Innopac Holdings Ltd : INNOPAC ANNOUNCEMENT

(Incorporated in Singapore) (Company Registration No. 197301788K)

Innopac Holdings Ltd ("Innopac" or the "Company") wishes to announce that it has on 30
January 2013 entered into a Bid Implementation Deed ("Implementation Deed") with Merlin Diamonds Limited ("MED") whereby the Company has agreed to make a takeover bid ("Takeover Bid") for up to 212,147,063(1) ordinary fully paid shares ("Merlin Shares") constituting 100% of the issued and paid-up share capital of MED.
Under the terms of the Implementation Deed, the Company has agreed to make an offer ("Offer") for the Merlin Shares at the bid price ("Bid Price") of A$0.28 (approximately S$0.358 at an exchange rate of A$1.00 to S$1.28) for each Merlin Share. The aggregate consideration ("Consideration") for the Merlin Shares is up to a maximum of approximately A$59,401,178 (approximately S$76,033,508 at an exchange rate of A$1.00 to S$1.28).
The Consideration is to be satisfied by way of an allotment and issue of up to approximately
354,468,566(2) new ordinary shares ("Consideration Shares") credited as fully paid in the issued and paid-up share capital of the Company at an issue price of S$0.2145 for each Consideration Share. The Consideration Shares would be allotted and issued to the
shareholders of MED who accept the Offer. The issue price of S$0.2145 represents the
weighted average price for trades of the Company's shares done on the SGX-ST Mainboard for 7 consecutive trading days prior to and including 30 January 2013, being the day on which
the Implementation Deed is executed.

Notes:

(1) As at the date of the Implementation Deed, MED has an issued and paid-up share capital of 150,783,427, ordinary shares. On 14 December 2012, MED announced that it had entered into Placement Agreement with four international investors to place 43,000,000 shares at a price of A$0.21 for each shares to raise A$9,030,000. ("Placement") On 2 January 2013, a new issue announcement was submitted to the ASX for the listing and quotation of 9,000.000 new shares. On 25 January 2013, an additional new issue announcement was submitted to the ASX for the listing and quotation of another 9,000.000 new shares.

On the 14 December 2012, MED further announced that it had entered into an A$8 million convertible note agreement with an international investor to provide further funding towards the re-commencement of mining operations at the Merlin diamond mine in Northern Territory ("Convertible Notes"). The term for these notes is

1 year and bears interest at 6.5% that is payable quarterly. The Convertible Notes can also be converted into fully paid ordinary shares at any time during the 1 year term at a conversion price of A$0.22. Assuming that the Convertible Notes are converted, this would result in the creation of 36,363,636 new shares in MED.

(2) The number of Consideration Shares to be allotted and issued includes fractional entitlements that would be rounded upwards to the nearest whole number. The Company will separately announce the exact number of Consideration Shares to be allotted and issued after the close of the Offer.

The relative figures computed on the bases set out in Rule 1006 of the Listing Manual Part A: Mainboard Rules ("Listing Manual"), each rule, a "Rule" and collectively the "Rules" of the Singapore Exchange Securities Trading Limited ("SGX-ST") are set out below.

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Notes:

(1) The audited net losses of MED (before income tax, minority interests and extraordinary items) for the year ended 30 June 2012 was A$2,757,669 (approximately S$3,529,816) at an exchange rate of S$1.00 to A$1.28. The unaudited net profit of the Company (before income tax, minority interests and extraordinary items) for the 12 months ended 30 June 2012 was S$17,696,000. The net losses attributable to the assets acquired, compared with the Group's net profit is 19.95%.

(2) The aggregate value of the consideration given for the acquisition of the Merlin Shares is S$76,033,508. The Company's market capitalisation on the market day preceding the date of the Implementation Deed was S$712,994,711. The aggregate value of the consideration given compared with the Company's market capitalisation is 10.66%.

(3) The number of equity securities to be issued by the issuer as part consideration for the acquisition of the Merlin Shares is 354,468,566. As at the date of the Implementation Deed, the Company has 2,910,182,495 shares in issue. The number of equity securities to be issued by the Company as part consideration for the acquisition of the Merlin Shares compared with the number of equity securities in issue is 12.18%.

As none of the relative figures computed on the bases set out in Rule 1006(b), Rule 1006(c) and Rule 1006(d) exceed 20%, the Takeover Bid is a discloseable transaction for the purpose of Chapter 10 of the SGX-ST Listing Manual.
The information to be provided under Rule 1010 of the Listing Manual is set out below.

Rule 1010(1)

The Takeover Bid involves the Company making the Offer for all the Merlin Shares at the Bid Price. MED is a company incorporated under the laws of Australia and has its registered office and principal place of business at Level 8, 580 St. Kilda Road, Melbourne, Victoria
3004, Australia. The Merlin Shares are listed and quoted for trading on the Australian
Securities Exchange ("ASX").
MED is currently developing and focusing on its flagship Merlin Diamond Mine Project ("Merlin Project") in the Northern Territory, Australia and is engaged in extensive exploration for additional sources of diamonds in and around the Merlin Project with a view of re- establishing production. The Merlin Project also comprises the Merlin Diamond Mine operations and the surrounding exploration tenements ("Merlin Orbit") totalling approximately
2,480km2 which effectively encompasses the known extent of the Merlin Kimberlite Field.
The Merlin Project is located approximately 100km south of the settlement of Borroloola and comprises 14 kimberlite pipes, grouped into four clusters. Nine of these pipes were subject to open-pit mining over a 5 year period commencing in 1998. The operations ceased in 2003 having produced 507,000 carats of diamonds. During its short operational life, Merlin Diamond Mine was renowned for the production of top quality white diamond and large specials, the largest being 104.73 carats. MED acquired the Merlin Project from the Rio Tinto group in 2004.
In 2012, part of the diamonds that were recovered under the exploration and feasibility studies was sold on international markets generating proceeds of approximately US$1.865 million. MED has retained a quantity of the larger diamonds, one of which has been cut and polished, for future sale and for marketing purposes.
The Merlin Diamond Mine has significant near-term production potential and high priority
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exploration targets within the tenement holding surrounding the Mining Lease.

Note:

(1) Please refer to the Statement of Competent Person at the end of this announcement.

In addition to the Merlin Project, MED has an extensive 23,630km2 tenement holding in Arnhem Land. These tenements are considered to have potential for diamonds and other minerals.
The Directors of MED are:
1. Mr Joseph Gutnick, Executive Chairman and Chief Executive Officer
2. Mr. Craig Michael, Non-Executive Director
3. Mr. Henry Nerzog, Non-Executive Director
4. Mr. David Tyrwhitt, Non-Executive Director
The major shareholders of MED* are:

Prior to the Implementation Deed, neither the Company nor any of its directors or substantial shareholders had any dealings (including business relationships) whatsoever with MED, its respective directors or shareholders. As at the date of the Implementation Deed, MED does not own any share in the Company and the Company is not interested in, whether legally or beneficially, in any Merlin Share.

*Source: Bloomberg LLP

Rule 1010(2)

MED is an investment holding company. It has two (2) subsidiaries, namely Striker Diamonds
Pty Ltd and Merlin Diamonds Pty Ltd that are both incorporated in Australia.
As explained above, MED is developing its flagship Merlin Diamond Mine Project in the Northern Territory, Australia and is engaged in extensive exploration for additional sources of diamonds in and around the mine.
Exploration is also taking place in the Company's tenement holdings associated with its North
Kimberley and Arnhem Land projects.
For additional information, please refer to MED's website at http://www.merlindiamonds.com.au/
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Rule 1010(3)

The consideration payable by the Company for the Merlin Shares is up to approximately
A$59,401,178 (approximately S$76,033,508 at an exchange rate of A$1.00 to S$1.28).
The closing price of each Merlin Share as traded on the ASX on 30 January 2013 was A$0.205. The Bid Price represents a premium of approximately 36.59% over the closing price of each Merlin Share on 30 January 2013.
No valuation report was procured for the Merlin Shares. In agreeing to the Bid Price, the Company relied on the closing price of the Merlin Shares and the net asset value of each Merlin Shares of A$0.312 as at 30 June 2012.
It was also determined that an offering of A$0.28 per Merlin Share would be sufficient to sway existing MED shareholders to agree to the Offer.
The Consideration is to be satisfied by way of an allotment and issue of the Consideration Shares to the shareholders of MED who accept the Offer. The entitlement of the shareholders of MED to the Consideration Shares will be pro-rated according to the number of Merlin Shares they own. Under the terms of the Implementation Deed, all fractional entitlements to the Consideration Shares will be rounded upwards to the nearest whole. As such, the exact number of Consideration Shares to be allotted and issued will depend on the level of acceptances received and the rounding upwards of fractional entitlements. The Company will make announcements of the exact number of Consideration Shares to be allotted and issued subsequent to the close of the Offer.
The issue price of S$0.2145 represents the weighted average price for trades of the Company Shares done on the SGX-ST Mainboard for the 7 consecutive trading days prior to and including 30 January 2013 being the day the Implementation Deed was executed.
Under the terms of the Implementation Deed, the Company is required to lodge and issue a Bidder's Statement ("Bidder's Statement") to the MED shareholders. The Offer contained in the Bidder's Statement will be opened for acceptance for a period of not less than 30 days from the date the Bidder's Statement is lodged and issued.

Rule 1010(4)

The Takeover Bid is subject to the following conditions:

The Company will (i) make an off-market takeover offer to acquire all the Merlin Shares on terms which are no less favourable than the Agreed Bid Terms and otherwise in accordance with all applicable provisions of the Corporations Act; and (ii) publicly announce a proposal to make the off-market takeover offer referred to in paragraph (i) above, in accordance with make announcements after both parties have executed this Deed.
The Offer will extend to the MED Shares which are issued during the period from the Register Date to the end of the Offer Period due to a conversion or exercise of rights attached to securities which exist, or will exist, as at the Register Date including pursuant to any of the Convertible Notes or Placement.
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1.67 Consideration Shares for every 1 MED Share, with any fractional entitlements to the Consideration Shares rounded to the nearest whole Consideration Share.
(a) For the avoidance of doubt, the Consideration is calculated as follows:
The value of the Merlin Shares is based on a price of A$0.28 per Merlin Share. The value of the Consideration Shares is calculated by reference to the weighted average price for trades of the Company's shares done on the SGX-ST Mainboard for the 7 consecutive trading days prior to and including
30 January 2013.
(b) Instead of issuing the Consideration Shares to Small Parcel Shareholders (being a Merlin Shareholder who would otherwise be issued with a small parcel under the Offer), Innopac may, subject to compliance with all applicable laws and regulations, including the Corporations Act, issue the Consideration Shares, to which a Small Parcel Shareholder would be otherwise issued, to a nominee appointed by the Company or MED who will sell those Consideration Shares and pay to that Small Parcel Shareholder the proceeds received, after deducting applicable brokerage, taxes and charges.

The Offer will remain open for a minimum period of 30 days (unless withdrawn during that period under section 652B of the Corporations Act).

During the period from the date of the Bidder's Statement to the end of the Offer Period (the period during which the Offer is open for acceptance) (each inclusive), none of the following occurrences (being the prescribed occurrences listed in section 652C of the Corporations Act) happens:

(a) MED converts all or any of its shares into a larger or smaller number of shares under section 254H of the Corporations Act;

(b) MED or a subsidiary of MED resolves to reduce its share capital in any way;

(c) MED or a subsidiary of MED enters into a buy-back agreement or resolves to approve the terms of a buy-back agreement under section

257C (1) or 257D (1) of the Corporations Act;

(d) MED or a subsidiary of MED issues shares or grants an option over its shares, or agrees to make such an issue or grant such an option other than any issue of shares pursuant to the Convertible Note or Placement;

(e) MED or a subsidiary of MED issues, or agrees to issue, convertible notes other than the MED Convertible Note;

(f) MED or a subsidiary of MED disposes, or agrees to dispose of, the whole, or a substantial part, of the MED Group's business or property;

(g) MED or a subsidiary of MED grants, or agrees to grant, a security interest in the whole, or a substantial part, of the MED Group's business or property;

(h) MED or a subsidiary of MED resolves to be wound up;

(i) a liquidator or provisional liquidator of MED or of a subsidiary of MED is appointed;

(j) a court makes an order for the winding up of MED or of a subsidiary of

MED;
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(k) an administrator of MED or of a subsidiary of MED is appointed under section 436A, 436B or 436C of the Corporations Act;

(l) MED or a subsidiary of MED executes a deed of company arrangement;

or

(m) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of the MED Group,

each a "Prescribed Occurrence".

None of the Prescribed Occurrences happens during the period beginning on the Announcement Date and ending at the end of the day before the Bidder's Statement is given to MED.

During the period from the date of the Bidder's Statement to the end of the Offer
Period:

(a) there is not in effect any preliminary or final decision, order or decree issued by a Government Agency;

(b) no action or investigation is instituted, or threatened by any Government

Agency with respect to MED or any subsidiary of MED; or

(c) no application is made to any Government Agency (other than an application by the Company or any Related Body Corporate of the Company, an application under sections 657C or 657G of the Corporations Act, or an application commenced by a person specified in section 659B(1) of the Corporations Act in relation to the Takeover Bid),

in consequence of, or in conjunction with, the Takeover Bid other than a determination by ASIC or the Takeovers Panel in exercise of the power and discretions conferred by the Corporations Act, which restrains or prohibits or threatens to restrain or prohibit, or may otherwise materially adversely impact upon, the making of the Takeover Bid or the completion of any transaction contemplated by the Takeover Bid (including implementing the intentions expressed therein) or seeks to require the divestiture by the Company of any MED Shares, or the divestiture of any assets by MED or by any subsidiary of MED or by any company within the Innopac Group.

During the Offer Period, Innopac receives all approvals which are required by law or by any Government Agency:

(a) to permit the Offers to be made to and accepted by MED's Shareholders;

or

(b) as a result of the Offers or the successful acquisition of the MED's Shares and which are necessary for the continued operation of the business of MED and its subsidiaries or of the Company and its subsidiaries,

and those Approvals are on an unconditional basis and remain in force in all respects and there is no notice or indication of intention to revoke, suspend, restrict, modify or not renew those Approvals. This includes the Company receiving the approvals of the Company in general meeting for the allotment and issue of the Consideration Shares and the SGX-ST for the listing and quotation of the Consideration Shares to be issued as Consideration.
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During the period from the Execution Date to the end of the Offer Period, no MED Material Adverse Change occurs.

The Company does not become aware, during the period from the Execution Date to the end of the Offer Period, that:

(a) any document filed by or on behalf of MED with ASX or ASIC contains a statement which is incorrect or misleading in any material respect or from which there is a material omission; or

(b) MED has not made an announcement in breach of its continuous disclosure obligations.

No person has any right (whether subject to conditions or not) as a result of Innopac acquiring MED Shares to:
(i) acquire, or require MED or a subsidiary of MED to dispose of, or offer to dispose of, any material asset of MED or a subsidiary of MED;
(ii) terminate or vary any material agreement with MED or a subsidiary of MED;
or
(iii) accelerate or adversely modify the performance of any obligations of MED or any of its subsidiaries in a material respect under any material agreements, contracts or other legal arrangements.

During the period from the date of the Implementation Deed to the end of the Offer
Period, no Material Adverse Change occurs.
"Material Adverse Change" means any event, change or condition that has, or could reasonably be expected to have, a material adverse effect on:
(a) the business, assets, liabilities, financial or trading position, profitability or prospects of the MED Group, taken as a whole (after taking into account any matters which offset the impact of the event or events giving rise to the adverse effect); or
(b) the status or terms of any of the prospecting, exploration or mining Tenements owned by MED or its subsidiaries (and, for the avoidance of doubt, relinquishment of parts of tenements in the ordinary course of business will not be considered, for the purpose of this definition, as an event having a material adverse effect on a Tenement), except for:
(c) events, changes and conditions publicly announced by MED or otherwise disclosed to ASIC or the ASX by MED or any of its subsidiaries prior to the Execution Date provided that the relevant announcement or disclosure is not, and is not likely to be, incomplete, incorrect, untrue or misleading;
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At or before the end of the Offer Period, the Company has a Relevant Interest in such number of MED Shares which represents at least 90% of the aggregate of all the MED Shares on issue.

Before the end of the Offer Period, the Treasurer of the Commonwealth of Australia
(Treasurer) either:
(c) ceases to be empowered to make an order under the Foreign Acquisitions and Takeovers Act 1975 (Cth) in relation to the proposed acquisition by the Company of up to all of the MED Shares it does not already hold; or

(d) gives written advice on a decision by or on behalf of the Treasurer stating (either unconditionally or on the basis of conditions which are reasonably acceptable to the Company) that there is no objection to the proposed acquisition by the Company of up to all the MED Shares it does not already hold.

The Company receives the approval from shareholders for the issuance of the Consideration Shares, and the SGX-ST for the listing and quotation of the Consideration Shares.

Rule 1010(5)

Based on the audited financial statements of MED for the financial year ended 30 June 2012, the book value and the Net Tangible Asset are as follows:

Rule 1010(6)

The Company intends to seek approval in general meeting for the allotment and issue of the
Consideration Shares.

Rule 1010(7)

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Based on the latest audited financial statements of MED for the financial year ended 30 June
2012, the net loss after income tax attributable to the Merlin Shares is A$2,757,669 (approximately S$3,529,816).

Rule 1010(8)

Assuming the Takeover Bid was completed at the end of the financial year ended 31
December 2011 the effect of the Takeover Bid on the net tangible assets per share of the
Company is that the NTA per share increases from 2.92 cents per share to 4.38 cents per share.

Notes:

(1) The audited NTA of the Company as at 31 December 2011 is S$53,224,000. The audited NTA of MED as at 30 June 2012 is approximately S$42,027,338.

(2) Assuming full issuance of 354,468,566 Consideration Shares.

The financial effects of the Takeover Bid on the Company are for illustrative purposes only and are therefore not indicative of the actual financial performance of position of the Company after the completion of the Takeover Bid.

Rule 1010(9)

The pro forma financial effects of the Takeover Bid on the earnings per share ("EPS") are as follows:

Notes:

(1) The audited profit after tax of the Company for the financial year ended 31 December 2011 is

S$2,323,000. MED recorded a loss of approximately S$3,529,816 for the financial year ended 30

June 2012.

(2) Assuming full issuance of 354,468,566 Consideration Shares.

The financial effects of the Takeover Bid on the Company are for illustrative purposes only and are therefore not indicative of the actual financial performance of position of the Company after the completion of the Takeover Bid.

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Rule 1010(10)

The Board considers the Proposed Takeover beneficial to the Company for the following reasons:
1. The Company is an investment holding and management company. Its present investments are in telecommunications, investment properties and marketable securities. The Proposed Takeover allows the Company to diversify its investment holdings and earnings base, which is intended to enhance shareholders' values in the Company.
2. The Company is optimistic of the outlook and prospects for the diamond mining industry. According to Bain & Company, Inc, in their report, "The Global Diamond Industry - Portrait of Growth (2012)"(1) they expect world diamond demand to grow at an average annual rate of 5.9% each year to nearly US$26 billion by 2020. They estimate India and China would account for 50% of incremental global demand and together will overtake the US as the largest diamond jewelry market globally.
3. MED has reported JORC compliant Resources and Reserves aggregating approximately 7.2 million carats of diamonds located in tenements in Australia. In addition to the 7.2 million carats of Mineral Resources and Reserves that MED has, it is also engaged in exploration for additional sources of diamonds in and around the Merlin Project.
4. MED is planning to start trial mining in Q2 2013 and commence commercial production by the second half of 2013.

Note:

(1) Bain & Company Inc has not consented to the inclusion of their report in this announcement. While the Directors have taken reasonable action to ensure that the information is extracted accurately and fairly, and has been included in this announcement in its proper form and context, they have not independently verified the accuracy of the relevant information.

Rule 1010(11)

None of the directors or controlling shareholders of the Company has any interest, direct or indirect, in the Proposed Takeover.

Rule 1010(12)

Subject to the Company in general meeting approving the allotment and issue of the Consideration Shares, the Company intends, subsequent to the close of the Offer, to appoint new directors to the Board of MED. It is not a term of the Implementation Deed that any director of MED be appointed to the Board of the Company.

Rule 1010(13)

Please refer to the relative figures computed based on Rule 1006 above.
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The Company has appointed Robert Wang & Woo LLP as its Singapore lawyers and Holding
Redlich as its Australian lawyers.

The issue of this Announcement has been approved by the Board of Directors (including those who may have been delegated detailed supervision of the preparation of this Announcement) who have taken all reasonable steps to ensure that the facts stated and the opinions expressed in this Announcement are fair and accurate and that no material facts have been omitted from this Announcement. The Board of Directors jointly and severally accepts responsibility accordingly. Where information contained in this Announcement has been extracted from published or otherwise publicly available sources, the sole responsibility of the Board of Directors has been to ensure that such information has been accurately and correctly extracted from these sources.
A copy of the Implementation Deed is available for inspection at the Singapore business office of the Company for 3 months at 190 Middle Road, #19-07 Fortune Centre, Singapore
188979.

Wong Chin Yong
Managing Director
31 January 2013

The information in this Announcement that relates to exploration results is based on information compiled by Dr DS Tyrwhitt who is a Fellow of the Australasian Institute of Mining and Metallurgy. Dr. DS Tyrwhitt is a consulting geologist employed by DS Tyrwhitt & Associates Pty Ltd. Dr. DS Tyrwhitt has 50 years experience in the industry and has more than 5 years experience which is relevant to the mineralisation being reported to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves". Dr. Tyrwhitt consents to the inclusion in this announcement of the matters based on the information in the form and context to which it appears.

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