PAC CENT CYBER<1186> - Announcement & Resumption
Not for release, publication or distribution in whole or in part in
or into the United States, Canada, Australia or Japan.
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.
This announcement is not an offer for sale or subscription of any
securities of Pacific Century CyberWorks Limited nor a solicitation
of an offer to buy or subscribe for any securities of Pacific Century
CyberWorks Limited.
PACIFIC CENTURY CYBERWORKS LIMITED
(a company incorporated in Hong Kong with limited liability)
(`PCCW')
DONCASTER GROUP LIMITED
(a company incorporated in Hong Kong with limited liability)
(the `Offeror')
VOLUNTARY CONDITIONAL SECURITIES EXCHANGE OFFER (the `Offer')
BY
WARBURG DILLON READ (ASIA) LIMITED (`WDR')
AND
BOCI ASIA LIMITED (`BOCI')
ON BEHALF OF THE OFFEROR, A WHOLLY-OWNED
SUBSIDIARY OF PCCW
TO ACQUIRE
ALL THE ISSUED SHARE CAPITAL
OF
CABLE & WIRELESS HKT LIMITED
(`C&W HKT')
WITHDRAWAL OF THE LISTING OF C&W HKT SHARES
ON
THE STOCK EXCHANGE OF HONG KONG LIMITED
A MAJOR TRANSACTION FOR
PCCW
AND
SEPARATE CONDITIONAL OFFER BY MERRILL LYNCH (ASIA PACIFIC) LIMITED ON
BEHALF OF CABLE AND WIRELESS (FAR EAST) LIMITED (`C&W FE')
TO EXCHANGE SHARES IN PCCW
FOR PART OF THE CONSIDERATION
RECEIVABLE BY SHAREHOLDERS IN C&W HKT UNDER THE TERMS OF THE OFFER
SUMMARY
The Offeror, a wholly-owned subsidiary of PCCW,
announces its intention to make a voluntary conditional securities
exchange offer to acquire the entire issued share capital of C&W HKT.
It is the intention of the Offeror to seek the recommendation of the
terms of the Offer from the Board of C&W HKT. In the event that such
recommendation is obtained and if the Boards of C&W and C&W HKT so
agree, the Acquisition may be implemented by way of a scheme of
arrangement between C&W HKT and the shareholders of C&W HKT.
The Offer will be made on the following basis:
either:
for each C&W HKT Share 1.10 New PCCW Shares (the `Share
Alternative') valuing each C&W HKT Share at HK$24.36
or:
for each C&W HKT Share US$0.9290 (equivalent to HK$7.23 at the
current exchange rate) in cash and 0.7116 New PCCW Shares (the
`Combination Alternative') valuing each C&W HKT Share at HK$22.99.
The Share Alternative values the entire issued share capital of C&W
HKT at HK$296.3 billion (US$38.1 billion).
The Combination Alternative values the entire issued share capital
of C&W HKT at HK$279.6 billion (US$35.9 billion).
The Offer will include an Increased Cash Election facility.
The C&W HKT shareholders will be entitled to receive a second
interim or final dividend of not more than HK$0.45 per C&W HKT Share
in aggregate up to a maximum of HK$5,448 million (US$700 million).
Subject, inter alia, to the approval of the ordinary shareholders of
C&W and to the approval of the holder of the special share in C&W,
C&W FE has irrevocably undertaken to accept the Offer; to elect for
the Combination Alternative and for US Dollars in respect of the cash
element thereof; and to elect for the maximum amount of cash
available under the Increased Cash Election, in respect of its entire
shareholding of approximately 54% in C&W HKT.
The Board of PCCW believes that the Acquisition has compelling logic
and is in the best interests of the shareholders of both C&W HKT and
PCCW. As a result of the Acquisition, shareholders of C&W HKT will
obtain a shareholding in one of Asia's most highly-rated convergent
broadband internet businesses and hence benefit from the value
created by the merger of PCCW and C&W HKT.
The Offer will be conditional, inter alia, upon approval by the
independent shareholders of C&W HKT of a voluntary withdrawal of
listing of the C&W HKT Shares on the Stock Exchange being obtained.
If the condition as to acceptances is satisfied in full the Offeror
will waive this approval condition. In the event that the Acquisition
is implemented by way of a scheme of arrangement, all the C&W HKT
shares will be cancelled and thereby delisted upon the Scheme
becoming effective.
The shares of PCCW were suspended from trading on the Stock Exchange
at PCCW's request on 25 February 2000, 28 February 2000 and 29
February 2000. Application has been made for trading in PCCW Shares
on the Stock Exchange to resume at 10.00 a.m. on 1 March 2000.
Appendix 3 of this announcement contains definitions of certain
expression used herein.
1. INTRODUCTION
The Offeror announces that it intends to make a voluntary
conditional securities exchange offer which is to be made by WDR and
BOCI on its behalf to acquire the entire share capital of C&W HKT
which is in issue and which may be issued before the close of the
Offer.
Recommendation and implementation
It is the intention of the Offeror to seek a recommendation of the
terms of the Offer from the Board of C&W HKT. In the event that such
recommendation is obtained and if the Boards of C&W and C&W HKT so
agree, the Acquisition may be implemented by way of a scheme of
arrangement between C&W HKT and the shareholders of C&W HKT under
Section 166 of the Companies Ordinance. If the C&W HKT Board agrees
to proceed with a Scheme, the Offer will not be made. Otherwise, the
Offeror will proceed with the Offer.
In addition to setting out the terms and conditions of the Offer,
this announcement refers, in paragraph 4 and Appendix 1, to the
variations in the terms and conditions which would apply if the
Acquisition were to be implemented by a Scheme.
Undertakings of C&W FE
Subject, inter alia, to the approval of the ordinary shareholders of
C&W and the approval of the holder of the special share in C&W, C&W
FE has irrevocably undertaken to accept the Offer and to elect for
the Combination Alternative described in paragraph 2 below, for US
Dollars in respect of the cash element thereof, and for the maximum
amount of cash available under the Increased Cash Election described
in paragraph 2 below, in respect of its entire shareholding of
approximately 54% in C&W HKT. C&W FE has also undertaken, subject to
certain conditions and qualifications set out in Appendix 2, not to
solicit any other offers for C&W HKT for a maximum period of 135 days
from the date of this announcement.
The circumstances in which the obligations of each of C&W and C&W FE
may lapse are set out in Appendix 2.
If all C&W HKT Shareholders, except C&W FE, elect for the Share
Alternative, C&W FE would receive an approximate 11.2% interest in
the enlarged fully diluted share capital of PCCW and if all C&W HKT
Shareholders, including C&W FE, elect for the Combination
Alternative, C&W FE would receive an approximate 20.9% interest in
the enlarged fully diluted issued share capital of PCCW.
2. THE OFFER
The Offer, which is subject to the conditions and further terms set
out below and in Appendix 1 and to be set out in the Offer Document
when issued, will be made on the following basis (based on the
closing share price of PCCW of HK$22.15 on 25 February 2000):
either:
for each C&W HKT Share 1.10 New PCCW Shares (the `Share
Alternative') valuing each C&W HKT Share at HK$24.36
or:
for each C&W HKT Share US$0.9290 (equivalent to HK$7.23 at the
current exchange rate) in cash and 0.7116 New PCCW Shares (the
`Combination Alternative') valuing each C&W HKT Share at HK$22.99.
The Share Alternative values the entire issued share capital of C&W
HKT at HK$296.3 billion (US$38.1 billion).(*)
The Combination Alternative values the entire issued share capital
of C&W HKT at HK$279.6 billion (US$35.9 billion).(*)
The Offer will include an Increased Cash Election facility. In
electing for cash under the Combination Alternative or the Increased
Cash Election facility, C&W HKT shareholders may specify payment in
US Dollars or in Hong Kong Dollars.
Fractions
Fractions of New PCCW Shares will not be issued to accepting C&W HKT
shareholders. Fractional entitlements to New PCCW Shares will be
aggregated and sold in the market with the proceeds distributed pro
rata to the C&W HKT shareholders entitled to them. However,
individual entitlements of less than HK$100 will not be paid to C&W
HKT shareholders but will be retained for the benefit of the enlarged
PCCW Group.
Financial Resources
WDR and BOCI are satisfied that sufficient financial resources are
available to the Offeror to satisfy implementation in full of the
Combination Alternative. The Offeror has entered into an agreement
dated 29 February 2000 to finance the cash element of the Offer
through a debt facility arranged by BOCI Capital Limited, HSBC
Investment Bank Asia Limited, Banque Nationale de Paris, Hong Kong
Branch and Barclays Capital Asia Limited.
Comparisons of value
The Share Alternative, valued at HK$24.36 per C&W HKT Share,
represents a premium of approximately 38.0% compared with the closing
price of C&W HKT Shares on the Stock Exchange of HK$17.65 on 10
February 2000, being the last trading day for C&W HKT Shares prior to
the announcement of PCCW possibly acquiring an interest in C&W HKT.
The Share Alternative represents a discount of approximately 5.95%
compared with the closing price of C&W HKT Shares on the Stock
Exchange of HK$25.90 on 25 February 2000.
The Combination Alternative, valued at HK$22.99 per C&W HKT Share,
represents a premium of approximately 30.2% over the closing price of
C&W HKT Shares on the Stock Exchange of HK$17.65 on 10 February 2000.
The Combination Alternative represents a discount of approximately
11.2% compared with the closing price of C&W HKT Shares on the Stock
Exchange of HK$25.90 on 25 February 2000.
The closing prices of PCCW Shares were HK$23.40 and HK$22.15 on 10
February 2000 and 25 February 2000, respectively, prior to their
suspension on 25 February 2000.
(*) Exchange rate of US$1 - HK$7.7824 on 25 February 2000.
Highest and lowest prices
During the six month period preceding the date of this announcement,
the highest closing price of C&W HKT Shares as quoted on the Stock
Exchange was HK$26.40 each on 14 February 2000 and the lowest closing
price of C&W HKT Shares as quoted on the Stock Exchange was HK$15.65
each on 19 October 1999. During the same six month period, the
highest and lowest closing prices of PCCW Shares were HK$26.35 and
HK$4.50 on 15 February 2000 and 30 August 1999, respectively.
Dividend
The C&W HKT shareholders will be entitled to receive and retain a
second interim or final dividend in respect of the year ending 31
March 2000 of not more than HK$0.45 per C&W HKT Share (in aggregate
up to a maximum of HK$5,448 million (US$700 million)) to be paid to
C&W HKT shareholders prior to the Offer becoming or being declared
unconditional in all respects.
New PCCW Shares
The New PCCW Shares will be issued credited as fully paid and rank
pari passu in all respects with the existing issued PCCW Shares.
Application is to be made to the Stock Exchange for the listing of
and permission to deal in the new PCCW Shares to be issued pursuant
to the Offer.
Full acceptance of the Offer, assuming no elections for the
Combination Alternative (except by C&W FE) and that C&W FE takes full
advantage of the Increased Cash Election detailed below and without
taking into account exercise of Options under the Share Option Scheme
while the Offer remains open for acceptance, will result in the issue
of approximately 8,654 million New PCCW Shares representing
approximately 38.5% of the enlarged and fully diluted (taking into
account conversion of all outstanding convertible bonds and the
exercise of employee and other share options) issued PCCW share
capital.
Increased Cash Election facility
The maximum aggregate amount of cash to be paid out under the
Combination Alternative is US$11.3 billion (HK$87.9 billion).
C&W HKT shareholders who validly elect for the Combination
Alternative may elect, subject to availability, to increase the
amount of cash receivable pursuant to the Combination Alternative in
respect of their holdings of C&W HKT Shares. However, the maximum
aggregate amount of cash to be paid out under the Combination
Alternative will not be varied as a result of any such election. The
amount of cash receivable will therefore depend on the elections of
other C&W HKT shareholders. Any cash delivered under the Increased
Cash Election facility will be allocated on a pro rata basis.
The Increased Cash Election facility will remain open until 4.00
p.m. on the second day after the satisfaction of all the conditions
to the Offer other than the condition as to acceptances and (if not
then satisfied) the condition as to C&W HKT shareholder approval of a
voluntary withdrawal of listing of the C&W HKT Shares. If the Offer
is not then unconditional as to acceptances, the Offeror may extend
the Increased Cash Election facility to a later date. If the
Increased Cash Election facility has been closed, the Offeror
reserves the right to reintroduce a comparable facility, subject to
the rules of the Takeovers Code.
As a result of the operation of the Increased Cash Election
facility, C&W HKT shareholders who make an election therefor, will
not know the exact number of New PCCW Shares or the amount of cash
which they will receive until settlement of the consideration,
although an announcement will be made when the Acquisition becomes
effective of the approximate extent to which the Increased Cash
Election will be satisfied. C&W HKT shareholders electing for
additional cash under the Increased Cash Election facility will be
deemed to have done so at a rate of US$2.392 (equivalent to HK$18.62
at the current exchange rate) per New PCCW Share.
The C&W FE Offer
As well as irrevocably undertaking to accept the Offer, to elect for
the Combination Alternative, for US Dollars in respect of the cash
element thereof and for the maximum amount of cash available under
the Increased Cash Election, C&W FE has agreed that (subject to
compliance with all necessary approvals and conditions) it will
procure that Merrill Lynch (Asia Pacific) Limited will make an
independent offer to C&W HKT shareholders (other than C&W FE and
certain overseas shareholders) who elect to accept the Combination
Alternative in respect of the cash element under the Combination
Alternative or the Increased Cash Election facility.
Under the C&W FE Offer, Merrill Lynch (Asia Pacific) Limited, acting
on behalf of C&W FE, will offer to exchange one New PCCW Share,
receivable by C&W FE pursuant to its election for the Combination
Alternative, for US$2.392 (equivalent to HK$18.62 at the current
exchange rate) in cash receivable by other C&W HKT shareholders who
elect to accept the Combination Alternative. The maximum possible
number of New PCCW Shares available under the C&W FE Offer will be
2,163 million New PCCW Shares.
The C&W FE Offer is independent of the Offer and is conditional upon
the Offer becoming unconditional in all respects. PCCW makes no
recommendation to C&W HKT shareholders as to whether they should
accept or reject the C&W FE Offer. C&W HKT shareholders should
consult their own financial adviser if they are in any doubt as to
any aspect of the C&W FE Offer.
If the Acquisition is implemented by the Scheme, C&W FE reserves the
right to replicate the terms of the C&W FE Offer described in this
paragraph 2 in the Scheme documentation to the extent practicable.
Lock-up
C&W FE has agreed, save with the consent of PCCW, to retain its
entire resultant holding following the Offer and C&W FE Offer in PCCW
for a period of six months following completion of the Offer and to
retain 50% of such holding for a further period of six months. In
such circumstances, upon completion of the Offer, C&W FE would become
a substantial shareholder, within the meaning of the Listing Rules,
of PCCW. C&W FE's agreement is on the basis that PCCW has given its
consent to, and will fully co-operate with, a placing by C&W FE of
approximately 4% of the enlarged issued share capital of PCCW, as
soon as practical following completion of the Offer. The precise size
and timing of the placing will take into account available market
demand, market conditions and the desire for an orderly after-market.
Other arrangements
C&W FE has agreed with CMGI, an existing 4.4% shareholder of PCCW
that, conditional upon the Offer becoming unconditional in all
respects, C&W FE will transfer to CMGI US$500 million (HK$3,891
million) worth of New PCCW Shares received by it under the Offer in
consideration for CMGI issuing to C&W FE US$500 million worth of
newly issued CMGI shares.
HMTF PCCW Investors, LLC, an affiliate of Hicks Muse, an independent
third party not connected with a director, chief executive or
substantial shareholder of PCCW, or any of its subsidiaries or an
associate of any of them, have agreed subject to the Offer becoming
unconditional in all respects and to the exchange of Shares between
CMGI and C&W FE referred to above, to subscribe for US$500 million
(HK$3,891 million) in new PCCW convertible securities (`PCCW
convertible securities'). The PCCW convertible securities will be
subordinated, have a 10 year maturity and a dividend yield of 7.5%
per annum (which will be paid in kind for at least the first 5 years)
and will be convertible at a 10% premium to the average closing price
of PCCW Shares for the 15 trading days prior to the Offer becoming
unconditional in all respects. Subject to the Offer being
unconditional in all respects and to the exchange of Shares between
CMGI and C&W FE referred to above, in the event of any subscription
for such PCCW convertible securities by Hicks Muse, PCCW will make a
further announcement containing details of the PCCW convertible
securities.
3. BACKGROUND TO AND RATIONALE FOR THE ACQUISITION
Background to and reasons for the Acquisition
The Board of PCCW believes that the Acquisition has compelling logic
and is in the best interests of the shareholders of both C&W HKT and
PCCW. As a result of the Acquisition, shareholders of C&W HKT will
obtain a shareholding in one of Asia's most highly-rated convergent
broadband Internet businesses and hence benefit from the value
created by the merger of these two successful companies.
Strategic and commercial rationale
Strengthens PCCW's Position as the Pre-eminent Internet Play in Asia
The Acquisition will reinforce PCCW's position as the leading
Internet company in Asia. It will have:
- A multi-disciplinary management team expert in all facets of the
broadband market
- The largest, low-cost multimedia content creation team in Asia
- World class partners which further enhance the merged company's
position in the Internet space
- Market leadership in Hong Kong, a pre-eminent early adopter market
in Asia
- Strong scaleable content and distribution assets for rapid
deployment in China, Asia, and the Middle East
- Compelling single-brand content delivered across multiple languages,
geographies, and delivery platforms
- A multi-access portal
The combination of PCCW and C&W HKT is driven, in part, by the
Board's view that it is critical to have leading market share in a
given market space in order to generate long-term value. The key
convergence themes driving the Acquisition include the following:
- Positions the Combined Group as the owner of a pervasive brand from
which to maximize the networking effects and economics of expanding
the model from Hong Kong across the region and ultimately globally
- Adds over 6 million addressable customers across multiple platforms
to PCCW's target market of 130 million cable-enabled homes and 12
million easily upgradable homes. Improves the speed, breadth, and
scalability of the PCCW services rollout by acquiring a large,
multi-platform customer base and a leverageable infrastructure of
assets and human resources
- Maximizes the benefits of existing customer relationships through
the provision of value-added broadband services and content under
development by both entities
- Enhances and expands relationships and intellectual property across
multiple distribution vehicles
The Combined Group unites the value of Internet content,
communication and community that will be created by PCCW's locally
customized, multi-language Web `portals,' with the benefits of a
multi-platform multi-access broadband infrastructure in the
pre-eminent established market in Asia.
Expands Near-Term Customer Base for PCCW's Branded Internet Services
The Acquisition adds approximately 3.3 million telephony customers,
1.0 million wireless customers, 400,000 Internet users, 90,000
interactive television users and 22,000 broadband customers to PCCW's
existing target market of 130 million cable customers across the
region. C&W HKT is the leading Internet service provider in Hong
Kong, and the Board of PCCW believe that its subscribers represent an
attractive market for PCCW's broadband access and content offering
and the cross-selling of new and existing interactive services. In
addition, C&W HKT's broadband optical fiber and DSL network reaches
80% of households in Hong Kong which are therefore capable of
accessing its broadband service. The Board of PCCW believes that
PCCW's unique interactive and multimedia content offerings will
significantly improve customer retention, growth and profitability at
C&W HKT.
Accelerates the Creation of Platform Independent, Bundled Services
and Content The Board of PCCW believes that speed to market with
bundled services and content is a key strategic objective, and
represents the primary barrier to entry for creating sustainable
value. The Combined Group will allow the bundling of proprietary
content across multiple narrowband and broadband online services. It
is PCCW's intention to expand this across China, Asia, the Middle
East, and the rest of the world. It is expected that as bundling
evolves, online entertainment and applications, and mobile
communications will emerge as high-end, proprietary products, and
that local voice services and raw bandwidth will become commoditized
as stand-alone offerings. As a result, pure conduits will need to
lower their costs and/or align with content suppliers to compete, and
the strongest content brands will need to gain access to multiple
platforms.
Merges Powerful Content with Pervasive and Broad Distribution The
Board of PCCW believes that highly personalized content and
applications have emerged as the key drivers of Internet subscriber
growth. AOL, Yahoo! and Excite have created captive `communities' of
users through such programming in the U.S. market. The next stage for
these companies is to merge the new media companies that drive brand
development and the usage of content with the leading and emerging
information delivery platforms.
C&W HKT's Multiple Broadband Platforms Position the Combined Group
for Rapid Penetration Across Asia The Board of PCCW believe that over
time, to deliver long-term shareholder value, it is important to
adopt a technology neutral approach towards content distribution. The
merged entity will deliver broadband content using various
technologies such as cable or DSL to the consumer or enterprise and
WAP to mobile customers. The Board of PCCW intend to ensure service
can be provided over future technologies such as GPRS, 3G, fixed
wireless, etc., as they become available.
- In Asia, where the penetration of varied broadband technologies is
low and fragmented, a single brand may distribute content and
services through different platforms in some markets (such as PCCW's
NOW TV via AsiaSat III and cable across Asia), and through a
different, more pervasive platform in other markets (such as C&W
HKT's iTV services through fiber and DSL in Hong Kong)
- In order to achieve scale across markets, companies are expected to
attempt to develop a single brand of Internet content and service
(with multiple channels) across different delivery platforms,
simultaneously
- C&W HKT's leading position in the market in Hong Kong makes it the
ideal base in Asia from which to roll-out an extensive range of
services across multiple platforms. Hong Kong has one of the largest
media-rich customer bases in Asia, has high penetration rates across
the various narrowband and broadband technologies (HFC, DSL, fixed
line, fixed wireless and mobile wireless), and will serve as the
ideal launching point for the provision of localized and customized
content across China and the rest of Asia, through multiple
distribution infrastructures
Ability to Further Internationalize Existing and Planned C&W HKT
Businesses As part of the total package of service offerings which
PCCW can deliver to customers in its target markets, it would have
the opportunity to further internationalize C&W HKT lines of business
such as:
- Corporate services (e.g., virtual private network services to
multinational companies)
- Voice over IP and videoconferencing
- Mobile voice and data services
- Cross marketing of C&W HKT and PCCW value-added services
- C&W HKT's regional connectivity assets: 44 Gbps of total capacity,
with direct links to all countries in the region, including 425 Mbps
of dedicated internet backbone into the U.S. and 71 Mbps into China
Opportunities to Leverage Existing C&W HKT Operational
Infrastructure
- Acquire existing skilled staff base with expertise in networking, IT
and telecommunications and support functions such as billing, and
customer relationship management
- Opportunity to improve time-to-market for PCCW services in
surrounding regions as support functions currently in place at C&W
HKT can be extended and repurposed for additional PCCW services, as
an alternative to building new operational infrastructure units
(e.g., call centers and data centers)
- Improve ability to scale PCCW's business rapidly by utilizing the
operating infrastructure and human resources of C&W HKT
- Possible savings in capital expenditures
- C&W HKT operates two of the largest commercial satellite earth
stations in Asia, potentially eliminating the need for PCCW to
develop its own uplinking for the provision of its satellite-based
services
Synergies in Partners and Portfolio Companies
- C&W HKT has a portfolio of Internet investments that will add
incremental scale to CyberWorks Ventures
- PCCW increases the size of its positions in at least one investment
in which C&W HKT is also an investor (e.g. Asia Java Fund)
- The combination of the Internet business partners of PCCW (including
Intel Corporation, CMGI, Hikari Tsushin, and IMG/TWI), and C&W HKT
help the combined entity achieve scale and effectively pursue new
business opportunities
- Increasing the size of the PCCW network of partners and portfolio
companies increases the number of relationships and opportunities in
which these parties can participate with each other
4. CONDITIONS OF THE ACQUISITION
Terms and conditions of the Offer
The C&W HKT Shares will be acquired by the Offeror fully paid and
free from all liens, equities, charges, encumbrances and other
interests and together with all rights now or hereafter attaching
thereto, including the right to receive and retain all dividends and
other distributions declared, made or paid hereafter save that the
C&W HKT shareholders will be entitled to receive and retain a second
interim or final dividend in respect of the year ending 31 March 2000
of not more than HK$0.45 per C&W HKT Share (in aggregate up to a
maximum of HK$5,448 million (US$700 million)) to be paid to C&W HKT
shareholders prior to the Offer becoming or being declared
unconditional in all respects. PCCW will discuss with the Board of
C&W HKT an appropriate book closing date for this dividend in due
course.
The New PCCW Shares to be issued under the Offer will be issued
credited as fully paid and rank pari passu in all respects with the
existing issued PCCW Shares as at the date of this announcement. PCCW
will not, prior to the Offer becoming or being declared unconditional
in all respects, issue for cash any shares or securities which are
convertible into or exchangeable for or carry rights to acquire any
shares in PCCW save pursuant to PCCW's existing mandate from its
shareholders in respect of approximately 1.18 billion PCCW Shares
(11.5% of the existing issued share capital of PCCW) at a price of
not less than HK$23.50 per share. This mandate expires on the date of
the next annual general meeting and it is the intention of PCCW's
board to renew it at that meeting.
The terms and conditions of the Offer are set out or referred to in
Appendix 1. The conditions include the approval at shareholders
meetings by the shareholders of each of PCCW, PCCW Holdings and C&W
and the approval of the holder of the special share in C&W.
Pacific Century Diversified Limited, Pacific Century Group Holdings
Limited and PCCW Holdings, which between them control 59.3% of the
issued share capital of PCCW, have stated that they will vote in
favour of the resolutions at the PCCW shareholders meeting.
Pacific Century Group (Cayman Islands) Limited and Anglang
Investments Limited which between them control 75.8% of the issued
share capital of PCCW Holdings, have stated that they will vote in
favour of the resolution at the PCCW Holdings shareholders meeting.
C&W has irrevocably undertaken, subject to certain conditions and
qualifications, to recommend to all C&W shareholders that they vote
in favour of the resolutions to be proposed at the C&W shareholders
meeting to approve the disposal by C&W FE of all its C&W HKT Shares.
A termination fee of US$100 million will be payable by C&W to PCCW
in the event that C&W does not recommend or its shareholders do not
vote in favour of the resolutions to be proposed at the C&W
shareholders meeting referred to above, or, in the event that a
higher competing offer becomes wholly unconditional. A termination
fee of US$100 million will be payable by PCCW to C&W in the event
that PCCW or PCCW Holdings do not recommend or their respective
shareholders do not vote in favour of the other resolutions referred
to above.
Withdrawal of listing
It is a condition of the Offer that approval by shareholders of C&W
HKT (other than C&W FE) of a voluntary withdrawal of listing of the
C&W HKT Shares on the Stock Exchange be obtained, in which case an
announcement will be made. If the condition as to acceptance is
satisfied the Offeror will waive this approval condition. In the
event that the Acquisition is implemented by the Scheme, all the C&W
HKT shares will be cancelled and thereby delisted upon the Scheme
becoming effective.
No application will be made to the Stock Exchange for the withdrawal
of the listing until the Offer becomes unconditional in all respects
in which case an announcement will be made.
In the event that the Offeror declares the Offer to be
unconditional, shareholders of C&W HKT who decide not to accept the
Offer, and whose C&W HKT Shares are not otherwise acquired by the
Offeror, may hold an illiquid investment for which no recognised
market will exist.
Waiver of Offer Conditions
Save for the conditions as to acceptances and as to the admission to
trading of the New PCCW Shares, which are not waivable, and to the
conditions relating to consent under C&W HKT's articles of
association and the approval by the C&W shareholders, which are
waivable only with the consent of C&W, the Offeror reserves the right
to waive all or any of the conditions of the Offer in whole or in
part.
Save as described above, the Offeror is under no obligation to waive
or treat as fulfilled any of the Offer Conditions or to declare the
Offer unconditional in all respects by a date earlier than the Long
Stop Date, notwithstanding that other Offer Conditions may have been
fulfilled at such earlier date and that there are at such earlier
date no circumstances indicating that any of such conditions may not
be capable of fulfilment.
Completion of the Offer
If the Offer Conditions are not satisfied or not waived on or before
the first closing date of the Offer, the Offer will be extended by
the Offeror and the Offeror will issue a press announcement as soon
as practicable thereafter in accordance with the Takeovers Code. The
latest date on which the Offeror can declare the Offer unconditional
is the Long Stop Date.
If the Offer Conditions are satisfied or waived on or before the
Long Stop Date, C&W HKT shareholders will be notified by press
announcement as soon as practicable thereafter in accordance with the
Takeovers Code.
Scheme conditions
In the event that the Acquisition is effected by way of a Scheme the
following conditions will apply in the place of the acceptance
condition in paragraph 1(A) of Appendix 1:
(a) the approval by a majority in number representing three-fourths in
value of the holders of the C&W HKT Shares or any class thereof
present and voting, either in person or by proxy, at a meeting or
meetings convened by the Court;
(b) the necessary special resolutions required to implement the Scheme,
including a proposed reduction of share capital of C&W HKT being duly
passed by a majority of three-fourths of the votes cast by holders of
C&W HKT Shares present and voting, either in person or by proxy, at
an extraordinary general meeting of C&W HKT; and
(c) the sanction (with or without modification) of the Scheme and
confirmation of any reduction in capital included in the Scheme by
the Court, and a copy of the order of the Court being delivered for
registration to the Registrar of Companies in Hong Kong.
In the event that the Acquisition is effected by way of a Scheme,
all of the existing C&W HKT Shares will be cancelled and thereby
delisted upon the Scheme becoming effective and the delisting
condition in paragraph 1(F) of Appendix 1 will be waived.
5. OPTIONHOLDERS
It is the intention of the Offeror to put appropriate proposals to
participants in the Share Option Scheme in connection with the Offer.
Details of such offer will be announced in accordance with the
Takeovers Code when PCCW receives the details of the Share Option
Scheme.
6. INFORMATION ON THE OFFEROR
The Offeror is a company newly incorporated in Hong Kong for the
purposes of the Acquisition and is a wholly-owned subsidiary of PCCW.
The Offeror has not traded.
7. INFORMATION ON PCCW
Business of PCCW
PCCW is involved primarily in technology businesses related to the
Internet and the delivery of broadband Internet service through an
innovative satellite to broadband ground distribution system that
includes HFC cable systems, broadband telecom infrastructure and
wireless transmission networks. Its aim is to build on its expertise
and knowledge of digital technology and new media to become a leader
in Internet infrastructure, content, and services. PCCW is in the
process of launching a highly complementary combination of businesses
that together form an interactive broadband platform for offering and
enabling a wide variety of consumer and enterprise services through
the Internet and television. PCCW's investment division, CyberWorks
Ventures, provides valuable funding and management advice to young
companies that have synergies with its core businesses. The
Cyber-Port will be PCCW's base in Hong Kong where other leading high
technology and Internet related companies will also be located. This
confluence of technology companies will provide a fertile environment
for the generation of new ideas, innovations and businesses.
PCCW's businesses are currently based in Hong Kong, where they have
their executive offices. PCCW is in an early stage of development and
in the past year has undergone significant changes in ownership,
management and asset base.
8. Industry Background
Internet penetration in Asia
While worldwide Internet growth has been rapid, Internet use in Asia
has lagged behind that of the United States and Europe due to the
absence of a well-developed wireline infrastructure and a relatively
lower PC penetration rate. According to Baskerville Communications, a
market research firm, in 1998, Asia Pacific countries had an average
of 8.5 fixed wirelines per 100 people. According to IDC, Asia had a
PC penetration rate of 2.2% in 1998, projected to increase to 4.2% in
2003. While traditional dial-up access and localised content may be
lacking, use of the Internet is growing in Asia. IDC estimates that
there were approximately 23 million Internet users in Asia at the end
of 1998, and that this number will grow to 98 million by the end of
2002. Internet growth in Asia will be dependent upon, among other
things, the availability of connectivity and access to the Internet,
as well as compelling content.
Broadband access
The overall rapid growth of the Internet has driven the demand for
faster connectivity and continuous access. Higher bandwidth, or
broadband, Internet access provides users with rapid transmission of
data as well as connectivity that is `always on'. In addition,
greater bandwidth facilitates more complex applications and enriched
content, such as streaming video and audio, which can congest most
dial-up Internet access networks. Currently, Internet broadband
access in the United States and Europe is provided through the
existing wireline infrastructure with integrated services digital
network (ISDN) and digital subscriber line (DSL) services, through
the cable TV infrastructure with cable modem services, and through
satellite and wireless services. Internet broadband access in Asia
has been very limited due to the lack of both well-developed wireline
infrastructures (apart from advanced markets such as Hong Kong and
Singapore) and cable TV-based Internet access services, and the early
stage of development of the wireless broadband market.
Cable TV, DSL, and Wireless Broadband in Asia
According to Baskerville Communications, the approximately 110
million cable TV subscribers in the Asia Pacific region will grow to
144 million by the end of 2003. PCCW believes that cable subscribers
as a subset of the Asia Pacific region population represent one of
the most attractive demographic groups for the services it plans to
provide. The majority of the existing cable infrastructure in Asia
has been constructed in the past eight years. Due to the relatively
recent rollout of cable services to the region, a significant part of
the cable infrastructure has been built with HFC cable technology,
which is highly suitable for rapid upgrade to interactive broadband
service. According to IDC, there were approximately 62,000 DSL
subscribers in the Asia-Pacific region excluding Japan in 1999, and
the number of DSL customers is growing rapidly. DSL technology
enables broadband Internet access over existing fixed line networks,
and avoids some of the congestion difficulties inherent to cable
broadband systems. There were approximately 157 million digital
wireless subscribers in the Asia-Pacific region at the end of 1999
and that the number of subscribers is expected to grow to 481 million
by the end of 2003. WAP, GPRS, and other wireless data technologies
will enable a multitude of mobile network appliances to connect to
the Internet, creating an environment conducive to a variety of
cross-platform interactive services.
The CyberWorks Solution
PCCW intends to deploy broadband infrastructure and the services
that it makes possible throughout the Asia-Pacific region and
ultimately globally. PCCW intends to accomplish this buildout through
three main vehicles: PCCW's unique services and applications,
CyberWorks Ventures portfolio companies, and regional and
international partnerships.
PCCW's Pacific Convergence Corporation (`PCC') subsidiary forms the
cornerstone of this strategy, leading the rollout of ISP-enabling
services and technologies to local access operators, and creating a
branded service that takes full advantage of its broadband
infrastructure and unique customer base. These services will offer
consumers and enterprises broadband Internet connectivity, specific
broadband content and service offerings in a number of languages
combined with a supporting infrastructure which enables electronic
transactions and commerce. PCCW's services will be accessible through
any type of Internet access device, including personal computers,
digital Internet access devices that display on TVs, and wireless
devices. PCCW's own Internet service offer its customers a
comprehensive range of content, entertainment, and consumer and
business applications. PCCW's investment division, CyberWorks
Ventures, has made a number of investments in young companies that
can benefit from co-operation with PCCW. Many are engaged in
`e-infrastructure' businesses that consist of services or
technologies that enable value-added services to be delivered over
the Internet. These are a source of content, software, hardware, and
service solutions to PCCW and are often positioned to take advantage
of its planned broadband platform and large potential captive
customer base. The Cyber-Port, a project being undertaken in
conjunction with the Hong Kong Government, is an IT-centric
development project for leading information technology and service
companies, which will be PCCW's base in Hong Kong. This confluence of
technology companies will provide a `critical mass' and fertile
environment for the generation for new ideas, innovations and
businesses.
Pacific Convergence
PCCW believes that interactive broadband access through the existing
cable TV infrastructure will enable it to provide consumers with
high-quality access, even in locations where traditional dial-up
connectivity is unavailable due to the limited amount or even total
absence of wireline infrastructure, and a highly competitive service
offering in regions where connectivity is better developed. PCCW is
engaged in this business segment with its strategic partners which
include Intel Corporation, SoftNet Systems, CMGI and IMG/TWI.
By deploying a satellite to cable head-end or telecoms earth station
infrastructure, PCCW will be able to rapidly establish contact and
connectivity with local access operators across the AsiaSat III
footprint. PCCW will enable operators who adopt PCCW's system to
provide full broadband Internet access to their consumer and
enterprise customers. Once the access network operator is connected,
consumers and businesses will be able to access PCCW's interactive
service offering through the use of Internet access devices such as
set-top boxes or personal computers. PCCW and the network operator
would share in the subscription fee collected from the subscriber.
PCCW's network delivery architecture comprises open standard Internet
protocols and ubiquitous PC, TV and audio components. It is PCCW's
intention to provide its services through any type of broadband
network (including telecoms plant upgraded with DSL technology),
digital interface or Internet access device that may be available or
emerge in the future.
PCCW is developing a global brand for its services. This brand, NOW
(Network of the World), is expected to become a powerhouse of the
Internet. The NOW offering will be a truly converged digital media
network, delivering a compelling customer experience that PCCW
expects to drive adoption and usage. The NOW service will also be
available through the Internet to users outside the PCCW ISP
footprint and on a variety of access platforms (e.g., wireless),
allowing PCCW to maintain constant contact with the customer and
leverage the proprietary services it develops over the maximum number
of users.
The initial rollout of this service will be in English and content
production facilities are being developed in London in partnership
with the IMG/TWI Group. Over 200 professionals in London and Asia are
at work developing PCCW content. Both the branded portal and its
associated vertical applications/content areas (`vortals') will over
time be produced in a number of appropriate local languages,
including Chinese and Japanese. The sequence and timing of local
language services rollout will be dictated by advertiser and customer
demand. The content within each vortal will provide a basis for
PCCW's television services as described below.
NOW TV will integrate television programming with simultaneous
multimedia content available on the Internet. The level of tight
integration is unique to PCCW. The simultaneous transmission of TV
and web portal content will allow advertisers to create fully
integrated campaigns across both media with messages that reinforce
each other. PCCW believes that the general availability of Internet
content co-ordinated with its television offerings will help drive the
conversion of current dial-up subscribers to its broadband access
service. Conversely, the use of the familiar medium of television
will help the company introduce cable viewers to the array of
interactive service offerings available with a subscription to its
broadband access service.
CyberWorks Ventures
CyberWorks Ventures is PCCW's investment division, investing in
Internet companies that can effectively leverage PCCW's broadband
platform and provide infrastructure services, content, context,
commerce, connectivity and community, or have other compelling
investment rationales. PCCW's investment takes the form of a
combination of cash, advertising inventory or equity in PCCW.
CyberWorks Ventures has already developed a portfolio of over 30
Internet investments. Some of these investments are very significant.
For example, CMGI Asia is a 50:50 joint venture which will see PCCW
bringing CMGI's 18 owned Internet businesses (including AltaVista) to
the whole of Asia (including Japan).
PCCW intends to foster collaboration among these companies,
encouraging cross-selling and marketing opportunities and supporting
business growth and the sharing of information and expertise, as well
as assisting them with its unique experience in and knowledge of
Asian markets. In addition, CyberWorks Ventures' portfolio companies
are positioned to offer investees an array of infrastructure
services, including web hosting and co-location, web consulting and
design, systems integration, and information technology management.
These services are expected to help each of CyberWorks Ventures'
portfolio companies and partners to focus on their respective core
competencies and accelerate the time-to-market of their products and
services.
Through 24 February 2000, PCCW has paid or committed to pay, in cash
or otherwise, a total of approximately US$550 million for the
acquisition of portfolio companies. Among CyberWorks Ventures'
investments are:
Action Ace.com
Asia Java Fund
Bowman Capital
CMGI
Creditland.com
DigiScents
Divine interVentures
ELetter
Equinix
Hikari Tsushin International Ltd
Horizon.com
iAsiaWorks
iLink.net
Korea Thrunet
Intelligenesis
Magically
MediaRing
NetCel
Orama Partners
Outblaze
Pets.com
Point Property
Satyam Infoway
SilkRoute Holdings
Sina.com
SoftNet Systems
Spike Networks
Stareastnet.com
TCM
Vicus
Weave Innovations
Ugo.com
Cyber-Port
The Cyber-Port Project consists of specially designed commercial
space dedicated to high technology industries with related
residential and other facilities intended to create a nurturing
business environment in which Hong Kong can attract and retain
promising technology businesses. The Cyber-Port project is expected
to comprise a variety of features, including an underlying
infrastructure optimised for technology uses. PCCW will be a primary
tenant of the Cyber-Port. Membership in the Cyber-Port community will
benefit PCCW as it is both a user and supplier of high technology
services. In addition, resident companies would benefit from direct
access to PCCW's broadband Internet platform.
PCCW intends to develop the Cyber-Port Project in partnership with
the Hong Kong Government to provide a working and living environment
that will attract companies and technology professionals to Hong
Kong, and retain them as well. PCCW's vision is that this project
will allow the concentration of talent and resources that will help
drive Asia's technology transformation by providing affordable office
space that will be fully connected to the Internet. Technology-based
businesses will want to be close to their customers in Asia and
technology workers will want to be in an environment where they can
be close to other technology workers.
At this point the Cyber-Port Project is documented only by a
non-binding letter of intent between the Hong Kong Government and
PCCW's controlling shareholder, the Pacific Century Group. The
development of the Cyber-Port Project has commenced; the first phase
is to be completed by the end of 2001 and the whole project is
expected to be completed by 2007. PCCW has already succeeded in
attracting 15 leaders of the Internet (including Microsoft, HP, IBM,
Cisco, Oracle and CMGI) to become tenants of the Cyber-Port.
Property development and customer premises equipment businesses
PCCW is currently engaged in the development of and investment in
commercial and residential real estate in the PRC and Hong Kong. It
is also engaged in a customer premises equipment business, in which
it acts principally as a systems integrator for office
telecommunications systems. These businesses provide PCCW with
positive cash flows, and may continue to serve that purpose or be
divested in the future to help PCCW finance its capital
requirements.
Elements of the PCCW Business Strategy
Take advantage of scale and establish a position as the leading
Internet company in non-Japan Asia; establish a position as the
preferred partner for companies, both regional and international, who
wish to participate in Internet and technology-related businesses in
Asia.
PCCW has established partnerships with leading global companies in
media, Internet and technology, and telecommunications. Major
partnerships include:
Partner Description
CMGI CMGI Asia joint venture to
establish Asia-Pacific
operations for the 18 CMGI
majority-owned operating
companies, beginning with
AltaVista, Engage
Technologies, iCast, and
1ClickCharge, augmenting the
existing large
cross-shareholding between
PCCW and CMGI
Intel Corporation Originally the joint venture
partner with PCC, Intel is
now a shareholder of PCCW,
after PCC became part of PCCW
as its broadband Internet
services arm
Trans World International TWI contributes its unique
access to world class sports
events & content to the PCC
product and produces the full
spectrum of English language
content in cooperation with
PCC
Hikari Tsushin Hikari Tsushin is one of
Japan's leading companies,
and a successful internet
investor. PCCW and Hikari
Tsushin announced a large
share exchange on 11 February
2000. The companies plan to
cooperate to manage Internet
investments through Hikari
Tsushin International
Limited.
Through PCCW's investment portfolio, management team, and current
partners, PCCW intends to expand its presence and reputation as the
preferred partner for Internet business in Asia, enhancing the
quality and quantity of its business and investment opportunities.
Leverage existing and planned infrastructure to provide a continuous
network of coverage to customers and leverage PCCW's content,
applications, and marketing.
PCCW intends to leverage the assets, energy, and customers of
existing and planned distribution networks which are capable of
providing access to the Internet. PCCW plans to distribute its
proprietary broadband content, services, and applications over these
systems. While it is PCCW's intent to use multiple networks to reach
its customer base, the cable infrastructure in its target markets is
likely to be a major contributor to subscriber growth in the
future.
Leverage existing cable infrastructure and cable operator experience
by providing a fully integrated broadband solution
Cable is one of the key local distribution technologies, in addition
to DSL and Wireless Application Protocol (`WAP') based platforms,
which PCCW intends to utilise in making its services available to end
users. PCCW's goal is to convert existing cable TV and telephony
subscribers in Asia and the Middle East into users of its interactive
broadband Internet services. In less developed markets, PCCW's
strategy is to use the existing satellite to cable infrastructure in
the region to provide broadband Internet access with higher quality
and dependability than is currently available though dial-up
services. While PCCW intends to offer its broadband access services
at affordable prices for the local consumer, the Board of PCCW
believe PCCW's services will command premium prices due to their
compelling content, value-added services and broadband speed. PCCW's
enabling services allow existing network operators to rapidly and
cost-effectively transform themselves into fully integrated broadband
Internet service providers. The Board of PCCW believe that PCCW will
be able to attract a large subscriber base by mobilising the network
operators throughout a target region to sell its services,
essentially turning cable and other network operators into Internet
service providers.
Develop a compelling convergent digital media offering, beginning
with the use of co-ordinated television and web programming
PCCW believes that its unique digital content production approach,
current and future content acquisitions and partnerships, and
expertise will make the stand-alone television programming
compelling, that it will help drive adoption of the broadband
service, and that it will be carried by cable operators who are eager
to sell interactive services. PCCW's Internet portal will be
co-ordinated with NOW TV to provide parallel, contemporaneous content
and programming that is intended to drive cable viewers to convert to
broadband service so that they can take full advantage of PCCW's
interactive Internet offerings. PCCW intends to develop the NOW
broadband content service into a fully converged digital media
network which will provide consumers access to interactive content,
online communities and e-commerce. The NOW service will enable
consumers to customise the information and services they receive. In
conjunction with automated profiling and demographic analysis, this
personalization will allow PCCW to offer targeted information to
enhance customer satisfaction, usage, and retention and maximise
value for PCCW's advertising and e-commerce partners.
Relationship with Pacific Century Matrix
In April 1999, Pacific Century Group Inc. and DaimlerChrysler
Aerospace formed a joint venture, Pacific Century Matrix Limited
(`PCM'), which holds the exclusive right to use 20 geo-stationary
orbit positions owned by Pacific Century Group Inc.. In connection
therewith, PCM has entered into a lease agreement dated 9 July 1999
with Asia Satellite Telecommunications Company Limited to secure
capacity of up to six C-band transponders on the AsiaSat III
satellite.
Facilities
PCCW's corporate headquarters are located at 38/F, Citibank Tower,
Citibank Plaza, 3 Garden Road, Central, Hong Kong. PCCW also leases a
temporary production facility currently located at the City
University of Hong Kong. PCCW has constructed a 20,000 square foot
office and production and technical facilities located in Chai Wan,
Hong Kong, which currently comprise the headquarters of PCC.
9.
INFORMATION ON C&W HKT
Business of C&W HKT
C&W HKT, a principal subsidiary of C&W, is a world-leading
integrated communications company, and Hong Kong's major full-service
communications provider, marketing a full array of quality voice and
data telecommunications services backed by a state-of-the-art, fully
digital fibre-optic network. C&W HKT's services include basic
telephony; Interactive TV (iTV); international calls; narrow and
broadband Internet access; mobile telephony; multimedia services;
satellite links; specialised fax and data products;
telecommunications equipment and services; teleservices, including
customised solutions; and value-added services. With over 3.6 million
lines in operation, the Company has more than one line for every two
people in Hong Kong.
A key foundation of C&W HKT's strategy has been to transform itself
from a best-in-class provider of basic voice and fax services to a
fully integrated and competitive broadband communications provider.
C&W HKT has faced an increasingly liberalised market for providing
fixed, mobile, and ISP services to which C&W HKT has responded.
C&W HKT, from an early stage, adopted a deliberate strategy to move
beyond fixed and mobile voice / data services in to new areas of
communications. This has seen the introduction of broadband and
narrowband ISP services to residences and businesses; the
introduction of interactive TV services (iTV); the transformation of
the NETVIGATOR ISP site into a fully fledged portal and one of Hong
Kong's most popular and awarded sites; and more efficient content
delivery with upgraded international and regional links. In this
area, C&W HKT is a leader in terms of transformation from an
efficient PTT into a comprehensive and competitive broadband
communications provider.
C&W HKT has transformed the pricing and flexibility of its products
and services in order to be competitive in the market. C&W HKT
maintains some of the world's best operating parameters in terms of
high revenue and customers per employee and low operating cost per
customer.
Network Infrastructure
C&W HKT has invested more than HK$36 billion (US$4.7 billion) in its
network infrastructure in the last 10 years and has plans to make
Hong Kong the Asia-Pacific region's first super-intelligent city, as
well as an information superhighway and Internet hub.
C&W HKT operates one of the most modern telecommunications networks
in the world, including a comprehensive optical fiber network with
over 444,000 kilometers of fiber contained in approximately 6,120
kilometres of cable, generating one of the highest such installed
densities in the world. All transmission links for exchange junctions
are digital and all exchange equipment incorporates digital
technology.
C&W HKT operates 20 satellite antennae from two earth stations on
the south side of Hong Kong Island. Together, these comprise the
largest teleport in Asia and work with the Indian and Pacific Ocean
satellite systems, covering two-thirds of the earth's surface. Eight
international fiber-optic cables - 6 submarine and 2 overland - link
Hong Kong to other major financial and commercial centres worldwide.
C&W HKT has invested in the world's largest asynchronous transfer
mode (ATM) broadband network and launched the first ATM service in
Hong Kong. Through optical fibre-to-the-building and digital
subscriber line (DSL) technology, as of 30 September 1999, its
broadband network coverage reached more than 80% of Hong Kong's homes
and all the major business areas in Hong Kong. This broadband
packet-switched network supports transmission of voice, high speed
data and video services and is already configured for the delivery of
new high-speed multimedia services and e-commerce applications.
International Telecommunications Services
C&W HKT provides international telecommunications exchange and
transmission facilities and international telephone, data and video
communications services, international private leased circuits,
virtual private network services, satellite broadcast uplinking and
downlinking services and telegram and telex services. It also
provides wholesale networking services to other telecommunications
operators and service providers, offering both leased network
capacity and switched services.
C&W HKT positions Hong Kong as the communications hub of Asia, with
an investment of more than HK$2,750 million in its international
network infrastructure in the past five years alone.
The global telecommunications market is undergoing rapid change
driven by new technology and increasing liberalisation and
competition. Following C&W HKT's agreement with the Hong Kong SAR
Government to surrender its exclusive international license on 31
March 1998 and the introduction of international services competition
with effect from 1 January 1999, Hong Kong has become one of the most
liberalised and competitive telecommunications markets in the world.
Local Telecommunications Services
C&W HKT provides direct exchange lines for business and residential
customers, wholesale interconnection services for other local
operators, and public and private data network services.
C&W HKT enjoys a leading competitive position in the local market
underpinned by its services with advanced features, focus on customer
service and well established position in the provision of such
services. As of 31 March 1999 the three other local fixed-line
carriers had secured less than seven per cent of the total
directly-connected business lines in service and less than 1% of
residential lines.
Mobile Services
C&W HKT operates advanced digital GSM and D-AMPS mobile systems and
serves all local market segments through its three mobile brands,
1010, One2Free and 1+1. It provides packages of post-paid mobile
services and pre-paid rechargeable stored value mobile SIM cards. It
also supplies mobile handsets.
C&W HKT's GSM network now comprises over 1,400 base stations
providing comprehensive coverage across Hong Kong. It has pioneered
many mobile technology innovations, including the world's first
mobile phone service in an underground railway, the Hong Kong Mass
Transit Railway. With its intelligent dual-band 900/1800 megahertz
GSM services, C&W HKT's customers enjoy virtually uninterrupted
service on its networks with GSM call-drop rates below 1 per cent,
which is among the lowest in the world. As of 30 September 1999, C&W
HKT's mobile customer base was 925,000.
With the introduction of General Packet Radio Switching technology
later this year, C&W HKT customers will enjoy a ten-fold increase in
wireless data transmission capacity from current levels.
Internet
C&W HKT's Internet services include access services through dial-up,
broadband DSL and dedicated leased line connections, on-line content
and applications through Internet portals and total Internet
solutions for businesses such as website hosting, e-mail, corporate
Intranet and Extranet development and on-line security services.
Its NETPLUS business is Hong Kong's leading wholesale provider of
local and international Internet connectivity for other Internet
service providers, with 425 Mbps of transmission capacity to the US
alone.
The Hong Kong market continues to show strong growth in customer
numbers and Internet traffic. C&W HKT's NETVIGATOR ISP service was
elected as Hong Kong's 'Best Internet Service Provider' by readers of
PC World Magazine (Hong Kong) in 1997, 1998 and 1999. NETVIGATOR is
currently the Hong Kong ISP market leader with some 389,000 dial-up
customers and 22,000 broadband customers, representing approximately
40 per cent of the post-paid dial-up access market. C&W HKT's ISP
service generated Internet traffic of 1.1 billion minutes in December
1999.
C&W HKT's www.netvigator.com portal provides Internet users in Hong
Kong, Taiwan and Canada with access to a broad range of content and
applications in Chinese and English. As of 30 September 1999, total
average daily traffic through this site was over 4 million daily page
views.
Interactive Multimedia Services
The strength of its advanced broadband network allowed C&W HKT to
launch one of the world's first broadband interactive television
(iTV) services in March 1998. These services include a broad range of
on-demand entertainment and information services such as movies
(video-on-demand), home shopping, music videos, radio, news, karaoke,
home banking offered in conjunction with the Bank of China Group and
educational content. C&W HKT's iTV customer base was approximately
90,000 as at 30 September 1999.
In March 1999, C&W HKT and Microsoft Corporation announced a
strategic co-operation to develop a range of multimedia applications
to be delivered to personal computers and televisions via C&W HKT's
broadband network utilizing Microsoft software. In October 1999, the
iZENE.NETVIGATOR broadband portal powered by Microsoft software and
delivered on C&W HKT's broadband network was launched.
Technical and Other Services
C&W HKT also provide technical, computer and engineering services,
principally to the Hong Kong SAR Government, telephone directory
advertising services and call center services.
Regional Expansion
C&W HKT is a regional and international entity and has eight offices
in the Asia Pacific region and two in Canada.
C&W HKT is continuing to diversify its telecommunications activities
outside Hong Kong with a focus on Internet and advanced network
services. Recent examples include its involvement in mobile
consulting projects in the mainland China and recent further
investments in Taiwan through Taiwan Telecommunications Network
Services, a value-added network services business, and in FIC Network
Service, an Internet service provider. C&W HKT also has an investment
in MobileOne, the second mobile operator in Singapore, with 320,000
customers as of 31 March 1999.
C&W HKT Management and Staff
The management and staff of C&W HKT have created a telephone company
in Hong Kong which is the envy of Asia in terms of quality and cost
efficiency. PCCW is delighted that this transaction with C&W HKT
offers significant growth opportunities for the new merged business
and all who work in it. With the expansionary possibilities available
to the new merged business in both Internet and the growth of PCCW's
business across Asia, the directors of PCCW believe that there will
be broader opportunities for career potential and personal
development. The directors of PCCW hope all members of the C&W HKT
management team and all employees will share their excitement and
enthusiasm.
The directors of PCCW have also decided that upon completion of the
Acquisition three members of C&W HKT's senior management team will be
invited to become executive directors of PCCW.
10.
COMPULSORY ACQUISITION
Level of Acceptance
If the Offeror acquires not less than 90% of the C&W HKT Shares to
which the Offer relates, it is the intention of the Offeror to apply
the provisions of Section 168 of the Companies Ordinance relating to
the compulsory acquisition of those C&W HKT Shares not acquired by
the Offeror pursuant to the Offer (the `Compulsory Acquisition') in
order to acquire all the C&W HKT Shares.
Right to Compulsory Acquisition
In accordance with the requirements of the Companies Ordinance, the
Offeror may proceed with the Compulsory Acquisition if it acquires
not less than 90% of the C&W HKT Shares to which the Offer relates
within a period of four months beginning from the date of the Offer.
If the Compulsory Acquisition proceeds, the Offeror will be required
to make available (subject to any arrangements made in respect of
shareholders of C&W HKT not resident in Hong Kong) the Share
Alternative and the Combination Alternative to the C&W HKT
Shareholders whose C&W HKT Shares are the subject of the Compulsory
Acquisition (the `Outstanding Shareholders').
Terms of Compulsory Acquisition
The Outstanding Shareholders will (subject to any arrangements made
in respect of shareholders of C&W HKT not resident in Hong Kong) be
afforded the opportunity to choose between the Share Alternative and
the Combination Alternative for a minimum period of two months after
the notice of Compulsory Acquisition (the `Acquisition Notice') is
given to them.
Timing of Compulsory Acquisition
Under the Companies Ordinance, the Acquisition Notice must be given
to the Outstanding Shareholders not later than five months after the
date of the Offer. As the Outstanding Shareholders must be given a
minimum of two months from the date of the Acquisition Notice to
exercise their election (subject to any arrangements made in respect
of shareholders of C&W HKT not resident in Hong Kong) for the Share
Alternative or the Combination Alternative, the final date for the
issue of New PCCW Shares and payment of cash to the Outstanding
Shareholders is expected to be no later than seven months and 14 days
after the date of the Offer.
11.
SETTLEMENT OF CONSIDERATION
In the event that the Acquisition is implemented by the Offer, the
applicable consideration will be despatched to shareholders who
validly accept the Offer within 10 days (or such longer period as may
be agreed with the Executive) of the later of:
(a)
the date on which the Offer becomes (or is declared) unconditional
in all respects; and
(b)
the date on which the relevant C&W HKT Shares are tendered for
acceptance of the Offer.
In the event that the Acquisition is implemented by the Scheme, the
applicable consideration will be settled within 5 days of the
effective date of the Scheme which is expected to be not later than
14 days after the Court sanction of the Scheme.
The Offeror has undertaken for the benefit of all C&W HKT
shareholders that simultaneously with declaring the Offer
unconditional in all respects, or if the Acquisition is implemented
by the Scheme, upon the effective date of the Scheme, to irrevocably
direct its bankers that sums drawn under the facilities being
provided by those bankers to pay the cash consideration will be held
in bank accounts on trust for those C&W HKT shareholders who have
validly elected or will validly elect to receive shares and cash
under the Combination Alternative pending settlement of that
consideration within 10 days from the date of the Offer becoming or
being declared unconditional in all respects or if the Acquisition is
implemented by the Scheme, within 5 days of the effective date of the
Scheme (as applicable).
12.
OFFEROR'S INTENTIONS
Maintaining a listing
If the Delisting Approval is not obtained but the Offeror waives
that condition, the Offer will still be subject to the other
conditions, including the condition in respect of receiving
sufficient acceptances for Compulsory Acquisition. In the event that
the Offeror is unable to achieve the level of acceptances for
Compulsory Acquisition and Delisting Approval is not obtained but the
Offeror chooses to waive both of these conditions and to declare the
Offer unconditional as to acceptances, it is the Offeror's intention
for C&W HKT to maintain the listing of the C&W HKT Shares on the
Stock Exchange.
The Offeror and PCCW understand that Rule 8.08 of the Listing Rules
relating to the minimum prescribed percentage of C&W HKT Shares to be
held by the public has to be complied with. In these circumstances,
each of the existing directors of the Offeror and PCCW will jointly
and severally undertake to the Stock Exchange, prior to the despatch
of the Offer Document containing further details of the Offer to take
or procure the taking of appropriate steps to ensure that Rule 8.08
of the Listing Rules is complied with.
If the Acquisition is implemented by the Scheme, the C&W HKT Shares
will be cancelled and thereby delisted upon the Scheme becoming
effective.
To the extent applicable and in pursuance of the compulsory
acquisition power under the Companies Ordinance, if the Offeror
acquires not less than the relevant number of C&W HKT Shares, it is
the intention that rights will be exercised under the relevant
provisions of the Companies Ordinance relating to the compulsory
acquisition of those C&W HKT Shares not acquired by the Offeror
pursuant to the Offer in order to acquire all the C&W HKT Shares (see
`Compulsory Acquisition' above).
Management operations
It is the intention of PCCW that the management and daily operations
of C&W HKT will be carried out by the existing management of C&W HKT
and to invite three of the directors of C&W HKT to join the PCCW
Board.
Relationship with C&W
C&W will be invited to appoint and retain two directors on the board
of PCCW during the period in which C&W FE's holding of PCCW Shares
exceeds 15% of PCCW's issued share capital and one director during
the period in which its holding exceeds 7.5%.
C&W and PCCW intend to explore opportunities for commercial
co-operation on arm's length market terms.
13.
OVERSEAS SHAREHOLDERS
The making of the Offer and/or the C&W FE Offer to persons not
resident in Hong Kong may be affected by the laws of relevant
jurisdictions. Such persons should inform themselves about and
observe any applicable legal or regulatory requirements. The Offer
will extend, to the extent required by law, to those persons not
resident in Hong Kong to whom the Offer document and any related
documents may not be despatched or by whom such documents may not be
received under the laws of relevant jurisdictions. The Offeror and
C&W FE reserve the right to make arrangements in respect of
shareholders of C&W HKT not resident in Hong Kong in relation to the
terms of the Offer and, as applicable, the C&W FE Offer.
It is the responsibility of any overseas persons wishing to accept
the Offer (whether or not they elect for the Combination Alternative)
and, if applicable, for the C&W FE Offer to satisfy themselves as to
the full observance of the laws of the relevant jurisdiction in
connection therewith, including the obtaining of any governmental,
exchange control or other consents which may be required, or the
compliance with other necessary formalities and the payment of any
issue, transfer or other taxes due in such jurisdiction.
The Offer and the C&W FE Offer are not being made, directly or
indirectly, in or into, or by use of the mails, or by any means or
instrumentality (including, without limitation, facsimile
transmission, telex or telephone) of interstate or foreign commerce
of, or any facilities of a national securities exchange of, the
United States, nor are they being made in Canada, Australia or Japan.
Accordingly, copies of this announcement are not being and must not
be mailed or otherwise distributed or sent in or from the United
States, Canada, Australia or Japan. Persons receiving this
announcement (including, without limitation, nominees, custodians and
trustees) should observe these restrictions and not send or
distribute this announcement in or into the United States, Canada,
Australia or Japan.
The New PCCW Shares to be issued in connection with the Acquisition
and the C&W FE Offer have not been registered under the U.S.
Securities Act of 1933, as amended, or under the securities laws of
any state of the United States. The relevant clearances have not been
obtained from the securities commission of any province or territory
of Canada. No prospectus in relation to the Offer, the C&W FE Offer
or the New PCCW Shares has been lodged with, or registered by the
Australian Securities Commission, nor have any steps been taken to
enable the New PCCW Shares to be offered in compliance with
applicable securities laws in Japan. Accordingly, unless an exemption
under applicable securities laws is available, or such steps are
subsequently taken, the New PCCW Shares may not be offered, sold,
re-sold, transferred or delivered, directly or indirectly, in or into
or from, the United States, Canada, Australia or Japan or any other
jurisdiction in which the offer of the New PCCW Shares would
constitute a violation of relevant laws or require registration
thereof, or to or for the account or benefit of any US Person or any
person in Canada, Australia or Japan.
Notwithstanding the restrictions in the previous two paragraphs, the
Offeror and C&W FE will retain the right to permit the Offer and the
C&W FE Offer respectively to be accepted and the Offeror and C&W FE
respectively will retain rights to permit any exchange or sale of
securities to be completed if, in their respective discretion, they
are satisfied that the transaction in question is exempt from or not
subject to the legislation or regulation giving rise to the
restrictions in question.
The attention of the shareholders of C&W HKT not resident in Hong
Kong is drawn to the relevant provisions of the formal Offer Document
which will be despatched on behalf of the Offeror in due course.
The Offeror reserves the right to notify any matter, including the
making of the Offer, to the shareholders of C&W HKT not resident in
Hong Kong by announcement or by advertisement in a newspaper which
may not be circulated in the jurisdictions of which such shareholders
of C&W HKT are resident. The notice will be deemed to have been
sufficiently given, despite any failure by such shareholders to
receive or see that notice.
14.
FURTHER TERMS OF AND GENERAL MATTERS RELATING TO THE OFFER
Offer Document
The Offer Document (which will contain details of the Offer, the C&W
FE Offer and information in relation to C&W HKT and PCCW) and the
Forms of Acceptance or, in the event that the Acquisition is to be
effected by the Scheme, the necessary forms of election and proxy
will be sent to shareholders of C&W HKT as soon as practicable.
Subject to the approval of the Executive and the consent of C&W HKT,
the Offer Document may be combined with C&W HKT's circular to the
shareholders of C&W HKT containing the response of the Board of C&W
HKT to the Offer.
Stamp Duty
In the event the Acquisition is effected by the Offer, one-half of
the amount of Hong Kong stamp duty payable will be deducted, at the
rate of HK$1.25 for every HK$1,000 (or part of HK$1,000) of the
consideration, from the amount payable to the shareholders of C&W HKT
who accept the Offer and who validly elect for the Combination
Alternative. All stamp duty payable in connection with the Share
Alternative and the balance of the stamp duty payable in connection
with the Combination Alternative will be borne by the Offeror.
Interests in C&W HKT Shares
Neither PCCW, the Offeror nor WDR or any person acting in concert
with them, save for:-
(a)
Mr Mico Cho Yee CHUNG, a director of PCCW, who owns together with
his wife a total of 181,445 shares in C&W HKT; and
(b)
BOCI, a financial adviser to PCCW, and their respective affiliates
who are presumed to be acting in concert with PCCW under the
Takeovers Code, who own 142 shares in C&W HKT; and
(c)
CSFB, a financial adviser to PCCW, and their respective affiliates
who are presumed to be acting in concert with PCCW under the
Takeovers Code, who own 60,669 shares and 42,822 American Depositary
Receipts in C&W HKT,
owns or controls any C&W HKT Shares or has Options to acquire (or
other outstanding derivatives in respect of) any C&W HKT Shares.
Financial Advisers
WDR and BOCI have been appointed to advise PCCW and the Offeror in
respect of the Offer and are satisfied that sufficient financial
resources are available to the Offeror for the implementation of the
Offer. PCCW is also being provided with strategic and general advice
by CSFB. Merrill Lynch and Greenhill & Co. have been appointed to
advise C&W and Merrill Lynch (Asia Pacfic) Limited has been appointed
to advise C&W FE in respect of the C&W FE Offer and Jardine Fleming
has been appointed to advise C&W HKT in respect of the Offer.
Trading of PCCW Shares
Trading in the securities of PCCW on the Stock Exchange was
suspended on 25, 28 and 29 February 2000. PCCW has made an
application to the Stock Exchange for the resumption of trading in
the shares of PCCW on the Stock Exchange as of 10.00 a.m. on 1 March
2000. Shareholders of PCCW and potential investors should be aware
that the Offer is subject to certain conditions being fulfilled as
referred to above and as such may not become unconditional.
Accordingly, shareholders of PCCW and potential investors are advised
to exercise caution when dealing in PCCW securities.
PCCW Offer Document
An Offer Document containing further details of the Offer and the
notice convening an extraordinary general meeting of PCCW
shareholders in connection with the Offer in accordance with the
Takeovers Code and the Listing Rules will be despatched to PCCW
shareholders as soon as practicable.
By Order of the Board
Pacific Century CyberWorks Limited
Chu Mee Lai, Helen
Company Secretary
By Order of the Board
Doncaster Group Limited
Chu Mee Lai, Helen
Company Secretary
Hong Kong, 29 February 2000
The Boards of PCCW and the Offeror jointly and severally accept full
responsibility for the accuracy of the information contained in this
announcement, save that the only responsibility of the Board of PCCW
and the Offeror in respect of information contained in this
announcement relating to the C&W HKT Group which has been compiled
and reproduced from public sources, is to ensure that such
information is correctly and fairly reproduced and presented. Subject
as aforesaid, they confirm having made all reasonable enquiries, that
to the best of their knowledge, their 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.
Appendix 1
Conditions to the Acquisition
1.
Conditions to the Offer
The Offer
The Offer (which is deemed to include, where relevant, references to
the Share Alternative and/or Combination Alternative) will be made in
compliance with the Takeovers Code, will be governed by the laws of
Hong Kong and will be subject to the jurisdiction of the Court and to
the terms and conditions set out below, in the Offer Document and in
the Form of Acceptance.
The Acquisition will be subject to the following conditions:
(A)
Valid acceptances being received (and not, where permitted,
withdrawn) by not later than 4.00 p.m. on the first closing date of
the Offer (or such later time(s) and/or date(s) as the Offeror may,
subject to the rules of the Takeovers Code, decide) in respect of not
less than 90 per cent. (or such lesser percentage as the Offeror may
decide) in nominal value of C&W HKT Shares to which the Offer
relates, provided that this condition will not be satisfied unless
PCCW (and/or any of its wholly-owned subsidiaries) shall have
acquired, or agreed to acquire, whether pursuant to the Offer or
otherwise, C&W HKT Shares carrying, in aggregate, more than 50% of
the voting rights then normally exercisable at general meetings of
C&W HKT.
For the purposes of this condition:
(i)
C&W HKT Shares which have been unconditionally allotted shall be
deemed to carry the voting rights they will carry upon being entered
in the register of members of C&W HKT; and
(ii)
the expression `C&W HKT Shares to which the Offer relates' means (i)
C&W HKT Shares unconditionally allotted or issued on or before the
date the Offer is made and (ii) C&W HKT Shares unconditionally
allotted or issued after that date but before the time at which the
Offer ceases to be open for acceptance (or such earlier date, not
being earlier than the date on which the Offer becomes unconditional
as to acceptances or, if later, the first closing date of the Offer,
as PCCW may, subject to the Takeovers Code, decide) but excluding any
C&W HKT Shares which, on the date the Offer is made, are held or
contracted to be acquired by C&W HKT and/or its associates;
(B)
C&W HKT's board of directors resolving to consent to PCCW and its
associates becoming holders of more than 10% of the shares in C&W HKT
as required under C&W HKT's articles of association (The Executive
has indicated that any disagreement to give such consent is not
allowed under General Principle 9 and Rule 4 of the Takeovers
Code.)
(C)
The shareholders of PCCW passing, at the extraordinary general
meeting convened for that purpose (or at any adjournment thereof),
such resolutions as may be necessary to implement the Acquisition;
(D)
The shareholders of PCCW Holdings approving, at the extraordinary
general meeting of such shareholders convened for that purpose (or at
any adjournment thereof), such resolutions as may be necessary to
implement the Acquisition;
(E)
The shareholders of C&W approving, at the extraordinary general
meeting convened for that purpose (or at any adjournment thereof),
such resolutions as are necessary to implement the Acquisition, and
the approval of the holder of the special share in the capital of C&W
being obtained;
(F)
The passing at a duly convened meeting of the C&W HKT shareholders
of a resolution to approve the voluntary withdrawal of listing of the
C&W HKT Shares on the Stock Exchange by a majority in number
representing three-fourths in value of the C&W HKT Shares held by
shareholders of C&W HKT present and voting either in person or by
proxy (other than, pursuant to the Listing Rules and Rule 2.2 of the
Takeovers Code, those C&W HKT shareholders who are controlling
shareholders, directors or the chief executive of C&W HKT or their
respective associates and the Offeror and any person acting in
concert with the Offeror);
(G)
an approval in principle being given by the Stock Exchange for the
listing and quotation of the New PCCW Shares;
(H)
if applicable, the European Commission having issued a decision,
under Article 6(1)(b) of Council Regulation (EEC) 4064/89 as amended
by Council Regulation (EC) 1310197 (the `Merger Regulation') (or
being deemed to have done so under Article 10(6) of the Merger
Regulation);
(I)
if applicable, the expiry or termination of all applicable waiting
periods (including any extensions thereof) under the United States
Hart-Scott- Rodino Anti-trust Improvements Act 1976 and the
regulations made thereunder;
(J)
the obtaining of all other consents, clearances, authorisations and
approvals which are necessary for the implementation of the
Acquisition and the resulting change of control of C&W HKT, or which
would prohibit or prevent the implementation of the Acquisition or
make the Acquisition illegal, void or unenforceable under the laws of
any relevant jurisdiction or would, directly or indirectly, restrain,
restrict or delay the Acquisition or its implementation, where the
absence of any such consents, clearances, authorisations or approvals
would have a material adverse effect on the C&W HKT Group taken as a
whole;
(K)
no government or governmental, quasi-governmental, statutory or
regulatory body or court or any other person or body (each a
`Relevant Authority') (including, without limitation, the
Telecommunications Authority) having decided to take, institute or
implement any action or steps or enacted, made or proposed any
statute, regulation or order or otherwise taken any steps that does
or would upon taking effect to an extent which would be material to
the C&W HKT Group taken as a whole:
(i)
make the Acquisition or its implementation illegal, void or
unenforceable under the laws of any relevant jurisdiction;
(ii)
require the divestiture by either the PCCW Group or the C&W HKT
Group or any of their respective subsidiaries of all or any material
portion of their respective businesses, assets or properties or
impose any material limitation on the ability of any of them to
conduct their respective businesses or own their respective assets or
properties;
(iii)
require any member of the PCCW Group to make an offer to acquire any
shares or other securities in any member of the C&W HKT Group owned
by any third party; or
(iv)
impose any material limitation on the ability of any member of the
PCCW Group to hold or exercise effectively, directly or indirectly,
any rights of ownership over securities in C&W HKT or to exercise,
directly or indirectly, management control over C&W HKT or any other
member of the C&W HKT Group;
(L)
all necessary filings or applications in connection with the
Acquisition or its implementation having been made, all appropriate
waiting periods (including extensions thereof) in respect of the
Acquisition under any applicable legislation or regulations of any
jurisdiction having expired, lapsed or been terminated and all
authorisations, orders, recognitions, grants, consents, licences,
confirmations, clearances, permissions and approvals
(`Authorisations') deemed necessary or appropriate for or in respect
of the Acquisition, or which are necessary for C&W HKT to carry on
its business, having been obtained in terms and in a form reasonably
satisfactory to the Offeror from all appropriate Relevant Authorities
to the extent that such authorisations are material in the context of
the Offer, or other bodies with whom any member of the PCCW Group or
the C&W HKT Group has entered into contractual arrangements and all
such Authorisations remaining in full force and effect and there
being no intimation or notice of an intention to revoke or not to
renew any of the same having been received, in each case as may be
necessary in connection with the Acquisition under the laws or
regulations of any jurisdiction and all necessary statutory or
regulatory obligations in connection with the Acquisition and their
implementation in any relevant jurisdiction having been complied
with;
(M)
there being no provision of any arrangement, agreement, licence or
other instrument to which any member of the C&W HKT Group is a party
or by or to which any such member is or are or may be bound, entitled
or subject which as a consequence of the implementation of the
Acquisition or the acquisition or proposed acquisition by any member
of the PCCW Group of some or all of the share capital or other
securities in C&W HKT or because of a change in control or management
of C&W HKT could or might reasonably result in, to an extent which is
material in the context of the C&W HKT Group, taken as a whole:
(i)
any monies borrowed by or other indebtedness (actual or contingent)
of any member of the C&W HKT Group being repayable or being capable
of being declared repayable prior to their stated maturity;
(ii)
the creation of any mortgage, charge or other security interest over
the whole or any material part of the business, property or assets of
any member of the C&W HKT Group or any such security (whether arising
or having arisen) becoming enforceable;
(iii)
any such arrangement, agreement, licence (including, without
limitation, the C&W HKT Group's licences under the Telecommunication
Ordinance), permit, franchise or other instrument being terminated or
adversely modified or any material action being taken or any material
obligation arising thereunder; or
(iv)
the interest or business of any member of the C&W HKT Group in or
with any person, firm, company or body (or any arrangement or
arrangements relating to such interest or business) being terminated
or adversely modified or affected, in each case in consequence of the
Acquisition;
(N)
save as publicly announced prior to 28 February 2000, no member of
the C&W HKT Group having since 31 March 1999 (being the date to which
the latest annual report and accounts of C&W HKT Group were made up):
(i)
issued, agreed or authorised or proposed the issue of additional
shares of any class, or securities convertible into, or rights,
warrants or options to subscribe for or acquire, any such shares or
convertible securities (save as between C&W HKT and its wholly-owned
subsidiaries or for options granted, and any shares in C&W HKT issued
upon exercise of options granted, prior to 28 February 2000, under or
pursuant to the Share Option Scheme);
(ii)
save for the second interim or final dividend in respect of the year
ending 31 March 2000 of up to a maximum of HK$0.45 per C&W HKT Share,
recommended, declared, paid or made any bonus, dividend or other
distribution other than between members of the C&W HKT Group;
(iii)
to an extent which is material in the context of the C&W HKT Group
as a whole, merged with any body corporate or acquired or disposed of
any assets or authorised, proposed or announced any intention to
propose any merger, demerger, acquisition or disposal;
(iv)
issued, authorised or proposed the issue of any debentures or, save
in the ordinary course of business, incurred or increased any
indebtedness or contingent liability in each case to an extent which
is material in the context of the C&W HKT Group, taken as a whole;
(v)
purchased, redeemed or repaid or announced any proposal to purchase,
redeem or repay any of its own shares or other securities or redeemed
or reduced or made any other change to any part of its share capital
to an extent which is material in the context of the C&W HKT Group,
taken as a whole;
(vi)
entered into any contract, transaction, arrangement or commitment
(whether in respect of capital expenditure or otherwise) which is of
a long-term, onerous or unusual nature or magnitude, and which
involves or is likely to involve an obligation of a nature or
magnitude which, in any case, is material in the context of the C&W
HKT Group, taken as a whole; and
(vii)
made or authorised or proposed or announced an intention to propose
any change in its loan capital to an extent which is material in the
context of the C&W HKT Group, taken as a whole;
(O)
save as publicly announced or otherwise disclosed by C&W HKT or its
advisers to PCCW or its advisers prior to 28 February 2000, since 31
March 1999, being the date to which the latest audited report and
accounts of C&W HKT were made up:
(i)
there having been no material adverse change in the business,
financial or trading position or prospects of any member of the C&W
HKT Group to an extent which is material in the context of the C&W
HKT Group, taken as a whole;
(ii)
there not having been instituted or remaining outstanding any
litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the C&W HKT Group is a party
(whether as plaintiff or defendant or otherwise) and no such
proceedings having been threatened in writing against any such member
and no investigation by any government or quasi- governmental,
supranational, regulatory or investigative body or court against or
in respect of any such member or the business carried on by any such
member having been threatened in writing, announced, instituted or
remaining outstanding by, against or in respect of any such member in
each case which is material and adverse in the context of the C&W HKT
Group, taken as a whole; and
(P)
the Commission having approved in writing pursuant to Section 26A of
the SFC Ordinance that the Offeror and any other person who, as a
result of the acquisition of C&W HKT Shares pursuant to the
Acquisition, will become a substantial shareholder of any company in
the C&W HKT Group which is a registered person, becoming a
substantial shareholder of such company in the C&W HKT Group.
2.
Conditions of the Scheme
In the event that the Acquisition is effected by the Scheme the
condition in paragraph 1(F) of this Appendix I will be waived by the
Offeror and the following condition will apply in the place of the
condition in paragraph 1(A) of this Appendix 1:
(A)
the approval by a majority in number representing three-fourths in
value of the holders of the C&W HKT Shares or any class thereof
present and voting, either in person or by proxy, at a meeting or
meetings convened by the Court;
(B)
the necessary special resolutions required to implement the Scheme,
including a proposed reduction of share capital of C&W HKT being duly
passed by a majority of three-fourths of the votes cast by holders of
C&W HKT Shares present and voting, either in person or by proxy at an
extraordinary general meeting of C&W HKT; and
(C)
the sanction (with or without modification) of the Scheme and
confirmation of any reduction in capital included in the Scheme by
the Court, and a copy of the order of the Court being delivered for
registration to the Registrar of Companies in Hong Kong.
3.
Delisting under the Scheme
In the event that the Acquisition is effected by the Scheme, all of
the C&W HKT Shares will be cancelled and thereby delisted upon the
Scheme becoming effective.
4.
Waiver of conditions
The Offeror reserves the right to waive all or any of the conditions
set out in paragraph 1 of this Appendix 1, in whole or in part, for
the purposes of the Acquisition, except for conditions (A) and (G)
with the proviso that it will not waive conditions (B) and (E) except
with the consent of C&W.
Appendix 2
Irrevocable Undertaking
The circumstances in which the irrevocable undertaking may lapse are
as follows:
(A)
the Offer Document or the Scheme Document, as the case may be, not
having been despatched on or before the date 35 days after the date
hereof unless the SFC shall have consented to later despatch and
delay has not been caused by default of PCCW or the Offeror; or
(B)
any condition of the Offer having been invoked; or
(C)
the Offer lapsing or being withdrawn; or
(D)
the conditions of the Offer, other than the condition as to
acceptances, not having been satisfied or (if waivable by the Offeror
without C&W's consent) waived on or before the date 135 days after
the date hereof; or
(E)
the obligations of either of C&W or C&W FE under this undertaking
having become inconsistent with the fiduciary duties of the directors
of the relevant one of them and C&W or C&W FE, as the case may be,
having notified PCCW in writing to such effect; or
(F)
any specified events relating to the PCCW Group having occurred in
circumstances where the occurrence of such event would permit an
offeror to lapse an offer subject to the Takeovers Code were it to be
the case that PCCW was an offeree the subject of such offer.
Appendix 3
Definitions
The following definitions apply throughout this announcement, unless
the context requires otherwise:
`Acquisition' the proposed acquisition of
C&W HKT by PCCW whether
implemented and effected by
the Offer or the Scheme;
`Board' the Board of Directors of any
of C&W, C&W HKT, PCCW or the
Offeror, as applicable;
`BOCI' BOCI Asia Limited;
`C&W' Cable and Wireless plc, a
company incorporated in
England and Wales with
limited liability;
`C&W FE' Cable and Wireless (Far East)
Limited, a company
incorporated in Hong Kong
with limited liability and a
wholly-owned subsidiary of
C&W;
`C&W FE Offer' the independent conditional
offer by C&W FE to C&W HKT
shareholders (other than C&W
FE and certain overseas
shareholders) who elect to
accept the Combination
Alternative;
`CMGI' CMGI Inc.;
`Combined Group' PCCW and its subsidiaries (as
such term is defined in the
Companies Ordinance) as
enlarged following the
implementation of the
Acquisition;
`Combination Alternative' the proposed combination
alternative under which
holders of C&W HKT Shares who
validly accept the Offer may
elect to receive a
combination of New PCCW
Shares and cash (in HK$ or
US$) in exchange for their
C&W HKT Shares;
`Companies Ordinance' the Companies Ordinance
(Chapter 32 of the Laws of
Hong Kong);
`C&W HKT Group' C&W HKT and each of its
subsidiaries (as such term is
defined in the Companies
Ordinance);
`C&W HKT Shares' the existing issued shares of
HK$0.50 each in C&W HKT at
the date hereof and any such
further shares which are
unconditionally allotted or
issued after the date hereof
and before the date on which
the Offer closes (or such
earlier date or dates as PCCW
and the Offeror may decide)
pursuant to the exercise of
options under the Share
Option Scheme;
`Court' the High Court of the Hong
Kong Special Administrative
Region of the People's
Republic of China;
`Court Meeting(s)' the meeting(s) of the
shareholders of C&W HKT, or
any class thereof, convened
by direction of the Court in
connection with the Scheme;
`CSFB' Credit Suisse First Boston
(Hong Kong) Securities
Limited;
`Delisting Approval' approval by the independent
shareholders of C&W HKT of a
voluntary withdrawal of
listing of the C&W HKT Shares
on the Stock Exchange;
`Executive' the Executive Director of the
Corporate Finance Division of
the Securities and Futures
Commission;
`Extraordinary General the extraordinary general
Meeting' meeting of C&W HKT, or any
class thereof, to consider
and if thought fit, approve
the reduction of capital
included in the Scheme;
`Form of Acceptance' the form of acceptance,
election and authority
relating to the Offer to
accompany the Offer Document;
`Hicks Muse' Hicks Muse Tate and Furst
Inc.;
`Hong Kong' the Hong Kong Special
Administrative Region of the
People's Republic of China;
`Increased Cash Election' the facility for shareholders
to elect to increase the
amount of cash receivable
pursuant to a valid election
under the Combination
Alternative;
`Listing Rules' the Rules Governing the
Listing of Securities on the
Stock Exchange;
`Long Stop Date' the last date when the
Offeror can declare the Offer
unconditional, being 60 days
after the date of making the
Offer or such later date as
the Executive may consent to
(being not later than 135
days after the date of this
announcement);
`Merrill Lynch (Asia Pacific) Merrill Lynch (Asia Pacific)
Limited' Limited, a dealer and
investment adviser registered
under the Securities
Ordinance (Chapter 333 of the
Laws of Hong Kong)
`New PCCW Shares' the new PCCW Shares proposed
to be issued, credited as
fully paid, pursuant to the
Offer;
`Offer' the voluntary conditional
securities exchange offer by
WDR and BOCI on behalf of the
Offeror to acquire the C&W
HKT Shares;
`Offer Conditions' the conditions to the Offer
set out in paragraph 1 of
Appendix 1;
`Offer Document' the formal document proposed
to be sent to shareholders of
C&W HKT containing, inter
alia, details of the
Acquisition;
`Offeror' Doncaster Group Limited, a
company incorporated in Hong
Kong and a wholly owned
subsidiary of PCCW;
`Option' or `Options' an option or options over C&W
HKT Shares granted as at 28
February 2000;
`PCCW' Pacific Century CyberWorks
Limited, a company
incorporated in Hong Kong
with limited liability, the
shares of which are listed on
the Stock Exchange;
`PCCW Group' PCCW and each of its
subsidiaries (as such term is
defined in the Companies
Ordinance);
`PCCW Holdings' Pacific Century Regional
Developments Limited, the
holding company of PCCW whose
securities are listed on the
Singapore Stock Exchange;
`PCCW Shares' shares of HK$0.05 each in the
capital of PCCW;
`SFC Ordinance' The Securities and Futures
Commission Ordinance (Chapter
24 of the Laws of Hong Kong);
`Scheme' a scheme of arrangement
between C&W HKT and the C&W
HKT shareholders under
Section 166 of the Companies
Ordinance to cancel all the
existing C&W HKT Shares;
`Share Alternative' the proposed share
alternative under which
holders of C&W HKT Shares who
validly accept the Offer may
elect to receive New PCCW
Shares in exchange for their
shares in C&W HKT;
`Share Option Scheme' the share option scheme
adopted by C&W HKT;
`Stock Exchange' The Stock Exchange of Hong
Kong Limited;
`substantial shareholder' has the meaning given in
section 2 of the SFC
Ordinance;
`Takeovers Code' The Hong Kong Code on
Takeovers and Mergers as in
force from time to time;
`Telecommunications The Telecommunications
Authority' Authority of Hong Kong;
`Telecommunication Ordinance' The Telecommunication
Ordinance (Chapter 106 of the
Laws of Hong Kong);
`United States' The United States of America
its territories and
possessions, any State of the
United States of America and
the District of Columbia;
`US Person' a US person as defined in
Regulation S of the US
Securities Act 1933 (as
amended); and
`WDR' Warburg Dillon Read (Asia)
Limited.
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