CITIC Limited — Capital/Financing Update 2013

Dec 19, 2013

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CITIC Pacific Limited 中信泰富有限公司

(Incorporated in Hong Kong with limited liability) (Stock Code: 00267)

ANNOUNCEMENT

DISCLOSEABLE TRANSACTION: DISPOSAL OF DCH COMMERCIAL CENTRE

In line with CITIC Pacific’s strategy to focus on its core businesses, the Vendor, an indirect wholly-owned subsidiary of CITIC Pacific, entered into the Sale and Purchase Agreement on 19 December 2013 with the Purchaser, to dispose of the Target Company and the related Shareholder’s Loan. The Target Group is solely engaged in the ownership and leasing of DCH Commercial Centre, an office tower in Quarry Bay, Hong Kong. CITIC Pacific is a party to the Sale and Purchase Agreement as the Vendor’s guarantor and Swire Properties is a party to the Sale and Purchase Agreement as the Purchaser’s guarantor. The consideration for the Disposal is HK$3.9 billion (subject to adjustment for the working capital of the Target Group as at completion).

Listing Rules Implications

As the applicable percentage ratio(s) (as defined in the Listing Rules) in respect of the Disposal exceed 5% but are less than 25%, the Disposal constitutes a discloseable transaction for CITIC Pacific under Chapter 14 of the Listing Rules.

INTRODUCTION

The Board is pleased to announce that on 19 December 2013, the Vendor, an indirect whollyowned subsidiary of CITIC Pacific, entered into the Sale and Purchase Agreement with the Purchaser, pursuant to which the Vendor agreed to sell and the Purchaser agreed to purchase the Sale Interest for HK$3.9 billion (subject to adjustment for the working capital of the Target Group as at completion). CITIC Pacific is a party to the Sale and Purchase Agreement as the Vendor’s guarantor and Swire Properties is a party to the Sale and Purchase Agreement as the purchaser’s guarantor.

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THE DISPOSAL

The Sale and Purchase Agreement

Date

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19 December 2013

Parties

• (a) Newmarket Holdings Limited (as the Vendor)

• (b) CITIC Pacific Limited (as the Vendor’s guarantor)

• (c) Marvel Glory Limited (as the Purchaser)

• (d) Swire Properties Limited (as the Purchaser’s guarantor)

INFORMATION ON THE PURCHASER

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchaser is a special purpose vehicle established for the purpose of acquiring the Sale Interest. The Purchaser is held as to 50% by Sunny Treasure Group Limited, a wholly-owned subsidiary of Swire Properties, 30% by a wholly-owned subsidiary of Kerry Holdings Limited and as to 20% by an indirect wholly-owned subsidiary of Yung’s Enterprise Holdings Limited.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Sunny Treasure Group Limited and Swire Properties are third parties independent of CITIC Pacific.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Kerry Holdings Limited is the indirect holding company of Kerry Properties Limited. Kerry Properties Limited is, in turn, a substantial shareholder of a subsidiary of CITIC Pacific, and is therefore a connected person of CITIC Pacific under the Listing Rules. However, the total assets, profits and revenue of this subsidiary represents less than 5% of the relevant percentage ratios of CITIC Pacific for the latest financial year, under Rule 14A.31(9)(b) of the Listing Rules. Accordingly, CITIC Pacific is exempt from all the reporting, announcement and independent shareholders’ approval requirements contained in Chapter 14A of the Listing Rules pursuant to Rule 14A.31(9) of the Listing Rules in connection with the Disposal.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the ultimate beneficial owner of Yung’s Enterprise Holdings Limited is Mr. Larry Yung Chi Kin, the father of Mr. Carl Yung Ming Jie, a non-executive Director. As the Purchaser is held as to 20% by Yung’s Enterprise Holdings Limited, the Purchaser is not an associate (as defined in Rule 14A.11(4) of the Listing Rules) of Mr. Carl Yung Ming Jie.

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Subject of the Disposal

The Sale Share represents 100% of the equity interest of the Target Company, and the Shareholder’s Loan represents the total amount owing by Pacific Grace to CITIC Pacific. The Target Group is solely engaged in the ownership and leasing of DCH Commercial Centre, an office tower in Quarry Bay, Hong Kong.

Consideration

Pursuant to the terms of the Sale and Purchase Agreement, the Purchaser will acquire the Sale Interest from the Vendor for HK$3.9 billion (subject to adjustment for the working capital of the Target Group as at completion). A deposit of HK$390 million was paid upon signing of the Sale and Purchase Agreement and this shall be applied towards satisfying the consideration on completion. Upon completion, the Purchaser shall pay an amount equivalent to the Shareholder’s Loan to CITIC Pacific, and shall pay to the Vendor the balance of the consideration (adjusted for the working capital of the Target Group as at 30 September 2013), representing the consideration for the Sale Share, less the deposit.

The consideration will be subject to a post-completion adjustment, by reference to the working capital of the Target Group as at 30 September 2013, as compared with that on completion of the Disposal. If the working capital of the Target Group as at 30 September 2013 is greater than that as at completion, or if the deficit in working capital of the Target Group as at 30 September 2013 is less than that as at completion, as the case may be, then the Vendor shall pay the Purchaser the difference. If the working capital of the Target Group as at 30 September 2013 is less than that as at completion, or if the deficit in working capital of the Target Group as at 30 September 2013 is greater than that as at completion, as the case may be, then the Purchaser shall pay the Vendor the difference.

The consideration for the Disposal was arrived at after arm’s length negotiations between the Vendor and the Purchaser, taking into account a number of factors as a whole, such as recent market rental yields for Grade A offices in Hong Kong, the current rental status of the Property and evaluation of proposals from other potential purchasers.

Completion

The sale and purchase of the Sale Share and assignment of the Shareholder’s Loan shall complete simultaneously.

Completion of the Disposal shall take place on 15 January 2014 or such other date as the parties may agree otherwise and if such day is not a Business Day, on the immediately preceding Business Day.

Guarantee

Under the Sale and Purchase Agreement, Swire Properties has irrevocably and unconditionally guaranteed, in favour of CITIC Pacific and the Vendor, the due and punctual payment by the Purchaser of the consideration.

Under the Sale and Purchase Agreement, CITIC Pacific has irrevocably and unconditionally guaranteed, in favour of the Purchaser, the due and punctual performance of the obligations (present, future, actual or contingent) of the Vendor in accordance with the Sale and Purchase Agreement.

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INFORMATION ON CITIC PACIFIC

CITIC Pacific’s operational focus is on the PRC, both the mainland and Hong Kong. Its major businesses are special steel manufacturing, iron ore mining and property development in the PRC. Other businesses include energy and civil infrastructure. CITIC Pacific also holds controlling interests in Dah Chong Hong Holdings Limited and a 41.4% interest in CITIC Telecom International Holdings Limited.

INFORMATION ON THE VENDOR

The Vendor is an investment holding company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of CITIC Pacific.

INFORMATION ON THE TARGET GROUP

The Target Company is an investment holding company, the sole asset of which is its 100% equity interest in Pacific Grace, the sole asset of which, in turn, is the Property. The Property is an office tower in Quarry Bay, Hong Kong, and is currently held by the Group as an investment property.

Set out below is a summary of the unaudited consolidated financial information of the Target Group for the two years ended 31 December 2011 and 2012 (prepared in accordance with Hong Kong accounting standards):

	For the year	ended 31 December
	2012	2011
	HK$’ million	HK$’ million
Net profit before taxation	355	291
Net profit after taxation	355	291

The unaudited consolidated shareholder’s deficit of the Target Group as at 31 December 2012 attributable to its shareholder, prepared in accordance with Hong Kong accounting standards, was approximately HK$93 million. The unaudited book value of the Property as at 30 June 2013 was HK$2,966 million.

REASONS FOR AND BENEFITS OF THE DISPOSAL

It is CITIC Pacific’s strategy to focus on the development of its three major businesses of special steel manufacturing, iron ore mining and property development in the PRC. The Property is held as an investment property and the Directors are of the view that taking into account the expected return on investment, the Disposal is not only in line with the Group’s strategy but also represents a good opportunity to realise the gain and deploy resources to the Group’s core businesses. It is expected that with reference to the unaudited book value of the Property as at 30 June 2013, an estimated profit of approximately HK$900 million would arise from the Disposal. CITIC Pacific intends to use the net proceeds (after deducting relevant costs and expenses in connection with the Disposal) for general working capital purposes of the Group. The Target Company and Pacific Grace will cease to be subsidiaries of CITIC Pacific upon completion of the Disposal.

The Directors believe that the terms of the Sale and Purchase Agreement are fair and reasonable, on normal commercial terms and in the interests of CITIC Pacific and its shareholders as a whole.

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LISTING RULES IMPLICATIONS

As the applicable percentage ratio(s) (as defined in the Listing Rules) in respect of the Disposal exceed 5% but are less than 25%, the Disposal constitutes a discloseable transaction for CITIC Pacific under Chapter 14 of the Listing Rules.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Kerry Holdings Limited is the indirect holding company of Kerry Properties Limited. Kerry Properties Limited is, in turn, a substantial shareholder of a subsidiary of CITIC Pacific, and is therefore a connected person of CITIC Pacific under the Listing Rules. However, the total assets, profits and revenue of this subsidiary represents less than 5% of the relevant percentage ratios of CITIC Pacific for the latest financial year under Rule 14A.31(9)(b) of the Listing Rules. Accordingly, CITIC Pacific is exempt from all the reporting, announcement and independent shareholders’ approval requirements contained in Chapter 14A of the Listing Rules pursuant to Rule 14A.31(9) of the Listing Rules in connection with the Disposal.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the ultimate beneficial owner of Yung’s Enterprise Holdings Limited is Mr. Larry Yung Chi Kin, the father of Mr. Carl Yung Ming Jie, a non-executive Director. As the Purchaser is held as to 20% by Yung’s Enterprise Holdings Limited, the Purchaser is not an associate (as defined in Rule 14A.11(4) of the Listing Rules) of Mr. Carl Yung Ming Jie.

DEFINITIONS

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

“Board”	board of Directors
“Business Day”	a day other than a Saturday, Sunday or public holiday on which
	banks are open in Hong Kong to the general public for business
“CITIC Pacific”	CITIC Pacific Limited, a company incorporated in Hong Kong
	with limited liability, the shares of which are listed on the Stock
	Exchange (Stock Code 00267)
“connected person”	has the meaning as ascribed under the Listing Rules
“Directors”	directors of CITIC Pacific
“Disposal”	the sale of the Sale Interest pursuant to the Sale and Purchase
	Agreement
“Group”	CITIC Pacific and its subsidiaries (other than the Target Group)
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange

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“Pacific Grace” Pacific Grace Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Target Company

• “PRC”

the People’s Republic of China

• “Property” DCH Commercial Centre, an office tower situated at 25 Westlands Road, Quarry Bay, Hong Kong

• “Purchaser” Marvel Glory Limited, a company incorporated in the British Virgin Islands with limited liability, and held as to 50% by Sunny Treasure Group Limited, a wholly-owned subsidiary of Swire Properties, 30% by a wholly-owned subsidiary of Kerry Holdings Limited, and 20% by an indirect wholly-owned subsidiary of Yung’s Enterprise Holdings Limited

• “Sale and Purchase the unconditional agreement entered into between the Vendor, Agreement” CITIC Pacific, the Purchaser and Swire Properties on 19 December 2013 in relation to the Disposal

• “Sale Interest” the Sale Share and the Shareholder’s Loan

• “Sale Share” one share of US$1 par value in the share capital of the Target Company, representing 100% of the entire issued share capital of the Target Company

• “Shareholder’s Loan” the total amount owing from Pacific Grace to CITIC Pacific (inclusive of principal (up to the date of completion of the Disposal) and interest (if any) up to (but not including) the date of completion of the Disposal

• “Swire Properties” Swire Properties Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange (Stock Code 1972)

• “Target Company” Joyluck Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of CITIC Pacific

• “Target Group” the Target Company and Pacific Grace

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

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“Vendor”

Newmarket Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of CITIC Pacific

By Order of the Board CITIC Pacific Limited Ricky Choy Wing Kay Company Secretary

Hong Kong, 19 December 2013

As at the date of this announcement, the executive Directors are Messrs Chang Zhenming (Chairman), Zhang Jijing, Vernon Francis Moore and Liu Jifu; the non-executive Directors are Messrs André Desmarais, Ju Weimin, Yin Ke, Carl Yung Ming Jie and Peter Kruyt (alternate director to Mr André Desmarais); and the independent non-executive Directors are Messrs Alexander Reid Hamilton, Gregory Lynn Curl, Francis Siu Wai Keung and Dr Xu Jinwu.

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