Hung Hing Printing Group Limited — M&A Activity 1999

Aug 24, 1999

Listed Company Information

NOBLE LINK HOLD<0254> - Announcement 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. This announcement is made for information purposes only and does not constitute an offer or an invitation or offer to acquire, purchase or subscribe for securities. NOBLE LINK HOLDINGS LIMITED ("the Company") (Incorporated in Hong Kong with limited liability) Discloseable and Share Transaction SUMMARY On 23rd August 1999, a conditional sale and purchase agreement (the "Agreement") was entered into between Sun Wealth International Limited (the "Vendor") and the Company whereby the Vendor agreed to sell and the Company agreed to purchase 2 shares of US$1.00 each in Gold Elements Holdings Limited ("Gold Elements"), representing 20% of the issued share capital of Gold Elements, for a consideration of HK$113,000,000 ("Consideration"). A deposit of HK$11,000,000 was paid to the Vendor on signing. The balance of the consideration is to be satisfied as to HK$9,000,000 by way of cash and as to HK$93,000,000 by the issue and allotment of 51,666,667 shares of HK$1.00 each in the Company ("Consideration Shares"), credited as fully paid at HK$1.80 each (representing a discount of 10% to the closing price of the shares of the Company of HK$2.00 on 23rd August, 1999), to the Vendor or as it may direct on completion of the Agreement ("Completion"). The Consideration Shares represent approximately 24.59% of the existing issued share capital of the Company as at the date hereof and 19.74% of the issued share capital of the Company, as enlarged by the issue of the Consideration Shares. The Vendor has undertaken to the Purchaser that by a date falling not later than nine months from Completion of the Agreement, Gold Elements will be the owner of the entire registered capital of Shanghai Celebrity Entertainment Co. Ltd. (the "JV Co"), a sino-foreign co-operative joint venture company incorporated in the People's Republic of China ("PRC") which will in turn be the holder of a property under development known as Shanghai International Celebrity Plaza situated at 332 Ling Ling Road, Xu Hui District, Shanghai, the PRC (the "Property") and that a long term land use right certificate will be issued in the name of JV Co. On Completion, Gold Elements will not hold JV Co, JV Co will not hold the Property and there will not be a land use right certificate issued in the name of JV Co yet. The Agreement constitutes a discloseable and share transaction for the Company under Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange ("Listing Rules"). The Vendor is an independent third party not connected to the directors, chief executive or substantial shareholders of the Company, or their respective subsidiaries or associates, as defined in the Listing Rules. A circular containing details of the Agreement and a notice convening an extraordinary general meeting of the Company will be despatched to shareholders of the Company shortly. THE AGREEMENT Date: 23rd August, 1999 Parties:Sun Wealth International Limited (as vendor) and the Company (as purchaser) Terms: The Vendor agreed to sell and the Company agreed to purchase 2 ordinary shares of US$1.00 each in the capital of Gold Elements, representing 20% of the issued share capital of Gold Elements. The remaining 80% of the issued share capital of Gold Elements will on Completion be held by the Vendor. Consideration: HK$113,000,000 A deposit of HK$11,000,000 was paid by the Company to the Vendor on signing of the Agreement. On Completion, the balance of HK$102,000,000 is to be satisfied as to HK$9,000,000 in cash and HK$93,000,000 by the issue and allotment of 51,666,667 Consideration Shares, credited as fully paid at HK$1.80 (representing a discount of 11.55% to the average closing price of the shares of the Company for the 10 trading days prior to the date of the Agreement of HK$2.035 and a discount of 10% to the closing price of the shares of the Company of HK$2.00 on 23rd August, 1999) to the Vendor or as it may direct on Completion. The Consideration Shares represent approximately 24.59% of the existing issued share capital of the Company as at the date hereof and 19.74% of the issued share capital of the Company, as enlarged by the issue of the Consideration Shares. The Company will fund the amounts payable to the Vendor by internal resources. CONDITIONS PRECEDENT Completion of the Agreement is conditional upon amongst others:- (i) the passing at an extraordinary general meeting of the shareholders of the Company of an ordinary resolution to approve the issue and allotment of the Consideration Shares, credited as fully paid at HK$1.80 each, to the Vendor or as it may direct; (ii) the Stock Exchange granting a listing of and permission to deal in the Consideration Shares; (iii) a due diligence investigation to be carried out by the Company having been completed to the satisfaction of the Company in its sole discretion; (iv) all consents or approvals of any relevant governmental authorities or other relevant third parties in Hong Kong or the PRC which are required or appropriate for the entry into and the implementation of the Agreement having been obtained; (v) the granting of a waiver by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission ("SFC") to CIL Holdings Limited ("CIL") from any obligation to make a general offer for all the Shares in the Company which may arise as a result of the transactions contemplated under this Agreement and CIL's acquisition of shares of the Company from Ambang Jaya Sdn. Bhd. and Angkasa Marketing (Singapore) Sdn. Bhd. (together "Ambang and Angkasa") on or around 30th December, 1999; (i) the provision of security by the Vendor to secure its obligations under the Agreement to the reasonable satisfaction of the Company; (ii) the agreement on a form of shareholders' agreement in relation to the management and operation of the Gold Elements post Completion; (iii) the receipt by the Company of a legal opinion issued by a firm of lawyers practising in the PRC approved by the Company confirming matters related to the title of the Property; and (iv) the production of evidence to the satisfaction of the Company that the Loan (as defined below) in a sum of RMB200,000,000 will be made available to JV Co. If the conditions have not been satisfied or waived by the Purchaser, on or before 28th February, 2000 (or such later date as the relevant parties may agree), the Agreement shall terminate. A press announcement will be made to inform the public of details of the security given by the Vendor to the Company pursuant to Clause (vi) above as soon as possible and in any event not later than Completion. If the agreement is terminated as a result of the Vendor failing to use its reasonable endeavours to procure the satisfaction of conditions (iv), (vi) and (ix), or to comply with its obligations on Completion, the Vendor is required to return the Deposit without interest to the Purchaser. Although the condition (v) set out above can be waived by the Company, the Company at present does not intend to exercise such waiver and it is presently intended that the Company will not proceed to Completion if this condition is not fulfilled. There is no assurance that the SFC will grant the waiver referred to in paragraph (v) above. OTHER TERMS OF THE AGREEMENT Matters relating to the management and operation Gold Elements post Completion were included in the Agreement including the procedure for convening board meetings, pre-emption provisions on the disposal of shares and matters requiring the unanimous consent of the board e.g. issue of shares, distributions of dividends and acquisitions or disposals of assets. The Vendor also undertook to the Purchaser that by a date falling not later than nine months after Completion (a) JV Co will be a wholly-owned subsidiary of Gold Elements, JV Co will be the owner of Property and that the shares in JV Co and the Property and the other assets of Gold Elements and JV Co will be free and clear of all encumbrances (b) a long term land use right certificate relating to the Property will be issued in the name of JV Co (c) the Property will be freely transferable to any party (d) a business licence or other relevant document in accordance with the laws of the PRC will be produced confirming that the term of JV Co has been extended to 50 years with effect no earlier than 29th March, 1996 (e) a loan of not less than RMB200,000,000 will be made by a bank in the PRC to JV Co on terms to the reasonable satisfaction of both parties which loan is to be used for working capital purposes and completion of interior contracting work of the Property (the "Loan"). The Loan should be sufficient to cover the costs of the project. There is a possibility that the Vendor may not comply with such undertakings in breach of the Agreement. A press announcement will be made if the matters set out in paragraphs (a) to (c) above is not completed within nine months from Completion. It is intended that the reasonable costs and expenses for achieving the matters referred to in paragraph (b) and (c) will be borne by JV Co. The Vendor will bear the costs of transfer of the registered capital of JV Co from its existing shareholders to Gold Elements. Assuming the Vendor does not dispose of its shares in the Company after Completion and based on the issued share capital of the Company as at the date hereof and as enlarged by the issue of the Consideration Shares, at the time falling nine months after Completion, the Vendor would still be a holder of approximately 19.74% of the shares of the Company. If the Vendor fails to comply with the undertakings as set out above, the remedy for the Company is to enforce the security under paragraph (ix) of the section headed "Conditions Precedent" above or to commence legal proceedings against the Vendor for breach of the Agreement. The form of security which the Vendor will give has not been agreed upon at this stage. COMPLETION Five business days after the satisfaction of the Conditions set out above (or such later date as the parties may agree). REASONS AND BENEFITS The Consideration (including the determination of the issue price of HK$1.80 of the Consideration Shares) was determined based on arms-length commercial negotiations between the parties based on a discount of 18.3% on the Property Valuation (defined below). The purpose of acquiring shares in Gold Elements instead of in JV Co is that it is simpler to purchase shares in a British Virgin Islands company rather than a PRC company. The reason the Company has agreed to proceed to Completion whilst the title of the Property is not vested in JV Co and Gold Elements is not the holder of JV Co is that the Vendor needs to use the funds received on Completion to pay the costs of transferring the registered capital of JV Co to Gold Elements. Time is also required for JV Co to complete the formalities for vesting of the title of the Property in JV Co and to arrange for the Loan. On the basis that the Consideration is satisfied by way of the issue of the Consideration Shares and a cash payment of HK$20,000,000 and that the projected rate of return is favourable, the directors (including the independent non-executive directors) are of the view that the terms of the Agreement are fair and reasonable. The benefits accruing to the Company in entering into the Agreement is that it can expand its property portfolio in the PRC as part of the principal activities of the Company and its subsidiaries of property investment. THE PROPERTY The Property is situated at a prime location of Shanghai and comprises 7 blocks of building erected on a site with an area of approximately 18,139 sq.m. Upon completion of construction, it is intended that the Property will comprise of approximately 98 deluxe rooms, 112 suites and 44 duplex suites to be furnished to international five star hotel standards in a serviced apartment tower with amenities and a shopping arcade. The Property has been valued at RMB740,000,000 (approximately equivalent to HK$691,600,000 using an exchange rate of RMB1.07 = HK$1.00) as at 1st August, 1999 in a draft valuation report prepared by an independent valuer ("Property Valuation"). Based on information provided by the same valuer, the present occupancy rate of a building of the same nature as the building to be constructed on the Property in a similar area in Shanghai is 55-65% and the projected rate of return on the Company's investment is 11%. The superstructure of the Property is completed at present but the external and internal furnishing and fixing work has not yet commenced. The Property is scheduled to be completed by the end of 2000. The Company has no obligation to, does not intend to make and will not assume on Completion any obligation to make any further capital commitment (other than the satisfaction of the Consideration) for the development of the Property. GOLD ELEMENTS AND JV CO Gold Elements is a newly incorporated investment holding company. The Vendor now holds 70% of the registered capital of JV Co whose scope of business includes certain recreation activities and the leasing of commercial units. The remaining 30% of the registered capital of JV Co is now owned by an independent third party not connected to the directors, chief executive or substantial shareholders of the Company or their respective subsidiaries or associates. JV Co does not own any material assets or conduct any material activities at present (other than the development of the Property). JV Co is now the leasee of the Property. On Completion, there should be no restriction on the ability of JV Co to distribute profits to Gold Elements. THE VENDOR The Vendor is an independent third party not connected to the directors, chief executives or substantial shareholders of the Company or their respective subsidiaries or associates. The issued share capital of the Vendor is HK$1,000,000. There is no present intention for the Vendor to have representation on the board of directors of the Company. The Company understands that the Vendor currently intends to hold the shares in Gold Elements and the Company as a long term investment. There is at present no lock up period for disposal of shares by the Vendor in Gold Elements and the Company. GENERAL The transactions contemplated under the Agreement constitutes a discloseable and share transaction for the Company under the Listing Rules. A circular containing details of the transaction and a notice convening an extraordinary general meeting will be despatched to shareholders of the Company as soon as practicable. Application will be made to the Stock Exchange for listing of and permission to deal in the Consideration Shares. The principal activities of the Company and its subsidiaries are investment holding, property investment, property development and related services in Hong Kong and the PRC. This transaction may or may not proceed as it is subject to the fulfilment of various conditions referred to above. Shareholders are advised to exercise caution in dealing in the shares of the Company. Notes: 1. The Purchaser is informed that no formal lease agreement at present has been entered into between the owner of the Property and JV Co. 2. Based on the shareholding of CIL in the Company as at the date hereof and the issued share capital of the Company as enlarged by the issue of the Consideration Shares. 3. Based on the shareholding of CIL in the Company as at the date hereof and taking into account the shares to be acquired by CIL from Ambang and Angkasa pursuant to an agreement dated 23rd November, 1998 and assuming no further acquisitions or disposals of shares in the Company by CIL as from the date hereof. By Order of the Board Noble Link Holdings Limited Ho Pui Tsun, Peter Director Hong Kong, 23rd August, 1999 The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable inquiries, that to the best of their knowledge, 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.