Esprit Holdings Limited — M&A Activity 1999

Nov 16, 1999

Listed Company Information

GRANDE HOLDINGS<0186> & TOYO HOLDINGS<0094> - Joint 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. TOYO HOLDINGS LIMITED (incorporated in Bermuda with limited liability) THE GRANDE HOLDINGS LIMITED (incorporated in Bermuda with limited liability) Joint Announcement Acquisition of 18.74% shareholding interest in Toyo Holdings Limited by The Grande (Nominees) Limited, a wholly owned subsidiary of The Grande Holdings Limited (Discloseable transaction for The Grande Holdings Limited) and An unconditional mandatory cash offer by for all the issued shares of HK$0.01 each and Options in Toyo Holdings Limited on behalf of The Grande (Nominees) Limited (other than those already owned by The Grande (Nominees) Limited or parties acting in concert with it) Grande Nominees acquired 590,000,000 Shares, representing 18.74% of the existing issued share capital of the Company from Peninsula Resources Limited at HK$0.092 per Share on 11 November, 1999. Before the completion of the Acquisition, Grande Nominees held a 31.76% interest in the Company. Peninsula Resources Limited is beneficially wholly owned by Mr. Johnson Ko. As a result of the Acquisition, Grande Nominees now holds 50.50% of the existing issued share capital of the Company and is required under the Code to make the Offer. Pacific Challenge, on behalf of Grande Nominees, will make an unconditional mandatory cash offer for all the issued Shares at HK$0.10 per Share (representing the highest price paid by Grande Nominees and parties acting in concert with it for the acquisition of Shares during the 6-month preceding to this announcement), other than those already owned by Grande Nominees or parties acting in concert with it. The terms of this Offer are set out in the section headed "Unconditional mandatory cash offer" below. An Independent Board Committee will be formed to advise the Independent Shareholders in respect of the Offer. A composite Offer document setting out the terms of the Offer together with the relevant acceptance and transfer form will be despatched to the Shareholders and the Optionholders as soon as practicable. The Acquisition and the Offer constitute a discloseable transaction for Grande under the Listing Rules. A circular containing further details of the Acquisition and the Offer will be despatched to the shareholders of Grande as soon as practicable. The Open Offer of the convertible preference shares and the consolidation of share capital as announced on 6 October, 1999 with their details included in the circular despatched on 26 October, 1999 by the Company will be deferred until further notice. An announcement will be made in relation to the deferral. Shareholders and investors should exercise extreme caution when dealing in the Shares and the shares of Grande. Acquisition Date of the Acquisition: 11 November, 1999 Parties: Vendor: Peninsula Resources Limited is beneficially wholly owned by Mr. Johnson Ko, an independent third party not connected with the director, chief executive, or substantial shareholder of Grande or any of its subsidiaries (with the exception of the Company and its subsidiaries). Before the Acquisition, Peninsula Resources Limited owned 590,000,000 Shares, representing 18.74% of the existing issued share capital of the Company. After the Acquisition, Peninsula Resources Limited does not hold any interest in the Company. Purchaser: Grande Nominees, a company incorporated in the British Virgin Islands, which is a wholly owned subsidiary of Grande, a company incorporated in Bermuda whose securities are listed on the Stock Exchange. Before the completion of the Acquisition, Grande Nominees and parties acting in concert with it held a 31.76% shareholding interest in the Company. Other than the Shares and the Options, the Company has no other outstanding securities. Shares acquired: 590,000,000 Shares, representing approximately 18.74% of the Company's existing issued share capital. Purchase price: HK$0.092 per Share, amounting to HK$54,280,000 for 590,000,000 Shares. The purchase price was determined on an arm's length and commercial basis. The directors of Grande consider the purchase price for the Shares to be fair and reasonable. Reasons for and benefits of the Acquisition to the Grande Group: The Acquisition is expected to create synergy for the Grande Group and the Company and its subsidiaries in terms of distribution of consumer electronic products and technical expertise. The Acquisition will enable the Company and the Grande Group to further develop their distribution channels, thus increasing their bargaining power with the distributors. The Acquisition will also consolidate the technical expertise of the Company and the Grande Group and allow for more efficient resources allocation. In addition, the Grande Group will be able to better utilise its management expertise and enhance its participation in the operations and future performance of the Company. INFORMATION ON THE COMPANY The Company and its subsidiaries are principally engaged in the design, manufacture and sale of low-end consumer audio and video products, components and other consumer products, investment holding and investment property holding. Grande has given its consent to the Company in respect of the entering into with the underwriting agreement dated 15 November, 1999 with Akai Holdings Limited and the granting of loan facility to Akai Holdings Limited, details of which will be included in the announcement to be released as soon as possible. The audited consolidated loss before taxation and extraordinary items of the Company and its subsidiaries was approximately HK$269,970,000 for the year ended 31 December, 1998. The Company recorded an audited consolidated loss of approximately HK$279,803,000 for the same year after deducting the taxation and extraordinary items. The unaudited consolidated loss before taxation and extraordinary items of the Company and its subsidiaries was approximately HK$563,972,000 for the 6 months ended 30 June, 1999. The unaudited consolidated loss after taxation and extraordinary items was approximately HK$569,859,000 for the same 6-month period. The losses for the year ended 31 December, 1998 and the 6 months ended 30 June, 1999 were mainly attributable to exceptional items, which include the provisions for diminution in values of listed investments and non-core assets, loss arising from closure of subsidiaries and business restructuring, provisions for bad debts, discontinued operations and write off of fixed assets. The exceptional items are unlikely to recur in the near future. INFORMATION ON GRANDE NOMINEES Grande Nominees, which is a wholly owned subsidiary of Grande, is an investment holding company. INFORMATION ON THE GRANDE GROUP The Grande Group is principally engaged in the design, development, manufacture and distribution of computer peripherals, consumer electronic products and high-end consumer audio products. The directors of Grande do not consider that any competition between the Company and Grande exists as the principal markets of their products are different. Both the Company and Grande do not intend to compete with each other in the future. Grande is a company incorporated in Bermuda whose securities are listed on the Stock Exchange. Mr. Christopher W. Ho owns 185,987,140 shares in Grande, representing approximately 71.26% of all the shares of Grande in issue. The directors of Grande include Mr. Christopher W. Ho, Ms. Christine Asprey, Mr. Michael King Kwok Cheung, Mr. Alain A. Eman, Mr. S. H. Hwang, Mr. C. F. Lam, Mr. Paul K. F. Law, Mr. Ming Kong Lee, Mr. Adrian Chi Chiu Ma, Mr. Terence P. Scandrett, Mr. Samuel Kin Yuen, Mr. John T. Evans and Mr. H. K. Tsoi. UNCONDITIONAL MANDATORY CASH OFFER Grande Nominees has increased its shareholding in the Company by 18.74% from 31.76% to 50.50% and is therefore required, under the Code to make an unconditional mandatory cash offer for all the issued Shares and Options other than those already owned by Grande Nominees or parties acting in concert with it. Pacific Challenge, on behalf of Grande Nominees, will make the Offer. An independent board committee of Grande comprising Mr. John T. Evans and Mr. Herbert H. K. Tsoi has been established to consider and approve the Acquisition at HK$0.092 per Share from the Vendor and the Offer, and considers carrying out both the Acquisition and the Offer at their respective prices to be in the interests of the shareholders of Grande. The Company has 23,995,000 outstanding Options, which are granted under its employee share options scheme, to subscribe for 23,995,000 Shares. The Options are exercisable up to and including 2 June, 2000 at a subscription price of HK$0.376 per Share. Offer price: HK$0.10 per Share The Offer price of HK$0.10 per Share represents the price per Share paid by Grande Nominees on 27 May 1999 where Grande Nominees acquired 1,000,000,000 Shares representing a 31.76% voting rights in the Company. Apart from the share acquisition on 27 May 1999, Grande Nominees and parties acting in concert with it did not deal in Shares in the past 6 months preceding this announcement. The Offer price represents a premium of about 9.89% to the closing price of HK$0.091 per Share quoted on the Stock Exchange on 11 November, 1999, the last trading day before the suspension in trading of the Shares pending the release of this announcement, and a premium of about 12.36% to the 10-day average closing price of HK$0.089 per Share quoted on the Stock Exchange up to and including 11 November, 1999. Based on the unaudited consolidated net tangible assets value of the Company and its subsidiaries as at 30 June, 1999 of HK$561,000,000 and the existing issued share capital of 3,148,676,822 Shares, the Offer price of HK$0.10 per Share represents a discount of about 44.44% to the net tangible assets value per Share of HK$0.18. An Offer will be made by Grande to each Optionholder based on the following Offer price: For every Option HK$0.001 in cash Total consideration: At present there are 3,148,676,822 Shares in issue. At the Offer price of HK$0.10 per Share, this Offer values the entire issued share capital of the Company at about HK$314,867,682.20. Based on the Offer price of HK$0.001 per Option, the total consideration for the Options is approximately HK$23,995. Apart from the Options, there was no other option, warrant or conversion right affecting the Shares outstanding at the date hereof. Pacific Challenge confirms that there are sufficient financial resources available to Grande Nominees to satisfy full acceptance of the Offer. Terms of the Offer: A composite Offer document setting out the terms of the Offer and the relevant acceptance and transfer form will be sent to the Shareholders and the Optionholders as soon as practicable. An Independent Board Committee will be set up to consider the Offer and to advise the Independent Shareholders on the terms of the Offer. An independent financial adviser will be appointed to advise the Independent Board Committee. Effect of accepting the Offer: By accepting the Offer, Shareholders and Optionholders will sell their Shares and Options respectively, and all rights attached to the Shares, including the right to receive all dividends and distributions declared, made or paid on or after the completion of the Offer. Stamp duty: Stamp duty at a rate of HK$1.25 for every HK$1,000 of the Offer price will be deducted from the amount paid to Shareholders who accept the Offer. INTENTIONS OF GRANDE NOMINEES REGARDING THE COMPANY The intention of Grande Nominees is that the Company will continue its existing businesses of the design, manufacture and sale of consumer audio and video products, components and other consumer products. Grande Nominees does not intend to make any material changes to the businesses of the Company. It is intended that the daily operation and management of the Company and its subsidiaries will continue to be carried out by the existing management of the Company and there will not be any material changes to the employees, management or directors of the Company by reason only of the Offer. The directors of the Company currently comprises 10 executive directors including Mr. Christopher W. Ho, Mr. Cheung King Kwok, Michael, Mr. Lee Ming Kong, Mr. Michael Andrew Barclay Binney, Mr. Ma Chi Chiu, Adrian, Mr. Hirohisa Kudo, Mr. Shun Shindo, Mr. Yuen Kin, Samuel, Mr. Koichi Enomoto and Mr. Hideo Matsuoka, and two independent non-executive directors namely Mr. Etsuro Tago and Mr. Jun Ishikawa. Among them, Mr. Christopher W. Ho, Mr. Cheung King Kwok, Michael, Mr. Lee Ming Kong, Mr. Ma Chi Chiu, Adrian and Mr. Yuen Kin, Samuel are also directors of Grande. Maintaining the listing status of the Company: The Stock Exchange has stated that it will closely monitor trading in the Shares if, at the close of the Offer, less than 25% of the Shares are held by the public. If the Stock Exchange believes that: * a false market exists or may exit in the Shares; or * there are too few Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the Shares. Grande Nominees intends to keep the Company listed on the Stock Exchange. The directors of Grande Nominees will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares. If the Company remains listed on the Stock Exchange, the Stock Exchange will closely monitor all acquisitions or disposals of assets by the Company. The Stock Exchange has the discretion to require the Company to issue a circular to the Shareholders irrespective of the size of the proposed transaction, particularly when such proposed transaction represents a departure from the principal activities of the Company. The Stock Exchange also has the power to aggregate a series of transactions and any such transactions may result in the Company being treated as if it were a new listing applicant. RESUMPTION OF TRADING IN SHARES At the request of the Company, trading in the Shares on the Stock Exchange was suspended with effect from 12 November, 1999 pending the release of this announcement. The trading in the Shares will be further suspended pending the release of an announcement in relation to the underwriting agreement and loan agreement entered into between the Company and Akai Holdings Limited on 15 November, 1999. The trading in the Shares will be resumed as soon as practicable. GENERAL The Acquisition and the consequent unconditional mandatory cash offer for the Shares constitute a discloseable transaction for Grande under the Listing Rules. A circular containing further details of the Acquisition and the Offer will be despatched to the shareholders of Grande as soon as practicable and in any event not later than 7 December, 1999. The Company has entered into the underwriting agreement and loan agreement with Akai Holdings Limited on 15 November, 1999, details of which will be included in the announcement to be released as soon as possible. Pacific Challenge has been retained by Grande as its financial adviser and to make the Offer on its behalf. The Open Offer and the consolidation of share capital of the Company as announced on 6 October, 1999 with their details included in the circular despatched on 26 October, 1999 by the Company will be deferred until further notice. An announcement will be made in relation to the deferral. Such deferral is not expected to lead to a termination of the underwriting agreement of the Open Offer, but will have a negative impact on the working capital on the Company and its subsidiaries. Shareholders and investors should exercise extreme caution when dealing in the shares of the Company and Grande. TERMS USED IN THIS ANNOUNCEMENT "Acquisition" the acquisition of 590,000,000 Shares, representing 18.74% of the existing issued share capital of the Company, by Grande Nominees from the Vendor at HK$0.092 per Share on 11 November, 1999 "Board" the board of directors of the Company "Code" The Hong Kong Code on Takeovers and Mergers "Company" Toyo Holdings Limited, a company incorporated in Bermuda with limited liability, securities of which are listed on the Stock Exchange "Grande Group" Grande and its subsidiaries other than the Company and its subsidiaries "Grande Nominees" The Grande (Nominees) Limited, a wholly owned subsidiary of Grande "Grande" The Grande Holdings Limited, a company incorporated in Bermuda with limited liability, securities of which are listed on the Stock Exchange "Hong Kong" the Hong Kong Special Administrative Region "Independent Board the independent committee of the Board, comprising Mr. Etsuro Tago and Committee" Mr. Jun Ishikawa, who are the independent non-executive directors of the Company "Independent Shareholders" Shareholders other than Grande Nominees and parties acting in concert with it "Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange "Offer" the unconditional mandatory cash offer by Pacific Challenge on behalf of Grande Nominees for all the issued Shares and Options (other than those already owned by Grande Nominees and parties acting in concert with it) pursuant to the Code "Open Offer" a proposed open offer of convertible preference shares of the Company announced on 6 October, 1999 "Option(s)" options of the Company granted under the employee share option scheme of the Company conferring the holders thereof rights to subscribe in cash for new Shares at subscription prices determined in accordance with the scheme "Optionholder(s)" holder(s) of the Options "Pacific Challenge" Pacific Challenge Capital Limited, financial adviser to Grande "Sale Shares" 590,000,000 Shares owned by the Vendor and sold to Grande Nominees under the Acquisition "Share(s)" share(s) of HK$0.01 each in the capital of the Company "Shareholder(s)" shareholder(s) of the Company "Stock Exchange" The Stock Exchange of Hong Kong Limited "Vendor" Peninsula Resources Limited, which is beneficially wholly owned by Mr. Johnson Ko, an independent third party not connected with any of the directors, chief executive or substantial shareholders of Grande and its subsidiaries (except the Company and its subsidiaries) By Order of the Board By Order of the Board Toyo Holdings Limited The Grande Holdings Limited Christopher W. Ho Christopher W. Ho Chairman President and Group Chief Executive Hong Kong, 15 November, 1999 The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement except those relating to the Grande Group and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this announcement except those relating to the Grande Group have been arrived at after due and careful consideration and there are no other material fact not contained in this announcement, the omission of which would make any statement in this announcement misleading. The directors of Grande jointly and severally accept full responsibility for the accuracy of the information contained in this announcement insofar as it relates to Grande Group and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this announcement relating to Grande Group have been arrived at after due and careful consideration and there are no other material fact not contained in this announcement, the omission of which would make any statement in this announcement insofar as it relates to Grande Group misleading.