DONG-JUN (HOLD)<0412> - Announcement
DONG-JUN (HOLDINGS) LIMITED
(Incorporated in Bermuda with limited liability)
DISCLOSEABLE TRANSACTION
ACQUISITION OF INTEREST IN A FORMER SUBSIDIARY
Dong-Jun (Holdings) Limited announced that it entered into an acquisition
agreement on 31 March, 1999 pursuant to which Dong-Jun would buy back a
60% equity interest in Intercontinental Star Limited, an indirect
subsidiary of Dong-Jun ("Inter Star"), from Warerly Limited ("Warerly")
for a consideration of HK$210,000,000 (the "Settlement Acquisition"). The
background of the Settlement Acquisition is described below.
Due to inadvertent oversight, Dong-Jun failed to comply with the
disclosure requirement pursuant to Rule 14.23 of the Listing Rules in
respect of the Settlement Acquisition. At the request of the Stock
Exchange, this announcement is duly made and a circular containing
information on the Settlement Acquisition will be despatched to the
shareholders of Dong-Jun as soon as possible.
The Stock Exchange reserves the right to take further action against
Dong-Jun in respect of its failure to disclose the Settlement Acquisition
at the time of transaction.
This announcement is made at the request of the Stock Exchange.
Background of the Settlement Acquisition:
On 1 August, 1997, Inter Star, a then 70 per cent owned subsidiary of
Dong-Jun, entered into an exclusive sales agency and underwriting
agreement (the "Agency Agreement") with * (the"Developer"), an independent
third party (as defined in the ListingRules), for Inter Star to act as a
sole and exclusive agent in a proposed sale of certain premises situated
in a real estate developmentproject/building complex under the name of *
(the "Properties") situated in Shenzhen, the PRC. Details of the
transaction were disclosed in the circular of Dong-Jun dated 26 August,
1997.
On 25 March, 1998, Dong-Jun entered into a sale and purchase agreement
with Warerly for the disposal of a 60% equity interest in Inter Star for a
total consideration of HK$252,000,000 comprising of HK$210,000,000 for 60%
equity interest in Inter Star and the attributable shareholder's loan of
HK$42,000,000 (the "Warerly Acquisition"). Warerly was an independent
third party (as defined in the Listing Rules). Details of the Warerly
Acquisition were disclosed in the circular of Dong-Jun dated 20 April,
1998.
Since the latter part of 1998, Dong-Jun became aware that the Developer
failed to take all necessary actions to complete the construction works
for the Properties as stipulated in the Agency Agreement. Dong-Jun also
became aware that the Developer was in breach of the Agency Agreement for,
inter alia, misrepresentation and its failure to provide relevant title
documents of the Properties upon repeated requests. Warerly became aware
of the problem and through its legal adviser requested Dong-Jun to buy
back the 60% equity interest in Inter Star at the original consideration
of HK$210,000,000, failing which, Warerly would take immediate legal
action against Dong-Jun. In respect of Warerly's claim, Dong-Jun
considered, among other things, the legal advice on the impact and
consequence of the potential claim by Warerly, the resultant legal,
interest and/or judgement costs, the time involved, and the financial
resources of and financial impact to Dong-Jun. The directors of Dong-Jun
concluded that it was in Dong-Jun's best interest to settle Warerly's
claim by repurchasing the 60% equity interest in Inter Star from Warerly.
Settlement Acquisition agreement dated 31 March, 1999
Parties:
Vendor : Warerly Limited, a company incorporated in British
Virgin Islands
Purchaser : Gold Peak Investments Limited, a wholly-owned
subsidiary of Dong-Jun. Gold Peak had a then 10% beneficial interest in
Inter Star immediately before the Settlement Acquisition.
Assets to be acquired:
60% of the issued shares of Inter Star
Consideration:
HK$210,000,000 in cash
The consideration was determined with reference to the purchase price of
the 60% equity interest in Inter Star by Warerly in the Warerly
Acquisition. The directors of Dong-Jun considered that the consideration
was fair and reasonable as far as the Settlement Acquisition was
concerned.
The consideration was funded by Dong-Jun's internal resources and was duly
paid on completion.
Assignment of shareholder's loan:
The parties agreed that Warerly would assign back to Gold Peak the
shareholder's loan of HK$42,000,000 in consideration of the release by
Gold Peak of Warerly's obligation under the Warerly Acquisition.
Completion:
31 March, 1999
Inter Star:
Intercontinental Star Limited, incorporated in British Virgin Islands, was
beneficially owned as to 10% by Dong-Jun (through Gold Peak), 60% by
Warerly and 30% by an independent third party (as defined in the Listing
Rules) prior to the Settlement Acquisition.
Dong-Jun:
Dong-Jun and its subsidiaries are principally engaged in property
development and investment in the PRC with a primary focus on large-scale
and quality commercial and residential property projects for sale and/or
lease to investors and end-users in both the PRC and overseas. It is also
Dong-Jun's intention to diversify its resources to other high value-added
businesses when opportunities arise.
The Properties:
The construction works of the Properties commenced in mid 1997 and the
superstructure of about 22-storey of the Properties was completed as of
the date of this announcement. Further construction of the outstanding
upper storeys of the Properties and the identity of the property developer
to complete such construction are pending subject to the development of
the arbitration proceeding as described below.
Litigation:
In light of the Developer's breach of the Agency Agreement, Dong-Jun
initiated arbitration proceedings against the Developer and its PRC listed
holding company (as guarantor for due performance of the obligation of the
Developer under the Agency Agreement) in August 1999 under which Dong-Jun
claimed against the Developer and its listed holding company in the PRC to
recover the deposit of the exclusive agency fee paid under the Agency
Agreement of HK$70,000,000 and the incidental loss of approximately
HK$17,000,000 incurred by Inter Star as a result of the breach by the
Developer.
The case is now being handled by Dong-Jun's PRC lawyers. The first
arbitration hearing was held in January 2000 and the second hearing was
being scheduled pending the collection of further documentary evidence by
both parties.
Discloseable Transaction:
Pursuant to Rule 14.23 of the Listing Rules, the Settlement Acquisition
constitutes a discloseable transaction and proper disclosure was required.
However, proper disclosure was not made on a timely basis due to
inadvertent oversight by Dong-Jun notwithstanding that relevant
information of the Settlement Acquisition was disclosed in Dong-Jun's 1999
annual report. The Stock Exchange reserves the right to take further
action against Dong-Jun in respect of its failure to disclose the
Settlement Acquisition at the time of transaction.
A circular containing information on the Settlement Acquisition will be
despatched to the shareholders of Dong-Jun as soon as possible.
By Order of the Board
DONG-JUN (HOLDINGS) LIMITED
Wong Chun Hung, Vincent
Chairman
Hong Kong, 3 April, 2000
(* For the Chinese name, please refer to the press announcement today)
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