Hang Lung Group Limited — M&A Activity 1999

Sep 24, 1999

Listed Company Information

PAC CENT CYBER<1186> - Announcement & Resumption 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. PACIFIC CENTURY CYBERWORKS LIMITED (Incorporated in Hong Kong with limited liability) VERY SUBSTANTIAL ACQUISITION SHARE SWAP BETWEEN PACIFIC CENTURY CYBERWORKS LIMITED AND CMGI, INC. ANNOUNCEMENT The directors of Pacific Century CyberWorks Limited (the `Company') wish to announce that the Company entered into a conditional agreement (the `Agreement') on 22nd September, 1999 with CMGI, Inc. (`CMGI'), an independent third party of the Company, pursuant to which the Company has agreed to purchase 4,057,971 new shares of common stock of US$0.01 each in the capital of CMGI (the `CMGI Shares') (representing 3.5% of the existing issued share capital of CMGI and 3.4% of the enlarged issued share capital of CMGI, assuming no conversion of existing preferred stocks) which is to be satisfied by the issue of 448,347,107 new shares of HK$0.05 each in the capital of the Company (the `Consideration Shares') (representing 6.2% of the existing issued share capital of the Company and 5.5% of the enlarged issued share capital of the Company) (the `Share Swap'). The directors of the Company believe that the Share Swap will not only enable the Company to leverage on the experience, expertise and the well-established internet businesses of CMGI in the United States of America (the `US') in the development of its businesses in Asia, but can also expand its businesses outside Asia. Significant synergy is expected to be generated from this strategic alliance. The Share Swap will constitute a very substantial acquisition for the Company which must be made conditional on approval by shareholders under the Rules (the `Listing Rules') Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the `Stock Exchange'). The Listing Rules provide that such approval may be obtained either by convening a general meeting of shareholders of the Company or by means of a written approval by shareholders of the Company who hold more than 50% of the issued share capital of the Company giving the right to attend and vote at such general meeting. It is intended that Pacific Century Regional Developments Limited (`PCRD') which is currently interested in 4,403,226,000 shares, representing 60.5% of the issued share capital of the Company, will provide the Stock Exchange with a written approval of the Share Swap pursuant to Rule 14.07(1) of the Listing Rules, subject to approval by the shareholders of PCRD, if required. In the event that such written approval is provided by PCRD to the Stock Exchange, no general meeting of shareholders of the Company would be required to be convened to approve the Share Swap, otherwise an extraordinary general meeting of the shareholders of the Company will be convened to approve the Share Swap. As the Company has satisfied the requirements of Rule 14.07(3) of the Listing Rules, it will not be treated as a new applicant for listing under the Listing Rules. THE AGREEMENT Date of Agreement: 22nd September, 1999 Vendor: CMGI, a public company incorporated in Delaware, whose shares are listed on The Nasdaq National Market, Inc. (the `Nasdaq') in the US. CMGI is a third party independent of the directors, chief executive or substantial shareholders of the Company, any of its subsidiaries or their respective associates (as defined under the Listing Rules). Purchaser: the Company, a public company incorporated in Hong Kong with limited liability, whose shares are listed on the Stock Exchange. CMGI Shares to be purchased 4,057,971 new shares of common stock of US$0.01 each at a price of US$86.25 (approximately HK$668.44) per share, representing a premium of approximately 4.2% to the closing share price of CMGI of US$82.8125 (approximately HK$641.80) on 22nd September, 1999. Total purchase price of the CMGI Shares amounts to approximately US$350 million (approximately HK$2,712.5 million). The CMGI Shares represent approximately 3.5% of the existing issued share capital of CMGI and approximately 3.4% of the enlarged issued share capital of CMGI, assuming no conversion of existing preferred stocks. As of the close of business on 20th September, 1999, 116,177,788 shares of common stock in CMGI were issued and outstanding, and (i) no shares of Series A preferred stock in CMGI, (ii) 35,000 shares of Series B preferred stock in CMGI (convertible into an aggregate of 1,384,538 shares of common stock in CMGI), (iii) 375,000 shares of Series C preferred stock in CMGI (convertible into an aggregate of 3,925,674 shares of common stock in CMGI), and (iv) 18,090.45 shares of Series D preferred stock in CMGI (convertible into an aggregate of 1,809,045 shares of common stock in CMGI) were issued and outstanding. Upon full conversion of existing preferred stocks, the CMGI Shares represent approximately 3.3% of the existing issued share capital of CMGI and approximately 3.2% of the enlarged issued share capital of CMGI. There will be no representation by the Company on the board of directors of CMGI as a result of the Share Swap. Consideration The consideration for the purchase of the CMGI Shares by the Company will be satisfied by the issue of 448,347,107 new shares of HK$0.05 each in the capital of the Company at HK$6.05 per share, representing a discount of 6.2% to the closing share price of the Company of HK$6.45 on 22nd September, 1999. Total value of the Consideration Shares amounts to approximately HK$2,712.5 million (approximately US$350 million). The Consideration Shares represent approximately 6.2% of the existing issued share capital of the Company, approximately 5.8% of the enlarged issued share capital of the Company assuming completion of the Placing (as defined below) and approximately 5.5% of the enlarged issued share capital of the Company assuming completion of the Placing (as defined below) and the Share Swap. The purchase price for the CMGI Shares and the issue price for the Consideration Shares were based on the closing prices of the shares in CMGI of US$86.25 (approximately HK$668.44) and the Company of HK$6.05 on the Nasdaq and the Stock Exchange, respectively, on 3rd September, 1999, which was the most recent trading day in the shares of CMGI and the Company prior to a memorandum of understanding dated 5th September, 1999 regarding the Share Swap and further possible co-operation opportunities as mentioned below. The consideration was arrived at after arm's length negotiation between CMGI and the Company. The directors of the Company consider that the terms of the Agreement are fair and reasonable and are beneficial to the Company and its shareholders taken as a whole. The Consideration Shares will be issued pursuant to the general mandate granted to the directors of the Company at the extraordinary general meeting of the Company held on 7th September, 1999. There will be no representation by CMGI on the board of directors of the Company as a result of the Share Swap. Ranking of the Consideration Shares The Consideration Shares will rank pari passu in all respects with the existing shares of the Company. Conditions Completion of the Share Swap will take place on the third business day following the satisfaction or waiver of, inter alia, the following conditions on or before 30th November 1999, or such later date as may be agreed by the parties to the Agreement: (i) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the Consideration Shares; (ii) the performance of, or compliance with, all agreements, obligations and conditions contained in the Agreement that are required to be performed or complied with by the Company and all the approvals and consents necessary to complete the Share Swap (including any requisite approvals from the shareholders of the Company and PCRD, if applicable) having been obtained by the Company; (iii) the CMGI Shares having been approved for listing on Nasdaq; (iv) the performance of, or compliance with, all agreements, obligations and conditions contained in the Agreement that are required to be performed or complied with by CMGI and all the approvals and consents necessary to complete the Share Swap having been obtained by CMGI; and (v) the expiration or early termination of the waiting period under the United States' Hart Scott- Rodino Antitrust Improvements Act of 1976, as amended, if applicable. Both the Company and CMGI have undertaken to each other respectively that the CMGI Shares and Consideration Shares are intended to be held as long term strategic investments. Pursuant to the Agreement, each of the Company and CMGI shall not sell, dispose of or otherwise transfer any of the CMGI Shares and Consideration Shares respectively for a period of three years from the date of completion unless (i) the sale, disposition or transfer is made to an entity that is a subsidiary, direct or indirect, of such party and such entity has signed an agreement acceding to the obligations of the initial party to the Agreement, or (ii) prior written consent has been obtained from the other party. INFORMATION ON THE COMPANY Business The principal activities of the Company are (i) property development in Hong Kong and the PRC; (ii) investment and development of the Cyber-Port project subject to entering into a binding contract with the Government of the Hong Kong SAR; and (iii) technology-related businesses. The Company will be involved primarily in technology businesses related to the Internet and the delivery of broadband Internet service through an innovative satellite to cable distribution system. It will soon launch a highly complementary combination of businesses that together form an interactive broadband platform for offering and enabling a wide variety of consumer services through the Internet and television. It will also provide broadband Internet connectivity services, offer interactive and compelling content through the Internet and television and enable e-commerce. Shareholding Structure The existing shareholding structure of the Company, the shareholding structure of the Company upon completion of the placing and the subscription as announced on 13th September, 1999 (the `Placing') and upon completion of the Placing and the Share Swap are set out below: Shareholder Current Immediately Immediately Shares after ly after completion completion of of Placing Placing and Share Swap Shares Shares PCRD 4,403,226,000 60.5 4,403,226,000 57.2 4,403,226,000 54.1 Pacific 21,484,000 0.3 435,484,000 5.7 435,484,000 5.3 Century Group Holdings Limited Pacific 752,302,268 10.3 752,302,268 9.8 752,302,268 9.2 Century Diversifi ed Limited Intel 77,800,000 1.1 77,800,000 1.0 77,800,000 1.0 Pacific, Inc. CMGI - - - - 448,347,107 5.5 Public 2,027,488,000 27.8 2,027,488,000 26.3 2,027,488,000 24.9 TOTAL 7,282,300,268 100.0 7,696,300,268 100.0 8,144,647,375 100 INFORMATION ON CMGI Business CMGI is a recognized leader in the internet economy. It is a public company incorporated in Delaware whose shares are listed on the Nasdaq. It has built a substantial base of internet operating companies and, through its venture affiliates, has invested in a growing group of synergistic internet enterprises that enhance the value of its core holdings. With nearly 50 companies, CMGI represents the largest, most diverse network of internet companies in the world. This network includes both CMGI operating companies and a growing number of synergistic investments through its venture capital affiliate @Ventures. CMGI leverages the technologies, content, and market reach of its extended family of companies to foster rapid growth and industry leadership across its network, and the larger internet economy. The notable companies that CMGI majority-owns and operates include AltaVista, Engage Technologies, iCAST, and NaviSite. CMGI's @Ventures, affiliates, have ownership interests in, among others, ThingWorld.com, Critical Path and Raging Bull. CMGI is also the majority-owner of Saleslink, InSolutions and On-Demand Solutions, leaders in the direct marketing, fulfilment and turnkey arenas. As of the date of this announcement, CMGI and its associates do not have any shareholding in the Company. Financial results The audited consolidated net asset value of CMGI as at 31st July 1998, prepared in accordance with the United States Generally Accepted Accounting Principles (the `US GAAP'), was approximately US$ 133.14 million (approximately HK$1,031.84 million). A summary of the consolidated income statement results of CMGI prepared in accordance with the US GAAP for each of the two years ended 31st July, 1998 is set out below. For the year ended 31st July, 1997 1998 US$'million HK$ US$'million HK$ equivalent equivalent (in (in million) million) Net revenue 60.06 465.47 81.92 634.88 Operating (40.92) (317.13) (70.26) (544.52) (loss) Net (22.03) (170.73) 31.90 247.23 (loss)/income REASONS FOR AND BENEFITS OF THE SHARE SWAP The directors of the Company welcome the introduction of CMGI as a shareholder of the Company as they believe that CMGI will add value to the Company. Through the Share Swap transaction, a strategic alliance between the Company and CMGI can be formed. The directors of the Company believe that through the Share Swap, it will not only enable the Company to leverage on the experience, expertise and the well- established internet businesses of CMGI in the US in the development of its businesses in Asia, but can also expand its businesses outside Asia. In addition, significant synergy is expected to be generated from this strategic alliance. FURTHER POSSIBLE CO-OPERATION OPPORTUNITIES WITH CMGI The Company is currently in discussion with CMGI to explore opportunities including the establishment of a joint venture for the exploitation of unique US based internet technologies owned by CMGI within the Asian marketplace including Japan and an agreement for co-investment in both the US and Asian internet ventures. However, the discussions are at a preliminary stage that may or may not conclude successfully. GENERAL The Share Swap will constitute a very substantial acquisition for the Company under the Listing Rules and approval by shareholders of the Company is therefore required. Such approval may be obtained either by convening a general meeting of shareholders of the Company or by means of a written approval of the Share Swap by shareholders of the Company who hold more than 50% of the issued share capital of the Company giving the right to attend and vote at such general meeting. It is intended that PCRD which is currently interested in an aggregate of 4,403,226,000 shares, representing 60.5% of the issued share capital of the Company will provide the Stock Exchange with a written approval of the Share Swap pursuant to Rule 14.07(1) of the Listing Rules, subject to approval by the shareholders of PCRD (if required). In the event that such written approval is provided by PCRD to the Stock Exchange, no general meeting of shareholders of the Company would be required to be convened to approve the Share Swap, otherwise an extraordinary general meeting of shareholders of the Company will be convened to approve the Share Swap. As the Company has satisfied to requirements of Rule 14.07(3) of the Listing Rules, it will not be treated as a new applicant for listing under the Listing Rules. A circular containing, inter alia, details of the Share Swap will be despatched to shareholders of the Company as soon as practicable. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares to be issued pursuant to the Share Swap. At the request of the Company, trading in the shares of the Company on the Stock Exchange was suspended with effect from 2:30 p.m. on 23rd September, 1999, pending the issue of this announcement. An application has been made by the Company to the Stock Exchange for resumption of trading in the shares of the Company with effect from 10:00 a.m. on 24th September, 1999. By order of the Board Chu Mee Lai, Helen Company Secretary Hong Kong, 23rd September, 1999 Note: For the purpose of this announcement and unless otherwise specified, all amounts in US dollars are translated into Hong Kong dollars at an exchange rate of US$1:HK$7.75.