CWT International Limited — M&A Activity 2000

Mar 21, 2000

Listed Company Information

WAH TAK FUNG<0297> - Announcement & Resumption of Trading 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 however arising from or in reliance upon the whole or any part of the contents of this announcement. WAH TAK FUNG HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) MAJOR TRANSACTION The Directors are pleased to announce that the Purchaser, a wholly owned subsidiary of the Company, and the Company have entered into the Agreement with the Vendor on 17 March 2000 to acquire from the Vendor 99% of the issued share capital of Union View for a total consideration of HK$112.5 million (subject to adjustments described below) to be satisfied by payment in cash to the Vendor and by the allotment and issue of new Shares at an issue price of HK$0.33 per Share subject to and upon terms and conditions described below. Union View has on 9 March 2000 entered into the JV Agreement with Shenzhen Holinet for the establishment of the Joint Venture in which Union View will be acquiring a 25% interest. In addition, Union View has also entered into the Extinguishment Agreement with Shenzhen Holinet on 9 March 2000 pursuant to which Shenzhen Holinet will extinguish and keep Union View fully indemnified against all debts and liabilities arising from the Injected Business to be transferred by Shenzhen Holinet to the Joint Venture. The Joint Venture will principally be engaged in the development, production and sale of computer hardware and software, internet security system, computer network solutions and the related technology, equipment, facilities and products which will comprise, amongst others, Network Safety Computer, Network Safety Separation Card, Network Safety Separation Selection Appliance, Single-Wiring-System Separation Control Card, Double-Wiring-System Separation Control Card and the provision of after sales services. The Acquisition constitutes a major transaction for the Company for the purposes of the Listing Rules and will be subject to Shareholders' approval at a special general meeting of the Company. A circular of the Company in relation to the Acquisition together with a notice of the special general meeting will be despatched to Shareholders as soon as possible. Trading in the Shares was suspended from 10:00 a.m. on 10 March 2000 pending the finalisation of negotiations between the parties on the terms of the Acquisition and the release of this announcement. An application has been made to the Stock Exchange for resumption of trading in Shares with effect from 10:00 a.m. on 21 March 2000. The Directors are pleased to announce that the Purchaser and the Company have entered into the Agreement with the Vendor on 17 March 2000 to acquire from the Vendor the Sale Shares. The Agreement Date : 17 March 2000 Vendor : Costa Investments Limited, a company incorporated in the British Virgin Islands with limited liability. The Vendor is wholly and beneficially owned by Mr. Lau Sing, Thomas who is a businessman with over 10 years of experience in the China trade business. The Vendor, its beneficial owner and director are independent third parties not connected with any of the directors, chief executive or substantial shareholders of the Company or its subsidiaries or their respective associates. Purchaser : Star Cherry Investments Limited, a company incorporated with limited liability in the British Virgin Islands and a wholly owned subsidiary of the Company Guarantor : The Company Sale Shares : 99 ordinary shares of US$1.00 each in the issued share capital of Union View representing 99% of its entire issued share capital. Consideration: Payment The aggregate Consideration is the sum of HK$112.5 million (subject to adjustments described below) to be satisfied in the following manner: (a) deposits in a total sum of HK$20 million have been paid in cash to the Vendor prior to the signing of the Agreement; (b) subject to the satisfaction of the following conditions: (i) the Purchaser being satisfied with the results of a financial due diligence review to be conducted by it on Union View and the Injected Business; (ii) a valuation of the Sale Shares being completed to the reasonable satisfaction of the Purchaser by an independent valuer to be appointed jointly by the Vendor and the Purchaser showing that the value of the Sale Shares is not less than HK$112,500,000; (iii) a valuation of the Injected Business being completed to the reasonable satisfaction of the Purchaser by an independent valuer to be appointed jointly by the Vendor and the Purchaser showing that the value of the Injected Business is not less than HK$450,000,000; (iv) all necessary consents, approvals and authorizations having been obtained from the Shenzhen Administration for Foreign Investments and the State Administration for Industry and Commerce and other approving authorities if necessary in connection with the purchase of the Sale Shares by the Purchaser, the establishment and incorporation of the Joint Venture, the implementation of all transactions contemplated under the JV Agreement and the Extinguishment Agreement and all other matters incidental thereto and their certified copies having been provided to the Purchaser; (v) (1) the Vendor and its associates and the directors of Union View each having discharged in full any indebtedness of such person to Union View; (2) Union View having been released from all debts and obligations to, and from all guarantees, indemnities, mortgages and surety and security arrangements of any kind given by Union View in favour of the Vendor or any associate of the Vendor; and (3) the accounts of Union View, audited by an independent accountant acceptable to the Purchaser, having been provided to the Purchaser reflecting the matters referred to in this sub-paragraph (v); a further HK$20 million will be satisfied on or before 6 April 2000 or on such later date on which the above conditions have been fully satisfied by payment in cash; and (c) subject to the satisfaction of the conditions set out in the paragraph headed "Conditions of the Agreement" below, the balance of HK$72,500,000 will be satisfied by the allotment and issue to the Vendor of an equivalent value of new Shares at an issue price of (i) HK$0.33 per Share or (ii) the closing price per Share as quoted on the Stock Exchange on the trading day prior to the date of Completion ("Closing Price"), whichever is lower, such Shares to be credited as fully paid and rank pari passu with the existing Shares, but such Shares shall be subject to a maximum number representing no more than 18% of the enlarged issued share capital of the Company as at Completion as described in the paragraph headed "Consideration Shares" below, and any balance not so satisfied by the issue of Shares will be satisfied by payment in cash. In the event that the Closing Price is equal to or above HK$0.33 per Share, the balance of the Consideration of HK$72,500,000 will be fully satisfied on Completion on the basis of an issue price of HK$0.33 per Consideration Share in the manner described above. In the event that the Closing Price is below HK$0.33 Share, the balance of the Consideration of HK$72,500,000 will be satisfied on Completion by the issue of Shares and payment of cash (if any) on the basis that the issue price is HK$0.33 per Share first and additional cash amount payable which results from the application of the Closing Price as the issue price per Share to satisfy the balance of HK$72,500,000 will be paid to the Vendor on the next business day following the date of Completion. In the event that the granting of the listing of, and permission to deal in, the Shares to be issued on Completion shall not have been obtained from the Listing Committee of the Stock Exchange by the third business day following the day on which the Agreement has become unconditional, Completion shall be extended to 7 days thereafter whereupon the balance of HK$72,500,000 (subject to adjustments as described below) shall be satisfied in whole by payment in cash to the Vendor. In the event that the Purchaser or the Company defaults in satisfying any part of the Consideration by the times and in the manner stipulated in the Agreement, the Vendor shall be entitled to rescind the Agreement whereupon the deposits and all sums paid to the Vendor under the Agreement will be forfeited by the Vendor. Source of Funding The deposits of HK$20 million out of the Consideration were funded by the internal resources of the Company. The Company proposes to finance the cash payments to be made to satisfy all or any part of the balance of the Consideration by conducting fund raising activities which may include a new issue of shares or debentures. At present, no such funding arrangement has been determined by the Board. Consideration Shares It is a condition of the Agreement that if any part of the Consideration is to be satisfied by the allotment and issue of Shares, the total amount of the Consideration Shares shall not exceed 18% of the issued shares of the Company as at the date of Completion as enlarged by the issue of such Consideration Shares. Accordingly, based on the existing issued share capital of the Company of 991,411,385 Shares as at the date of this announcement, a maximum of 217,626,889 Shares will fall to be issued under the Agreement, representing approximately 22% of the existing issued share capital of the Company and approximately 18% of the existing issued share capital of the Company as enlarged by the issue of such Shares. Adjustment If the value of the Sale Shares as shown in the valuation (which is to be agreed jointly by the Vendor and the Purchaser) as referred to in paragraph (b)(ii) in the section headed "Payment" above is less than HK$112.5 million, the Consideration will be reduced by a sum equal to such shortfall. If such valuation exceeds HK$112.5 million, no adjustments will be made to the Consideration. Basis The Consideration was determined after arm's length negotiations between the Purchaser and the Vendor with reference to the amount of HK$450 million at which the Vendor valued the Injected Business as at the date of signing of the Agreement. The issue price of HK$0.33 per Consideration Share represents a discount of approximately 20% to the closing price per Share of HK$0.415 on 9 March 2000, being the trading date immediately preceding the signing of the Agreement and represents a discount of approximately 0.3% to HK$0.331, being the average closing price per Share for the ten trading days up to and including 9 March 2000. In the event that the Closing Price is lower than HK$0.33 per Share, the Consideration Shares will be issued at the Closing Price. The Directors consider the Consideration, the issue price per Consideration Share which will be equal to the lower of HK$0.33 and the Closing Price and the method of payment to be fair and reasonable. Conditions of the Agreement : Completion is conditional upon all of the following conditions being satisfied on or before 8 May 2000 but by no later than 22 May 2000 or such later date as may be agreed by the parties: (i) the establishment and incorporation of the Joint Venture under the JV Agreement and the Extinguishment Agreement having been completed in accordance with the terms thereof and the business licence of the Joint Venture having been issued and the scope of business of the Joint Venture as reflected in its articles of association not having exceeded the scope of the Injected Business; (ii) save for those matters required to be performed by the parties at Completion, all steps and actions required to be taken to give effect to the purchase of the Sale Shares by the Purchaser and the transfer of the Injected Business to the Joint Venture in accordance with the JV Agreement and the Extinguishment Agreement having been completed; (iii) the Purchaser having received a legal opinion from a legal adviser in the PRC acceptable to the Purchaser in respect of the transactions contemplated and matters referred to in the Agreement, the JV Agreement and the Extinguishment Agreement; (iv) if required, the shareholders of the Company having approved in accordance with the provisions of the Listing Rules the transactions contemplated under the Agreement, the implementation thereof and all other matters relating thereto, including the issue of any Consideration Shares; and (v) the Vendor having received evidence reasonably satisfactory to it supporting the ability of the Purchaser or the Company to make due and punctual payment of the Consideration in the manner set out in the Agreement. If the conditions set out above are not fulfilled on or before 22 May 2000 or such later date as the parties may agree, the Agreement will become null and void and of no further force and effect whereupon the deposits and all sums paid to the Vendor under the Agreement (excluding any interest accrued on such sums) shall be refunded to the Purchaser on demand. In the event that the Purchaser fails to satisfy the condition referred to in paragraph (v) above by Completion, the Vendor shall be entitled to rescind the Agreement whereupon the deposits and all sums paid to the Vendor under the Agreement will be forfeited by the Vendor. Completion : Completion shall take place within 3 business days after the conditions set out above have been satisfied or, if approval for the listing of and permission to deal in any of the Consideration Shares shall not have been obtained by the date of Completion, Completion shall be extended to 7 days thereafter. Shareholdings As at the date of this announcement, Quizzical, the existing controlling shareholder of the Company, together with its associates are interested in approximately 38% of the Company's issued share capital. Based on the existing issued share capital of the Company as at the date of this announcement and assuming that a maximum of 217,626,889 Consideration Shares are to be issued to the Vendor under the Agreement, the Vendor will become a substantial shareholder of the Company interested in approximately 18% of its issued share capital as enlarged by the issue of such Consideration Shares and the shareholding of Quizzical and its associates in the Company will be reduced to approximately 31% of such enlarged issued share capital of the Company. Based on the existing issued share capital of the Company as at the date of this announcement and assuming that the full amount of 217,626,889 Consideration Shares are issued under the Agreement, the combined shareholding interests of the Vendor and Quizzical in the Company will be approximately 49% of the Company's enlarged issued share capital immediately after Completion. In these circumstances and in the event that the Vendor and Quizzical are considered as parties acting in concert under the Code, they will incur an obligation under Rule 26 of the Code to make a mandatory general offer for all the issued Shares not already owned or agreed to be acquired by them upon Completion. Quizzical has indicated to the Board that it will, as soon as practicable after the date of this announcement, seek a confirmation from the Executive that no obligation will arise or there will be a waiver of any obligation for Quizzical and/or any other person to make a mandatory general offer under the Code for all or any part of the issued Shares as a result of or incidental to the transactions contemplated under the Agreement. In the event that such confirmation is not granted by the Executive and Quizzical and the Vendor are considered as parties acting in concert under the Code, they have indicated to the Board that they will fulfil their obligations under the Code to make a mandatory general offer for all the issued Shares not already owned or agreed to be acquired by them in accordance with the Code. The Vendor has no present intention to appoint any nominee to the Board. Information relating to Union View, Shenzhen Holinet and the Joint Venture Union View has not carried on any business since its incorporation save for the entering into of the JV Agreement and the Extinguishment Agreement. Shenzhen Holinet is principally engaged in the development, production and sale of computer hardware and software, internet security system, computer network solutions and their related technology, equipment, facilities and products and the provision of after sales services, and wireless broad band telecommunications products and also participates in commercial projects in the field of information technology. Pursuant to the JV Agreement, Shenzhen Holinet will be transferring the Injected Business into the Joint Venture in which Union View and Shenzhen Holinet will hold a 25% and 75% interest respectively. Pursuant to the JV Agreement, the Joint Venture will, subject to approval from the State Administration for Industry and Commerce of the PRC, principally be engaged in the Injected Business. Its registered capital will be RMB15 million and total investment amount will be RMB75 million. Union View will be responsible for injecting a cash payment of HK$75 million into the Joint Venture (part of which will be used to pay up the amount of the Joint Venture's registered capital) in return for its acquisition of a 25% interest in the Joint Venture. Completion is conditional on, amongst others, the establishment and incorporation of the Joint Venture having been completed which will include the injection of capital into the Joint Venture in accordance with the JV Agreement. The Purchaser will only be responsible for satisfying the amount of the Consideration under the Agreement and neither the Company nor the Purchaser will be liable under the JV Agreement for any payment to be made as capital contribution into the Joint Venture. Shenzhen Holinet will be responsible for injecting the Injected Business into the Joint Venture in return for its acquisition of a 75% interest in the Joint Venture. In addition, Shenzhen Holinet will also be responsible for obtaining all approvals and consents from the relevant PRC authorities in connection with the establishment of the Joint Venture and the operation of its business as well as the purchase and setting up of all equipment and facilities and the hiring of all management, technical and other support staff of the Joint Venture. All profits after taxation and all debts and liabilities of the Joint Venture will be distributed to and borne by Union View and Shenzhen Holinet in proportion to their respective interests in the Joint Venture. As at the date of this announcement, details on the net profit and asset value attributable to the Injected Business are not available pending independent valuation and financial due diligence to be performed on such business. Detailed financial information relating to the Injected Business including an accountant's report on such business will be included in the circular to be despatched by the Company to the Shareholders in connection with the Acquisition. Reason for the Acquisition The Group is principally engaged in property investment and development, property leasing and building management and agency services. The Group has recently acquired a 25% interest in M.POS (HK) Limited which is principally engaged in the operation of a system which will enable mobile merchants and businesses to conduct a variety of transactions including acceptance of payments by credit cards, debit cards, smart cards and cheques, as well as distribution of mobile terminals. Such mobile terminals also operate as wireless internet devices enabling the users to access the internet as well as communicate by electronic mail. Since the principal business of the Joint Venture will involve the development of internet security system, the Directors believe that it would assist in consolidating the Group's businesses in the area of advanced technology and information technology. The Directors believe that the Acquisition presents an excellent opportunity for the Group to continue diversifying its businesses into the technology and internet-related field which the Directors believe offers vast market potential. The Directors consider the terms of the Acquisition to be fair and reasonable and in the best interest of the Group. General Pursuant to the Listing Rules, the Acquisition constitutes a major transaction for the Company and is subject to Shareholders' approval at a special general meeting of the Company. The Stock Exchange has the power, under the Listing Rules, to aggregate a series of acquisitions by the Company and any such acquisitions may, in any event, result in the Company being treated as a new applicant for listing and subject to the requirement for new applicants as set out in the Listing Rules. A circular containing, among other matters, the notice convening the special general meeting of the Company and details of the Acquisition will be despatched to Shareholders as soon as practicable. An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. Suspension and resumption of trading The Company has on 14 February 2000 announced, amongst others, that it was in preliminary discussion with certain independent third parties in relation to a possible investment by the Company in a business involved in the operation of internet security system in the PRC. Following the Company's announcement on 14 February 2000, the Company was in continual discussion with such parties in relation to the possible investment. Such discussion only reached a more advanced stage after the close of business on 9 March 2000 but no specific terms have been agreed then. At the request of the Company, trading in Shares was suspended from 10:00 a.m. on 10 March 2000 pending the finalisation of such discussion as a result of which an agreement relating to the Acquisition was entered into by the parties after the close of business on 10 March 2000. As a result of further negotiations between the parties on the terms of the Acquisition, the agreement made on 10 March 2000 was cancelled by the parties on 17 March 2000 and, in replacement of such agreement, the Agreement was entered into on the same day by the parties. Trading in Shares remained suspended from 10:00 a.m. on 10 March 2000 until 4:00 p.m. on 20 March 2000. Application has been made to the Stock Exchange for resumption of trading in Shares with effect from 10:00 a.m. on 21 March 2000. Definitions "Acquisition" the acquisition by the Purchaser from the Vendor of the Sale Shares pursuant to the Agreement "Agreement" a sale and purchase agreement entered into between the Purchaser, the Vendor and the Company on 17 March 2000 in connection with the Acquisition "associate(s)" has the meaning ascribed thereto under the Listing Rules "Board" board of directors of the Company "Code" Hong Kong Code on Takeovers and Mergers "Company" Wah Tak Fung Holdings Limited, a company incorporated in Bermuda with limited liability, the ordinary share capital of which is listed on the Stock Exchange "Completion" completion of the Agreement "Consideration" a total of HK$112.5 million for the Acquisition, subject to adjustments in accordance with the Agreement "Consideration Shares" new Shares in the capital of the Company to be issued at an issue price of HK$0.33 per Share to satisfy part of the Consideration in accordance with the Agreement "Director(s)" executive director(s) of the Company "Executive" the Executive Director of the Corporate Finance Division of the Securities and Futures Commission or any of his delegates "Extinguishment Agreement" an agreement entered into between Union View and Shenzhen Holinet on 9 March 2000 pursuant to which Shenzhen Holinet will extinguish and keep Union View fully indemnified against all debts and liabilities arising from the portion of the business of Shenzhen Holinet to be transferred by Shenzhen Holinet to the Joint Venture "Group" the Company and its subsidiaries "Hong Kong" the Hong Kong Special Administration Region of the PRC "Injected Business" the development, production and sale of computer hardware and software, internet security system, computer network solutions and the related technology, equipment, facilities and products which will comprise, amongst others, Network Safety Computer, Network Safety Separation Card, Network Safety Separation Selection Appliance, Single-Wiring-System Separation Control Card, Double-Wiring-System Separation Control Card and the provision of after sales services, to be transferred by Shenzhen Holinet to the Joint Venture pursuant to the JV Agreement "Joint Venture" the Sino-foreign cooperative joint venture enterprise to be established by Union View and Shenzhen Holinet in accordance with the JV Agreement "JV Agreement" an agreement entered into between Union View and Shenzhen Holinet on 9 March 2000 for the establishment of the Joint Venture "Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange "PRC" the People's Republic of China, excluding Hong Kong for the purpose of this announcement "Purchaser" Star Cherry Investments Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of the Company "Quizzical" Quizzical Holdings Limited, the existing controlling shareholder of the Company "Sale Shares" 99 ordinary shares of US$1.00 each in the issued share capital of Union View "Share(s)" ordinary share(s) of HK$0.10 each in the capital of the Company "Shareholder(s)" shareholders of the Company "Shenzhen Holinet" Shenzhen Holinet Industrial Co. Ltd., a company incorporated in the PRC with limited liability and a technology enterprise registered in the Shenzhen Special Economic Zone in the PRC "Stock Exchange" The Stock Exchange of Hong Kong Limited "Union View" Union View Investments Holdings Limited, a company incorporated in British Virgin Islands with limited liability "Vendor" Costa Investments Limited, a company incorporated in the British Virgin Islands with limited liability "HK$" Hong Kong dollars, the lawful currency of Hong Kong "RMB" Renminbi, the lawful currency of the PRC "%" per cent. By Order of the Board of Directors of Wah Tak Fung Holdings Limited SIU King Nin, Pet Executive Director Hong Kong, 20th March, 2000 The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no facts the omission of which would make any statement in this announcement misleading.