Guoxia Technology Co., Ltd. — M&A Activity 1999

May 20, 1999

Listed Company Information

ANANDA WING ON<1189> - 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. ANANDA WING ON TRAVEL (HOLDINGS) LIMITED (Incorporated in Bermuda with limited liability) DISCLOSEABLE AND CONNECTED TRANSACTIONS The Directors are pleased to announce that on 18th May, 1999, Ananda Wing On Travel, a wholly-owned subsidiary of the Company, agreed conditionally to acquire the entire issued share capital of, and the benefit of a shareholder's loan to, Ananda China Investment from Ananda China Holdings and to acquire the entire issued share capital of Ananda Hotel Management from Messrs. Chan. Ananda China Holdings, the vendor of the entire issued share capital of Ananda China Investment, is indirectly wholly-owned by Messrs. Chan. Messrs. Chan are substantial beneficial shareholders and directors of the Company and accordingly, the Acquisitions constitute connected transactions of the Company for the purposes of the Listing Rules. Currently, Messrs. Chan are beneficially interested in 281,122,000 Shares representing approximately 51.1 per cent. of the issued share capital of the Company. Upon Completion, Messrs. Chan will be beneficially interested in 427,220,444 Shares, representing approximately 61.4 per cent. of the enlarged issued share capital of the Company. The consideration for the acquisition of the entire issued share capital of Ananda China Investment (including the assignment of the shareholder's loan) is HK$280.0 million, and the consideration for the acquisition of the entire issued share capital of Ananda Hotel Management is HK$1.97 million. The total consideration for the Acquisitions, completion of which will take place simultaneously, will be satisfied by the issue to the Vendors or their nominees of 146,098,444 new Shares, equivalent to an issue price per new Share of HK$1.93 which is based on the average closing price of the Shares for the last five business days immediately prior to the date of signing of the Agreement. The closing price of the Shares as at 18th May, 1999 and the average closing price of the Shares for the last ten business days prior to 19th May, 1999 are HK$1.85 and HK$1.94 respectively. The Acquisitions also constitute discloseable transactions of the Company for the purposes of the Listing Rules. Upon Completion, the sole asset of Ananda China Investment will be a 50 per cent. equity interest in Heilongjiang Ananda, a sino-foreign equity joint venture company engaged in the operation of a hotel, known as Singapore Hotel, an entertainment resort complex, known as Dream World (including a water park, food and beverage outlets, nightclub and other entertainment facilities) and the development of a residential and commercial complex located in Harbin, Heilongjiang Province, the PRC. Ananda Hotel Management has entered into a hotel management contract with Heilongjiang Ananda to manage Singapore Hotel and Dream World. The terms of the Acquisitions were arrived at after arm's lengths negotiations and the Directors (including the independent non-executive Directors) consider that the terms of the Acquisitions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. In accordance with the Listing Rules, the Acquisitions are subject to the approval of the Independent Shareholders. A circular containing, inter alia, further details of the Acquisitions, will be sent to Shareholders as soon as possible. Details of the Acquisitions Parties to the sale and purchase agreement dated 18th May, 1999: Ananda China Investment: Vendor: Ananda China Holdings, a company indirectly wholly-owned by Messrs. Chan. Purchaser: Ananda Wing On Travel, a wholly-owned subsidiary of the Company. Shares agreed to be purchased: one share of US$1.00 representing 100 per cent. of the issued share capital of Ananda China Investment. Indebtedness agreed to be purchased: the shareholder's loan of US$15,730,000 (approximately HK$122.7 million) and any other amount of indebtedness owing by Ananda China Investment to Ananda China Holdings as at the date of Completion. Ananda Hotel Management: Vendors: Messrs. Chan. Purchaser: Ananda Wing On Travel, a wholly-owned subsidiary of the Company. Shares agreed to be purchased: four shares of US$1.00 each, representing 100 per cent. of the issued share capital of Ananda Hotel Management. Information relating to Ananda China Investment Ananda China Investment is a company incorporated in BVI on 12th January, 1999, whose sole asset on Completion will be a 50 per cent. interest in Heilongjiang Ananda, a sino-foreign equity joint venture company incorporated in the PRC which is engaged in the operation of a hotel, known as Singapore Hotel, an entertainment resort complex known as Dream World (including a water park, food and beverage outlets, nightclub and other entertainment facilities) and the development of a residential and commercial complex in Harbin, Heilongjiang Province, the PRC. The development of Heilongjiang Ananda comprises two phases; the first phase of the project, which is fully completed, comprises the Singapore Hotel, a 337-room luxury hotel built to 5-star standards and a waterpark and entertainment resort complex, known as Dream World. The second phase of the project comprises a proposed residential and commercial development on a site adjacent to the Singapore Hotel and Dream World, with an area of approximately 31,798 square metres and a fully- developed gross floor area of approximately 181,353 square metres. The Land is currently vacant. No commitments or contracts have yet been entered into for the development of the residential and commercial complex. Singapore Hotel is a 22-storey building with a total gross floor area of approximately 37,218 square metres, comprising 337 guest rooms, food and beverage outlets, an indoor heated swimming pool, an exercise room, shops, a sauna and a karaoke lounge. The hotel opened in November, 1997 and became fully operational in January, 1999. Dream World, with a gross floor area of 32,000 square metres, is an entertainment resort complex adjacent to the Singapore Hotel. It has an all-weather water park, including a heated swimming pool, water rides and an artificial river. In addition, the complex has a 26-lane bowling alley, food courts, a nightclub and a karaoke lounge. The complex was opened in August, 1997 and is now fully operational. Before the completion of the acquisition of Ananda China Investment by Ananda Wing On Travel can proceed, Ananda China Investment must complete the acquisition of the 50 per cent. equity interest in Heilongjiang Ananda which is currently held by a company wholly-owned by Messrs. Chan. A company wholly-owned by Messrs. Chan entered into the Heilongjiang Ananda joint venture agreement in November 1992 to replace the original foreign joint venture partner of Heilongjiang Ananda which was originally established in March 1992. As at 31st December, 1998, the total registered and paid-up capital and the audited net assets (prepared in accordance with accounting principals generally accepted in Hong Kong) of Heilongjiang Ananda are US$31,460,000 (approximately HK$245.4 million) and approximately RMB183.2 million (approximately HK$171.2 million) respectively. In accordance with the joint venture contract of Heilongjiang Ananda dated 17th November, 1992, the profit and loss of Heilongjiang Ananda shall be allocated to the parties to the joint venture in proportion to the percentages of their respective contribution to the paid-up registered capital which is contributed in proportion to their respective shareholdings in Heilongjiang Ananda. Upon Completion, Ananda China Investment is entitled to nominate four out of the eight directors of Heilongjiang Ananda. The other joint venture partners of Heilongjiang Ananda are [*] and [*] which are independent of, and not connected with, any of the directors, chief executive or substantial shareholders of the Company, any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). The term of the joint venture of Heilongjiang Ananda is 25 years commenced from March 1992 as stated in its Certificate of Approval for Establishment of Enterprises with Foreign Investment in the PRC. Upon dissolution, the proceeds from the realisation of the assets of Heilongjiang Ananda will be allocated to the parties to the joint venture in proportion to the percentages of their respective amounts contributed to the paid-up registered capital. Ananda China Investment was incorporated with the sole purpose of holding a 50 per cent. equity interest in Heilongjiang Ananda, and has therefore not traded since its incorporation. Upon Completion, the accounts of Heilongjiang Ananda will not be consolidated into those of the Group. Heilongjiang Ananda is a sino-foreign equity joint venture company established in March 1992. For the financial period from its establishment until 31st December, 1998, the last date to which audited accounts (prepared in accordance with accounting principals generally accepted in Hong Kong) have been compiled, Heilongjiang Ananda reported a loss for the period from ordinary activities of approximately RMB77.8 million (approximately HK$72.7 million). The activities of Heilongjiang Ananda during this period were the construction and development of the Singapore Hotel and Dream World which only opened in November 1997 and August 1997 respectively and started to become revenue-generating thereafter. Information relating to Ananda Hotel Management Ananda Hotel Management is a company wholly-owned by Messrs. Chan. Ananda Hotel Management has entered into a hotel management contract with Heilongjiang Ananda to manage the Singapore Hotel and Dream World. The principal terms of the management contract are as follows: Term: For a period commencing from 31st December, 1994 and expiring on 1st January, 2003. Remuneration: (a) a management fee equal to 2.5 per cent. of the total business turnover of the Singapore Hotel and Dream World; and (b) a sum equal to 5 per cent. of the gross operating profit of the Singapore Hotel and Dream World. Ananda Hotel Management was incorporated on 14th July, 1994 and entered into the hotel management contract described above on 31st December, 1994, to manage the Singapore Hotel and Dream World. Apart from the above hotel management contract, Ananda Hotel Management currently has not entered into any other hotel management contracts. Accordingly, since the Singapore Hotel and Dream World opened in November 1997 and August 1997 respectively, they only began to generate revenues thereafter, Ananda Hotel Management did not earn significant revenues during the period from its incorporation until 31st December, 1998, the last date to which audited accounts (prepared in accordance with accounting principals generally accepted in Hong Kong) have been compiled. In respect of this period, Ananda Hotel Management recorded a turnover of approximately HK$6.6 million and reported a loss from ordinary activities of approximately HK$1.1 million. As at 31st December, 1998, Ananda Hotel Management had audited net liabilities of approximately HK$1.1 million, including an inter-company loan of HK$2.6 million which has been capitalised prior to signing of the Agreement. The unaudited net asset value of Ananda Hotel Management as at 30th April, 1999 is approximately HK$1.97 million. Consideration for the Acquisitions The consideration for the Acquisitions is HK$280.0 million in respect of Ananda China Investment (including the assignment of the benefit of a shareholder's loan of US$15,730,000 (approximately HK$122.7 million)) and HK$1.97 million in respect of Ananda Hotel Management. The total consideration for the Acquisitions of HK$281.97 million will be satisfied by the allotment to the Vendors or their nominees of 146,098,444 new Shares at a price per Share of HK$1.93, which is based on the average closing price of the Shares for the last five business days immediately prior to the date of signing of the Agreement. The closing price of the Shares as at 18th May, 1999 and the average closing price of the Shares for the last ten business days prior to 19th May, 1999 are HK$1.85 and HK$1.94 respectively. The consideration for the Acquisitions was arrived at after arm's length negotiations. The consideration for the acquisition of Ananda China Investment is based on a discount of approximately 14.5 per cent. to the valuation of the 50 per cent. equity interest of Ananda China Holdings in the business enterprise of Heilongjiang Ananda, comprising the Singapore Hotel, Dream World and the Land, of RMB350.5 million (approximately HK$327.6 million) as at 31st March, 1999. The valuation was conducted by American Appraisal Hong Kong Limited, an independent valuer. The consideration for the acquisition of Ananda Hotel Management is based on the unaudited net asset value of Ananda Hotel Management of approximately HK$1.97 million as at 30th April, 1999. Currently, Messrs. Chan are beneficially interested in 281,122,000 Shares representing approximately 51.1 per cent. of the issued share capital of the Company. The 146,098,444 new Shares to be allotted to the Vendors or their nominees, when aggregated with the existing holding of 281,122,000 Shares beneficially owned by Messrs. Chan, will represent approximately 61.4 per cent. of the issued share capital of the Company as enlarged by the issue of such Shares. The issue of the 146,098,444 new Shares is subject to the approval of the Independent Shareholders. Conditions and expected completion date for the Acquisitions The Acquisitions are conditional, inter alia on the following: (i) all Consents which are required or appropriate for the entering into or the implementation or completion of the Acquisitions being obtained; (ii) Ananda China Investment having completed the acquisition of the legal ownership of 50% of the equity interest in Heilongjiang Ananda; (iii) the delivery of a PRC legal opinion by Ananda China Holdings in respect of Heilongjiang Ananda and the properties held by it to the reasonable satisfaction of the Ananda Wing On Travel (which legal opinion will demonstrate the land use rights and building ownership of the properties held by Heilongjiang Ananda); (iv) Ananda Wing On Travel is satisfied with the results of a due diligence review of Ananda China Investment, Heilongjiang Ananda and Ananda Hotel Management; (v) the approval of Independent Shareholders at a special general meeting of the Company to be convened; (vi) the Listing Committee of the Stock Exchange granting a listing of, and permission to deal in, the new Shares to be issued pursuant to the Agreement; and (vii) all necessary approvals from the Bermuda Monetary Authority required for the increase in authorised share capital of the Company and the issue of the new Shares pursuant to the Agreement, being obtained. Completion will take place no later than two business days following the date of satisfaction or wavier (as the case may be) of the last of the conditions to the Acquisitions. It is currently expected that Completion will take place no later than 18th August, 1999. Reasons for the Acquisitions The Group is principally engaged in the provision of outbound package tours, cross-border limousine and shuttle bus services and other travel-related services, including airline ticketing, hotel booking services and travel insurance marketing. As part of the Group's overall corporate strategy, the Directors have taken the decision to increase the net asset backing of the Group as well as to diversify the Group's sources of travel and travel-related revenue. In view of the growth in the Group's package tours to the PRC, the Directors believe that the Acquisitions provide the Group with an attractive opportunity to acquire a significant interest in a hotel and entertainment resort complex in a popular tourist and holiday destination in the PRC and thus, achieve both of these strategic goals. Singapore Hotel is a luxury hotel built to 5-star standards in Harbin and the Dream World water park is the only one of its kind in Harbin. Both assets have been completed to exacting standards, are of the highest quality and are now fully operational. The Land, which is adjacent to Singapore Hotel and Dream World, provides the Group with a further opportunity to enhance the overall resort complex through the development of a commercial and residential complex, although there are no specific plans to develop the Land at this stage. The acquisition of Ananda Hotel Management provides the Group with a 100 per cent. interest in the management of Singapore Hotel and Dream World. In addition to providing a new and diversified source of revenue to the Group, ownership of the management contract enables the Group to control and maintain the high standards and quality of service required to operate Singapore Hotel and Dream World successfully. In addition, it is the intention of the Directors to seek to expand the business operations of Ananda Hotel Management by securing management contracts to operate other hotels in mainland China. Although historically Heilongjiang Ananda and Ananda Hotel Management have reported losses, for the majority of this period the Singapore Hotel and Dream World were under construction and began to generate revenue only in late 1997. Accordingly, as Singapore Hotel and Dream World are both now fully operational, the Directors believe that the investment by the Company at this stage, on terms which the Directors believe are favourable to the Group, will enhance the net asset backing of the Group and will provide the Group with the prospect of attractive returns. Connection between the parties Prior to Completion, Messrs. Chan, who are executive Directors of the Company and the beneficial owners of Hounslow Limited, the controlling shareholder of the Company, owning approximately 51.1 per cent. of the current issued share capital of the Company, are also the ultimate beneficial owners of Ananda China Investment and Ananda Hotel Management. Accordingly, Messrs. Chan are connected persons of the Company for the purposes of the Listing Rules and the Acquisitions are subject to the approval of the Independent Shareholders. The total consideration for the Acquisitions of approximately HK$281.97 million in aggregate represents approximately 41.7 per cent. of the net tangible assets of the Group as at 31st March, 1998, as disclosed in the latest published audited consolidated accounts of the Company, and adjusted for the retained profit for the period from 1st April 1998 to 30th September, 1998. The consideration for the Acquisitions will also be satisfied entirely in Shares which will represent approximately 26.6 per cent. of the existing issued share capital of the Company and approximately 21.0 per cent. of the issued share capital as enlarged by the issue of the 146,098,444 new Shares. Accordingly, for the purposes of the Listing Rules, the Acquisitions also constitute discloseable transactions for the Company. General BNP Prime Peregrine Capital Limited has been appointed as the financial adviser to the Company in respect of the Acquisitions. An independent financial adviser will be appointed to advise an independent committee of the Board to be formed on the fairness and reasonableness of the Acquisitions. A circular containing, inter alia, further information relating to the Acquisitions, the advice and opinion of the independent financial adviser, the recommendations of the independent committee of the Board and a notice convening a special general meeting of the Company to consider the Acquisitions, will be despatched to Shareholders as soon as possible. At the request of the Company, trading of the Shares has been suspended with effect from 10:00 am on 19th May, 1999. The Company has applied to the Stock Exchange for resumption of trading in the Shares with effect from 10:00 am on 20th May, 1999. Note: the translation of Renminbi into Hong Kong dollars is based on an approximate exchange rate of HK$1.00 = RMB1.07. Definitions The terms defined below and used in this announcement have the following meanings:- "Acquisitions" the proposed acquisitions of the entire issued share capital of Ananda China Investment and Ananda Hotel Management together with the benefit of a shareholder's loan of US$15,730,000 (approximately HK$122.7 million) and any other amount of indebtedness owing by Ananda China Investment to Ananda China Holdings as at the date of Completion "Agreement" the agreement dated 18th May, 1999 relating to the Acquisitions "Ananda Wing On Travel" Ananda Wing On Travel (BVI) Limited, a company incorporated in BVI, wholly-owned by the Company and the purchaser of the Acquisitions "Ananda China Holdings" Ananda China Hotel (Holdings) Limited, a company incorporated in BVI on 12th January, 1999, indirectly wholly-owned by Messrs. Chan and the vendor of the entire issued share capital of, and the benefit of a shareholder loan to, Ananda China Investment "Ananda China Investment" Ananda China Hotel Investment Limited, a company incorporated in BVI on 12th January 1999 and indirectly wholly-owned by Messrs. Chan whose sole asset on Completion will be a 50 per cent. equity interest in Heilongjiang Ananda "Ananda Hotel Management" Ananda Hotel Management Limited, a company incorporated in BVI on 14th July, 1994 and wholly-owned by Messrs. Chan "BVI" the British Virgin Islands "Company" Ananda Wing On Travel (Holdings) Limited, an exempted company incorporated in Bermuda, the shares of which are listed on the Stock Exchange "Consents" includes any licence, approval, authorisation, permission, waiver, order or exemption "Completion" Completion of the Acquisitions pursuant to the Agreement "Directors" the directors of the Company "Dream World" the Dream World water park and entertainment resort complex, situated in Harbin, Heilongjiang Province, the PRC and owned by Heilongjiang Ananda "Group" the Company and its subsidiaries "Heilongjiang Ananda" [*] Heilongjiang Ananda Entertainment Co. Ltd., a joint venture company established in the PRC in March 1992 and which owns Singapore Hotel, Dream World and the Land "Independent Shareholders" Shareholders other than Messrs. Chan and their respective associates, as defined in the Listing Rules "Land" the land adjacent to Singapore Hotel and Dream World with a site area of approximately 31,798 square metres on which it is proposed to develop a residential and commercial complex "Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange "Messrs. Chan" Mr. Chan Yeuk Wai, the Chairman of the Company, and Mr. Chan Yeuk Pun, the Deputy Chairman and Managing Director of the Company and together, the vendors of the entire issued share capital of Ananda Hotel Management "PRC" the People's Republic of China, which, for the purposes of this announcement, excludes Hong Kong "Shareholders" holders of Shares "Shares" ordinary shares of HK$0.10 each in the capital of the Company "Singapore Hotel" the 337 room luxury hotel built to 5-star standards, situated in Harbin, Heilongjiang Province, the PRC and owned by Heilongjiang Ananda "Stock Exchange" The Stock Exchange of Hong Kong Limited "Vendors" together, the vendors of Ananda China Investment and Ananda Hotel Management, being, respectively, Ananda China Holdings and Messrs. Chan. By order of the Board Ananda Wing On Travel (Holdings) Limited Chan Yeuk Wai Chairman Hong Kong, 19th May, 1999 ([*] For the Chinese names, please refer to the press announcement today.)