Hony Media Group — M&A Activity 1999

Oct 26, 1999

Listed Company Information

CHINA STRATEGIC<0235>& CHINA ONLINE<0383>-Joint Announcement & Resumption of Trading The Stock Exchange of Hong Kong Limited (the `Stock Exchange') 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 STRATEGIC HOLDINGS LIMITED (`CSH') (Incorporated in Hong Kong with limited liability) MAJOR TRANSACTION CHINA ONLINE (BERMUDA) LIMITED (`COL') (Incorporated in Bermuda with limited liability) CHANGE OF MAJOR SHAREHOLDER ANNOUNCEMENT The respective board of directors of CSH and COL wish to announce that CSH has entered into a conditional agreement (the `Agreement') with China Sci-Tech Holdings Limited (`CST') pursuant to which CSH has agreed to sell 3,000,000,000 shares of COL (representing approximately 32.82% of COL's existing issued share capital) to CST at a total cash consideration of HK$840 million (the `Transaction'). Completion of the Transaction is subject to certain conditions which are described in the section entitled `Conditions' below. Completion is expected to take place on or before 31 December, 1999. Following the completion of the Transaction, CST will become a substantial shareholder and possibly the single largest shareholder of COL. At present CSH is interested in approximately 4,302,648,560 shares of COL representing approxmately 47.07% of COL's existing issued share capital. Mr. Oei Hong Leong, Chairman of CSH and COL, and his associates (as defined in the Listing Rules) are presently interested in approximately 3.57% of the issued share capital of COL. CSH has agreed that by completion of the Transaction (`Completion'), CSH and its subsidiaries will dispose their remaining shares of COL (the `Remaining Shares') to persons who are not connected with CST and CSH and hence immediately following Completion neither CSH nor its subsidiaries will be interested in any shares of COL. Mr. Oei Hong Leong has also indicated that he will dispose of the entire shareholding interest in COL presently held by him and his associates (as defined in the Listing Rules) to persons who are not connected with CST and CSH before Completion. Pursuant to the Listing Rules, the Transaction constitutes a major transaction for CSH and is therefore subject to the approval of CSH's shareholders in accordance with the Listing Rules. Mr. Oei Hong Leong and his associates will abstain from exercising their voting rights on matters relating to the Transaction. Investors should note that the Transaction is subject to satisfaction of a number of conditions including the raising of the required funding to complete the Transaction and if such conditions are not satisfied (or, where applicable, waived), the Transaction may not proceed. In the meantime, investors are advised to exercise caution in dealing in the shares of CSH and COL. Trading of CSH's shares and COL's shares were suspended with effect from 10:00 a.m. on Thursday, 21 October, 1999. An application has been made for the trading of CSH's shares and COL's shares to be resumed at 10:00 a.m. on Tuesday, 26 October, 1999. A. DETAILS OF THE TRANSACTION 1. Date of Agreement: 21 October, 1999 2. Parties: Vendor: CSH, a company which shares are listed on the Stock Exchange Purchaser: CST, a company which shares are listed on the Stock Exchange Subject company: COL, a company which shares are listed on the Stock Exchange 3. The Agreement A conditional sale and purchase agreement was entered into on 21 October, 1999 between CSH and CST for the disposal of 3,000,000,000 shares of HK$0.01 each in the share capital of COL (`Sale Shares') by CSH to CST. The Sale Shares represent approximately 32.82% of COL's existing issued share capital. Consideration The consideration for the disposal is HK$840 million cash, equivalent to a consideration per Sale Share of HK$0.28, which will be satisfied as follows:- (i) HK$20 million has been paid as a refundable deposit on signing of the Agreement; (ii) HK$80 million will be paid as a refundable deposit on the third business day after the signing of the Agreement; (iii) the balance of HK$740 million in cash on Completion. In the event that Completion does not take place or the Agreement is otherwise terminated, the deposits referred to above shall be refunded together with any interest accrued thereon in the escrow account at usual bank deposit rate, by CST to CSH. In the event the Transaction is completed, all interest accrued on such deposits shall belong to CSH. The price of HK$0.28 for each Sale Share represents (i) a premium of approximately 9.8% to the closing price of HK$0.255 per COL share on 20 October, 1999, (ii) a premium of approximately 13.4% to the last 10 trading days average closing price of HK$0.247 per COL share and (iii) a premium of approximately 344% to the unaudited consolidated net tangible asset value per COL share of HK$0.063 as at the date of this announcement. The terms of the Agreement were negotiated on arm's length basis by reference to the unaudited consolidated net tangible asset value per share of COL as at the date of the Agreement being HK$0.20 based on, inter alia, the shares of Pacific Century CyberWorks Limited (`PCC') held by COL being valued at HK$5.65 per share, the closing price of PCC shares on 20 October, 1999. The closing price of PCC's shares on 25 October, 1999 was HK$6.10 per share. Conditions Completion of the Agreement is conditional on, inter alia, the following conditions being fulfilled or otherwise waived on or before the business day before the date of Completion:- (i) the shares of COL remaining listed on the Stock Exchange at all times until Completion (save for any temporary suspension not exceeding five consecutive trading days) and the listing of the shares of COL on the Stock Exchange shall not have been withdrawn or objected to as a result of the Agreement; (ii) all consents and approvals of and waivers by the shareholders of CSH and COL respectively, the Stock Exchange and the SFC required in connection with the transactions contemplated by the Agreement shall have been obtained; (iii) all consents and approvals of and waivers by the shareholders of CST, the Stock Exchange and the SFC required in connection with the transactions contemplated by the Agreement shall have been obtained; (iv) the completion of the open offer of shares by CST which is expected to be completed by CST on or before 30 December, 1999; (v) the Stock Exchange not having notified CST that CST shall be treated as a new applicant for listing or that the listing of CST's securities on the Stock Exchange shall or may be cancelled as a result of the transactions contemplated by the Agreement; (vi) CST having been satisfied, in its sole and absolute discretion, with the results of a due diligence investigation to be carried out by CST on, inter alia, the business, assets, operations and financial position of COL and its subsidiaries after signing of the Agreement; and (vii) confirmation from the Executive Director of the Corporate Finance Division of the SFC that CST will not be required to make a general offer in respect of all the issued shares of COL (other than the Sale Shares) as a result of Completion. Mr. Oei Hong Leong and his associates will abstain from exercising their voting rights to matters relating to the Transaction. Completion Completion is expected to take place on or before 31 December, 1999 (or such later date as the parties may agree). The conditions are required to be satisfied (or, execpt for the condition referred to in (iii) above, waived) by 5:00 p.m. on the business day prior to the date of Completion (or such later date as the parties may agree). CST has indicated that it does not intend to waive the condition referred to in (vii) above. The Completion of the Transaction would result in a change to the composition of COL's board of directors. Under the Agreement, CST has the right on Completion to request all the existing board members to resign and nominate its own nominees to the board. Other terms Under the Agreement, CSH is required to notify CST if COL disposes of any of its material assets prior to Completion. CSH has undertaken to CST that after 1 November, 1999 and pending Completion, CSH shall procure that no disposal or dealing or encumbrance in the shares of PCC held by COL as at the date of the Agreement shall be made unless with the prior consent of CST. CSH has given a warranty that the assets of COL at the time of Completion shall include COL's share investment of 200 million shares in PCC. Furthermore, under the Agreement, CST's consent is required if COL is to declare dividends before Completion. 4. Adjustment to consideration Apart from the usual representations and warranties provided by CSH to CST under the Agreement, CSH has agreed that in the event the consolidated net tangible asset value per COL's shares as at Completion is less than HK$0.20 per share, then the consideration payable by CST to CSH would be reduced based on the following and such shortfall shall be payable 2 business days following the determination of the consolidated net tangible asset value per COL's share: amount = unit X 0.20 X 100% of price of less the reduction HK$0.28 consolida per ted net share tangible asset value per share of COL as at the date of Completion ----------- 0.20 5.For the existing shareholding structure and the structure after completion of the Transaction, please refer to the press announcement today. Based on the information available to COL, COL is not aware of any other substantial shareholder of COL other than as set out above. 6. Information on COL and CSH COL is an investment holding company and it is, through its subsidiaries, involved in mobile phone distribution in Hong Kong, investing with strategic partners in distribution networks in China and share investment of 200 million shares in PCC (representing approximately 2.6% of PCC's existing issued share capital). The board of COL is evaluating and exploring opportunity to extend its scope of business to be an internet service provider as well as internet content provider in the Greater China region. However as at the date of this announcement, COL is not engaged in any such negotiations. According to the latest annual report of COL, the audited consolidated net losses of COL before taxation and minority interest for the financial years ended 31 December, 1997 and 31 December, 1998 were HK$62,463,000 and HK$610,568,000 respectively and the audited consolidated net losses of COL after taxation and minority interest for the financial years ended 31 December, 1997 and 31 December, 1998 were HK$22,166,000 and HK$564,725,000 respectively. Based on information published up to 30 September, 1999 adjusted for the subsequent exercise of share options of COL and without revaluing COL's assets, (including its share investment of 200 million shares in PCC), COL's unaudited consolidated net tangible asset value as at the date hereof is HK$571,678,000 (representing HK$0.063 per COL's share) . For the 6 months period ended 30 June, 1999, the unaudited consolidated profits before taxation of COL was HK$359,892,000 (representing HK$0.039 per COL's share). At present, CSH is interested in approximately 47.07% of COL's existing issued share capital. Under the terms of the Agreement, CSH has agreed that by Completion, CSH and its subsidiaries will dispose their Remaining Shares of COL (that is, approximately 14.25% of COL's existing issued share capital) to persons who are not connected with CST and CSH. Hence following Completion neither CSH nor its subsidiaries will be interested in any shares of COL. Mr. Oei Hong Leong has also indicated that he will by Completion dispose of his remaining interest in COL to persons who are not connected persons of CST and CSH. CSH has yet to identify ways of disposing of its Remaining Shares of COL. CSH is an investment holding company. Besides investments through COL and its subsidiaries in the telecommunications systems and information technology related businesses in Hong Kong and mainland China, CSH and its subsidiaries have substantial investments in a wide range of businesses in mainland China, including manufacturing industries relating to food and brewery and rubber tires, property investment as well as infrastructure and energy related projects. As at the date of this announcement, COL's entire unaudited consolidated net tangible asset value represents approximately 28.78% of CSH's unaudited consolidated net tangible asset value. 7. Reasons for the Transaction The directors of CSH take the view that given the present market sentiments it is an opportune time to divest its investment in COL (which has been acquired since 1997) enabling CSH to realise its investment at a substantial gain and increase the asset backing of the shares of CSH. The proceeds from the disposal will be used as the group's working capital until CSH identifies a suitable investment opportunity. At present, CSH is not engaged in any negotiation relating to such investment. 8. General A circular containing details of the Transaction and notice of an extraordinary general meeting to be convened to approve the Transaction and related matters will be despatched to the shareholders of CSH in due course. If COL remains listed, the Stock Exchange will closely monitor all acquisitions or disposals of assets by COL. The Stock Exchange has the discretion to require COL to issue a circular to its shareholders irrespective of the size of the proposed transaction, particularly when such proposed transaction represents a departure from the principal activities of COL. The Stock Exchange has the power to aggregate a series of transactions and any such transactions may result in COL being treated as if it was a new listing applicant. 9. Resumption of Trading Trading of CSH's shares and COL's shares were suspended with effect from 10:00 a.m. on Thursday, 21 October, 1999. An application has been made for the trading of CSH's shares and COL's shares to be resumed at 10:00 a.m. on Tuesday, 26 October, 1999. By order of the Board of China Strategic Holdings Limited Ma Wai Man, Catherine Executive Director By order of the Board of China Online (Bermuda) Limited Ma Wai Man, Catherine Executive Director Hong Kong, 25 October, 1999. The directors of CSH accept full responsibility for the accuracy of the information contained in this announcement other than that relating to COL and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading. The directors of COL accept full responsibility for the accuracy of the information contaned in this announcement other than that relating to CSH and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.