Central Development Holdings Limited — M&A Activity 1999

Jul 27, 1999

Listed Company Information

PARAMOUNT<0282>SEAPOWER RES I<0269>&SEAPOWER INT'L<0240> - Joint Announcement & PARAMOUNT,SEAPOWER INT'L Resumption The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. NEXT MEDIA INTERNATIONAL HOLDINGS LIMITED (Incorporated in the British Virgin Islands with limited liability) PARAMOUNT PUBLISHING GROUP LIMITED (Incorporated in Hong Kong with limited liability) Very Substantial Acquisition Considered as an Application for New Listing and Connected Transaction SEAPOWER RESOURCES INTERNATIONAL LIMITED (Incorporated in the Cayman Islands with limited liability) SEAPOWER INTERNATIONAL HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) Very Substantial Acquisition and Connected Transaction JOINT ANNOUNCEMENT (The contents of the joint announcement dated 28th June, 1999 and this joint announcement are published and can be downloaded at the "www.nextmedia.com" website) Acquisition of Interests in Websites Operated by Next and in the Business relating to the Easy Finder Magazine Disposal of Convertible Notes Assignment of Interest Receivable to Next and Proposed Placing of 630,000,000 New Shares at HK$0.20 each Financial Adviser to Next Media International Holdings Limited Yu Ming Investment Management Limited Further to the joint announcement of Next, SIH, SRI and Paramount dated 28th June, 1999 (the "Joint Announcement"), conditional formal agreements were entered into between, inter alia, Next, SIH, SRI and Paramount on 23rd July, 1999 in respect of the following transactions: 1. Sale and purchase of a company which will own the following domain names (the "Next Domain Names") and the internet business carried on in relation thereto: nextmedia.com nextmedia.com.hk next.com.hk easyfinder.com.hk autoexpress.com.hk jobfinder.com.hk sw.com.hk nextphoto.com club.easyfinder.com.hk which have an aggregate average daily page view in excess of 500,000. 2. Sale and purchase of the companies and business relating to the Easy Finder Magazine (and its booklets) 3. Sale and purchase of the Sold Notes and the assignment of interest 4. Placing and underwriting of new Shares It was stated in the Joint Announcement that all the four transactions mentioned above are inter-conditional. Pursuant to the formal agreements entered into between the parties on 23rd July, 1999, only transactions (1) to (3) mentioned above are inter- conditional. Terms used in this announcement shall have the same meanings as described in the Joint Announcement unless defined otherwise. The purpose of the above transactions is to increase value for shareholders of Paramount (the "Paramount Shareholders") by acquiring one of the most visited websites in Hong Kong. The Paramount Board believes that websites with over 500,000 daily page view offer immense potential for the business of internet content provider and e-commerce, the success of which hinges on the traffic on the websites. Next intends that Paramount's existing printing and publishing business will be maintained, which will complement the business of the Easy Finder Magazine. Pursuant to Rules 14.06 and 14.23(1)(b) of the Listing Rules, the acquisitions of the company which will own the Next Domain Names and the related business, and the companies and business relating to the Easy Finder Magazine (and its booklets) will constitute very substantial acquisitions and connected transactions for Paramount and SIH. Paramount will be treated as a new applicant for listing under the Listing Rules. The new listing application would be subject to approval of the Listing Committee of the Stock Exchange, and the acquisitions would be subject to approval of the Paramount Independent Shareholders and the SIH Shareholders. Such approvals may or may not be granted. To meet the new listing requirements, Paramount also has to satisfy, amongst other things, the profit requirements as set out in Chapter 8 of the Listing Rules. Subject to approval of the Listing Committee of the Stock Exchange, Paramount will send a circular comprising a listing document and prospectus (the "Listing Document") and SIH will send a circular to their respective shareholders containing, amongst other things, further information on the Transactions and notices to the general meetings. Investors should note that the Transactions are subject to satisfaction of a number of conditions. The Transactions may or may not proceed. In the meantime, investors are advised to exercise caution in dealing in the shares of SIH, SRI and Paramount. PRINCIPAL PARTIES Paramount A company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange and whose principal business is the provision of printing, publishing and reprographic services. As at the date of the Joint Announcement, Paramount had 234,686,728 Shares in issue. On 29th June, 1999, SRI converted HK$27 million principal amount of the Notes into 60,000,000 new Shares. As at the date of this announcement, Paramount has 294,686,728 Shares in issue. Other than the Notes and options granted under its share option scheme, Paramount has no other securities convertible into Shares. SIH A company incorporated in Bermuda, the shares of which are listed on the Stock Exchange. SIH is interested in 50.2 per cent. of the existing issued share capital of Paramount, and its principal business is property and investment holding and the provision of cold storage warehousing, logistics, printing, publishing and reprographics services. SRI A company incorporated in the Cayman Islands, the shares of which are listed on the Stock Exchange. SRI is interested in 20.4 per cent. of the existing issued share capital of Paramount and is currently the sole holder of the Notes. SRI is owned as to 44.3 per cent. by SIH. Next A company incorporated in the British Virgin Islands. Its principal business activities are publishing of the weekly magazines, including "Next Magazine", "Easy Finder Magazine", "Sudden Weekly Magazine" and "Eat and Travel Magazine", the management and operation of the websites under the Next Domain Names, newspaper printing and book publication. Next and its shareholders and directors are not connected with and are not acting in concert with SIH, SRI or Paramount or the directors, chief executives or substantial shareholders of SIH, SRI or Paramount or any of their respective subsidiaries or an associate of any of them. As at the date of this announcement, Next and its associates are not interested in any Shares or other securities issued by SIH, SRI or Paramount. Mr. Lai Chee Ying, Jimmy is interested in 81.3 per cent. of Next and is the controlling shareholder of Next. 6.8 per cent. is held by a discretionary trust established for the benefit of Mr. Lai Chee Ying, Jimmy's family. The remaining 11.9 per cent. interest of Next is owned by employees of Next. The board of directors of Next are Mr. Lai Chee Ying, Jimmy, Mr. Ho Kwok Fai, Morris, Mr. Yeung Wai Hong and Mr. Kok Hon Kay, Peter. THE ACQUISITION DEED IN RESPECT OF THE WEB BUSINESS (THE "WEB DEED") Date: 23rd July, 1999 Parties: Vendor: Next Purchaser: Paramount Others: Various wholly-owned subsidiaries of Next (collectively the "Web Business Transferors") and SIH Business and assets to be acquired: Paramount will acquire from Next all of the issued shares in the capital of Sudden Bright Limited (in the process of changing its name to Next Media Interactive Limited ("Next Interactive")). Prior to completion of the Web Deed, Next Interactive will have completed a reorganization and will have acquired the following Next Domain Names: "nextmedia.com" "nextmedia.com.hk" "next.com.hk" "easyfinder.com.hk" "autoexpress.com.hk" "jobfinder.com.hk" "sw.com.hk" "nextphoto.com" "club.easyfinder.com.hk" and other assets (including related format rights and computer hardware and software), and the licences for copyrights and trademarks for the operation of the websites under the Next Domain Names (the "Web Assets") from Next and its subsidiaries (the "Next Group"). The Web Assets are all the assets required to carry on the business of the creation, development and electronic publication of the websites under the Next Domain Names (the "Web Business"). Existing employees for the Web Business will be transferred to Paramount upon completion of the Web Deed. Consideration: HK$97,500,000, which will be settled by way of issue of 487,500,000 new Shares at the par value of HK$0.20 each, which represents 165.4 per cent. of the 294,686,728 Shares currently in issue. The consideration was arrived at after arm's length negotiation and with reference to the average price to revenue ratio and value of each page view of most U.S. internet related stocks. Conditions: Completion of the Web Deed is conditional upon, inter alia, the following events occurring on or before 30th November, 1999 or such later date as may be agreed by the parties to the Web Deed: 1. Paramount being satisfied as to the financial, contractual, taxation and trading positions of Next Interactive and the Web Business; 2. Next being satisfied as to the financial, contractual, taxation and trading position of the Paramount Group; 3. the Executive granting the Whitewash Waiver; 4. approval by the Paramount Independent Shareholders of the Web Deed and the Magazine Deed (to be defined below); 5. approval by the Paramount Shareholders of the increase in the authorized share capital of Paramount; 6. approval by the Paramount Independent Shareholders of the issue of new Shares pursuant to the Web Deed, the Magazine Deed and the Placing Agreement (to be defined below); 7. approval by the SIH Shareholders and shareholders of SRI, if any is required, for the transactions contemplated in the Web Deed, the Magazine Deed, the Notes Agreement (to be defined below) and the Placing Agreement; 8. approval by the Stock Exchange of the listing of new Shares to be issued as contemplated in the Web Deed and the Magazine Deed; 9. approval by the Stock Exchange of the sale and purchase of the Sold Notes pursuant to the Notes Agreement; 10. such other approvals or consents required to effect the Transactions; 11. the Magazine Deed and the Notes Agreement becoming unconditional save for the conditions relating to the Web Deed becoming unconditional; 12. listing of the Shares on the Stock Exchange not being revoked; 13. completion of the transfer of the Web Business and the Web Assets from the Web Business Transferors to Next Interactive; and 14. the entering into of the Placing Agreement. The Web Deed, the Magazine Deed and the Notes Agreement (the "Master Agreements") are inter-conditional. Completion: Completion of the Web Deed shall take place on the second business day after all the conditions set out above have been satisfied, or waived by Next or Paramount in respect of certain of the above conditions (including the Whitewash Waiver condition), or such later date as the parties may agree. Major warranty: Pursuant to the Web Deed, Paramount warrants, inter alia, that as at the date of completion of the Web Deed, the current assets of Paramount will not be less than HK$64,000,000, the total liabilities (excluding the Notes, minority interests and certain capital commitment of Paramount) of the Paramount Group will not be more than HK$365,000,000 and the consolidated net operating loss before taxation and before exceptional items of Paramount per month (from the date of the Web Deed to the date of completion) is less than HK$7,000,000. SIH, as the controlling shareholder of Paramount, and Paramount have provided to Next representations and warranties relating to Paramount and its subsidiaries (the "Paramount Group"). SIH's liability under such representations and warranties is limited to 63 per cent. of any liability incurred by the Paramount Group, up to a maximum amount of HK$95,000,000 in respect of both the Web Deed and the Magazine Deed in aggregate, as a result of any breach of such representations and warranties. A further announcement will be made by SIH and Paramount in the event that SIH and Paramount incur any material liability under such warranty. THE ACQUISITION DEED IN RESPECT OF THE MAGAZINE BUSINESS (THE "MAGAZINE DEED") Date: 23rd July, 1999 Parties: Vendors: Next Media (Holdings) Limited ("Next Media") and Easy Finder Advertising Limited ("Easy Finder Advertising"), wholly-owned subsidiaries of Next (collectively the "Magazine Vendors") Purchasers: Firsthill Limited ("Firsthill"), a wholly-owned subsidiary of Paramount, and Capital Communications Corporation Limited ("CCC"), a 99.7 per cent. subsidiary of Paramount (the remaining 0.3 per cent. interest is owned by an individual independent from Paramount) (collectively the "Magazine Purchasers") Others: Next, Next Media Limited, a wholly-owned subsidiary of Next, (together warrantors to the Magazine Deed), Paramount and SIH Business and assets to be acquired: Firsthill will acquire from Next Media all of the issued shares in the capital of each of Easy Finder Limited ("Easy Finder"), Job Finder Limited ("Job Finder") and Easy Media Limited (collectively the "Magazine Companies"). CCC will acquire from Easy Finder Advertising the business and assets necessary for the provision of advertising services relating to the Easy Finder Magazine (and its booklets). The Magazine Companies and the business of Easy Finder Advertising will together comprise all the assets required to carry out the business of writing, editing, publishing and distributing the Easy Finder Magazine (and its booklets) and the marketing and sale of advertising space therein (the "Magazine Business"). The assets will include the right, title and interest in and to the full benefit of all names, trademarks, service marks, devices or logos comprised in or associated with and all copyrights used in the Magazine Business. Consideration: HK$237,600,000, which will be settled by way of issue of 1,188,000,000 new Shares at the par value of HK$0.20 each, which represents 403.1 per cent. of the 294,686,728 Shares currently in issue. The consideration was arrived at after arm's length negotiation and represents 7.02 and 9.50 times the unaudited combined net profit after taxation and extraordinary items of the Magazine Companies and the business of Easy Finder Advertising for the year ended 31st March, 1998 and 31st March, 1999 respectively. Conditions: Completion of the Magazine Deed is conditional upon, inter alia, the following events occurring on or before 30th November, 1999 or such later date as may be agreed by the parties to the Magazine Deed: 1. the Magazine Purchasers being satisfied as to the financial, contractual, taxation and trading positions of the Magazine Companies and the Magazine Business; 2. the Magazine Vendors being satisfied as to the financial, contractual, taxation and trading position of the Paramount Group; 3. the Executive granting the Whitewash Waiver; 4. approval by the Paramount Independent Shareholders of the Magazine Deed and the Web Deed; 5. the Web Deed and the Notes Agreement becoming unconditional save for the conditions relating to the Magazine Deed becoming unconditional; 6. other similar general and regulatory conditions to which the Web Deed is subject. The Magazine Deed, the Web Deed and the Notes Agreement are inter- conditional. Completion: Completion of the Magazine Deed shall take place on the second business day after all the conditions set out above have been satisfied, or waived by the Magazine Vendors or the Magazine Purchasers in respect of certain of the above conditions (including the Whitewash Waiver condition), or such later date as the parties may agree. Major warranty: Pursuant to the Magazine Deed, Paramount warrants, inter alia, that as at the date of completion of the Magazine Deed, the current assets of Paramount will not be less than HK$64,000,000, the total liabilities (excluding the Notes, minority interests and certain capital commitment of Paramount) of the Paramount Group will not be more than HK$365,000,000 and the consolidated net operating loss before taxation and before exceptional items of Paramount per month (from the date of the Magazine Deed to the date of completion) is less than HK$7,000,000. SIH, as the controlling shareholder of Paramount, and Paramount have provided to the Magazine Vendors and to Next representations and warranties relating to the Paramount Group. SIH's liability under such representations and warranties is limited to 63 per cent. of any liability incurred by the Paramount Group, up to a maximum amount of HK$95,000,000 in respect of both the Web Deed and the Magazine Deed in aggregate, as a result of any breach of such representations and warranties. A further announcement will be made by SIH and Paramount in the event that SIH and Paramount incur any material liability under such warranty. THE AGREEMENT IN RESPECT OF THE NOTES DISPOSAL AND THE ASSIGNMENT OF INTEREST RECEIVABLES (THE "NOTES AGREEMENT") Date: 23rd July, 1999 Parties: Assignors: SIH, SRI and Seapower Consortium Company Limited ("Seapower Consortium"), a wholly-owned subsidiary of SIH (collectively the "Assignors") Assignee: Next The Notes Disposal: SRI shall sell to Next the Sold Notes (being part of the Notes in an aggregate principal amount of HK$140,000,000 held by SRI) in an aggregate principal amount of HK$105,000,000 together with all interest accruing thereon from 26th June, 1999, the date of the Agreement, for a consideration of HK$12,000,000. The consideration was arrived at after arm's length negotiation. SRI will write off approximately HK$93 million in the profit and loss account, before taking into account the effect of accrued interest, of its investment in the Notes. The directors of SRI believe that the Magazine Business will bring synergy to the existing business of Paramount and the potential increase in value in the Shares (upon conversion of the Retained Notes) under the new management of Paramount outweighs the loss in the disposal of the Sold Notes, and therefore consider that the disposal of the Sold Notes is in the interest of SRI. If converted in full at the current conversion price of HK$0.45 per Share, the Sold Notes are convertible into 233,333,333 Shares which represent 79.2 per cent. of the 294,686,728 Shares currently in issue and 8.2 per cent. of the existing issued share capital of Paramount as enlarged by the issue of new Shares pursuant to the Web Deed, the Magazine Deed and the placing and underwriting of new Shares contemplated under the Placing Agreement and upon full conversion of the Notes (the "Enlarged Share Capital of Paramount"). On 29th June, 1999, an aggregate principal amount of HK$27,000,000 of the Retained Notes (the "Converted Notes") was converted by SRI (at the current conversion price of HK$0.45 per Share) into 60,000,000 new Shares which represents 20.4 per cent. of the existing issued share capital of Paramount. The interest of SIH in Paramount was diluted from 63.0 per cent. to 50.2 per cent. of the issued share capital of Paramount as enlarged by the issue of new Shares as a result of such conversion. SRI will convert the balance of the Retained Notes in an aggregate principal of HK$8,000,000 (the "Notes Balance") into 17,777,777 Shares at the existing conversion price of HK$0.45 per Share on or before completion of the Notes Agreement (the "Completion"). The conversion shares will represent 6.0 per cent. of the 294,686,728 Shares currently in issue and 0.6 per cent. of the Enlarged Share Capital of Paramount. The Assignment of Interest Receivables: The Assignors will assign the following interest to Next: 1. all interest accrued and remaining due (amounting to HK$9,417,976.61 as at 25th June, 1999) on loans in the aggregate principal amount of approximately HK$4.5 million owed by Paramount to Seapower Consortium (the "Loans") and a loan (the principal amount of which has been repaid) owed by Paramount to Seapower Consortium, and all interest accrued under the Notes (amounting to HK$17,219,664.41 as at 25th June, 1999), amounting to an aggregate of HK$26,637,641.02 (the "Total Accrued Interest"); and 2. all further interest accrued from 26th June, 1999 and remaining due on the Loans as at the date of Completion and all further interest accrued from 26th June, 1999 and remaining due under the Converted Notes as at the date of conversion and under the Notes Balance as at the earlier of the date of conversion of the Notes Balance or the date of Completion. The total consideration for the above interest shall be the sum of HK$7,991,292.31, representing a discount of approximately 70 per cent. to the Total Accrued Interest, of which HK$1,946,210.97 shall be apportioned to SIH, HK$3,219,688.36 shall be apportioned to SRI, and HK$2,825,392.98 shall be apportioned to Seapower Consortium. The consideration was arrived at after arm's length negotiation and taking into account the financial position of Paramount. The relevant members of the Seapower Group will write off approximately HK$18.6 million in aggregate of their interest in the accrued interest. Since the Seapower Group does not rely on repayment of the accrued interest for capital for their daily operation, the write-off will not have any material adverse effect on the Seapower Group. Upon completion of the Transactions, Next intends to waive an amount equal to approximately 70 per cent. of its rights to the accrued interest. Conditions: Completion of the Notes Agreement is conditional upon, inter alia, the following events occurring on or before 30th November, 1999 or such later date as may be agreed by the parties to the Notes Agreement: 1. approval by the Stock Exchange in respect of the sale and purchase of the Sold Notes; 2. such other approvals or consents to effect the transactions contemplated in the Notes Agreement; and 3. the Web Deed and the Magazine Deed becoming unconditional save for the conditions relating to the Notes Agreement becoming unconditional The Notes Agreement, the Web Deed and the Magazine Deed are inter-conditional. Completion: Completion of the Notes Agreement shall take place simultaneously with the completion of the Web Deed and the Magazine Deed. THE PLACEMENT AND UNDERWRITING OF NEW SHARES On or before the despatch of the Listing Document by Paramount, Paramount will enter into a placing and underwriting agreement (the "Placing Agreement") with Yu Ming in respect of the proposed issue of 630,000,000 new Shares at HK$0.20 each. The 630,000,000 new Shares represent 213.8 per cent. of the 294,686,728 Shares currently in issue and 22.1 per cent. of the Enlarged Share Capital of Paramount. Approximately HK$123 million (after expenses) will be raised in the placement, which will be used to reduce the bank borrowings of Paramount and as working capital of Paramount. 480,000,000 new Shares (the "Placing Shares") will be placed by Yu Ming to professional, institutional and individual investors on a best efforts basis. The balance of 150,000,000 new Shares (the "Underwritten Shares") will be reserved for the employees (including directors) of the Next Group and will be underwritten by Yu Ming. The allocation will be determined by Yu Ming after consultation with Paramount. Further details on the basis of allocation of the Underwritten Shares and on the use of proceeds from placement will be disclosed in the Listing Document. Any placement of new Shares to connected parties of Paramount will be subject to approval of the independent shareholders of Paramount and the relevant requirements of the Listing Rules. The Placing Shares and the Underwritten Shares represent 16.8 per cent. and 5.3 per cent. respectively of the Enlarged Share Capital of Paramount. Yu Ming is not connected with Paramount, or the directors, chief executive or substantial shareholders of Paramount or any of its subsidiaries or an associate of any of them. Conditions: Completion of the Placing Agreement is conditional upon, inter alia,: 1. completion of the Web Deed, the Magazine Deed (which are subject to approval of Paramount Independent Shareholders) and the Notes Agreement; and 2. permission to deal in and listing of the new Shares to be issued pursuant to the Placing Agreement being granted by the Listing Committee of the Stock Exchange Since the parties will proceed with the Master Agreements even if completion of the Placing Agreement does not take place. Therefore, the Master Agreements are not conditional upon completion of the Placing Agreement. THE PRINTING AGREEMENT BETWEEN PARAMOUNT AND NEXT (THE "PRINTING AGREEMENT") Parties: Next, Paramount Printing Services Limited ("Paramount Printing"), a wholly-owned subsidiary of Paramount Printing Service: On completion of the transactions contemplated under the Master Agreements, Next and Paramount Printing will enter into the Printing Agreement, pursuant to which, the Next Group shall invite Paramount Printing to tender for the printing jobs for Next Magazine, Sudden Weekly Magazine and Eat and Travel Weekly Magazine (collectively the "Magazines") for the period commencing on the date of termination of the existing printing contracts with other printers in respect of the relevant Magazines, and expiring on 31st December, 2000. The Next Group will invite other printers to tender for such printing jobs. So long as the tender submitted by Paramount Printing is at a price equal to or more favourable than that tendered by other printers, Next or the relevant member of the Next Group shall award the printing job to Paramount Printing. Paramount Printing will tender for the printing jobs for the Magazines on normal commercial terms which are comparable to those offered by Paramount to any independent third party. If Paramount Printing is awarded the printing jobs, its printing capacity utilization will be substantially improved. The Paramount Board is of the view that the terms of the Printing Agreement are fair and reasonable and that the entering into of the Printing Agreement is in the interest of Paramount and the Paramount Shareholders. Terms: The term of the Printing Agreement commences on the date of execution of that agreement and expires on 31st December, 2000. The Printing Agreement is renewable annually for successive periods of one year. After 31st December, 2000, tenders for printing jobs for the Magazines shall be on a yearly basis if the Printing Agreement is renewed. Connected Transaction: Next has the entire rights for the publication and publishing of the Magazines. After completion of the Transactions, Next will be interested in 67.0 per cent. of the issued share capital of Paramount (assuming full conversion of the Notes into Shares). The Printing Agreement will constitute a connected transaction for Paramount, subject to approval of the Paramount Shareholders. Details of the Printing Agreement will be disclosed in a further announcement of Paramount. INFORMATION ON THE WEB BUSINESS General The Web Business was started in 1996 by the Next Group and quickly grew to become one of the most visited websites in Hong Kong. The board of directors of Next (the "Next Board") believes that the success of the websites has been attributable to their content which is primarily the content of the published Next Magazine, Sudden Weekly Magazine and Easy Finder Magazine. Although only Easy Finder Magazine will be acquired by Paramount pursuant to the Magazine Deed (and Paramount will not have publishing rights for the printed copy of Next Magazine and Sudden Weekly Magazine), the inclusion of the content of Next Magazine and Sudden Weekly Magazine would help to increase traffic to the websites under the Next Domain Names. "nextmedia.com" (or "nextmedia.com.hk") is the website linked to numerous associated websites, including:- next.com.hk This website provides online access to the weekly Next Magazine on a subscription basis. The subscriber's access will cover the current issue as well as past issues. Content includes commentary on social, leisure, life style, entertainment, business, economics, property, finance, people and political matters. The archive is a powerful database for its viewers. easyfinder.com.hk This website provides free online access to the weekly Easy Finder Magazine. The content mainly covers trend, fashion, hobby, new products and places for young readers. autoexpress.com.hk This website provides free online information on automobiles, including one of the most comprehensive internet communities for second hand car buyers and sellers, a chat room for car owners, and almost all information a car owner needs to know, including insurance, maintenance and modifications. This website is targeted towards car enthusiasts and owners of all age. jobfinder.com.hk This website provides free online services for those placing and seeking jobs. sw.com.hk This website provides free online access to the Sudden Weekly Magazine. The contents mainly cover show business celebrities and people, rumours, new shows and movies and local and overseas hot topics. It has a photograph archive with over 500 recent photos of celebrities. nextphoto.com This website provides free online librarian services for those seeking photographs of celebrities, historical events, popular figures, etc. club.easyfinder.com.hk This website is currently under construction and will be a place where club members can download photographs of celebrities free of charge. Financial Information Assuming the structure of Next Interactive had been in existence since 1st April, 1997, the unaudited pro forma net loss before and after taxation and extraordinary items for the year ended 31st March, 1998 would be approximately HK$1.08 million. The unaudited pro forma net profits before and after taxation and extraordinary items of Next Interactive for the year ended 31st March, 1999 would be approximately HK$1.06 million and HK$0.87 million respectively. As the above figures are estimates made by Next, they will be subject to adjustments upon review by the reporting accountants. As at 31st May, 1999, the pro forma net asset value of Next Interactive was approximately HK$52,300. INFORMATION ON THE MAGAZINE BUSINESS General Easy Finder Magazine is a weekly magazine circulated in Hong Kong since September 1991. It is a trend and fashion oriented magazine targeted at readers between the age of 14 and 25. It has a circulation of over 140,000 copies per week and a readership of over 380,000. It has a supplemental booklet called Trading Express/AutoExpress which mainly focuses on classified advertisement for second hand cars, jobs and careers, and second hand consumer products and collectibles. Financial Information Assuming the structure of the Magazine Companies and the business of Easy Finder Advertising had been in existence since 1st April, 1997, and that Easy Finder Magazine had been printed by Paramount since then, the unaudited combined pro forma net profits before and after taxation and extraordinary items of the Magazine Companies and the business of Easy Finder Advertising for the year ended 31st March, 1998 would be approximately HK$42.34 million and HK$33.86 million respectively. The unaudited combined pro forma net profits before and after taxation and extraordinary items of the Magazine Companies and the business of Easy Finder Advertising for the year ended 31st March, 1999 would be approximately HK$28.49 million and HK$25.01 million respectively. As the above figures are estimates made by Next, they will be subject to adjustments upon review by the reporting accountants. As at 31st May, 1999, the unaudited combined pro forma net asset value of the Magazine Companies and the business of Easy Finder Advertising was approximately HK$82 million. FINANCIAL INFORMATION ON PARAMOUNT The audited net loss before and after taxation of Paramount for the year ended 31st March, 1997 were approximately HK$74.76 million and HK$75.28 million (which includes exceptional item of approximately HK$39.74 million) respectively. The audited net loss before and after taxation of Paramount for the year ended 31st March, 1998 were approximately HK$59.86 million and HK$59.54 million respectively. There was no exceptional item for the year ended 31st March, 1998. The audited consolidated net asset value of Paramount as at 31st March, 1998 was approximately HK$194 million and the unaudited consolidated net asset value of Paramount as at 30th September, 1998 was approximately HK$164 million (after taking into account the loss of HK$30.1 million for the six months ended 30th September, 1998). Based on 234,686,728 issued Shares as at 30th September, 1998, the net asset value per Share was approximately HK$0.83 as at 31st March, 1998 and approximately HK$0.70 as at 30th September, 1998 (the "Net Asset Value per Share"). DISCOUNT OF NEW ISSUE PRICE TO MARKET PRICE Although the issue price of HK$0.20 each for the new Shares to be issued under the Web Deed, the Magazine Deed and the Placing Agreement represents a discount of 81.7 per cent. to HK$1.09 per Share, the last trading price before the trading in the Shares was suspended at 14:30 on 23rd July, 1999, the issue price was determined on 25th June, 1999. As explained in the Joint Announcement, the issue price represents a premium of 10.5 per cent. to the average closing price of HK$0.181 per Share (the "Closing Price") for the 20 trading days ended 15th June, 1999, the day immediately preceding the trading day when unusual price movements occurred. The Paramount Directors believe that the surge of the Share price from HK$0.195, the closing price of the Shares on 15th June, 1999, to HK$1.17, the closing price of the Shares on 22nd July, 1999, is the result of the transactions referred to in this announcement. Having considered the premium of the issue price to the Closing Price, the weakening financial position and an anticipated downward revision of asset value of the factory building of Paramount and the huge potential of the Web Business in view of the increasing popularity of internet, the Paramount Directors consider that the issue price is fair and reasonable despite it representing a discount to the Net Asset Value per Share, and that the acquisition of the Web Business and the Magazine Business is in the interests of Paramount and the Paramount Independent Shareholders. CHANGES IN THE BOARD OF DIRECTORS At present, there are 4 executive directors and 2 non-executive directors on the Paramount Board. Pursuant to the Web Deed and the Magazine Deed, Paramount will procure the appointment of Mr. Kok Hon Kay, Peter and Mr. Ting Ka Yu, Stephen (the "Proposed Directors") nominated by Next as non-executive directors of Paramount subject to the requirements of the Code. The Proposed Directors will not be involved in the management of Paramount until completion of the Master Agreements and will not vote on matters in relation to the Transactions at any board meetings of Paramount. Mr. Kok Hon Kay, Peter is a qualified accountant. In the seventies and eighties, he held senior financial positions in several U.S. multinational companies. After that, he was appointed the Chief Executive Officer of a garment manufacturer and then joined Apple Daily Limited in 1995. He is at present the Chief Operating Officer of Apple Daily Printing Limited and oversees all production and printing operations of the group. Mr. Ting Ka Yu, Stephen is a member of the Institute of Chartered Accountants in Australia. After working for over 6 years in a leading public accountancy firm both in Hong Kong and Australia, he held senior management positions in various companies including a publicly listed group. He joined Apple Daily Limited in 1997 as the Chief Financial Officer. If completion of the Master Agreements shall fail to take place, Next shall cause the two directors which it has so nominated immediately to resign. Upon completion of the Master Agreements, all the existing directors of Paramount will resign and it is the intention of Mr. Lai Chee Ying, Jimmy to act as a director of Paramount. More details on the appointment of directors to the Paramount Board will be disclosed in the further announcement of Paramount and the Listing Document. Mr. Lai Chee Ying, Jimmy, is a director of Next Media Group. Prior to the founding of the magazine publishing business in 1989, he had over thirty years of experience in the garment industry, including founding and developing a substantial garment manufacturing business and garment retail chain under the GIORDANO brand. He also founded the "Apple Daily" newspaper and adM@art direct marketing business which commenced operation in June 1995 and June 1999 respectively. SHAREHOLDING Existing shareholding structure Shareholding structure after completion of the Transactions (assuming that the 480,000,000 Placing Shares have been fully placed out and the 150,000,000 Underwritten Shares have been underwritten by Yu Ming but Next has not converted any part of the Sold Notes into Shares) Shareholding structure after completion of the Transactions (assuming that the 480,000,000 Placing Shares have been fully placed out and the 150,000,000 Underwritten Shares have been underwritten by Yu Ming and Next has converted in full the Sold Notes into Shares) VERY SUBSTANTIAL ACQUISITIONS AND CONNECTED TRANSACTIONS FOR PARAMOUNT AND SIH Pursuant to Rules 14.06 and 14.23(1)(b) of the Listing Rules, the acquisitions of the Web Business and the Magazine Business as contemplated under the Web Deed and the Magazine Deed will constitute very substantial acquisitions and connected transactions for Paramount and Paramount will be treated as a new applicant for listing under the Listing Rules. The new listing application would be subject to approval of the Listing Committee of the Stock Exchange, and the transactions contemplated under the Web Deed and the Magazine Deed are subject to approval of the Paramount Independent Shareholders. Such approvals may or may not be granted. To meet the new listing requirements, Paramount also has to satisfy, amongst other things, the profit requirements as set out in Chapter 8 of the Listing Rules. By virtue of the fact that SIH has a 50.2 per cent. equity interest in Paramount, and that Next will be the controlling shareholder of Paramount upon completion of the Transactions, the acquisition of the Web Business and the Magazine Business by Paramount as contemplated under the Web Deed and the Magazine Deed will also constitute very substantial acquisitions and connected transactions for SIH but SIH will not be treated as a new applicant for listing under the Listing Rules. Approval by the SIH Shareholders is required. THE WHITEWASH WAIVER On completion of the Transactions (assuming full conversion of the Notes), Next will be interested in 67.0 per cent. of the enlarged issued share capital of Paramount. Under the Code, upon completion of the Transactions, Next and parties acting in concert with it would be obligated to make a general offer to purchase all the Shares other than those held by Next and parties acting in concert with it. An application has been made by Yu Ming, on behalf of Next, to the Executive for approval of the Whitewash Waiver which may or may not be granted by the Executive. Pursuant to the Web Deed, the Magazine Deed and the Notes Agreement, if the Whitewash Waiver is not granted by the Executive and if Next waives the Whitewash Waiver condition, SIH and SRI shall undertake to Magazine Vendors and Next not to accept any general offer made by Magazine Vendors or Next as a result of completion of the Transactions. THE EXCLUSIVITY SIH and SRI have undertaken to Next and the Magazine Vendors pursuant to the Web Deed and the Magazine Deed and the Notes Agreement that they will not without the prior written consent of Next and the Magazine Vendors solicit any proposal or offer or enter into any discussions, negotiations or transaction for any of Paramount's share or loan capital which would or might result in SIH and SRI ceasing to be a "controlling shareholder" of Paramount within the meaning of the Listing Rules. Therefore SIH and SRI are not in a position to discuss with any third party any proposal relating to their controlling interests in Paramount. REASONS FOR AND BENEFITS OF THE TRANSACTIONS Paramount Internet is amongst the highest growth businesses in the world and commands a high valuation in the stock market in the United States. Existing employees for the Web Business will be transferred to Paramount upon completion of the Master Agreements. The Paramount Board believes that the websites with over 500,000 daily page view offer immense potential for the internet portal business, the success of which hinges on the traffic on the websites. The Paramount Board believes the acquisition of the Web Business gives Paramount a head start in the business of internet content provider. It is hoped that shareholders' value will be increased as a result of the completion of the Web Deed. The Paramount Board is of the opinion that the acquisition of the Magazine Business will improve the recurrent income of Paramount. Tenders awarded to Paramount Printing under the Printing Agreement in respect of printing services for the Magazines will significantly improve the printing capacity utilization of Paramount. Having considered the above benefits, the Paramount Board considers that the terms of the Transactions are fair and reasonable and the entering into of the Web Deed and the Magazine Deed is in the interests of Paramount and the Paramount Independent Shareholders. SIH The board of directors of SIH is of the opinion that the acquisitions of the Web Business and the Magazine Business would release reliance of Paramount on financial support from SIH and concurs with the Paramount Board's view that the Transactions will revitalize Paramount and that the value of investment of the Paramount Shareholders (including SIH) will be enhanced. SIH intends to hold its interest in Paramount for investment purpose. SIH's interest in Paramount will be diluted from 50.2 per cent. to 5.2 per cent. upon completion of the Transactions (assuming full conversion of the Notes). Paramount will cease to be consolidated in the accounts of SIH. Since Paramount has been making loss for the past few years, such a de-consolidation will actually improve the consolidated earnings of SIH. Further details on the financial impact, including effect on the balance sheet and the profit and loss account, on SIH will be disclosed in a circular to be despatched to the SIH Shareholders. SRI Given the difficult economic environment, the board of directors of SRI (the "SRI Board") is of the opinion that the disposal of the Sold Notes as contemplated under the Notes Agreement offers SRI an opportunity to recoup some of its investment in Paramount while enjoying any potential gain in the Shares (through conversion of the Retained Notes) under the new management of Paramount. The SRI Board considers that the terms of the Notes Agreement are fair and reasonable and that the entering into of the Notes Agreement is in the interests of SRI and SRI Shareholders. SRI intends to hold its interest in Paramount for investment purpose. INTENTION OF NEXT ON PARAMOUNT Internet Businesses Although the 500,000 daily page view on the Next Domain Names is significant, the Next Board believes there is ample room for improvement. Given the continuous supplies of updated contents from the popular Next Magazine, Sudden Weekly Magazine and Easy Finder Magazine, it is expected that the page view can increase with (i) the introduction of interactive activities (other than the websites' existing chat-room functions) and (ii) a better index on classification of topics of interests to internet users. Easy Finder Magazine has an extensive second hand section on cars as well as consumer products. The Next Board intends that Paramount will allocate resources to study the feasibility of implementing an internet equivalent section on the websites, with a view on conducting e-commerce on those items in the long run. Printing and Publishing Businesses Next intends that Paramount's existing business will be maintained. At present, the Next Group has no further plan other than the transactions contemplated under the Magazine Deed and the Printing Agreement, which are intended to benefit the income and the business activities of Paramount. Next has no intention of injecting assets to Paramount other than those contemplated in the Web Deed and the Magazine Deed or changing the existing employment of Paramount. No discussion has been made between the parties in relation to divestment of Paramount's assets upon completion of the Transactions. Other than the Web Business and the Magazine Business, Next is mainly engaged in the publishing of "Next Magazine", "Sudden Weekly" and "Eat and Travel" weekly magazines and newspaper printing. At present, the publication of "Next Magazine, "Sudden Weekly Magazine" and "Eat and Travel Magazine" are the remaining businesses of Next that are likely to compete with the Magazine Business. Next will satisfy the Stock Exchange that, upon completion of the Transactions, it will not engage in a business which competes directly with Paramount's business (including the Web Business and the Magazine Business). Details of the future plan of Next on Paramount will be disclosed in the Listing Document. MAINTAINING THE LISTING OF SHARES OF PARAMOUNT It is the intention of Next and parties acting in concert with it that the listing of the Shares on the Stock Exchange be maintained after completion of the Transactions. Accordingly, the directors and proposed directors of Paramount and the directors of Next will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that a sufficient public float exists for the Shares as required under the Listing Rules. The Stock Exchange has stated that, in the event that less than 25 per cent. of the issued Shares are in public hands following completion of the Transactions, it will closely monitor the trading in the Shares. If the Stock Exchange believes that a false market exists or may exist in the trading of the Shares or that there are insufficient Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend dealings in the Shares. The Stock Exchange has also stated that if Paramount remains a listed company, any further acquisitions or disposals of assets by Paramount and its subsidiaries will be subject to the provisions of the Listing Rules. Pursuant to the Listing Rules, the Stock Exchange has the discretion to require Paramount to issue a circular to its shareholders irrespective of the size of the proposed transactions, particularly when such proposed transaction represents a departure from the principal activities of Paramount. The Stock Exchange also has the power to aggregate a series of transactions and any such transaction may result in Paramount being treated as a new applicant for listing and subject to the requirements for new applicants as set out in the Listing Rules. SUSPENSION AND RESUMPTION OF TRADING IN THE SHARES Trading in the Shares and shares of SIH on the Stock Exchange was suspended at the request of Paramount and SIH respectively at 14:30 on 23rd July, 1999. Application has been made to the Stock Exchange for the resumption of trading in the Shares and the shares of SIH with effect from 10:00 a.m. on 27th July, 1999. GENERAL Yu Ming has been appointed as the financial adviser to Next and as the sponsor for the new listing of Paramount. The Listing Document of Paramount containing, inter alia, details of the Transactions, the advice from the independent board committee, the advice from the independent financial adviser and the notice convening an extraordinary general meeting of Paramount will be despatched to Paramount Shareholders. A circular containing, inter alia, details of the Transactions, the advice from the independent board committee, the advice from the independent financial adviser and the notice convening a special general meeting of SIH will be despatched to SIH Shareholders. The contents of the Joint Announcement and this announcement are also published on the website "nextmedia.com" and can be downloaded therefrom. By order of the board of Paramount Publishing Group Limited Vincent Cheung Wing Hung Director By order of the board of Next Media International Holdings Limited Yeung Wai Hong Chairman By order of the board of Seapower International Holdings Limited Shirley Choi Siu Lui Vice-Chairman By order of the board of Seapower Resources International Limited Shirley Choi Siu Lui Director Hong Kong, 26th July, 1999. The directors of Paramount accept full responsibility for the accuracy of the information contained in this announcement other than that relating to Next, SIH and SRI and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts relating to Paramount not contained in this announcement, the omission of which would make any statement in this announcement misleading. The directors of Next accept full responsibility for the accuracy of the information contained in this announcement other than that relating to Paramount, SIH and SRI and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts relating to Next not contained in this announcement, the omission of which would make any statement in this announcement misleading. The directors of SIH accept full responsibility for the accuracy of the information contained in this announcement other than that relating to Paramount, Next and SRI and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts relating to SIH not contained in this announcement, the omission of which would make any statement in this announcement misleading. The directors of SRI accept full responsibility for the accuracy of the information contained in this announcement other than that relating to Paramount, Next and SIH and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts relating to SRI not contained in this announcement, the omission of which would make any statement in this announcement misleading.