CHEUNG TAI HONG<0199> - Announcement
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 this announcement.
CHEUNG TAI HONG HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
DISCLOSEABLE TRANSACTION - ASSET ACQUISITION
SUMMARY
The board of directors of Cheung Tai Hong wishes to
announce that Cheung Tai Hong Technology has entered into a
conditional agreement for the acquisition of the entire issued share
capital of Sunray currently owned by Cheng.
Sunray is an investment holding company whose sole investment is 19%
interest in the issued share capital of Value-Net.
The consideration is HK$51,300,000 which will be satisfied as to
HK$29,000,000 to be payable in cash with the remaining balance of
HK$22,300,000 to be satisfied by the issue of the Consideration
Shares.
The proposed Asset Acquisition constitutes a discloseable
transaction for Cheung Tai Hong under the Listing Rules. Cheung Tai
Hong will send a circular containing further details on the Asset
Acquisition to the shareholders of Cheung Tai Hong as soon as
practicable.
At the request of Cheung Tai Hong, trading in the Shares was
suspended with effect from 10:00 a.m. on 18th February, 2000. An
application has been made to the Stock Exchange for the resumption of
trading in the Shares with effect from 10:00 a.m. on 22nd February,
2000.
S & P AGREEMENT DATED 17th FEBRUARY, 2000
Parties
(1) Purchaser: Cheung Tai Hong Technology, a
wholly-owned subsidiary of
Cheung Tai Hong;
(2) Vendor: Cheng, an independent third
party not connected with the
Directors, chief executive or
substantial shareholders of
Cheung Tai Hong or any of its
subsidiaries or any of their
respective associates (as
defined in the Listing
Rules). He is also not
related to Mr. Lee Tung Hai,
the relevant placee under the
Top-up Placement and
Subscription.
Asset Acquired
1 share of US$1.00 in Sunray, representing the entire issued share
capital of Sunray, which is the legal and beneficial owner of 950,000
shares of HK$1.00 each in Value-Net, representing 19% of its entire
issued share capital. Value-Net owns the entire issued share capital
of MIH.
Consideration
The consideration for the Asset Acquisition is HK$51,300,000. The
consideration was negotiated on an arm's length basis between the
Vendor and the Purchaser with reference to the value of Value-Net to
be valued by American Appraisal Hongkong Limited, a valuer appointed
by the Vendor.
Payment Method
The consideration for the Asset Acquisition will be satisfied as
follows:-
(1) as to HK$29,000,000 which shall be paid to the Vendor (or as it may
direct) in cash on Completion; and
(2) as to HK$22,300,000 to be satisfied by the issue and allotment to
the Vendor (or as it may direct) of the Consideration Shares on
Completion.
The Cash Consideration of HK$29,000,000 is to be financed out of the
Top-up Placement and Subscription. For more details on the Top-up
Placement and Subscription, please refer to another announcement
dated the same date of this announcement issued by Cheung Tai Hong in
relation to the Top-up Placement and Subscription.
For the Consideration Shares, the issue price of HK$0.20 was
determined with reference to the net book value of the Group of
approximately HK$289 million as disclosed in the latest published
audited consolidated accounts of Cheung Tai Hong as at 31st March,
1999 (i.e. equivalent to approximately HK$0.21 per Share as at 31st
March, 1999) and represents a discount of 69.7% to the closing price
of HK$0.66 as of 17th February, 2000 and a discount of approximately
55.6% to the average closing price of the Shares of HK$0.45 in the 10
days prior to 18th February, 2000. The Consideration Shares represent
approximately 7.4% of the existing issued share capital of Cheung Tai
Hong and approximately 6.9% of the existing issued share capital of
Cheung Tai Hong as enlarged by the issue and allotment of the
Consideration Shares and approximately 6.3% of the existing issued
share capital of Cheung Tai Hong as enlarged by the issue and
allotment of the Consideration Shares and 145,000,000 new Shares upon
completion of the Top-up Placement and Subscription. The
Consideration Shares are to be issued pursuant to the general mandate
granted to the Directors at the annual general meeting of Cheung Tai
Hong held on 28th September, 1999.
The Consideration Shares shall, when issued, rank pari passu in all
respects with the existing Shares in issue at the date of
allotment.
Following Completion, Cheng will hold approximately 6.9% of the
existing issued share capital of Cheung Tai Hong as enlarged by the
issue and allotment of the Consideration Shares and approximately
6.3% of the existing issued share capital of Cheung Tai Hong as
enlarged by the issue and allotment of the Consideration Shares and
145,000,000 new Shares upon completion of the Top-up Placement and
Subscription.
Conditions
The Completion is conditional upon fulfillment of the following
conditions:
(1) the Listing Committee of the Stock Exchange granting or agreeing to
grant (subject to allotment) listing of, and permission to deal in,
the Consideration Shares;
(2) business valuation prepared by American Appraisal Hongkong Limited
on Value- Net having been delivered to the Purchaser or Cheung Tai
Hong reporting a value of not less than HK$300,000,000 and on such
basis and subject to such qualifications or assumptions (if any)
acceptable to the Purchaser; and
(3) the Purchaser being satisfied with the results of the due diligence
investigation conducted by or on behalf of the Purchaser on each of
the Sunray Companies including but not limited to the following:-
(i) the financial, taxation, trading and other position of each of the
Sunray Companies;
(ii) the title of each of the Sunray Companies to its assets; and
(iii) that all necessary approvals, licences, consents, authorisation
and permits have been obtained in respect to the operation or business of
each of the Sunray Companies.
If the conditions are not fulfilled (unless waived by the Purchaser)
prior to the date falling 21 days after the date of the S&P Agreement
or such later date as the Purchaser may designate, the S&P Agreement
shall terminate and no party to the S&P Agreement shall have any
liability to the other party save in respect of any prior breaches of
the S&P Agreement. It is the intention of the Purchaser to take the
valuation of Value-Net as at 31st January, 2000 as one of the basis
before the results reported by American Appraisal Hongkong Limited is
acceptable.
Completion
Completion will take place on the date falling on the second
business day after the date on which all the conditions stated above
are fulfilled (or waived by the Purchaser) or such later date as the
Purchaser may designate.
Information on Sunray
Sunray is legally and beneficially owned by the Vendor. Sunray is an
investment holding company whose sole investment is 19% interest in
the existing issued share capital of Value-Net. The remaining
interest in the existing issued share capital of Value-Net is
currently held as to 50% by a third party unconnected with the
Directors, chief executive or substantial shareholder of Cheung Tai
Hong or any of its subsidiaries or any of their respective associates
(as defined in the Listing Rules) and as to 31% by two companies to
which the Vendor is the ultimate beneficial owner. Since April 1998,
Value-Net has been engaged in the development of internet
communication technology in voice over internet protocol and the
manufacturing of related system hardware and software in Hong Kong,
Taiwan and China. The net liabilities of Value-Net as disclosed in
its latest audited accounts as at 31st March, 1999 was approximately
HK$12.9 million. The loss of Value-Net for the period from 17th July,
1993, being its date of incorporation, to 31st March, 1998 and the
year ended 31st March, 1999 was approximately HK$40,000 and HK$17.8
million respectively.
The Vendor, being one of the co-founders of Value-Net, is currently
a director of such company and will continue to be a director of such
company after Completion. The Vendor will continue to have management
role in Value-Net. The board of directors of Value-Net currently
consists of 3 directors and will consist of not more than five
directors immediately after Completion. Upon completion, the
Purchaser is entitled to nominate one director to the board of
directors of Value-Net and one additional director will be nominated
by the 50% shareholder of Value-Net.
MIH is currently not carrying on any business activities. It is
currently intended that MIH will be the research and development arm
of the group and will engage in the development of information
technology and manufacturing of the user-end devices.
Other Terms of the S&P Agreement
Pursuant to the S&P Agreement, the Vendor irrevocably guarantees to
the Purchaser that for the financial year ending 31st March, 2001,
the consolidated profit after taxation and minority interests but
before exceptional and extraordinary items of Value-Net as shown in
the audited consolidated financial statements of Value-Net for the
financial year ending 31st March, 2001 prepared in accordance with
the generally accepted accounting principles in Hong Kong (the
`Audited 2001 Net Profit') shall not be less than HK$16,000,000.
Under the S&P Agreement, no profit guarantee has been given by the
Vendor for the year ending 31st March, 2000. The net profit of
Value-Net for the 10 months ended 31st January, 2000 as disclosed in
its unaudited management accounts for the 10 months ended 31st
January, 2000 was approximately HK$14.6 million.
The Vendor also undertakes with the Purchaser that it shall procure
the subscription by a company wholly-owned by the Vendor of 550,000
new shares of HK$1.00 each in Value-Net in cash, representing
approximately 9.9% of the existing issued share capital of Value-Net
as enlarged by the issue and allotment of such 550,000 new shares, at
the subscription price of HK$54 per share within 3 months after the
date on which Completion takes place. After completion of the
subscription of such 550,000 new shares as aforesaid, the Purchaser's
interest in the then issued share capital of Value-Net will be
diluted to approximately 17.12%.
The Purchaser has an option to require the Vendor to purchase the
Sale Share at a price equals to HK$54 multiplied by the number of
shares of HK$1.00 each in Value-Net owned by Sunray at the date of
the option notice if (i) the Vendor shall fail to complete the
subscription of the said 550,000 new shares in Value-Net within 3
months after the date of Completion as aforesaid, or (ii) the Audited
2001 Net Profit shall be less than HK$16,000,000. The Purchaser may
exercise such option within 1 month after (i) the Vendor's failure to
procure subscription by the expiry of 3 months from the date of
Completion or (ii) the receipt by the Purchaser of the audited
consolidated financial statements of Value-Net for the financial year
ending 31st March, 2001 (as the case may be).
On Completion, a shareholders agreement relating to Value-Net will
also be entered into among the Vendor and other shareholders of
Value-Net to provide for the ownership, management, financing and
other activities and operation of Value-Net and the shareholders'
rights and duties between them.
There is no current intention that the Vendor will be nominated to
the board of directors of Cheung Tai Hong but the Purchaser will
nominate one person to the board of directors of Value-Net upon
Completion.
Reasons for the Asset Acquisition
Cheung Tai Hong is an investment holding company and its
subsidiaries are principally engaged in property investment and
development, investment in department store and Chinese medicine
sector, the sales and engineering of electrical and mechanical
products. The acquisition of Sunray will entitle the Group to invest
in internet communication technology which is considered to be an
area with high growth potential and may provide the Group with
attractive return.
General
The Asset Acquisition constitutes a discloseable transaction on the
part of Cheung Tai Hong under the Listing Rules.
A circular containing, among other things, further details of the
S&P Agreement will be despatched to the shareholders of Cheung Tai
Hong as soon as practicable.
Application will be made to the Stock Exchange for the listing of
and permission to deal in the Consideration Shares.
Suspension of Trading
At the request of Cheung Tai Hong, trading in the Shares was
suspended with effect from 10:00 a.m. on 18th February, 2000. An
application has been made to the Stock Exchange for the resumption of
trading in the Shares with effect from 10:00 a.m. on 22nd February,
2000.
Definitions
`Asset Acquisition' the acquisition of the Sale
Share;
`Cash Consideration' the part of the consideration
for the Asset Acquisition to
be satisfied in
cash;
`Cheung Tai Hong' Cheung Tai Hong Holdings
Limited, a company
incorporated in Bermuda,
whose shares are listed on
the Stock Exchange;
`Cheung Tai Hong Technology' Cheung Tai Hong Holdings
or the (Technology) Limited, a
`Purchaser' company incorporated in Hong
Kong with limited liability
and is a wholly-owned
subsidiary of Cheung Tai
Hong;
`Cheng' or the `Vendor' Cheng Yuk Kuen, David, the
vendor of the Sale
Share;
`Completion' completion of the sale and
purchase of the Sale Share;
`Consideration Shares' the 111,500,000 Shares at an
issue price of HK$0.20 per
Share to be issued to the
Vendor as part of the
consideration for the Asset
Acquisition;
`Director(s)' the director(s) of Cheung Tai
Hong;
`Group' Cheung Tai Hong and its
subsidiaries;
`HK$' Hong Kong dollars, the lawful
currency of Hong Kong;
`Listing Rules' the Rules Governing the
Listing of Securities on the
Stock Exchange;
`MIH' MIH Information Technology
Company Limited, a company
incorporated on 29th March,
1999 in Hong Kong with
limited liability and is a
wholly-owned subsidiary of
Value-Net;
`PRC' the People's Republic of
China;
`S&P Agreement' a conditional sale and
purchase agreement in
relation to the Asset
Acquisition entered into
between the Vendor and the
Purchaser on 17th February,
2000;
`Sale Share' the 1 share of US$1.00 in the
capital of Sunray registered
in the name of and
beneficially owned by Cheng,
which is to be acquired by
Cheung Tai Hong Technology
from Cheng pursuant to the
S&P Agreement;
`Share(s)' share(s) of HK$0.10 each in
the capital of Cheung Tai
Hong;
`Stock Exchange' The Stock Exchange of Hong
Kong Limited;
`Sunray' Sunray Power Limited, a
company incorporated on 15th
July, 1999 in the British
Virgin Islands with limited
liability;
`Sunray Companies' Sunray, Value-Net and MIH
collectively;
`Top-up Placement and placing of 145,000,000
Subscription' existing Shares at a price of
HK$0.20 by Primestone
Enterprises Limited
(`Primestone') to Mr. Lee
Tung Hai and the subscription
of 145,000,000 new Shares at
the same price by Primestone;
`Value-Net' Value-Net Limited, a company
incorporated on 27th July,
1993 in Hong Kong with
limited
liability.
By Order of the Board
Wong Chun Hong
Chairman and Chief Executive Officer
Hong Kong, 21st February, 2000
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