. MR GroupCo / Seller. MR GroupCo is a company incorporated in Singapore on 24 March 2016 and is a wholly-owned subsidiary of MR HoldCo and is engaged in the business activities of head and regional head offices, centralised administrative offices and subsidiary management offices and development of e-commerce applications.
   As at the date of this Announcement, MR GroupCo has an issued and paid-up share capital of S$159,058,951.06 comprising S$156,402,941.06 in respect of 165,144,206 ordinary shares, and S$2,656,010 in respect of 37,950,000 preference shares, all of which are held by MR HoldCo.
4. MR SG. MR SG is a company incorporated in Singapore on 25 July 2011 and is a wholly owned subsidiary of MR GroupCo. The existing business and operations of the MR Group in relation to the MR Singapore Broadband Business is currently a division of MR SG. Besides the MR Singapore Broadband Business, MR SG provides mobile telecommunications services for customers in Singapore.
   As at the date of this Announcement, MR SG has an issued and paid-up share capital of S$53,930,635 comprising 122,763,487 ordinary shares, which is held by MR GroupCo.
5. NewCo. NewCo is a company which is newly incorporated in Singapore on 16 July 2021 and is a wholly-owned subsidiary of MR GroupCo. The business of NewCo is the provision of internet access, including ISPS activities. As a Condition, the MR Singapore Broadband Business will be transferred by MR SG to NewCo under the Business Transfer.
   As at the date of this Announcement, NewCo has an issued and paid-up share capital of S$1 comprising 1 ordinary share, which is held by MR GroupCo.

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1. Asset Value. Based on MR SG's unaudited financial statements for the financial year ended 30 June 2021 ("MR FY2021"), the aggregate net asset value attributable to the Sale Shares is negative S$1.2 million, assuming that the Business Transfer has been completed, and that the net assets of the MR Singapore Broadband Business have been transferred from MR SG to NewCo at book value.
2. Net Profits. Based on MR SG's unaudited financial statements for MR FY2021, the net profit attributable to the Sale Shares is S$5.2 million, assuming that the Business Transfer has been completed.

3. PRINCIPAL TERMS OF THE PROPOSED TRANSACTION

1. Share Purchase Agreement. Pursuant to the terms of the Share Purchase Agreement, MR GroupCo has agreed to sell, and the Purchaser has agreed to purchase, the Sale Shares free from any encumbrances and together with all rights attaching thereto as at the date of Completion (the "Completion Date"), including the right to receive all dividends and distributions declared, made or paid on or after the Completion Date.
2. Conditions Precedent. Pursuant to the terms of the Share Purchase Agreement, Completion is conditional upon the satisfaction or waiver (as the case may be) of the Conditions (or their satisfaction subject only to Completion), which include the following:
3. 1. the execution of the business transfer agreement by MR SG, MR HoldCo, NewCo and the Purchaser in relation to the Business Transfer (the "BTA");
   2. the execution of a shareholders agreement by the Purchaser, MR GroupCo and NewCo in relation to NewCo (the "Shareholders Agreement");
   3. the execution of a loan agreement to be entered into between the Purchaser (as the lender) and MR HoldCo (as the borrower) in relation to a loan of S$74.2 million for the purposes of partially refinancing the Bridge Loan and working capital requirements;
   4. the execution of the call option agreement to be entered into between, inter alia, the Purchaser and MR GroupCo granting the Purchaser a call option over shares in NewCo held by MR GroupCo (the "Second Call Option Deed");
   5. the execution of the wholesale agreement to be entered into between the Purchaser and NewCo (or an entity that is newly incorporated by MR GroupCo) for the provision of fibre broadband services (the "StarHub Broadband Wholesale Agreement");
   6. the execution of the wholesale agreement for StarHub to provide wholesale network services to MR SG;
   7. the execution of the procurement agreement to be entered into between the Purchaser and NewCo for NewCo to procure certain products or services through the Purchaser or a designated affiliate of the Purchaser;
   8. completion of the Business Transfer in accordance with the terms of the BTA;

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1. submission of the consolidation application in relation to the Proposed Transaction and receipt of the relevant approvals from the IMDA in relation to the Proposed Transaction without any conditions (or if approval is granted subject to terms and/or conditions, such terms and/or conditions being to the satisfaction of the Purchaser, and the satisfaction of MR GroupCo solely as to its ability to comply with such terms and/or conditions, to the extent imposed on MR GroupCo);
2. NewCo having received and maintaining in force and effect all licences necessary for the carrying on of the MR Singapore Broadband Business by NewCo (including a Facilities-Based Operations licence) without any onerous conditions (or if any licence is granted subject to onerous terms and/or conditions, such terms and/or conditions being to the satisfaction of the Purchaser, and the satisfaction of MR GroupCo solely as to its ability to comply with such terms and/or conditions, to the extent imposed on MR GroupCo), and all conditions applicable to any such licence having been and are being complied with;
3. MR SG having received and maintaining in force and effect all licences necessary for the carrying on of its business following the Business Transfer without any onerous conditions (or if any licence is granted subject to onerous terms and/or conditions, such terms and/or conditions being to the satisfaction of the Purchaser, and the satisfaction of MR GroupCo solely as to its ability to comply with such terms and/or conditions, to the extent imposed on MR GroupCo), and all conditions applicable to any such licence having been and are being complied with;
4. there being no acceleration by the Purchaser (as lender) or event of default under the Bridge Loan Agreement;
5. completion of the due diligence in respect of the MR Singapore Broadband Business to the satisfaction of the Purchaser with no material issues identified or if any material issues are identified, such issues being addressed by way of conditions precedent, warranties, indemnities and/or pre or post completion undertakings being provided for the benefit of NewCo and/or the Purchaser in the BTA on terms satisfactory to the Purchaser;
6. the approval by the shareholders, board of directors and auditors of MR SG of the audited financial statements of MR SG for the financial year ended 30 June 2020 ("MR FY2020"), where such approved audited financial statements shall be substantially in the same form as the draft audited financial statements of MR SG for MR FY2020 made available by or on behalf of MR GroupCo to the Purchaser or any of its agents, employees or professional advisers in the course of the due diligence carried out by or on behalf of the Purchaser on MR SG; and
7. the approval by the shareholders, board of directors and auditors of MR SG of the audited financial statements of MR SG for MR FY2021.

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Pursuant to the terms of the Share Purchase Agreement, MR GroupCo shall use its reasonable endeavours to ensure the satisfaction of the Conditions and the Purchaser shall use its reasonable endeavours to ensure the satisfaction of the Conditions listed above (other than the Conditions in paragraphs (h), (j), (k), (l), (n) and (o)), in each case, as soon as possible and in any event by 31 March 2022 or such other date as may be agreed in writing between the Purchaser and MR GroupCo (the "Cut-Off Date").

The Purchaser may at any time waive in whole or in part and conditionally or unconditionally any of the Conditions set out in paragraphs (e) and (i) to (o) by notice in writing to MR GroupCo. The Purchaser and MR GroupCo may waive any of the other Conditions by mutual agreement.

If the Conditions are not satisfied or waived on or before the Cut-Off Date, save as expressly provided in the Share Purchase Agreement, each of MR GroupCo or the Purchaser may, in its absolute discretion, terminate the Share Purchase Agreement by giving notice to the other parties.

3.3 Consideration. The consideration for the Sale Shares (the "Acquisition Consideration") was arrived at on a willing seller willing buyer basis after taking into account the historical financial performance and growth potential of the MR Singapore Broadband Business. The Acquisition Consideration will be funded by the Purchaser using internal cash resources.

Pursuant to the terms of the Share Purchase Agreement, the amount of the Acquisition Consideration shall be the aggregate of the following:

1. S$70,836,125 (the "Initial Consideration");
2. the "Net Closing Adjustment", which shall be determined based on a specific formula depending on:
3. 1. the difference between: (a) the net working capital of NewCo as at the applicable closing balance sheet date as set out in statements drawn up in accordance with the terms of the Share Purchase Agreement and (b) the initial net working capital attributable to the MR Singapore Broadband Business, being negative S$3,714,617;
   2. the difference between: (a) the net debt of NewCo as at the applicable closing balance sheet date as set out in statements drawn up in accordance with the terms of the Share Purchase Agreement and (b) the initial net debt attributable to the MR Singapore Broadband Business, being S$7,266,680;
   3. the difference between: (a) the final earnings before income, tax, depreciation and amortisation ("EBITDA") attributable to the MR Singapore Broadband Business based on the audited financial statements of MR SG for MR FY2021 in statements drawn up in accordance with the terms of the Share Purchase Agreement (the "Final EBITDA") and (b) the initial EBITDA attributable to the MR Singapore Broadband Business, being S$18,582,019;

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