Green Energy Group Limited — M&A Activity 2000

Feb 1, 2000

Listed Company Information

CHI PROSPERITY<0979> - 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 howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. CHINA PROSPERITY HOLDINGS (HONG KONG) LIMITED (incorporated in Bermuda with limited liability) Major Transaction DISPOSAL OF INTERESTS IN POWER PLANT Financial Adviser to the Company VICKERS BALLAS CAPITAL LIMITED The Directors announce that the Vendor, a wholly-owned subsidiary of the Company entered into a conditional sale and purchase agreement dated 28 January, 2000 with the Purchaser. Pursuant to the Agreement, the Vendor conditionally agreed to sell and the Purchaser agreed to buy 100% equity interest in and the Shareholder's Loan for a total consideration of HK$200 million. The sole asset of Mehboob is a 95% interest in the JV, which owns and operates the Power Plant. The net proceeds of the Disposal will amount to approximately HK$198 million. Approximately HK$100 million will be used for financing development of TV program, movie and video based content production business. Approximately HK$60 million will be used for financing the alteration and fit-out contracting business. Approximately HK$38 million will be used to pay general administrative expenses. The Disposal constitutes a major transaction for the Company under the Listing Rules and requires approval from the Shareholders. Gold Chief Investment Ltd., being the majority shareholder of the Company holding approximately 53% interest in the Company as at the date of this announcement, has given a written certificate approving the Disposal. A circular containing further information regarding the Disposal will be despatched to the Shareholders as soon as practicable. Trading in the Shares was suspended at the request of the Company with effect from 10:00 a.m. on 31 January 2000, pending release of this announcement. Application has been made to the Stock Exchange for resumption of trading in the Shares with effect from 10:00 a.m. on 1 February 2000. CONDITIONAL SALE AND PURCHASE AGREEMENT Date: 28 January 2000 Vendor: Starway, a wholly-owned subsidiary of the Company Purchaser: Supreme Dragon, an independent third party not connected with the chief executive, directors or substantial shareholders of the Company or its subsidiaries or any of their respective associates. Supreme Dragon holds 30% equity interest in Win's Prosperity Group Limited, which is indirectly held as to 33% by Win's Movie Production Limited, a wholly-owned subsidiary of the Company. ASSET TO BE DISPOSED The entire issued share capital of Mehboob and the Shareholder's Loan, which bears no interest. The sole asset of Mehboob is its 95% interest in the JV, which in turn owns and operates the Power Plant. The Group acquired its interest in the Power Plant from Eastman International Group Limited, an independent third party not connected with the chief executive, directors or substantial shareholders of the Company or its subsidiaries or any of their respective associates, at a consideration of HK$190 million on 28 December 1998. So far as the Directors are aware of, Eastman International Group Limited is not connected with the Purchaser. Details of such acquisition have been set out in the circular to the Shareholders dated 23 November 1998. Since the acquisition of its interest in the JV, the Company has not contributed capital to it. According to the unaudited management accounts of Mehboob (prepared in accordance with generally accepted accounting principles in Hong Kong) as at 31 October 1999, the unaudited consolidated net deficit of Mehboob amounted to approximately HK$4 million and the shareholder's loan owed by Mehboob to Starway amounted to approximately HK$191 million. According to the unaudited management accounts of the Company, the Shareholder's Loan amounted to approximately HK$191 million as at 31 December 1999. CONSIDERATION Amount: HK$200 million (of which a sum equivalent to the amount of the Shareholder's Loan as at 31 October 1999 of approximately HK$191 million being the purchase price for the Shareholder's Loan and the balance of approximately HK$9 million being the purchase price for the entire issued share capital of Mehboob) The consideration has been arrived at after arm's length negotiations. It has been determined after taking into account the unaudited consolidated net deficit of Mehboob of approximately HK$4 million and the shareholder's loan owed by Mehboob to the Vendor of approximately HK$191 million as shown in the management accounts of Mehboob (prepared in accordance with generally accepted accounting principles in Hong Kong) as at 31 October 1999. Pursuant to the Agreement, in the event that the aggregate sum of the audited consolidated net asset value of Mehboob and the Shareholder's Loan as at 31 October 1999 as shown in the audited accounts of Mehboob (prepared in accordance with generally accepted accounting principles in Hong Kong) shall be more than the aggregate sum of the unaudited consolidated net asset value of Mehboob and the shareholder's loan owed by Mehboob to the Vendor as shown in the management accounts of Mehboob as at 31 October 1999, the consideration shall be adjusted so that the consideration shall be the difference plus HK$200 million. However, in any event, the consideration will not be adjusted downward. The Directors consider the basis of the consideration to be fair and reasonable. Payment: The consideration will be paid in cash by instalments. Deposit of HK$5 million was paid upon signing of the Agreement. The first instalment of HK$20 million shall be paid on or before one month after the date of the Agreement. The second to seventh instalments of HK$25 million each shall be payable on or before two, three, four, five, six and seven months respectively after the date of the Agreement. The last instalment shall be paid upon completion. In case the consideration is adjusted upward (see paragraph ``Amount'' above), the additional payment shall be included in the last instalment payment to the Vendor. COMPLETION Subject to satisfaction of all the conditions set out in the paragraph headed ``Conditions'' below, completion shall take place on 28 September 2000 or on the day that may be appointed by the Purchaser to pay the consideration in full before 28 September 2000 whichever is the earlier. If the conditions are not satisfied by 28 September 2000, the Purchaser will have the option to (1) defer the completion to a date not more than 28 days after 28 September, 2000, (2) proceed to completion or (3) rescind the Agreement. In case the Agreement is rescinded, the deposit and instalments received shall be refunded without interest. CONDITIONS The Disposal is subject to the satisfaction of, amongst others, the conditions that: --- none of the representations, warranties and undertakings set out in the Agreement being proved to be untrue or inaccurate in any material aspect; --- approval of the Disposal by the Shareholders; --- compliance of all relevant regulatory requirements including but not limited to the applicable Listing Rules; and --- the Purchaser being reasonably satisfied with due diligence review of the affairs of Mehboob and its subsidiary. The representations, warranties and undertakings provided under the Agreement include, inter alia, matters relating to the financial statements, taxation, corporate matters and PRC matters of Mehboob and the JV. Other than the JV, Mehboob has no subsidiary or associated company. INFORMATION ON THE POWER PLANT Mehboob is an investment holding company incorporated in the British Virgin Islands on 8 January 1998. Its sole asset is a 95% interest in the JV. For the 10 months ended 31 October 1999, the unaudited consolidated net loss after taxation of Mehboob amounted to approximately HK$4 million. As at 31 October 1999, the unaudited consolidated net deficit of Mehboob amounted to approximately HK$4 million. As the operation of Mehboob only commenced in December 1998 (when the JV obtained its business licence) it did not prepare financial statements for the year ended 31 December 1998. The JV is a cooperative equity joint venture established on 3 March 1998 with a joint venture period of 30 years. It is owned as to 95% by Mehboob and 5% by the JV Partner, which is an independent third party not connected with the chief executive, directors or substantial shareholders of the Company or its subsidiaries or any of their respective associates. The JV Partner is a joint stock company incorporated in the PRC with limited liability. Its principal business is the generation and sale of electricity in the PRC. So far as the Directors are aware of, the JV Partner is not connected with the Purchaser. According to unaudited management accounts of Mehboob, as at 31 October 1999, the JV Partner has contributed RMB4.2 million (HK$3.9 million) as registered capital and has extended shareholder's loan of approximately RMB48 million (HK$44.1 million) to the JV; and Mehboob has contributed RMB79.8 million (HK$74.6 million) as registered capital and has extended shareholder's loan of approximately RMB119.7 million (HK$111.9 million) to the JV. Pursuant to the JV Agreement, the total investment in the JV amounted to RMB210 million (HK$196.3 million), including a fully paid-up capital of RMB84 million (HK$78.5 million). The JV owns and operates the Power Plant, which is a thermal power plant located in Ji Xi City, Heilongjiang, the PRC. According to the unaudited management accounts of the JV (which has been adjusted in accordance with generally accepted accounting principles in Hong Kong), for the 10 months ended 31 October, 1999, the JV recorded turnover and a net loss of approximately RMB25 million (HK$23 million) and approximately RMB5 million (HK$4.6 million) respectively and the net asset value of the Power Plant amounted to approximately RMB79 million (HK$74 million) as at 31 October 1999. No business valuation on the business of the Power Plant has been undertaken. REASONS FOR THE DISPOSAL The Group is principally engaged in investment holding and construction services (including principally, fit-out and alterations services) and has diversified into movie and TV program production and development of a broadband multimedia network project. The JV has encountered difficulties in collecting trade receivables from independent customers, some of whom have requested the JV to extend their credit period to more than one year since the second half of 1999. It has also incurred larger than expected maintenance cost for the Power Plant because of wearing out of machineries. As a result, the investment return from the JV is lower than what has been expected. The Directors do not anticipate that the investment return from the JV would substantially improve in the foreseeable future. Accordingly, the Directors consider that it would be in the interest of the Company to dispose of the JV and apply the proceeds to finance its principal businesses as mentioned above. USE OF PROCEEDS The Company intends to use the net proceeds of approximately HK$198 million of the Disposal as follows. --- as to approximately HK$100 million for financing development of TV program, movie and video based content production business through Reach Video Production Co., Ltd, which is wholly-owned by Win's Movie Production Limited, and a wholly-owned subsidiary of the Company; --- as to approximately HK$60 million for financing the alteration and fit-out contracting business; and --- as to approximately HK$38 million for general administrative expenses. The Company has no intention to apply proceeds from the Disposal to the ``Century Vision Network'' project, a broadband multi-media network project owned and developed by Win's Prosperity Group Limited, which is 33% indirectly owned by the Company. Details of the ``Century Vision Network'' project was set out in the circular to the Shareholders dated 15 November 1999. GENERAL The Disposal constitutes a major transaction for the Company under the Listing Rules and is, therefore, subject to the approval of the Shareholders. Gold Chief Investment Ltd., being the majority shareholder of the Company holding approximately 53% interest in the Company as at the date of this announcement, has given a written certificate approving the Disposal. A circular containing further information regarding the Disposal will be despatched to the Shareholders as soon as practicable. Trading in the Shares was suspended at the request of the Company with effect from 10:00 a.m. on 31 January 2000, pending release of this announcement. Application has been made to the Stock Exchange for resumption of trading in the Shares with effect from 10:00 a.m. on 1 February 2000. DEFINITIONS ``Agreement'' conditional sale and purchase agreement dated 28 January 2000 entered into by the Vendor and the Purchaser relating to the Disposal ``associate(s)'' the meanings ascribed to it by the Listing Rules ``Company'' China Prosperity Holdings (Hong Kong) Limited ``Directors'' the directors of the Company ``Disposal'' the proposed disposal by the Company of its interest in the JV ``Group'' the Company and its subsidiaries ``JV'' Heilongjiang Northern Asian Thermal Power Company Limited, a cooperative joint venture enterprise established pursuant to a joint venture agreement dated 3 March 1998 ``JV Partner'' Heilongjiang Bei Fong Enterprise Group Co. Ltd. ``Power Plant'' a power plant, which is wholly-owned by the JV and is located in Heilongjiang, the PRC ``PRC'' the People's Republic of China ``Hong Kong'' the Hong Kong Special Administrative Region of the People's Republic of China ``Listing Rules'' The Rules Governing the Listing of Securities on the Stock Exchange ``Mehboob'' Mehboob Assets Limited, a company incorporated on 8 January 1998 in the British Virgin Islands with limited liability ``Share(s)'' share(s) of HK$0.10 each in the share capital of the Company ``Shareholder(s)'' holder(s) of the Share(s) ``Shareholder's Loan'' all the loan owing from Mehboob to Starway together with all further loan or loans to be advanced by Starway to Mehboob up to completion of the Agreement. ``Starway'' or ``Vendor'' Starway Management Limited, a company incorporated on 15 September 1998 in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company ``Stock Exchange'' The Stock Exchange of Hong Kong Limited ``Supreme Dragon'' or ``Purchaser'' Supreme Dragon Group Limited, a company incorporated on 2 July 1999 in the British Virgin Islands with limited liablity ``HK$'' Hong Kong dollars ``RMB'' Renminbi Exchange rate used in this announcement is HK$1=RMB1.07. By Order of the Board China Prosperity Holdings (Hong Kong) Limited Tang Yau Sing Director Hong Kong, 31 January 2000