China Everbright Limited — M&A Activity 2000

Apr 3, 2000

Listed Company Information

SHOUGANG CENT<0103> - Announcement The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. SHOUGANG CONCORD CENTURY HOLDINGS LIMITED (the `Company') (Incorporated in Hong Kong with limited liability) CONNECTED AND DISCLOSEABLE TRANSACTION DISPOSAL OF INTEREST IN A JOINTLY CONTROLLED ENTITY The directors of the Company announce that on 31st March, 2000, Everlite Century Limited, a wholly-owned subsidiary of the Company, entered into an agreement with the below-mentioned connected person of the Company for the sale of 26% of the equity interest in Shanghai Shenjia Metal Products Company Limited, an indirect 51% owned jointly controlled entity of the Company, for a consideration of RMB65,785,300 (approximately HK$61,770,000). The aggregate consideration to be received for the equity interest in Shanghai Shenjia Metal Products Company Limited being disposed of exceeds 15 per cent of the consolidated net assets of the Company as shown in its latest published audited accounts. The disposal therefore constitutes a discloseable transaction of the Company under the Listing Rules. As the purchaser is a substantial shareholder of Shanghai Shenjia Metal Products Company Limited, which is a jointly controlled entity of the Company, the disposal also constitutes a connected transaction for the Company under the Listing Rules. The Company may only proceed to implement the agreement after obtaining the approval of the transaction by the independent shareholders of the Company at an extraordinary general meeting to be convened. DETAILS OF THE TRANSACTION Date of Agreement: 31st March, 2000 Parties: Vendor: Everlite Century Limited (`Everlite'), a wholly-owned subsidiary of the Company Purchaser: Shanghai Ergang Co., Ltd. An agreement (the `Agreement') was entered into for the sale by Everlite to the Purchaser (the `Disposal') of 26 per cent of the equity interest in Shanghai Shenjia Metal Products Company Limited (`Shanghai Shenjia'). The Company is an investment holding company and its principal subsidiaries are engaged in the trading of metallic ores, metals, copper and brass products, trading of industrial chemical products, manufacture and trading of pre-stressed concrete strands and wires and manufacture of steel cord. Assets being disposed of: 26% of the equity interest in Shanghai Shenjia. Shanghai Shenjia is a sino-foreign equity joint venture established in the People's Republic of China (the `PRC') with a registered capital of US$10,000,000 (approximately HK$77,500,000) and a total investment of US$20,000,000 (approximately HK$155,000,000). The equity interest in Shanghai Shenjia is currently owned in the following proportion: Joint venture party Percentage of equity interest Everlite 51% Purchaser 49% Shanghai Shenjia is engaged in the business of manufacture of pre-stressed concrete strands and wires. The audited net profit of Shanghai Shenjia before and after taxation and extraordinary items attributable to the 26% equity interest in Shanghai Shenjia being disposed of for the year ended 31st December, 1998 were approximately RMB3,562,000 (approximately HK$3,345,000) and approximately RMB3,117,000 (approximately HK$2,927,000) respectively, whereas the audited net profit of Shanghai Shenjia before and after taxation and extraordinary items attributable to such asset being disposed of for the year ended 31st December, 1997 were approximately RMB4,473,000 (approximately HK$4,200,000) and RMB4,147,000 (approximately HK$3,894,000) respectively. Consideration: The total consideration for the 26% equity interest in Shanghai Shenjia being disposed of (the `Consideration') is RMB65,785,300. The aggregate amount of the Consideration represents a premium of 173 per cent to the amount of RMB24,077,000 (approximately HK$22,607,000) representing 26 per cent of the net tangible asset value of Shanghai Shenjia as shown in the unaudited consolidated accounts of the Company for the six months ended 30th June, 1999. The Consideration was valued at a price earnings multiple of approximately 18.5 times the profit before taxation attributable to the 26 per cent equity interest in Shanghai Shenjia for the year ended 31st December, 1998. The Consideration was arrived at after arm's-length negotiations between Everlite and the Purchaser. Taking effect of the Agreement: The Agreement will take effect after the payment of the first installment of the Consideration by the Purchaser to Everlite. Payment terms: The first installment of the Consideration in the amount of RMB50,000,000 (approximately HK$46,948,000) shall be paid by the Purchaser upon the change in the ownership of the equity interest in Shanghai Shenjia pursuant to the Disposal being approved by the relevant governmental authorities. The second installment of the Consideration in the amount of RMB15,785,300 (approximately HK$14,822,000) shall be paid by the Purchaser on or before 30th September, 2000. REASONS FOR THE TRANSACTION: In view of the intense competition in the industry of pre-stressed concrete strands and wires, the directors of the Company (`Directors') foresee that further capital commitment in Shanghai Shenjia by the Company will be necessary. The Directors believe that it is in the interest of the Company and its subsidiaries (the `Group') to reduce its percentage ownership in the equity interest of Shanghai Shenjia, which is not an entity entirely controlled by the Group, in order to allow the Group to concentrate on its core business. The Directors expect that the Group will have a gain of an unaudited profit before taxation of approximately HK$2,064,000 arising as a result of the Disposal. At present, the Directors are optimistic that Shanghai Shenjia will continue to generate a stable source of earnings for the Group. The Directors will however continue to look for other opportunities to dispose of its remaining 25 per cent stake in the equity interest of Shanghai Shenjia after completion of the Disposal. An announcement will be made by the Company in respect of the disposal of such remaining interest in Shanghai Shenjia when such transaction has been entered into if it constitutes a notifiable transaction under the Listing Rules which requires disclosure by way of press notice. The Company intends to use the proceeds of sale from the Disposal for working capital purposes. Approval by the shareholders: The aggregate amount of the Consideration payable by the Purchaser for the equity interest in Shanghai Shenjia being disposed of by Everlite exceeds 15 per cent of consolidated net assets of the Company as shown in its latest published audited accounts for the year ended 31st December, 1998. The Disposal therefore constitutes a discloseable transaction of the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the `Listing Rules'). In addition, as at the date of this announcement, the Purchaser beneficially owns 49% of the equity interest in Shanghai Shenjia and is a connected person of the Company. Accordingly, for the purposes of the Listing Rules, the Disposal constitutes a connected transaction for the Company. Everlite may only proceed with the Disposal with the approval of the independent shareholders of the Company passed at an extraordinary general meeting to be held. As none of the shareholders of the Company are connected persons interested in the Disposal, no shareholder will be required to abstain from voting on the resolution approving the Disposal at the extraordinary general meeting of the Company to be held. An independent financial adviser will be appointed to give advice to the independent board of Directors (the `Independent Board') on its recommendation to the independent shareholders concerning the Disposal. General: A circular containing details of the Disposal, the letter from the independent financial adviser containing its advice to the Independent Board, the recommendation of the Independent Board and a notice convening the extraordinary general meeting of the Company will be despatched to the shareholders of the Company as soon as practicable. By Order of the Board of Shougang Concord Century Holdings Limited Tang Kwok Kau Director Hong Kong, 31st March, 2000 In this announcement, the translation of Renmenbi into Hong Kong dollars is based on the exchange rate of HK$1.00 to RMB1.065 and the translation of US dollars into Hong Kong dollars is based on the exchange rate of US$1.00 to HK$7.75.