Hephaestus Holdings Limited — M&A Activity 2006

Nov 28, 2006

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities in Panorama International Holdings Limited.

PANORAMA INTERNATIONAL HOLDINGS LIMITED

鐳射國際控股有限公司*

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

DISCLOSABLE TRANSACTION INVOLVING ISSUANCE OF NEW SHARES ACQUISITION OF ENTIRE INTERESTS IN DATEWELL LIMITED AND RESUMPTION OF TRADING

Financial Adviser to Panorama International Holdings Limited

VEDA CAPITAL

管略資本

On 22 November 2006, the Company entered into the Acquisition Agreement with the Vendors to acquire the Sale Shares for a total consideration of HK$5,500,000 which shall be satisfied by the allotment and issue of the Consideration Shares to the Vendors in proportion to their respective shareholdings in Datewell credited as fully paid upon Completion.

Datewell is an investment holding company. The Datewell Group is principally engaged in licensing of animation characters and design, co-production and distribution of animation characters, animation and related merchandises.

The Acquisition constitutes a discloseable transaction on the part of the Company under the GEM Listing Rules. A circular containing, among other things, details of the Acquisition will be despatched to the Shareholders within 21 days from the date of this announcement in accordance with the GEM Listing Rules.

At the request of the Company, trading of the Shares has been suspended on GEM from 9:30 a.m. on 22 November 2006 pending the release of this announcement. An application has been made to the Stock Exchange for the resumption of trading of Shares on GEM with effect from 9:30 a.m. on 28 November 2006.

• For identification purpose only

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THE ACQUISITION AGREEMENT

Date: 22 November 2006

Parties:
(1) The Vendors (as vendors)
(2) The Company (as purchaser)

The Company confirms that to the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of the Vendors is an Independent Third Party. Mr. So and Mr. Lo, save for being business partners, are not connected to each other. The Vendors and Mr. Chin, an executive Director, have been acquainted to each other as being participants in the entertainment industry and Mr. Chin referred such business opportunity to the Group.

Assets to be acquired

Pursuant to the Acquisition Agreement, the Company agreed to purchase and the Vendors agreed to sell the Sale Shares subject to and upon the terms of the Acquisition Agreement.

The Sale Shares

The Sale Shares comprise 100 shares of US$1.00 each in the share capital of Datewell, representing the entire issued share capital of Datewell. As at the date of this announcement, the Sale Shares are beneficially owned by the Vendors, as to 51% by Mr. So and as to 49% by Mr. Lo.

Consideration

The consideration for the Acquisition is HK$5,500,000 which shall be satisfied by the Company allotting and issuing the Consideration Shares to the Vendors in proportion to their respective shareholdings in Datewell credited as fully paid, at the Issue Price, upon Completion. Please refer to the section headed "Shareholdings" below for the details of shareholdings in the Company at present and immediately after the completion of the Acquisition.

The consideration was determined based upon a P/E Ratio of approximately 4.58 times of the Guaranteed Profit, which the Board considers to be fair and reasonable. Such P/E Ratio was determined by the Board with reference to the five listed companies in Hong Kong (including the Company) which are engaged in business similar to the Datewell Group. Two out of these five listed companies recorded losses for the latest financial year so that only three comparable listed companies recorded P/E Ratios. The P/E Ratio for the Acquisition is on the low range of the P/E Ratios of the three listed comparable companies since the Company is of the lowest market capitalization when compared to the other listed comparable companies. Taken into consideration of the Profit Guarantee and the opportunity to strengthen its business position in home entertainment sector by expanding into the animation business, the Board considers that the consideration for the Acquisition is fair and reasonable.

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The Consideration Shares

The Issue Price represents:

(a) a premium of approximately 5.16% over the closing price of HK$0.065 per Share as quoted on the Stock Exchange on the Last Trading Day;

(b) a premium of approximately 17.45% over the average of the closing prices of approximately HK$0.0582 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day; and

(c) a discount of 58.70% to the net asset value of HK$0.1655 per Share (based on the Group’s net asset value of approximately HK$66,941,000 as at 31 March 2006 and 404,400,000 Shares outstanding as at the date hereof.

The Issue Price was arrived at after arm’s length negotiation between the Group and the Vendors. The Directors (including the independent non-executive Directors) consider that the Issue Price is fair and reasonable and in the interests of the Shareholders as a whole. Based on the closing price of HK$0.065 per Share as quoted on the Stock Exchange on the Last Trading Day, the aggregate market value of the Consideration Shares will be HK$5,229,900.

The Consideration Shares will be allotted and issued under the general mandate to allot and issue Shares granted to the Directors by a resolution passed by the Shareholders at the annual general meeting of the Company held on 28 July 2006. As at the date hereof, the general mandate has not been utilized at all. An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

The Consideration Shares to be allotted and issued will represent approximately 20% of the existing issued share capital of the Company and approximately 16.6% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares. The Consideration Shares, when allotted and issued, will rank pari passu in all respects with each other and with the Shares in issue on the date of allotment and issue of the Consideration Shares.

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Shareholdings

The shareholdings in the Company as at the date of this announcement and immediately after completion of the Acquisition are shown as follows:

	As at the date of this announcement		Immediately after completion of the Acquisition
	Shares	% (approx.)	Shares	% (approx.)
Nice Hill Investments Limited	283,515,000	70.11%	283,515,000	58.47%
Public Shareholders
- Vendors	0	0%	80,460,000	16.60%
Mr. So	0	0%	41,034,600	8.47%
Mr. Lo	0	0%	39,425,400	8.13%
- Other public shareholders	120,885,000	29.89%	120,885,000	24.93%
Total	404,400,000	100.00%	484,860,000	100.00%

Profit guarantee

After arms' length commercial negotiations between the parties to the Acquisition Agreement and based on the business prospects of the Datewell Group being presented by the Vendors to the Company, the Vendors have guaranteed and warranted to the Company that if the Actual Profit of Datewell is less than the Guaranteed Profit of HK$1,200,000, the Vendors shall pay to Datewell in cash, on a dollar-for-dollar basis, an amount equivalent to the shortfall between the Actual Profit and the Guaranteed Profit within seven days after the delivery of the consolidated audited accounts of the Datewell Group for the financial year ending 31 March 2007.

For the avoidance of doubt, should Datewell record a loss in its consolidated audited financial statements for the relevant financial year, the Vendors shall pay to Datewell in cash an amount equivalent to the shortfall between that actual loss and the Guaranteed Profit, i.e. an amount equivalent to the aggregate of (i) the Guaranteed Profit; and (ii) the actual loss (expressed in positive figures) within seven days after the delivery of the consolidated audited accounts of the Datewell Group for the financial year ending 31 March 2007. According to the Acquisition Agreement, no limit has been set for the shortfall, if any, of the Guaranteed Profit from the Actual Profit. The Vendors have shown proof of their financial capabilities to the Board before entering into the Acquisition Agreement and the Board considered that the Vendors would be able to fulfil their obligations in the event the Guaranteed Profit falls short of the Actual Profit. The Board considers that the terms of the Guaranteed Profit are fair and reasonable.

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Conditions

The Acquisition Agreement is conditional upon:

(a) the Company being satisfied with the results of the due diligence review to be conducted on the Datewell Group;

(b) the warranties given by the Vendors in favour of the Company under the Acquisition Agreement remaining true, accurate and complete in all material respects;

(c) the Listing Committee granting listing of and permission to deal in the Consideration Shares;

(d) all necessary consents and approvals required to be obtained on the part of Datewell, the Vendors and the Company in respect of the Acquisition Agreement and the transactions contemplated hereby having been obtained; and

(e) the execution and completion of a sub-license agreement in relation to the use of certain animation characters and any documents including but not limited to any deeds or agreements in relation to the business of the Datewell Group, to be entered by any company under the Datewell Group with an Independent Third Party in approved form at the request of the Company, in such manner as the Company may approve.

If any of the above conditions has not been satisfied (or as the case may be, waived by the Company) on or before 4:00 p.m. on 22 December 2006 or such later date as the Company and the Vendors may agree, the Acquisition Agreement shall cease and determine and no party shall have any obligations and liabilities under the Acquisition Agreement save for any antecedent breaches of the terms thereof.

Completion

Completion will take place on the third Business Day after the fulfillment of all the conditions of the Acquisition Agreement. After Completion, Datewell will become a direct wholly owned subsidiary of the Company.

INFORMATION ON DATEWELL

Datewell is an investment holding company. Datewell is beneficially owned by the Vendors, as to 51% by Mr. So and as to 49% by Mr. Lo, Mr. so and Mr. Lo are the only directors of Datewell. The Datewell Group is principally engaged in licensing of animation characters and design, co-production and distribution of animation characters, animation and related merchandises.

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The chart below shows the current group structure of the Datewell Group:

Note: the balance of 49 % is held by an Independent Third Party

Creative Power Entertaining Company Limited, a direct wholly-owned subsidiary of Datewell, is engaged in licensing of animation characters, co-production and distribution of animation and related merchandises. China Creative Power Entertaining Company Limited, an indirect wholly-owned subsidiary of Datewell, is engaged in the design and development of animation characters, animation and related merchandises. Slightly Off Beat Animation Entertaining Limited, an indirect 51% subsidiary of Datewell (the balance of 49% shareholding is held by an Independent Third Party), is engaged in the design and development of animation characters and related merchandises.

Datewell was incorporated on 24 July 2006 and there is no available audited financial information for Datewell. The unaudited consolidated profit before income tax and net profit of the Datewell Group for the period from 24 July 2006 (date of incorporation) to 31 October 2006 amounted to HK$70,369 and HK$59,329 respectively. The unaudited consolidated net asset value of the Datewell Group were HK$60,109 as at 31 October 2006.

Mr. So and Mr. Lo will remain as directors of Datewell after Completion. Mr. Chin, an executive Director, will join as a director of Datewell after Completion to jointly operate and manage Datewell with Mr. So and Mr. Lo. There is no intention of the Board to appoint Mr. So and Mr. Lo as Directors and the Board considers that the Vendors as public Shareholders after Completion.

INFORMATION ON THE VENDORS

Mr. Lo, aged 48, has 28 years of experience in television and radio broadcast and the entertainment industries. He is mainly involved in production operations. He is also a renowned author in Hong Kong and has composed over 400 songs that were published and performed. Mr. Lo obtained a degree in Bachelor of Arts from the Open Institute of East Asia University of Macau in 1986.

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Mr. So, aged 41, has been engaging in the manufacturing business for over 20 years. Mr. So has various investments in toys, gifts and garment manufacturing businesses.

REASONS FOR THE ACQUISITION

The Company, incorporated in the Cayman Islands with limited liability, is an investment holding company and its issued Shares are listed on GEM. The Group is an entertainment programme provider principally engaged in the distribution of video programmes in video compact disc and digital video disc formats for home entertainment in Hong Kong, Macau, PRC and other Asian regions including Taiwan, South Korea, Singapore, Thailand, and Malaysia and the Philippines.

As mentioned in the 2006/2007 interim report of the Company, the Group is contemplating to enter into the business of animation production and distribution in the PRC. The Group strongly believes that animation production and distribution will be a fast growing industry in the PRC and will provide a very promising revenue stream to the Group in the near future. In 2005, the production value of animation industry in the PRC was approximately RMB20 billion. The Chinese government has recently given sturdy support to the industry development by implementing policies such as opening up more animated channels across the PRC and forbidding foreign produced animation programmes to be broadcasted during prime time, with the intention to have the animation industry grown until its production value reaches 1% of the country's gross domestic product, which represents approximately RMB150 billion. As a result, a fast growing demand for high quality animation programming is stimulated.

The Directors observed that the business of licensing of animation characters and design, co-production and distribution of animation characters, animation and related merchandises is vertically integrated with its existing distribution business model providing ample market potential and consider that the Acquisition offers the Group a good business opportunity to further strengthen its business position. The Directors further consider that when integrated into the Group's business operation, turnover and revenue to be generated to the Group from the Acquisition will increase progressively and will provide a steady income stream to the Group.

The Directors, including the independent non-executive Directors, consider that the terms of the Acquisition Agreement are entered into upon normal commercial terms following arms' length negotiations among the parties and that the terms of the Acquisition Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

GENERAL

The Acquisition constitutes a discloseable transaction on the part of the Company under the GEM Listing Rules. A circular containing, among other things, details of the Acquisition will be despatched to the Shareholders within 21 days from the date of this announcement in accordance with the GEM Listing Rules.

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SUSPENSION AND RESUMPTION OF TRADING

At the request of the Company, trading of the Shares has been suspended on GEM from 9:30 a.m. on 22 November 2006 pending the release of this announcement. An application has been made to the Stock Exchange for the resumption of trading of the Shares on GEM with effect from 9:30 a.m. on 28 November 2006.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meaning when used herein:

"Acquisition" the acquisition of the Sale Shares under the Acquisition Agreement

"Acquisition Agreement" the agreement dated 22 November 2006 and entered into between the Company and the Vendors in relation to the Acquisition

"Actual Profit" the consolidated actual audited net profits before tax and any extraordinary or exception items of Datewell for the financial year ending 31 March 2007

"Board" the board of Directors

"Business Day" a day (other than a Saturday and a Sunday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

"Company" Panorama International Holdings Limited, a company incorporated in the Cayman Islands with limited liability and issued Shares of which are listed on GEM

"Completion" completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement

"Consideration Shares" 80,460,000 Shares to be allotted and issued to the Vendors and credited as fully paid at the Issue Price to satisfy the consideration for the Acquisition

"Datewell" Datewell Limited, a company incorporated in the British Virgin Islands with limited liability

"Datewell Group" Datewell and its subsidiaries

"Directors" directors of the Company from time to time

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"GEM"	the Growth Enterprise Market of the Stock Exchange
"GEM Listing Rules"	the Rules Governing the Listing of Securities on the GEM
"Group"	the Company and its subsidiaries
"Guaranteed Profit"	the consolidated audited net profits before tax and any extraordinary or exceptional items of Datewell of no less than HK$1,200,000 for the financial year ending 31 March 2007
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Independent Third Party(ies)"	third party(ies) independent of the Company and connected persons (as defined under the GEM Listing Rules) of the Company and are not connected persons (as defined under the GEM Listing Rules) of the Company
"Issue Price"	the issue price of approximately HK$0.0684 per Consideration Share, being the consideration of HK$5,500,000 divided into the number of the Consideration Shares
"Last Trading Day"	21 November 2006, being the last trading day before the date of the Acquisition Agreement
"Listing Committee"	has the meaning ascribed to the terms under the GEM Listing Rules
"Mr. Chin"	Mr. Chin Wai Keung, Richard, an executive Director
"Mr. So"	Mr. So Wing Lok Jonathan, an Independent Third Party and is interested as to 51% in Datewell
"Mr. Lo"	Mr. Lo Wing Keung, an Independent Third Party and is interested as to 49% in Datewell
"P/E Ratio"	price earnings ratio
"PRC"	the People's Republic of China, which for the purpose of this announcement, shall exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
"RMB"	Renminbi, the lawful currency of the PRC
"Sale Shares"	100 ordinary shares of US$1.00 each in the issued share capital of Datewell and registered in the name and beneficially owned as to 51% by Mr. So and as to 49% by Mr. Lo

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"Share(s)" share(s) of HK$0.01 each in the capital of the Company

"Shareholder(s)" holder(s) of the Share(s)

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"US$" United States dollars, the lawful currency of the United States of America

"Vendors" Mr. So and Mr. Lo

"HK$" Hong Kong dollars, the lawful currency of Hong Kong

“%” per cent.

By Order of the Board of
Panorama International Holdings Limited
Mr. Chin Wai Keung, Richard
Director

Hong Kong, 27 November 2006

As at the date of this announcement, the Board comprises four executive Directors, Mr. Fung Yu Hing, Allan, Mr. Fung Yee Sang, Mr. Chin Wai Keung, Richard and Mr. Tso Kin Nam; and three independent non-executive Directors, Mr. Chow Shiu Ki, Mr. Hung Tik and Mr. Lam Wai Leung.

This announcement, for which the directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The directors of the Company, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief (i) the information contained in this announcement is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this announcement misleading; and (iii) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

This announcement will remain on the page of "Latest Company Announcements" on the GEM website for at least 7 days from the date of its posting.

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