G-Resources Group Limited — M&A Activity 2001

Feb 26, 2001

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.

STAR BIO-TECH (HOLDINGS) LIMITED

星光生物科技(控股)有限公司*

(Incorported in Bermuda with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTIONS

The Directors announce that Star Cyberpower, a wholly-owned subsidiary of the Company, has entered into the following conditional agreements on 23 February 2001:

1. A conditional agreement to acquire from Mr. Wong (the chairman and the controlling shareholder of the Company) 80% of the issued share capital of iTech at a consideration of HK$16,800,000 of which HK$4,200,000 will be satisfied by cash and the rest by issue of the Consideration Shares at the Issue Price.

The Consideration Shares, when issued, will rank pari passu in all respects with the existing issued Shares and represent approximately 8.77% of the existing issued share capital of the Company and 8.06% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares.

The shareholding of Mr. Wong in the Company will be increased from 38.29% to 43.26% after the allotment of the Consideration Shares.

1. A conditional agreement to acquire from Mr. Wong the entire issued share capital of High Stone at a cash consideration of HK$2,800,000.

The terms of the iTech Agreement and the High Stone Agreement have been agreed after arm's length negotiation between the parties and the Board considers them to be fair and reasonable to the Group and in the best interest of the Group.

Mr. Wong is the Chairman and the controlling shareholder of the Company holding 38.29% equity interest in the Company as at the date of this announcement and iTech and High Stone are 80% and wholly-owned by Mr. Wong respectively. As such, the iTech Agreement and the High Stone Agreement constitute connected transactions of the Company under the Listing Rules. The Acquisitions also constitute a discloseable transaction of the Company under the Listing Rules.

The Acquisitions are conditional on the fulfilment of certain conditions described below.

A circular containing, among other things, details of the iTech Agreement, the High Stone Agreement, letters of advice from the independent board committee of the Company and an independent financial adviser together with a notice of a special general meeting will be sent to shareholders of the Company in due course. The Acquisitions may or may not be approved by the independent shareholders of the Company.

‍THE AGREEMENTS

(i) the iTech Agreement dated 23 February 2001

Parties:

Vendor:	Mr. Wong, the chairman of the Company and the controlling shareholder of the Company
Purchaser:	Star Cyberpower, a wholly owned subsidiary of the Company

Asset to be acquired under the iTech Agreement:

8 shares of US$1.00 each held by Mr. Wong, being 80% of the entire issued share capital of iTech which is a company incorporated in the British Virgin Islands with limited liability in May 1999. The remaining 2 issued shares in iTech are beneficially owned by an independent third party not connected with any of the directors, chief executive or substantial shareholders of the Company or its subsidiaries or their respective associates. iTech is an investment holding company whose sole asset is its beneficial interest in the entire issued capital of Star (Shenzhen).

Star (Shenzhen) is incorporated in Shenzhen, the PRC in 1994 as a wholly foreign owned enterprise and is engaged in the manufacturing and sale of electronics and telecommunications products.

iTech recorded an unaudited consolidated net loss of HK$1,500,000 for the period from 2 September 1999 to 31 December 1999 and an unaudited consolidated net profit of HK$4,970,000 for the year ended 31 December 2000. As at 31 December 2000 the unaudited net asset value of Star (Shenzhen) is approximately HK$21,200,000. As at the date of this announcement, the audited accounts of iTech are not yet available.

Consideration:

A total of HK$16,800,000, which was agreed among the parties after arm's length negotiations with reference to 80% of the net asset value of Star (Shenzhen) of approximately HK$21,200,000 in iTech's account as at 31 December 2000. The consideration which carries approximately 0.94% discount to 80% of the net asset value of Star (Shenzhen) will be payable to Mr. Wong in the following manner upon completion of the iTech Agreement:

(1) HK$4,200,000 to be paid in cash which will be funded out of the internal resources of the Group; and

(2) K$12,600,000 to be satisfied by the issue of the Consideration Shares at the Issue Price.

The expected date of completion of the Agreements are set out in the section headed “Completion” below.

Consideration Shares:

The Consideration Shares when issued, will rank pari passu in all respects with the existing issued shares of the Company.

The Consideraton Shares represent about 8.77% of the existing issued share capital of the Company and about 8.06% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares. The shareholding of Mr. Wong in the Company will be increased from 38.29% to 43.26% after the allottment of the Consideration Shares.

The Issue Price was determined after arm's length negotiations between the parties and is the same as the closing price of HK$0.01 per Share as quoted on the Stock Exchange on 22 February 2001 and the average closing price of HK$0.01 per Share as quoted on the Stock Exchange for the 10 trading days up to and including 22 February 2001.

The Consideration Shares will be issued pursuant to the general mandate granted to the Directors by shareholders at the special general meeting on 15 December 2000. Application will be made by the Company to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

The parties do not intend there to be any change to the composition of the Board by reason only of the completion of the Agreements.

(ii) High Stone Agreement dated 23 February 2001:

Parties:

Vendor:	Mr. Wong
Purchaser:	Star Cyberpower

Asset to be acquired under the High Stone Agreement:

1 share of US$1.00, being the entire issued share capital beneficially owned by Mr. Wong in High Stone, a company incorporated in British Virgin Islands with limited liability in February 1999. High Stone is an investment holding company whose sole asset is the holding of its beneficial interest in the entire share capital of Cosmos.

Cosmos is a company incorporated in Hong Kong with limited liability in 1993 and its principal business is the holding of properties in Shenzhen, the PRC. These properties consist of office premises located at Shangbu Industrial District, Shenzhen, and 2 residential apartments, located in Hai Feng Yuan, Shenzhen. These properties have been used by Star (Shenzhen) free of rental as office and staff quarters respectively since September 1999 up to date and, upon completion of the Acquisitions, this arrangement will constitute an on-going connected transaction for the Company under the Listing Rules and accordingly will be subject to approval by the independent shareholders of the Company at its special general meeting at which Sheung Hai Developments Limited, being the controlling shareholder of the Company and being a company wholly owned by Mr. Wong, will abstain from voting. As at the date of this announcement, the Directors presently intend to continue the arrangement relating to the use of the properties as described above but may consider introducing a lease or similar arrangement regarding such use based on normal commercial terms. In the event that any such new arrangement constitutes an on-going connected transaction for the Company which requires approval of the independent shareholders under the Listing Rules, the Company will seek such approval in compliance with the Listing Rules. The Directors confirm that, save as mentioned, there will be no on-going connected transactions for the Company under the Listing Rules by reason of the completion of the Acquisitions.

Based on the unaudited accounts of Cosmo as at 31st December 2000, the net asset value of Cosmos is approximately HK$2,790,000 which is with reference to the market value of the properties as at 8 February 2001 as derived from a valuation of these properties performed by an independent valuer appointed by the Company as well as the unaudited net asset value of Cosmos and the unaudited consolidated net asset value of High Stone respectively as at 31 December 2000.

For the years ended 31 December 1999 and 2000, High Stone recorded an unaudited consolidated loss of approximately HK$4,441,000 and HK$271,000 respectively.

Consideration:

The consideration of HK$2,800,000 was agreed among the parties after arm's length negotiations with reference to the net asset value of High Stone and Cosmos and the carrying value of Cosmos of approximately HK$2,790,000 as at 31 December 2000. It carries an approximately 0.36% premium to the net asset value of Cosmos reflecting the market value of the properties as at 31 December 2000. The consideration will be payable to Mr. Wong in cash upon completion of the High Stone Agreement and will be funded out of the internal resources of the Group.

‍Conditions

Completion of the iTech Agreement is conditional upon:

(i) the approval of the iTech Agreement by the independent shareholders of the Company at a special general meeting to be convened;

(ii) the Stock Exchange granting listing of and permission to deal in the Consideration Shares; and

(iii) the High Stone Agreement becoming unconditional in all respects (save for the conditions relating to the iTech Agreement becoming unconditional).

Completion of the High Stone Agreement is conditional upon:

(i) the approval of the High Stone Agreement by the independent shareholders of the Company at a special general meeting to be convened; and

(ii) the iTech Agreement becoming unconditional in all respects (save for the conditions relating to the High Stone Agreement becoming unconditional).

‍Completion

Completion of the Agreements will take place on the third business day immediately after the satisfaction of the above conditions and is expected to be not later than 30 June 2001.

The terms (including the consideration) of the Agreements were negotiated after arm's length negotiation between the parties. The Directors are of the opinion that the terms of the Agreements are fair and reasonable.

‍REASONS FOR THE ACQUISITIONS:

The Directors have identified the steady profitability of Star (Shenzhen) in the PRC and believe that the Acquisitions are compatible with the existing business of the Group and will broaden and strengthen the income base of the Company. The acquisition of Cosmos which in turn holds the properties in Shenzhen as the office and staff quarter of Star (Shenzhen), will streamline the management and operations of Star (Shenzhen). The Directors consider the Acquisitions be in the best interest of the Company and for the long term benefit of the shareholders.

‍GENERAL:

The Company is an investment holding company the subsidiaries of which are principally engaged in the trading of electronic products and investments in high tech and bio-technology related businesses.

Mr. Wong is the Chairman and, through his wholly owned company, Sheung Hai Developments Limited, is the controlling shareholder of the Company holding 38.29% of the existing issued share capital of the Company. Immediately following completion of the iTech Agreement, Mr. Wong's interest in the Company will be increased to 43.26% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares. To the knowledge of the Directors, the Company has no other substantial shareholder save for Mr. Wong.

Mr. Wong also owns 80% equity interest in iTech and wholly owns High Stone. As such the iTech Agreement and the High Stone Agreement constitute connected transactions of the Company under the Listing Rules. The aggregate consideration of the Acquisitions amounted to HK$19,600,000 which represents approximately 31.12% of the consolidated net asset value of the Company of approximately HK$63,000,000 as at 22 February 2001 which has been adjusted from the audited consolidated net asset value of the Company of approximately HK$35 million as at 30 June 2000 taking into account issuance of new Shares subsequent to 30 June 2000. As such, the Acquisitions also constitute a discloseable transaction of the Company under the Listing Rules.

An independent board committee of the Company will be formed to give recommendations on the Acquisitions to the independent shareholders of the Company and an independent financial adviser will be appointed to advise the independent board committee in respect of the Acquisitions. Because of the interest of Mr. Wong in Sheung Hai Developments Limited, the controlling shareholder of the Company, and in the Acquisitions, Sheung Hai Developments Limited will abstain from voting at the special general meeting of the Company with respect to the relevant resolutions to be proposed for the approval of the Acquisitions.

A circular containing, among other things, details of the iTech Agreement, the High Stone Agreement, letters of advice from the independent board committee of the Company and an independent financial adviser, together with a notice of a special general meeting, will be sent to shareholders of the Company in due course.

‍DEFINITIONS:

In this Announcement, unless the content otherwise requires, the following expressions have the following meanings:

“Acquisitions”	The Acquisitions made pursuant to the Agreements
“Agreements”	The iTech Agreement and the High Stone Agreement both dated 23 February 2001
“Board”	The Board of Directors of the Company
“Company”	Star Bio-Tech (Holdings) Limited, a company incorporated in Bermuda with its securities listed on the Stock Exchange.
“Consideration Shares”	1,260,000,000 Shares to be issued to Mr. Wong
“Cosmos”	Cosmos Wealth Investment Limited, a company incorporated in Hong Kong with limited liability
“Directors”	The directors of the Company (including the independent non-executive Directors)
“Group”	The Company and its subsidiaries
“High Stone”	High Stone Assets Investment Limited, a company incorporated in the British Virgin Islands with limited liability
“High Stone Agreement”	The agreement made between Star Cyberpower and Mr. Wong dated 23 February 2001
“Issue Price”	HK$0.01 per Share
“iTech Agreement”	The agreement made between Star Cyberpower and Mr. Wong dated 23 February 2001
“iTech”	iTech Investments Inc., a company incorporated in British Virgin Islands with limited liability in May 1999
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock Exchange
“Mr. Wong”	Mr. Wong Kam Fu, the chairman and the controlling shareholder of the Company
“PRC”	the People's Republic of China
“Share(s)”	share(s) of a nominal value of HK$0.01 each in the capital of the Company
“Star Cybepower”	Star Cybepower Limited, a company incorporated in British Virgin Islands with linmited liability and a wholly owned subsidiary of the Company
“Star (Shenzhen)”	Star Paging Telecom Technology (Shenzhen) Company Limited, a company established under the laws of the PRC as a wholly foreign owned enterprise
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars
“US$”	United States dollars

By order of the Board
Star Bio-Tech (Holdings) Limited
Law Wing Tak, JackDeputy-Chairman
Hong Kong, 23 February, 2001

* The Chinese name is for identification purpose only.