Brockman Mining Limited — M&A Activity 2000

Jul 3, 2000

The Stock Exchange of Hong Kong 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.

WONG'S INTERNATIONAL (HOLDINGS) LIMITED

(incorporated in Bermuda with limited liability)

WONG'S CIRCUITS (HOLDINGS) LIMITED

(incorporated in Singapore with limited liability)

Disposal of the Printed Circuit Board Business

Major Transaction

On 29th June, 2000, WCH entered into an agreement with an independent purchaser in relation to the disposal of the entire issued capital of its subsidiaries which carry on, principally, the business of manufacturing single-sided, double-sided and multi-layered printed circuit boards. The consideration for the disposal is US$177,827,000 (or approximately HK$1,383,494,060), subject to adjustments as mentioned below. WCH is also entitled to retain the audited cash balances of the WCH Group accumulated up to 31st July 2000 or the Completion Date. On or before Completion, WIH will enter into an agreement with the same independent purchaser in relation to the disposal of WIT for a consideration of US$250,000 (or approximately HK$1,945,000).

The disposals constitute a major transaction for WIH under the Listing Rules and for WCH under the Listing Manual. Certificates to be signed by a closely allied group of shareholders of WIH representing over 50% of the issued share capital of WIH will be issued to approve the disposals but a general meeting of the shareholders of WCH is nevertheless required to approve the disposal.
WIH has applied to the SEHK for dispensation from the requirement for WIH to hold a general meeting of shareholders of WIH to approve the disposals.

1 THE AGREEMENT

1.1 Date

29th June, 2000

1.2 Parties

Vendor :	WCH
Purchaser :	PCL
Warrantors :	WCH and WIH
Covenantors :	Mr Johnny Wong and Mr Michael Wong

PCL is independent of, and not connected with, the directors, chief executives or substantial shareholders of WIH and WCH, any of their respective subsidiaries or associates (as defined in the Listing Rules or the Listing Manual (as the case may be)).

1.3 Assets to be disposed of

Sale Shares: WCH has agreed to sell, and PCL has agreed to acquire, the entire issued share capital of the Sale Companies together with the Subsidiaries.

1.3.2 PCB Business: Simultaneously with completion of the sale of the Sale Shares, the PCB Business will be sold as a going concern by WCPTH to Wellogan (which has changed its name and is now known as Wong's Circuits (HK) Limited) pursuant to the terms of a business sale and purchase agreement annexed to the Agreement. WCPTH is a subsidiary of WCH and Wellogan is a subsidiary of PCL.

1.3.3 The Agreement does not cover the separate disposal of WIT from WIH to PCL.

1.3.4 It is a term of the Agreement that the PCB Business should be sold subject only to its trade related liabilities. The PCB Excluded Liabilities and PCB Excluded Assets (including the PCB Retained Cash), as defined below, will be excluded from the Disposal.

1.4 Consideration

US$177,827,000 (or approximately HK$1,383,494,060). A deposit of US$200,000 (or approximately HK$1,556,000) was paid upon signing of the Agreement. The balance of US$177,627,000 (or approximately HK$1,381,938,060) will be payable by PCL to WCH, as to US$160,019,300 (or approximately HK$1,244,950,154) on Completion and as to US$17,607,700 (or approximately HK$136,987,906) to an escrow account on Completion. WIH’s announcement dated 2nd March 2000 referred to negotiations for a disposal at a consideration of US$180,000,000 (or approximately HK$1,400,400,000), but this consideration was reduced to US$177,827,000 (or approximately HK$1,383,494,060) following negotiations to exclude a property known as Yau Lee Centre from the disposal.

The deposit and US$17,607,700 (or approximately HK$136,987,906) to be paid to the escrow account will be released in accordance with paragraphs 1.7.3 and 1.7.4 below.

1.5 Adjustments to the Consideration

1.5.1 If the Net Asset Value of the PCB Business as at the Completion Date is less than HK$665,240,000, WCH is liable to pay for the shortfall to PCL within 14 days from the final determination of the Net Asset Value.

1.5.2 If the Working Capital of the PCB Business as at the Completion Date is less than HK$188,451,000, WCH is liable to pay such shortfall to PCL within 14 days from the final determination of the Working Capital.

1.5.3 If the EBITDA of the PCB Business for the first half year ending 30th June, 2000 as agreed by the auditors of WCH and the accountants of PCL exceeds HK$108,817,000 by 20%, a sum of US$5,500,000 will be payable by PCL to WCH within 14 days from the final determination of the EBITDA.

1.5.4 If the EBITDA of the PCB Business for the half year ending 31st December, 2000 as agreed by the auditors of WCH and the accountants of PCL exceeds HK$135,628,000 by 20%, a further sum of US$5,500,000 will be payable by PCL to WCH within 14 days from the final determination of the EBITDA.

1.6 Conditions

The Agreement is conditional upon, amongst other things:

(i) each of the Related Agreements having been executed at Completion, on terms and conditions satisfactory to PCL;

(ii) the discharge of all existing Debts;

(iii) the transfer of a particular employee to Wong's Circuits Corporation (which is a subsidiary of WCPTH and will be held by Wellogan);

(iv) all consents, approvals or clearances required under any and all applicable laws and relevant agreements (including the consents of the shareholders of WIH and WCH and the approvals of the SEHK and SGX-ST);

(v) the availability of debt financing to PCL; and

(vi) the delivery of a satisfactory disclosure letter to PCL by the Completion Date.

1.7 Completion

Completion of the Agreement and the WIT Agreement will take place on the Completion Date which is expected to be 31st July, 2000 or the second business day after the satisfaction or waiver of all the conditions of the Agreement (or such other day as the parties may agree) but shall in any event not be later than 30th October 2000.

1.7.1 In the event that WCH is ready, willing and able to complete but PCL fails to proceed with Completion on the Completion Date, the deposit will be forfeited to WCH without prejudice to the other rights and remedies of WCH under the Agreement or otherwise.

1.7.2 In the event that certain conditions of the Agreement are not complied with, PCL may rescind the Agreement and the deposit will be returned to PCL, without prejudice to the other rights and remedies of PCL under the Agreement or otherwise.

1.7.3 Subject to forfeiture and return of the deposit as mentioned in paragraphs 1.7.1 and 1.7.2 above, the deposit will be released to WCH on Completion.

1.7.4 Subject to the retention of an amount equal to 120% of the maximum amount of any claim made by PCL under the Agreement, the part of the Consideration (namely, US$17,607,700 or approximately HK$136,987,906)) paid to the escrow account on Completion will be released to WCH, as to US$8,903,850 (or approximately HK$69,271,953), on the later of (i) four months after Completion or (ii) the date of determination of the Completion Accounts and, as to the remaining balance, twelve months after Completion.

1.7.5 A breakage fee equal to 1% of the Consideration will be payable by WCH to PCL if Completion fails to take place for any of the following reasons:

(i) the WIH Directors and/or the WCH Directors decide not to proceed to Completion; or

(ii) if any of WIH, the Covenantors and their respective Associates who are entitled to vote fail to vote in favour of the resolution to approve the Agreement; or

(iii) if (a) any of WIH, the Covenantors and their respective Associates are not allowed to vote, (b) the Agreement is not approved by shareholders and (c) WIH and/or WCH sells or transfers all or a substantial part of the PCB Business within a period of twelve months from the Completion Date.

1.8 Non-compete undertaking

Each of WIH, the Covenantors and WCH has undertaken to PCL, except with PCL's consent in writing, (i) not to, directly or indirectly, for a period of five years after Completion carry on any business of designing, manufacturing and selling single-sided, double-sided and multi-layered printed circuit boards and (ii) not to use for a period of three years after Completion a name or trade mark including the words “Wong's Circuits” but WCH continues to have the right to use the name or mark in connection with its business.

1.9 Warranties and Indemnities

WCH will be liable for any breach of the warranties and indemnities given in connection with the Disposal. WCH's liability is limited to an amount equal to the total Consideration during the first year after Completion, but this maximum liability will be reduced to US$120,000,000 (or approximately HK$933,600,000) after the first year following Completion (except where the breach has arisen as a result of or in connection with any fraud, wilful misrepresentation or gross negligence in which event the limit shall remain at the Consideration). However, this limitation as to the maximum amount of liability does not apply to certain specific indemnity claims. As WIH holds 74.25% of the shares in WCH and the Disposal will result in WCH's assets becoming predominantly cash, WIH will also become liable for breach by WCH of the warranties and indemnities in the following circumstances namely, if (a) there is a change in control of WCH or the composition of its board of directors; (b) if WCH sells or transfers all or a substantial part of its assets and undertaking so that the net asset value of the WCH Group is reduced to less than US$135,000,000 (or approximately HK$1,050,300,000) from Completion to 30th June, 2001 and US$120,000,000 (or approximately HK$933,600,000) from 1st July, 2001 onwards or (c) if a receiver is appointed over any of the WCH's assets or action is commenced to wind up WCH. The maximum liability of WIH for any breach of warranties and indemnities is limited to 74.25% of the claim. In such circumstances, WCH’s maximum liability will be limited to 25.75% of the claim provided that if for any reason WIH is not able to or does not pay all or any part of its liability, WCH shall be liable for the shortfall.

2 THE WIT AGREEMENT

2.1 Date

on or before the Completion Date

2.2 Parties

Vendor : WIH

Purchaser : PCL

2.3 Assets to be disposed of

WIH will sell, and PCL will acquire, the entire issued share capital of WIT on Completion.

WIT currently provides marketing support to the printed circuit board business of the WCH Group. As such, it will also be acquired by PCL from WIH as a part of the acquisition of the printed circuit board business of the WCH Group.

2.4 Consideration

US$250,000 (or approximately HK$1,945,000) payable to WIH in cash on Completion. No deposit has been paid or will be payable under the WIT Agreement.

2.5 Condition and Completion

The sale and purchase of the WIT Shares under the WIT Agreement is conditional upon (amongst other things), and simultaneously with, Completion of the Agreement.

3 CORPORATE CHART BEFORE AND AFTER THE DISPOSAL OF THE PCB BUSINESS AND THE DISPOSAL OF WIT

Before

After

4 INFORMATION ON THE WIH GROUP AND THE SALE SHARES

The principal activities of the WIH Group are the manufacture of electronic products for original equipment manufacturer customers, including printed circuit boards, micro-computers, telecommunication equipment and other electronic products.

Based on the audited accounts of the Sale Companies and WIT for the years ended 31st December 1998 and 31st December 1999, the combined net profit of the Sale Companies and WIT before taxation (less intercompany dividends) was HK$120,881,746 and HK$166,786,978 respectively. The combined net profit of the Sale Companies and WIT for the years ended 31st December 1998 and 31st December 1999 after taxation (less intercompany dividends) was HK$94,573,146 and HK$140,133,978 respectively. There were no extraordinary items in either 1998 or 1999.

Based on the audited accounts of the Sale Companies and WIT for the year ended 31st December, 1999, the combined net asset value of the Sale Companies and WIT was HK$666,977,915.

5 FINANCIAL EFFECTS OF DISPOSAL ON WCH

The financial effects of the Disposal on WCH would be as follows:

5.1 The Consideration equals to 208% of the book value of the Sale Companies based on the combined book value as at 31st December 1999.

5.2 The net profits (after deducting all charges except taxation and extraordinary items) attributable to the Sale Companies as at 31st December, 1999 is S$36,631,000 (or approximately HK$166,660,060).

5.3 Based on 167,000,000 number of shares in WCH in issue as at 31st December, 1999, the net tangible asset per share is S$1.35 (or approximately HK$6.14) before the Disposal and S$2.29 (or approximately HK$10.42) after the Disposal.

5.4 Earnings per share of WCH before and after the Disposal is S$0.1753 per share (or approximately HK$0.798 per share) and S$(0.009) (or approximately HK$(0.041)) respectively.

6 REASONS FOR THE DISPOSAL AND FUTURE INTENTIONS OF WIH AND WCH

Although the PCB Business has achieved satisfactory growth over recent years, the WIH Directors (including the non-executive directors of WIH) believe that (i) the Disposal and the disposal of WIT represent a good opportunity to realise its investments in the PCB Business and (ii) the consideration of the Disposal and the disposal of WIT, arrived at an arm's length basis, is fair and reasonable.

Turnover attributable by the Sale Companies and WIT accounted for approximately 36.2% of the consolidated turnover of the WIH Group for the twelve month period ended 31st December, 1999. Following the Disposal and the disposal of WIT, the WIH Group will continue to have sufficient operations (through its assembly business and manufacturing business of electronic products for original equipment manufacturing customers) for the continued listing on the SEHK as required under paragraph 38 of the Listing Agreement between WIH and the SEHK. It is the intention of the WIH Directors to explore further investment opportunities, although there are no definite plans at the moment.

The WCH Directors believe that the Disposal represents a good opportunity to realise its investments in the PCB Business and the consideration of the Disposal, arrived at an arm's length basis, is fair and reasonable. Following the Disposal, WCH is expected to be predominantly a cash company. Pursuant to Clause 1009 of the Listing Manual, the SGX-ST will normally suspend the listing of a company if it becomes a cash company until it has a business that is able to satisfy the SGX-ST’s requirements for new listing. The SGX-ST may cancel the listing of the company if it is unable to meet the requirements for new listing within a period of 12 months of it becoming a cash company. The sale proceeds of the Disposal are expected to be placed with banks on short-term deposit in the first instance. The WCH Directors are exploring whether the sale proceeds may be used for other investments or distributed wholly or partly to shareholders of WCH or whether WCH may also be sold or liquidated after the Disposal. However, there are no definite plans in relation to this at the present moment.

7 GENERAL

The Disposal and the disposal of WIT constitutes a major transaction for WIH under the Listing Rules. Certificates to be signed by a closely allied group of shareholders holding more than 50 per cent. of the issued share capital of WIH will be issued to approve the Disposal and the disposal of WIT in lieu of a resolution to be passed at a shareholders' meeting of WIH. WIH has applied to the SEHK for dispensation from the requirement for WIH to hold a general meeting of the shareholders of WIH to approve the disposals.

The Disposal also constitutes a major transaction for WCH under the Listing Manual and is subject to approval by the shareholders of WCH at a general meeting under the Listing Manual.

The trading of shares of WIH and WCH on the SEHK and SGX-ST was suspended from 10:00 a.m. and 9:00 a.m. respectively on 29th June, 2000 and will be resumed at 10:00 a.m. and 9:00 a.m. respectively on 3rd July, 2000.

Bank of America, National Association is the financial adviser to WIH and WCH in connection with the Disposal and the disposal of WIT.

A circular containing further details of the Disposal and the disposal of WIT will be despatched to shareholders of WIH and WCH as soon as practicable.

As the Disposal and the disposal of WIT may or may not be completed, shareholders and investors are advised to exercise caution when dealing in the shares of WIH or WCH.\

8 DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise:

“Agreement”	the sale and purchase agreement in respect of the Disposal
“Associates”	in relation to a company, any subsidiary or holding company of the company and in relation to an individual, his close relatives
“Cash”	cash in hand or deposited at a bank held by any member of the WCH Group or forming part of the PCB Business, including unpaid interest accrued with respect thereto
“C-Mac Wong’s”	C-Mac Wong's Industries Holdings Limited, a limited liability company incorporated in the People's Republic of China
“Completion”	the completion of the sale and purchase of the Sale Shares and the PCB Business
“Completion Accounts”	the audited consolidated balance sheet of the PCB Business made up as at the close of business on the Completion Date and the audited consolidated profit and loss account of the PCB Business for the period from 31st December 1999 to the Completion Date
“Completion Date”	the later of (i) 31st July, 2000 or (ii) the second business day after the satisfaction or waiver of all conditions of the Agreement or (iii) such other day as the parties may agree (but in any event not later than 30th October, 2000)
“Consideration”	the total purchase price for the Sale Shares and the PCB Business
“Covenantors”	Mr Johnny Wong and Mr Michael Wong
“Debts”	any and all interest bearing debts and non-interest bearing debts due to any third party (excluding (i) Intercompany Accounts Payable and (ii) operational lease obligations, trade related liabilities, letters of credits opened by the WCH Group in the ordinary course of the PCB Business)
“Disposal”	the disposal of the Sale Shares and the PCB Business
“EBITDA”	earnings before interest, tax, depreciation and amortisation (but excluding any exceptional and extraordinary items) of the PCB Business calculated in accordance with Hong Kong GAAP in respect of any relevant period
“Intercompany Accounts Payable”	all amounts owing by (i) any member of the WCH Group to (i) any members of the WIH Group which is not a member of the WCH Group, excluding any trade payable
“Intercompany Accounts Receivable”	all amounts owing by (i) ay member of the WCH Group by (ii) any member of the WIH Group which is not a member of the WCH Group, excluding any trade receivable
“Listing Manual”	the Listing Manual of the SGX-ST
“Listing Rules”	the Rules governing the Listing of Securities on SEHK
“Mr Johnny Wong”	Mr Wong Chung Ah, Johnny, the Chairman of the WIH Group
“Mr Michael Wong”	Mr Wong Chung Yin, Michael, a director of WIH
“Net Asset Value”	the aggregate sum of the values of the fixed assets, plant, machinery, equipment, motor vehicles, stocks, work-in-progress, accounts receivables, prepayments and Cash (other than the PCB Excluded Assets) less (a) all provisions and reserves applicable or relating to any of the above assets; (b) the aggregate of accounts payable and all other existing trade related liabilities of the PCB Business (but excluding the PCB Excluded Liabilities); and (c) full provisions and reserves for all claims and deferred and contingent liabilities of the PCB Business
“PCB Accounts Payable”	all trade related amounts owing to third parties by the WCH Group with the PCB Business
“PCB Accounts Receivable”	all trade related amounts owing to the WCH Group by third parties in connection with the PCB Business
“PCB Business”	the business of designing, manufacturing and selling single-sided, double-sided and multi-layered printed circuit boards presently carried on by the WCH Group (but excluding the PCB Excluded Assets and the PCB Excluded Liabilities)
“PCB Excluded Assets”	(i) the equity interest in C-Mac Wong's and Rankport, (ii) PCB Retained Cash (iii) Factories on the 5/F, 13/F, 14/F and car parking spaces nos. 1, 2 and 5 on G/F, Yau Lee Centre, No. 45 Hoi Yuen Road, Kowloon (1,1769 equal undivided 9,995th parts or shares of and in Kun Tong Inland Lot No.12); (iv) dormitories at Block 1, Nan Fung Plaza, Tseung Kwan O, Kowloon, Hong Kong and (v) Intercompany Account Receivables
“PCB Excluded Liabilities”	those liabilities of the WCH Group which are excluded from the sale and purchase of the PCB Business, namely (i) Debts; (ii) Intercompany Accounts Payable; (iii) all dividends declared and payable by any members of the WCH Group (other than to other members of the WCH Group) on or before the Completion Date; (iv) all tax liabilities of any member of the WCH Group incurred on or before the Completion Date; and (v) any retention monies relating to the consideration of the manufacturing factory of the WCH Group at Tseung Kwan O.
“PCB Inventory”	the inventory of raw materials, materials in transit, merchandise, supplies, work in progress, and partly finished or finished products of the PCB Business
“PCB Retained Cash”	the audited Cash balance of the WCH Group accumulated up to 31st July 2000 or the Completion Date (whichever is earlier)
“PCL”	Pacific Circuits Limited, a limited liability company incorporated in the Cayman Islands which is beneficially owned by independent third parties.
“Rankport”	Rankport Limited, a limited liability company incorporated in the British Virgins Islands
“Related Agreements”	(i) a service supply agreement to be executed between WIH and PCL on or before Completion pursuant to which WIH will provide certain services to PCL and/or its affiliates including the sharing of premises and sale and marketing services; (ii) a financial management services agreement to be executed between WIH and PCL on or before Completion pursuant to which WIH will provide certain financial management services to PCL and/or its affiliates and (iii) trade marks licence agreements to be executed between Wong's Industrial (Holdings) Limited, a wholly-owned subsidiary of WIH, and PCL on or before Completion pursuant to which PCL is authorised exclusively to use the name “Wong's Circuits” in relation to the PCB Business and the logo of WIH and WCH on products related to the PCB Business for a period of three years after Completion
“Sale Companies”	UE, WCPE, WCUK, WCPTH, WCIS and WCPTHS
“Sale Shares”	all the issued shares capital of Sale Companies
“SEHK”	The Stock Exchange of Hong Kong Limited
“S$”	Singapore dollars
“SGX-ST”	The Singapore Exchange Securities Limited
“Subsidiaries”	all the subsidiaries of the Sale Companies (other than C-Mac Wong's and Rankport)
“UE”	Universal Enterprise Limited, a limited liability company incorporated in Hong Kong
“US$”	the lawful currency of the United States of America
“Warrantors”	WCH and WIH
“WCH”	Wong's Circuits (Holdings) Ltd, a limited liability company incorporated in Singapore whose shares are listed on SGX-ST
“WCH Directors”	the directors of WCH
“WCH Group”	the group of companies comprising WCH and its subsidiaries
“WCIS”	Wong's Circuits International (Singapore) Pte Ltd, a limited liability company incorporated in Singapore
“WCPE”	Wong's Circuits (P&E) Limited, a limited liability company incorporated in Hong Kong
“WCPTH”	Wong's Circuits (P.T.H.) Limited, a limited liability company incorporated in Hong Kong
“WCPTHS”	Wong's Circuits PTH (Singapore) Pte Ltd, a limited liability company incorporated in Singapore
“WCUK”	Wong's Circuits (UK) Limited, a limited liability company incorporated in the United Kingdom
“Wellogan”	Wellogan Limited, a limited liability company incorporated in Hong Kong which has changed its name and is now known as Wong's Circuits (HK) Limited
“WIH”	Wong's International (Holdings) Limited, a limited liability company incorporated in Bermuda whose shares are listed on the SEHK
“WIH Directors”	the directors of WIH
“WIH Group”	the group of companies comprising WIH and its subsidiaries
“WIT”	Wong's Industrial (Toronto) Limited, a limited liability company incorporated in the State of Ontario, Canada
“WIT Agreement”	the sale and purchase agreement in respect of WIT Shares
“WIT Shares”	all the issued share capital of WIT
“Working Capital”	the total amount of the PCB Accounts Receivable plus PCB Inventory minus PCB Accounts Payable, each of which is calculated in accordance with Hong Kong GAAP

In this announcement, where Hong Kong dollar amounts have been derived from US dollars or Singapore dollars, such translations have been made at the rate of US$1 to HK$7.78 and S$1 to HK$4.5497.

By Order of the Board of
WONG'S INTERNATIONAL
(HOLDINGS) LIMITED
Gabriel Chan Tsze WahCompany SecretaryHong Kong, 30th June, 2000

By Order of the Board of
WONG'S CIRCUITS
(HOLDINGS) LIMITED
Gabriel Chan Tsze WahDirectorSingapore, 30th June, 2000