GUANGDONG INV<0270> GUANGDONG BREW<0124> GUANGDONG BUILD<0818> & GUANGDONG TANN<1058>-Joint Announcement & Resumption
The Stock Exchange of Hong Kong Limited takes no
responsibility for the contents of this announcement, makes
no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any
part of the contents of the announcement.
Guangdong Investment LIMITED
(Incorporated in Hong Kong with limited liability)
GUANGDONG BREWERY HOLDingS LIMITED
(Incorporated in Bermuda with limited liability
GUANGDONG BUILDING INDUSTRIES LIMITED
(Incorporated in Hong Kong with limited liability)
GUANGDONG TANNERY LIMITED
(Incorporated in Hong Kong with limited liability)
ANNOUNCEMENT
VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION
INVOLVING,
AMONGST OTHER THINGS, THE ACQUISITION BY GUANGDONG
INVESTMENT LIMITED
OF AN INTEREST IN GH WATER SUPPLY (HOLDINGS) LIMITED
PROPOSED RESTRUCTURING OF THE INDEBTEDNESS OF
GUANGDONG INVESTMENT LIMITED AND ITS SUBSIDIARIES
INCREASE IN AUTHORISED SHARE CAPITAL OF
GUANGDONG INVESTMENT LIMITED
SUMMARY
Acquisition of the Dongshen Water Supply Project
Reference is made to previous announcements made by the
Company, GD Brewery, GD Building Industries and GD Tannery
including those dated 4 January 1999, 12 January 1999, 1
March 1999, 4 March 1999, 30 March, 1999, 25 May 1999, 22
September 1999 and 15 December 1999 and the proposed
restructuring of the GDE Group referred to therein and the
inclusion of the GDI Group in such proposed restructuring.
As part of the proposed restructuring of the GDI Group, the
Company has on 16 December 1999 entered into the Acquisition
Agreement agreeing conditionally to acquire 8,100 shares in
the share capital of GH Holdings, representing 81.00 per cent.
of its issued share capital.
Upon Completion of the Acquisition, GH Holdings will be a
non-wholly-owned subsidiary of and controlled by the
Company.
The principal asset of the GH Group is the Dongshen Water
Supply Project which will comprise, amongst other things,
the exclusive right to supply water to Hong Kong from
Guangdong Province and the non-exclusive right to supply
water to Shenzhen and Dongguan.
The Acquisition will constitute a very substantial
acquisition and a connected transaction of the Company under
Chapter 14 of the Listing Rules. Accordingly, the
Acquisition will be subject to the approval of shareholders
of the Company at a general meeting at which any shareholder
who has a material interest in the transaction (such as GDE,
as it and GDH Limited are both controlled ultimately by the
Guangdong Provincial Government) must abstain from voting.
Investors should note that the Acquisition Agreement is
subject to the satisfaction of a number of other conditions.
Investors are advised to exercise caution when dealing in
the securities of the Company listed on the Stock Exchange
or other relevant exchange.
Restructuring of the financial liabilities of the GDI Group
The Company has in principle agreed with the Steering
Committee to restructure its financial liabilities.
The terms of a debt restructuring termsheet signed on 16
December 1999 are indicative only and are not intended to
create legally enforceable obligations. The Company and its
creditors have yet to negotiate and finalise a formal
agreement relating to the restructuring of the financial
liabilities of the GDI Group. It is expected that an
agreement relating to the debt restructuring will be entered
into by 31 March 2000.
The proposed restructuring of the financial liabilities of
the GDI Group (excluding the liabilities of subsidiaries and
associated companies of the GDI Group incorporated in
mainland China) involves a schedule under which the
financial liabilities of the GDI Group will be repaid or
refinanced by no later than 31 March 2005.
Based on the indicative termsheet the current level of
financial liabilities of the GDI Group, which is
approximately HK$8,133 million, would be reduced by
approximately 45 per cent. over a five year period, with the
balance being refinanced.
No arrangements regarding the outstanding GDI Convertible
Bonds and FRNs have been made with their respective holders,
although it is envisaged that the terms of the Alexandra Bond,
the 2002 CBs and the FRNs may have to be revised to reflect
the proposed restructuring of the financial liabilities of
the GDI Group.
It is not currently envisaged that the terms of the GDI
Preference Shares will be affected by the proposed debt
restructing of the GDI Group.
As previously announced, the liabilities of GD Brewery and
its subsidiaries will not be included in the proposed
restructuring.
It is currently envisaged that certain subsidiaries of the
Company including GD Building Industries and GD Tannery may
each enter into separate debt restructuring arrangements
with their respective financial creditors regarding their
respective liabilities. Further announcements will be
released by GD Building Industries and GD Tannery as and when
appropriate.
A notice convening the Extraordinary General Meeting and a
circular containing information relating, amongst other
things, to the Acquisition, the Disposal, the restructuring
of the liabilities of the GDI Group, and the Whitewash Waiver
shall be despatched to GDI shareholders as soon as reasonably
practicable.
1. Introduction
Reference is made to previous announcements made by the
Company, GD Brewery, GD Building Industries and/or GD
Tannery on respectively 4 January 1999, 12 January 1999, 1
March 1999, 4 March 1999, 30 March 1999, 25 May 1999, 22
September 1999 and 15 December 1999 and the proposed
restructuring of the GDE Group referred to therein and the
inclusion of the GDI Group in such proposed restructuring.
As part of the proposed restructuring, the Company has on
16 December 1999 entered into the Acquisition Agreement and
has agreed conditionally to acquire 8,100 shares in, and
representing 81.00 per cent. of, the share capital of GH
Holdings from GDH Limited. Immediately following the
Acquisition, the balance of the share capital of GH Holdings
will be held by GDH Limited. In addition, GDH Limited will
inject the sum of US$20 million in cash into the Company.
GH Holdings holds a 99 per cent. interest in WaterCo which
will, following completion of the Corporatisation, operate
and manage the Dongshen Water Supply Project. Yue Gang holds
the remaining 1 per cent. interest in WaterCo.
Subject to Completion, the issue of the Consideration Shares
and the Additional Consideration Shares (assuming they are
issued) to GDH Limited would normally result in a requirement
on GDH Limited to make a mandatory general offer under the
Takeovers Code for all the GDI Shares not otherwise held by
GDH Limited and parties acting in concert with it (including
GDE). An application will be made by GDH Limited and parties
acting in concert with it for the Whitewash Waiver.
A board of independent non-executive directors of the
Company has been formed to advise the Independent
Shareholders in respect of, amongst other things, the
Acquisition, the Disposal and the Whitewash Waiver referred
to below.
Credit Suisse First Boston has been appointed as the
independent financial adviser to the board of independent
non-executive directors.
2. Proposed Restructuring affecting the GDI Group
The proposed restructuring of the GDE Group will also extend
to and have an effect on the GDI Group.
The GDI Directors understand from the advisers to the
Guangdong Provincial Government that, as part of the
restructuring of the GDE Group, GDI will:
Step 1 procure the corporatisation of the Dongshen Water
Supply Project through, amongst other things, the
establishment of WaterCo, the transfer of the Dongshen Water
Supply Project to WaterCo and the entering into of the Water
Agreements by WaterCo.
As part of the Corporatisation, GH Holdings will issue notes in the
aggregate principal sum of HK$14,000,000,000 which will ultimately be
exchanged by GDH Limited for certain liabilities of the GDE Group and
WaterCo will issue a note in the principal sum of US$100,000,000 to the
Guangdong Provincial Government.
Step 2 GDH Limited will transfer 8,100 shares in, and representing 81.00
per cent. of the share capital of GH Holdings to the Company in accordance
with the terms of the Acquisition Agreement and inject a cash sum of US$20
million into the Company.
Step 3 the Guangdong Provincial Government shall procure the transfer of
approximately 600 million GDI Shares under its indirect control to the
financial creditors of the GDE Group pursuant to the GDE Group
restructuring.
3. The Acquisition Agreement
Date: 16 December 1999
Parties:
Vendor: GDH Limited, a company incorporated in Hong Kong with limited
liability and which is ultimately wholly-owned by the Guangdong Provincial
Government.
Purchaser: GDI, a company incorporated in Hong Kong with limited
liability, the ordinary shares of which are listed on the Stock Exchange.
Consideration
The consideration for the acquisition of the interest in GH Holdings and
the injection of the cash sum of US$20 million will be satisfied by the
Company in the following manner:
(A) the allotment and issue to GDH Limited of the Consideration Shares
which will represent 47.31 per cent. of the Enlarged Share Capital (but
without including the Additional Consideration Shares);
(B) the transfer to GDH Limited by the Company of the GDF Shares and
the GDT Shares;
(C) the assignment by the GDI Group to GDH Limited of the aggregate
amount of loans advanced to the GDT Group by the GDI Group;
(D) the assignment by the GDI Group to GDH Limited and the release and
waiver of all rights and claims and benefit of the GDI Group against GDE
and its subsidiaries (the "GDE Group Liabilities") arising under:
(i) an agreement dated 6 November 1997 between GDE and the Company
relating to the acquisition of GD Finance by the Company;
(ii) an agreement dated 26 May 1997 (as supplemented by an agreement
dated 6 August 1997) between GDE and the Company relating to the share
allotment and deferral in respect of GD Timber to the Company; and
(iii) an agreement dated 6 November 1997 between Jing Mei Travel &
Trading Company Limited, Prosperous Dragon Limited and the Company
relating to, amongst other things, the acquisition by the Company of the
entire equity interest in each of Yue Hai Hotel, Zhuhai and Janemary
Estate Development Co. Limited by the Company;
(E) the assignment by the GDI Group to GDH Limited of all rights and
claims and benefit of the Group against the GDF Group and the GDT Group;
and
(F) the allotment and issue to GDH Limited of Additional Consideration
Shares subject to the terms of an earn-out agreement to be entered into by
GDH Limited and the Company.
The consideration was agreed following arm's length
negotiations between the Company and GDH Limited.
Conditions
Completion of the Acquisition is conditional upon certain
conditions being satisfied on or before 30 June 2000 or such
later date as shall be agreed by the parties to the
Acquisition Agreement including, amongst others, the
following:
(A) the delivery of all necessary approvals and consents of
whatever nature in respect of the Corporatisation and the
transactions contemplated by the Acquisition Agreement from
all relevant PRC regulatory authorities;
(B) the delivery of an opinion from the Independent
Financial Adviser that the terms of the Acquisition are fair
and reasonable so far as the Independent Shareholders are
concerned and recommending that the Independent Directors
recommend that the Independent Shareholders approve, inter
alia, the Acquisition and the Whitewash Waiver;
(C) all necessary approvals of the Independent Shareholders
in general meeting of, amongst other things, the Acquisition,
the Disposal, the issue of the Consideration Shares and the
Additional Consideration Shares and the Whitewash Waiver;
(D) the Executive granting the Whitewash Waiver;
(E) the Executive granting a waiver to GDH Limited, GDE and
parties acting in concert with them from the requirement to
make a general offer for all of the issued shares not
otherwise held by the Company of each of GD Brewery , GD
Building Industries and GD Tannery as a result of the issue
of the Consideration Shares and the Additional Consideration
Shares;
(F) the current listing of GDI Shares on the Stock Exchange
not being withdrawn and no indication having been received
from the Stock Exchange that listing of and permission to
deal in the GDI Shares in issue upon Completion will or is
likely to be withdrawn or suspended for more than 60 days;
(G) the Listing Committee of the Stock Exchange approving
and granting listing of, and permission to deal in, the
Consideration Shares and, if issued, the Additional
Consideration Shares on the Stock Exchange;
(H) the creditors of the GDI Group having approved and
consented to the transactions contemplated by or referred
to in the Acquisition Agreement;
(I) completion of the restructuring of the liabilities of
the GDI Group;
(J) completion of the transactions contemplated by the
Corporatisation and the Acquisition Agreement;
(K) the signing (where applicable) and delivery of each
Water Agreement (other than the COM Contract and the
Post-Construction Asset Transfer Agreement);
(L) the delivery by GDH Limited to the Company of a valuation
of the Water Assets by a PRC appraisal company designated
by the State-owned Assets Bureau of the PRC and the related
confirmation documents;
(M) WaterCo acquiring the right to supply water to Hong Kong
in accordance with the Concession Agreement;
(N) the granting and availability of financing facilities
on terms acceptable to the Company;
(O) an agreement on water tariffs acceptable to the Company;
(P) the delivery of copies of the GDI Group Accounts, GDF
Accounts and GDT Accounts by the Company to GDH Limited;
(Q) the delivery of copies of the GH Holdings Accounts by
GDH Limited to the Company;
(R) the signing of each of the COM Contract and the
Post-Completion Asset Transfer Agreement;
(S) the delivery by GDH Limited to the Company of PRC legal
opinions satisfactory to the Company;
(T) the delivery by GDH Limited to the Company of a legal
opinion in relation to the due incorporation of GH Holdings
and the issue and transfer of the shares in GH Holdings;
(U) there being, in the reasonable opinion of GDH Limited,
no material adverse change in the financial position,
business or property, results or operations, business
prospects or assets of each of or any of the GDI Group
including the Company, GD Finance and GD Timber) (taken as
a whole), the Company or any of the Material Subsidiaries
from the position as at 30 September 1999;
(V) there being, in the reasonable opinion of the Company,
no material adverse change in the financial position,
business or property, results or operations, business
prospects or assets of the GH Group and the Dongshen Water
Supply Project from the position as at 30 September 1999;
(W) the signing and delivery of an electricity supply
agreement between the Dongguan Power Bureau and WaterCo;
(X) approval of the water consumption fees; and
(Y) the entering into of an earn-out agreement related to
the future financial performance of the GH Group on terms
satisfactory to GDH Limited and the Company.
Completion
Completion shall take place on or before the fifth business
day following the date on which all of the above conditions
shall have been satisfied, or waived (as the case may be)
by the Company or GDH Limited in respect of certain of the
above conditions (including the Whitewash Waiver condition)
or such later date as the parties to the Acquisition
Agreement may agree. In any event, all the above conditions
must be fulfilled or waived on or before 30 June, 2000 (or
such later date as may be agreed by the parties to the
Acquisition Agreement).
4. The Dongshen Water Supply Project
The Dongshen Water Supply Project is a large scale interbasin
water project that takes and transports water from the
Dongjiang River at Qiaotou Town in Dongguan, Guangdong
Province to the Shenzhen Reservoir in Shenzhen for supply
to Hong Kong, Shenzhen and Dongguan.
On Completion, the Dongshen Water Supply Project will
comprise, amongst other things, a 30-year operating
concession to supply water to Hong Kong, to Shenzhen and to
Dongguan, water supply contracts, plant and equipment, and
land use rights. The Dongshen Water Supply Project has a
total annual capacity of 1.7 billion cubic meters and
currently provides approximately 75 per cent. of the water
consumed in Hong Kong.
The Dongshen Water Supply Project is currently owned and
operated by the Guangdong Province as an administrative
bureau. In 1998, the income and net profit after tax of the
Dongshen Water Supply Project were approximately Rmb2.4
billion and Rmb1.9 billion respectively, with over 90 per
cent. its income derived from the supply of water to Hong
Kong.
5. Details relating to GD Finance and GD Timber
Part of the consideration for the Acquisition shall be
satisfied by the transfer of the GDF Shares and the GDT Shares
to GDH Limited by the Company and the waiving and releasing
of certain claims which the GDI Group has against GDE arising
from certain performance guarantees provided to the Company
by GDE in respect of GD Finance and GD Timber. The unaudited
net asset value of GD Finance as at 30 September 1999 was
HK$77,636,000. The unaudited net liability of GD Timber as
at 30 September 1999 was HK$163,515,000. For the nine months
ended 30 September 1999, GD Finance had a profit (before tax
and minority interests) of HK$1,393,000. For the nine months
ended 30 September 1999, GD Timber had a loss of
HK$58,559,000.
6. Connected Transactions
The contractual arrangements represented by certain of the
agreements which WaterCo will on or before Completion enter
into, or have the benefit of, in respect of the management
and operation of the Dongshen Water Project and the supply
of water to, amongst others, Hong Kong may constitute
on-going connected transactions for the Company which the
GDI Directors consider would normally require full
disclosure and prior approval of the Independent
Shareholders.
Once the particulars of the commercial arrangements have
been agreed, an application will, if thought necessary, be
made to the Stock Exchange for a waiver from strict
compliance with the relevant disclosure and/or independent
shareholders' approval requirements of the Listing Rules in
respect of such connected transactions. The waiver will be
subject to approval by the Independent Shareholders at the
Extraordinary General Meeting referred to below.
7. Effects of the Acquisition on the Company
Details of the effects of the Acquisition on the financial
position of the GDI Group will be included in the circular
to be despatched to GDI Shareholders referred to below.
8. Increase in authorised share capital
As at the date of this announcement, the authorised share
capital of the Company was HK$2,500,000,000 divided into
5,000,000,000 GDI Shares of which 2,561,636,920 GDI Shares
were in issue and US$200,000 divided into 200,000 GDI
Preference Shares of which 86,950 GDI Preference Shares were
in issue. In order to issue the Consideration Shares and the
Additional Consideration Shares and to provide for
additional authorised but unissued share capital to
facilitate the issue of GDI Shares pursuant to convertible
instruments. The GDI Directors propose to increase the
authorised ordinary share capital of the Company from
HK$2,500,000,000 to HK$4,000,000,000 by the creation of an
additional 3,000,000,000 GDI Shares.
9. Restructuring of the financial liabilities of the GDI
Group
The Proposed Debt Restructuring
As previously announced by the Company on 4 March 1999, the
Company has requested the GDI Group Financial Creditors to
abide by certain standstill terms during the interim period
pending the finalisation of a proposal to restructure the
liabilities of the GDI Group with GDI Group Financial
Creditors, which include the continued payment of interest
at contractual rates and a postponement of repayment of
principal and proposals as to how the GDI Group intends to
operate under the standstill.
Since then, the Company and the GDI Group Financial Creditors
have been negotiating the restructuring of the financial
liabilities of the GDI Group. On 16 December 1999, the
Company and the Steering Committee signed a termsheet
containing the principal terms on which it is proposed to
restructure the financial liabilities of the GDI Group.
The terms of the debt restructuring termsheet are indicative
only and are not intended to create legally enforceable
obligations. The Company and the GDI Group Financial
Creditors have yet to negotiate and finalise a formal
agreement relating to the restructuring of the financial
liabilities of the GDI Group. It is expected that definitive
documentation relating to the debt restructuring will be
entered into by 31 March 2000.
The termsheet includes the following provisions:
(i) the repayment of approximately 45 per cent of the
existing financial liabilities of the GDI Group owing to
banks by 31 March 2005 with the balance being refinanced at
such time;
(ii) a standardised rate of 3 month HIBOR (Hong Kong Inter
Bank Offered Rate) or LIBOR (London Interbank Offered Rate)
plus applicable margins to be applied to all the rescheduled
borrowings in place of the original contractual rates of
interest;
(iii) existing security held by certain banks will
continue to be recognised;
(iv) certain covenants will be given by the Company to the
GDI Group Financial Creditors;
(v) certain covenants will be given by the Company to the
GDI's Group Financial Creditors; and
(vi) an asset disposal programme of the GDI Group (excluding
GD Brewery) will be prepared and will be reviewed by the
Steering Committee and asset disposal procedures will be
established requiring the Company to consult the Steering
Committee regarding the disposal of assets and businesses.
The proposed restructuring of the liabilities of the GDI
Group involves a schedule under which the financial
liabilities of the GDI Group will be repaid or refinanced
by no later than 31 March 2005. Monies lent to GDI's
subsidiaries and associated companies incorporated in
mainland China are excluded from and are not subject to the
proposed debt restructuring. Following the proposed debt
restructuring, based on the indicative termsheet, the
current level of financial liabilities of the GDI Group which
are approximately HK$8,133 million, would be reduced by
approximately 45 per cent. over a five year period and the
outstanding balance would be refinanced.
Liabilities of certain subsidiaries of the Company are not
included in the proposed debt restructuring and it is
currently envisaged that the liabilities of such
subsidiaries will be subject to separate terms under
restructuring arrangements to be negotiated with their
respective financial creditors. The positions in respect of
GD Brewery, GD Building Industries and GD Tannery are set
out below.
No arrangements regarding the GDI Convertible Bonds or FRNs
have been made with their respective holders, although it
is envisaged that the terms of the Alexandra Bond, the 2002
CBs and the FRNs may have to be revised to reflect the
proposed restructuring of the liabilities of the GDI Group.
GDI has outstanding 86,950 GDI Preference Shares carrying
a dividend of 31/4 per cent per annum. The dividend in respect
of the GDI Preference Shares for the semi-annual periods of
7 October 1998 to 6 April 1999 and 7 April 1999 to 6 October
1999 have not been paid. Such unpaid dividends are cumulative
and according to the terms of the GDI Preferences Shares are
payable when the Company has profits. It is not currently
envisaged that the terms of the GDI Preference Shares will
be affected by the proposed debt-restructuring of the GDI
Group.
GD Brewery
As previously announced, GD Brewery is not included in the
standstill arrangements. Accordingly, the liabilities of GD
Brewery and its subsidiaries will not be included in the
proposed debt restructuring of the GDI Group.
GD Building Industries and GD Tannery
It is currently envisaged that GD Building Industries and
GD Tannery may each enter into separate debt restructuring
arrangements with their respective financial creditors
regarding their respective liabilities. However no final
decision has been made as to whether GD Building Industries
and GD Tannery will enter into separate arrangements or form
part of the general debt restructuring of the GDI Group. In
the event that either GD Building Industries or GD Tannery
or both enter into separate arrangements, it is envisaged
that such arrangements would involve the rescheduling of
their respective financial liabilities and the agreeing of
revised interest rates, restructuring fees and appropriate
covenants. It is anticipated that final agreements relating
to such arrangements would be entered into by 31 March 2000.
10. Extraordinary General Meeting
The Extraordinary General Meeting will be convened to
consider, and if thought fit, approve, amongst other things,
the Acquisition and the Whitewash Waiver.
A notice convening the Extraordinary General Meeting will
be despatched to GDI Shareholders together with a circular
containing information in respect of, amongst other things,
the Acquisition and the Whitewash Waiver as soon as
reasonably practicable.
11. The Whitewash Application
Immediately after Completion, GDH Limited, GDE and parties
acting in concert with them will hold an aggregate of
approximately 69.85 per cent. of the Enlarged Share Capital
as a result of the issue of the Consideration Shares and the
Additional Consideration Shares (based on the number of GDI
Shares in issue as at the date of this announcement and the
Consideration Shares and, assuming that they are issued, the
Additional Consideration Shares). This represents an
increase of more than 5 per cent. of their lowest aggregate
percentage holding of voting rights in the Company of GDH
Limited, GDE and parties acting in concert with them during
the 12 months preceding the allotment and issue of the
Consideration Shares.
Under the Takeovers Code, upon Completion, GDH Limited, GDE
and parties acting in concert with them would be obliged to
make a general offer to purchase all existing issued GDI
Shares other than those held by GDH Limited, GDE or parties
acting in concert with them.
An application will be made by GDH Limited, GDE and parties
acting in concert with them to the Executive for the
Whitewash Waiver. In the event that the Whitewash Waiver is
not granted by the Executive or granted but not approved by
the Independent Shareholders at the Extraordinary General
Meeting, the Acquisition will not complete unless such
condition is waived by GDH Limited. No decision has yet been
made by GDH Limited as to what they will do in the event that
the condition relating to the Whitewash Waiver is not
satisfied.
If the Whitewash Waiver is granted by the Executive and
approved by the Independent Shareholders at the
Extraordinary General Meeting, the shareholdings of GDH
Limited, GDE and parties acting in concert with them in the
Company will represent approximately 69.85 per cent. of the
Enlarged Share Capital immediately after Completion.
Pursuant to the Takeovers Code, as the shareholdings of GDH
Limited, GDE and parties acting in concert with them in the
Company immediately upon Completion will exceed 50 per cent.,
GDH Limited, GDE and parties acting in concert with them will
be free to acquire additional GDI Shares thereafter without
incurring any further obligations under the Takeovers Code.
12. Waiver Relating to Shares of GD Brewery, GD Building
Industries and GD Tannery
GDI is the holding company of, and has a controlling interest
in GD Brewery, GD Building Industries and GD Tannery holding
respectively 72 per cent., 57.16 per cent. and 71.56 per cent.
of their respective issued shares.
Under the Takeovers Code, GDH Limited, GDE and parties acting
in concert with them will, on Completion and following the
issue of the Consideration Shares to GDH Limited, be deemed
to have acquired control, as defined in the Takeovers Code,
of each of GD Brewery, GD Building Industries and GD Tannery
by virtue of GDI's controlling interest in such companies
and subject as set out below will require GDH Limited, GDE
and parties acting in concert with them to make a general
offer for the existing issued shares of such companies other
than those held by GDI.
An application will be made to the Executive by GDH Limited,
GDE and parties acting in concert with them for a waiver from
the requirement to make a general offer for all the existing
shares of each of GD Brewery, GD Building Industries and GD
Tannery. In the event that the waiver to make a general offer
for all the existing shares of GD Brewery, GD Building
Industries and GD Tannery is not granted by the Executive,
the Acquisition may still proceed provided that GDH Limited
waives the condition in the Acquisition Agreement relating
to such waiver and makes a mandatory general offer for such
shares. No decision has yet been made by GDH Limited as to
what they will do in the event that the Executive does not
grant the waiver.
13. Very Substantial Acquisition and Connected Transaction
of the Company
The Acquisition constitutes a very substantial acquisition
for the Company pursuant to Rule 14.07 of the Listing Rules.
The preliminary pro-forma consolidated net assets before
long term liabilities as at 30 September 1999 of GH Holdings
was Rmb20,967,323,000 and the preliminary pro-forma
consolidated net assets at 30 September 1999 of GH Holdings
was Rmb415,000, as compared to the unaudited net asset of
the GDI Group as at 30 June 1999 of HK$4,866,912,000.
The Acquisition will also be a connected transaction of the
Company pursuant to Rule 14.23 of the Listing Rules since
GDH Limited is a connected person of the Company.
The Acquisition will, therefore, be subject to the approval
of GDI's shareholders at the Extraordinary General Meeting.
Any GDI shareholder who is interested in the Acquisition,
including GDE and its associates will be required to abstain
from voting at the Extraordinary General Meeting.
The Company has requested a suspension in dealings of its
securities on the Stock Exchange. The Acquisition and the
Company's application for a lifting of the suspension would
ordinarily be treated by the Stock Exchange as if it were
an application for listing from a new applicant for all
purposes. An application will be made by the Company to the
Stock Exchange for any related application for a lifting of
the suspension of dealings in the Company's securities on
the Stock Exchange and/or the Acquisition not to be treated
as a new listing of GDI Shares on the Stock Exchange.
14. Shareholding
It is expected that the shareholding structure of the Company
upon Completion, and assuming the Additional Consideration
Shares are issued, will be as set out below. However, changes
to such shareholdings, in particular those of GDE and GDH
Limited, may occur as a result of the restructuring of the
liabilities of the GDI Group and the GDE Group.
Before Acquisition After Acquisition
Percentage Percentage
of total number of total number
of issued GDI of issued GDI
GDI Shares Shares (Note) GDI Shares shares (Note)
Public 1,565,179,883 61.1% 1,565,179,883 30.15%
GDE 996,457,037 38.9% 996,457,037 19.19%
GDH Limited 0.0 0.0% 2,630,000,000 50.66%
2,561,636,920 100.0% 5,191,636,920 100.0%
Note: Percentages of total number of issued GDI Shares
are approximate and do not take into account the issue of
further ordinary shares including pursuant to the exercise
of share options and convertible securities.
The figures do not take account any GDI Shares which may be
transferred to the financial creditors of the GDE Group
pursuant to the GDE Group restructuring.
The shareholding in GDI as at the date of this announcement
is as follows:
Note: This includes the GDF Group and the GDT Group.
Immediately following the Completion and the issue of the
Consideration Shares and, assuming they are issued, the
Additional Consideration Shares, the shareholding in GDI is
expected to be as set out below. As stated above, changes
to such shareholdings, in particular those of GDE and GDH
Limited, may occur as a result of the restructuring of the
liabilities of the GDI Group and the GDE Group
15. Reasons for and benefits of the Acquisition
The GDI Directors believe that the Acquisition, being part
of the proposed restructuring of the GDI Group, will assist
to rebuild international creditors' and investors'
confidence in the GDI Group, to streamline its businesses,
to enhance the position of the GDI Group, in particular
through providing the GDI Group with cash flow from the
Dongshen Water Supply Project and is in line with the
focussed business strategy of the Company. The future
business strategy of the GDI Group will be to focus on the
core businesses of utilities, infrastructure, property and
hotel, whilst implementing measures to disengage from
non-core businesses which currently include brewery,
tannery, curtain wall construction, cement, timber, malting,
retail, trading, travel and finance and other businesses.
The benefits for the GDI Group are anticipated to be as
follows:
(A) the Company's financial position will be improved in
light of the additional cash flow from WaterCo;
(B) the financial creditors of the GDI Group will be
requested to agree to rescheduled repayments of existing
principal due from the GDI Group (other than the Guangdong
Brewery Holdings Limited and its subsidiaries);
(C) the number of issued GDI Shares will be increased by
virtue of the allotment and issue of the Consideration Shares
to GDH Limited;
(D) the business focus of the GDI Group, particularly in
utilities and infrastructure, will be enhanced.
Further announcements will be released by the Company, GD
Brewery, GD Building Industries and GD Tannery as and when
appropriate.
Trading in the securities of each of the Company, GD Brewery,
GD Building Industries and GD Tannery on the Stock Exchange
was suspended at the request of the Company, GD Brewery, GD
Building Industries and GD Tannery from 10:00 a.m. on 16
December 1999. Application has been made to the Stock
Exchange to resume trading in the securities of the Company,
GD Brewery, GD Building Industries and GD Tannery on the
Stock Exchange at 10:00 a.m. on 17 December 1999.
INVESTORS ARE ADVISED TO EXERCISE CAUTION WHEN DEALING IN
THE SECURITIES OF THE COMPANY.
Definitions of terms used in this announcement:
Term Meaning
"Acquisition" the acquisition by the
Company from GDH Limited of
8,100 issued shares of
US$1.00 each in the capital
of GH Holdings,
representing 81.00 per
cent. of the issued share
capital of GH Holdings
"Acquisition Agreement" the conditional agreement
entered into between GDH
Limited and the Company on
16 December 1999 in respect
of the Acquisition
"Additional Consideration means an aggregate of up to
Shares" 330,000,000 GDI Shares
"Alexandra Bond" a convertible bond in the
principal amount of US$27
million issued by the
Company in favour of
Alexandra Global
Investment Fund I Ltd. with
a right of conversion into
GDI Shares and which will
be due on 15 December 2001
"COM Contract" the construction, oversight
and management contract
relating to the Renovation
Project to be executed
between WaterCo and the
Guangdong Water Authority
"Company" or "GDI" Guangdong Investment
Limited, a company
incorporated in Hong Kong
with limited liability and
whose ordinary shares are
listed on the Stock
Exchange
"Completion" completion of the
transactions contemplated
by and in accordance with
the Acquisition Agreement
"Concession Agreement" a concession agreement to be
entered into by the
Dongshen Water Bureau on
behalf of the Guangdong
Provincial Government and
WaterCo in relation to the
Dongshen Water Supply
Project
"Consideration Shares" 2,300,000,000 new GDI Shares
and the expression
"Consideration Share"
shall be construed
accordingly
"Corporatisation" means the corporatisation of
the Dongshen Water Supply
Project which includes,
without limitation, (i)
the establishment of
WaterCo and (ii) the
entering into of the Water
Agreements
"Disposal" the transfer by the Company
to GDH Limited of the
entire issued ordinary
share capital of GDF and
GDT comprising part of the
consideration payable by
GDI
"Dongguan Water Supply means the agreement
Agreement" relating to the supply of
water to Dongguan to be
entered into between
WaterCo and the Dongguan
Municipal Government
"Dongshen Water Supply a large scale
Project" interbasin water project
which has been operated by
the Guangdong Province
Dongshen Water Supply
Management Bureau,
including, without
limitation, a network of
pumping stations, water
channels, pipelines,
aqueducts, tunnels and
other conduits, dams,
reservoirs and related
appurtenances, water
quality monitoring
systems, a biological
nitrification facility,
hydro-power generation
stations, engineering
maintenance and repair
factories and other
related equipment and
facilities and all as more
particularly described in
the section "The Dongshen
Water Supply Project"
"Enlarged Share Capital" the issued share capital of
the Company as enlarged by
the issue of the
Consideration Shares and,
if issued, the Additional
Consideration Shares
"Executive" the Executive Director of the
Corporate Finance Division
of the Securities and
Futures Commission or any
delegate of the Executive
Director
"Extraordinary General the extraordinary
Meeting" general meeting of the
Company to be held to
consider and if thought
fit, approve, inter alia,
the Acquisition
"FRNs" US$50 million floating rate
notes issued by the Company
on 20 September 1995 and
due in September 2000
"GD Brewery" Guangdong Brewery Holdings
Limited
"GD Building Industries" Guangdong Building
Industries Limited
"GDE" Guangdong Enterprises
(Holdings) Limited, a
company incorporated in
Hong Kong with limited
liability and which is
wholly owned by the
Guangdong Provincial
Government
"GDE Group" GDE and its subsidiaries
"GD Finance" Guangdong Finance Co.,
Limited, a wholly-owned
subsidiary of the Company
"GD Tannery" Guangdong Tannery Limited
"GD Timber" Guangdong Timber Limited, a
wholly-owned subsidiary of
the Company
"GDF Accounts" means the audited
consolidated balance sheet
as at 31 December 1999 and
profit and loss accounts of
GD Finance and its
subsidiaries and
associated companies
(including the notes, the
directors' and auditors'
reports and other
documents required by law
to be annexed thereto) for
the year ended 31 December
1999
"GDF Group" Guangdong Finance Co.
Limited and its
subsidiaries
"GDF Shares" 2 ordinary shares of HK$10.00
each of GD Finance
representing the entire
issued share capital of GD
Finance with voting rights
"GDH Limited" GDH Limited, a company
incorporated with limited
liability under the laws of
Hong Kong and which is
ultimately wholly-owned by
the Guangdong Provincial
Government
"GDI Convertible Bonds" the Alexandra Bond and the
2002 CBs
"GDI Directors" the directors of the Company
other than the independent
non-executive directors of
the Company appointed in
respect of the Acquisition
"GDI Group" GDI and its subsidiaries and
where the context requires
excluding Guangdong
Brewery Holdings Limited
and its subsidiaries
"GDI Group Accounts" means the audited
consolidated balance sheet
as at 31 December 1999 and
audited consolidated
profit and loss accounts of
GDI and its subsidiaries
and associated companies
(including the notes, the
director's and auditor's
reports and other
documents required by law
to be annexed thereto) for
the year ending 31 December
1999
"GDI Group Financial the financial
Creditors" creditors of the GDI Group
(excluding GD Brewery)
"GDI Preference Shares" 31/4 per cent. redeemable
cumulative convertible
preference shares of
US$1.00 each in the capital
of GDI
"GDI Shares" ordinary shares of HK$0.50
each of GDI
"GDT Accounts" the audited consolidated
balance sheet as at 31
December 1999 and profit
and loss accounts of GD
Timber and its
subsidiaries and
associated companies
(including the notes, the
director's and auditor's
reports and other
documents required by law
to be annexed thereto) for
the year ended 31 December
1999
"GDT Group" Guangdong Timber Limited and
its subsidiaries
"GDT Shares" 2 ordinary shares of HK$1.00
each of GD Timber
representing the entire
issued share capital of GD
Timber with voting rights
"GH Group" GH Holdings and its
subsidiaries including
WaterCo, which are
currently owned by the
Guangdong Provincial
Government
"GH Holdings" GH Water Supply (Holdings)
Limited, a company
incorporated in the Cayman
Islands with limited
liability which will,
immediately before
Completion, be owned as to
100 per cent. by GDH
Limited
"GH Holdings Accounts" means the audited
consolidated balance sheet
as at 31 December 1999 and
profit and loss accounts of
GH Holdings and its
Subsidiaries and
associated companies for
the year ended 31 December
1999, assuming the
Corporatisation had been
completed as at 1 January
1999
"Guangdong Provincial the People's
Government" Government of Guangdong
Province
"Hong Kong" the Hong Kong Special
Administrative Region of
the People's Republic of
China
"Independent Board the committee of the board of
Committee" directors of Independent
Directors
"Independent Directors" the independent non-
executive directors of the
Company in respect of the
Acquisition
"Independent Financial Adviser" Credit Suisse First
or "Credit Suisse First Boston (Hong Kong)
Boston" Securities Limited, an
investment adviser and
dealer registered under
the Securities Ordinance
(Chapter 333 of the Laws of
Hong Kong)
"Independent Shareholders" the holders of GDI shares
other than GDE and parties
acting in concert and its
associates
"Listing Rules" Rules Governing the Listing
of Securities on The Stock
Exchange of Hong Kong
Limited
"Material Subsidiaries" Guangdong (HK) Tours Co.,
Limited, Guangdong Power
(International) Limited,
Guangdong Tannery Limited,
Guangdong Brewery Holdings
Limited, Guangdong
Properties Holdings
Limited, Super Time
Development Limited and
Teem (Holdings) Limited
"MOFTEC" the Ministry of Foreign Trade
and Economic Co-operation
of the PRC
"Post-Construction Asset the post-construction
Transfer to be entered asset transfer agreement
Into Agreement" between the Guangdong
Provincial Government
and Yue Gang on completion
of the Renovation Project
"PRC" the People's Republic of
China excluding Hong Kong,
Macau and Taiwan
"Renovation Project" the Dongshen Water Supply
Renovation Project which
will transform most of the
existing water supply
channels and canals into
enclosed water pipes
"SAFE" the State Administration of
Foreign Exchange in the PRC
"SFC" Securities and Futures
Commission
"Shenzhen Water Supply the agreement relating
Agreement" to the supply of water to
Shenzhen to be entered into
between WaterCo and the
Shenzhen Municipal
Government
"Steering Committee" the steering committee of the
GDI Group Financial
Creditors.
"Stock Exchange" The Stock Exchange of Hong
Kong Limited
"Takeovers Code" Hong Kong Code on Takeovers
and Mergers
"Water Agreements" the Concession Agreement,
the Water Taking Licence,
the Water Project
Contract, the COM
Contract, the Hong Kong
Water Supply Agreement,
the Shenzhen Water Supply
Agreement, the Dongguan
Water Supply Agreement and
the Post-Construction
Asset Transfer Agreement
"WaterCo" Yue Gang Water Supply Company
Limited, a sino-foreign
co-operative joint venture
to be established in the
PRC
"Water Project Contract" the water project transfer
contract to be executed
between WaterCo and the
Guangdong Province General
Water Supply Project
Administration Bureau and
the Guangdong Water
Authority
"Water Taking Licence" the valid water-taking
licence issued or to be
issued by the Guangdong
Water Authority
authorising the diversion
of 2,423 billion cubic
metres of water from the
East River at Qiaotou
Township in Dongguan
"Whitewash Waiver" a waiver of the obligation of
GDH Limited, GDE and
parties acting in concert
with them to make a general
offer for all existing
issued GDI Shares not
otherwise held or to be
held by GDH Limited, GDE
and parties acting in
concert with them on
Completion pursuant to
Note 1 of the Notes on
Dispensation from Rule 26
of the Takeovers Code
"Yue Gang" Yue Gang Investment Company
Limited, a wholly state-
owned limited liability
enterprise legal person
controlled by the
Guangdong Provincial
C Government
"2002 CBs" convertible bonds issued by a
wholly-owned subsidiary of
GDI which are due on 7th
July, 2002 and have a right
of conversion into GDI
Shares and of which
US$112,700,000 (in nominal
amount) is outstanding
Note: In this Announcement figures originally expressed
in HK$ have been converted into US$ equivalents for the
purposes of this Announcement at the rate of US$1.00 =
HK$7.75 and vice versa, and in addition, figures have been
rounded.
By order of the Board
Guangdong Investment Limited
Kang Dian
Executive Deputy Chairman
Herbert Hui
Managing Director
By order of the Board
Guangdong Brewery Holdings Limited
Au Wai Ming
Chairman
By order of the Board
Guangdong Building Industries Limited
Cai Jinghua
Chairman
By order of the Board
Guangdong Tannery Limited
Yu Fang
Chairman
Hong Kong, 16 December, 1999
The directors of each of Guangdong Investment Limited (other
than Mr. Chen Maoqi who could not be contacted prior to the
issue of this announcement), Guangdong Brewery Holdings
Limited (other than Mr. V-nee Yeh). Guangdong Building
Industries Limited and Guangdong Tannery Limited (other than
Mr. James Hok Lai Cheng) jointly and severally accept full
responsibility for the accuracy of information contained in
this announcement (other than the information provided by
the advisers to the Guangdong Provincial Government and set
out in italics in this announcement) and confirm, having made
all reasonable inquiries, that to the best of their knowledge,
opinions expressed in this announcement have been arrived
at after due and careful consideration and there are no other
facts not contained in this announcement, the omission of
which would make any statement in this announcement
misleading.
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