JD Logistics, Inc. — M&A Activity 2004

Nov 2, 2004

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 liabilities whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(STOCK CODE: 1172)

(1) MAJOR AND CONNECTED TRANSACTIONS; AND (2) DISCLOSURE PURSUANT TO RULE 13.13 OF THE LISTING RULES

The Agreement

On 28 October 2004, the Vendor, the Purchaser, the Guarantor and Chengdu Subsidiary have entered into the Agreement relating to the sale and purchase of the Sale Shares and the Loan. The Agreement and the transactions contemplated thereunder constitute major and connected transactions for the Company under the Listing Rules and are subject to the approval of the independent Shareholders at the EGM in accordance with the requirements of the Listing Rules, which will be taken by poll. So far as the Company is aware, no Shareholder is required to abstain from voting on the resolution regarding the Agreement and the transactions contemplated thereunder.

A circular containing, among other things, further details of the Agreement and the transactions contemplated thereunder, a letter of recommendation from the Independent Board Committee to the independent Shareholders, a letter of advice from the independent financial adviser to the Independent Board Committee and the independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder, the Property Valuation and a notice of EGM, will be despatched to the Shareholders in accordance with the requirements of the Listing Rules as soon as practicable.

Disclosure pursuant to Rule 13.13 of the Listing Rules

As stipulated under the Agreement, the Vendor and the Purchaser agreed to procure Chengdu Subsidiary to advance the proceeds from any sales of the Property (after deducting relevant taxes and other expenses) to the Purchaser for the purpose of satisfying the Cash Consideration, which amount shall be paid from such bank account directly to the Vendor until the Cash Consideration has been settled in full. Such loans to be advanced by Chengdu Subsidiary to the Purchaser will therefore not exceed the Cash Consideration and will be interest-free and unsecured in nature.

The Company will comply with the continuing disclosure obligations under Rule 13.20 of the Listing Rules (if applicable) in its subsequent annual and interim reports.

Trading suspension and resumption

Trading in the shares of the Company has been suspended with effect from 9:30 a.m. on Friday, 29 October 2004 pending the publication of this announcement as a result of the conclusion of the Agreement. An application has been made by the Company to the Stock Exchange for the resumption of trading of the shares of the Company with effect from 9:30 a.m. on Tuesday, 2 November 2004.

THE AGREEMENT Date:

28 October 2004

Parties:

Chuang’s Development (Chengdu) Limited (莊士發展（成都）有限公司 ), a wholly-owned subsidiary of the Company, as the Vendor

Luzhou Baoguang Group Company Limited (瀘洲寶光集團有限公司 ), a company established in the PRC and the holding company of the Guarantor, as the Purchaser

Sichuan Langjiu Group Company Limited (四川郎酒集團有限公司 ), a company established in the PRC and a subsidiary of the Purchaser, as the Guarantor

Chengdu Chuang’s Centre Development Company Limited (成都莊士中心開發有限公司 ), a 51% subsidiary of the Company

Assets to be sold by the Vendor:

The Vendor has agreed to sell and the Purchaser has agreed to purchase the Sale Shares and the Loan. The Sale Shares represent the 51% equity interest in Chengdu Subsidiary currently owned by the Vendor. The Loan represents the remaining shareholder’s loan and accrued interest due to the Vendor by Chengdu Subsidiary after partial set off by the transfer of the Consideration Property by Chengdu Subsidiary to the Vendor as described below. Before such partial set off, the total outstanding sum of such loan was approximately RMB62.7 million (equivalent to approximately HK$58.6 million) as at 30 September 2004.

* For identification purpose only

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Conditions:

Completion of the sale and purchase of the Sale Shares and the Loan is conditional upon:

• (1) the Agreement and the transactions contemplated thereunder having been approved by the independent Shareholders at the EGM in accordance with the relevant provisions of the Listing Rules and all relevant approvals under the Listing Rules having been obtained;

• (2) the Purchaser having validly executed shareholders’ resolutions relating to the pledge of the Purchaser’s 49% equity interest in and its shareholder’s loan to Chengdu Subsidiary, the Guarantor having validly executed board resolutions approving the guarantee by the Guarantor and Chengdu Subsidiary having issued a letter confirming the filing and record of the share pledge by the Purchaser on its register of members; and

• (3) the Chengdu Foreign Economic and Trade Commission having issued document(s) in writing relating to the filing and/or approval relating to the pledge of the Purchaser’s 49% equity interest in Chengdu Subsidiary in the event that such Commission agrees to process such filing and/or approval application.

All parties shall use their best endeavours to procure the satisfaction of the conditions as soon as practicable. If any of the conditions is not satisfied (or waived by the Vendor in writing) within 60 days from the date of the Agreement (i.e. 27 December 2004) (or such other period as the parties may agree in writing), any of the parties may by notice in writing to the other parties terminate the Agreement. In the event the conditions precedent (1) or (3) above is not so fulfilled, the Vendor should refund any part of the Cash Consideration received to the Purchaser without interest. In the event the condition precedent (2) above is not so fulfilled, any part of the Cash Consideration received by the Vendor will not be refunded to the Purchaser and shall be forfeited by the Vendor. The Company will not waive condition precedent (1) in any event and the Company will consider whether conditions precedent (2) and/or (3) would be waived if necessary. The Company has no current intention to waive any of the conditions precedent. None of the conditions precedent has been fulfilled as at the date of this announcement.

Consideration:

The Purchaser has agreed (i) to pay to the Vendor the Cash Consideration, being a sum of RMB100 million (equivalent to approximately HK$93.5 million); and (ii) to procure the transfer of the Consideration Property by Chengdu Subsidiary to the Vendor free from all charges, mortgages, lien, encumbrances or third party rights, in order to set-off the loan owing by Chengdu Subsidiary to the Vendor by approximately RMB21.0 million (equivalent to approximately HK$19.6 million) from approximately RMB62.7 million (equivalent to approximately HK$58.6 million) to approximately RMB41.7 million (equivalent to approximately HK$39.0 million). The market value of the Consideration Property is approximately HK$19.8 million (equivalent to approximately RMB21.2 million) as valued by an independent property valuer, DTZ Debenham Tie Leung Limited, as at 30 September 2004. DTZ Debenham Tie Leung Limited is not connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates.

Basis of Consideration:

The Consideration has been determined after arm’s length negotiations between the Vendor and the Purchaser with reference to (i) the net asset value of Chengdu Subsidiary of approximately RMB119.9 million (equivalent to approximately HK$112.1 million) as at 30 September 2004 as adjusted by the independent valuation of the Property by DTZ Debenham Tie Leung Limited of approximately HK$250.0 million (equivalent to approximately RMB267.5 million) as at 30 September 2004; (ii) the outstanding balance of the loan of approximately RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor as at 30 September 2004. The adjusted net asset value of Chengdu Subsidiary of approximately RMB119.9 million (equivalent to approximately HK$112.1 million) as at 30 September 2004 represents (i) the revalued amount of the Property of approximately RMB267.5 million (equivalent to approximately HK$250.0 million); (ii) other assets of approximately RMB3.8 million (equivalent to approximately HK$3.6 million); and (iii) the aggregate liabilities of approximately RMB151.4 million (equivalent to approximately HK$141.5 million) (inclusive of the outstanding balance of the loan of approximately RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor).

The aggregate value of the Consideration of approximately RMB121.0 million (equivalent to approximately HK$113.1 million) represents a discount of RMB2.85 million (equivalent to approximately HK$2.66 million) or approximately 2.3%, to the aggregate value of the 51% equity interest in Chengdu Subsidiary of approximately RMB61.1 million (equivalent to approximately HK$57.1 million), and the loan of RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor. The Company considers the discount to be fair and reasonable which was reached at after arm’s length negotiations between the Vendor and the Purchaser.

Payment terms:

Under the Agreement, the Purchaser shall pay to the Vendor the Cash Consideration as follows:

• (i) RMB1 million (equivalent to approximately HK$0.9 million) within 7 days from the date of the Agreement (which amount has been received by the Vendor at the date of the Agreement);

• (ii) RMB19 million (equivalent to approximately HK$17.8 million) on the 30th day after fulfilment of the conditions precedent;

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• (iii) RMB20 million (equivalent to approximately HK$18.7 million) on the 60th day after fulfilment of the conditions precedent;

• (iv) RMB25 million (equivalent to approximately HK$23.4 million) on the 90th day after fulfilment of the conditions precedent;

• (v) RMB15 million (equivalent to approximately HK$14.0 million) on the 120th day after fulfilment of the conditions precedent; and

• (vi) RMB20 million (equivalent to approximately HK$18.7 million) on 150th day after the fulfilment of the conditions precedent.

Unless agreed by the parties otherwise, the Vendor and the Purchaser agreed that Chengdu Subsidiary shall not dispose of, mortgage or do any act in a way unsatisfactory to the Vendor on any part of the Property prior to the fulfilment of the conditions precedent of the Agreement. After the fulfilment of the conditions precedent, Chengdu Subsidiary can sell the Property (other than the Consideration Property) at an aggregate consideration of not less than approximately RMB249.2 million (equivalent to approximately HK$232.9 million).

The Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to deposit the proceeds from any sales of the Property into a designated bank account to be operated and controlled by the Vendor. The Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to lend such proceeds (after deducting relevant taxes and other expenses) as loans to the Purchaser for immediate payment of the Cash Consideration, which amount shall be paid from such bank account directly to the Vendor until the Cash Consideration has been settled in full. Such loans to be advanced by Chengdu Subsidiary to the Purchaser will therefore not exceed the Cash Consideration. The Purchaser shall pay to the Vendor on each payment date any shortfall if such proceeds shall be less than the Cash Consideration as described above.

The Purchaser has agreed to procure Chengdu Subsidiary to transfer the Consideration Property to the Vendor free from all charges, mortgages, lien, encumbrances or third party rights within 60 days after the fulfilment of all conditions precedent.

Security for Payment of the Consideration:

In order to secure the performance of the Purchaser’s obligations under the Agreement:

• (i) the Purchaser has agreed to provide valid shareholders’ resolution to pledge its 49% equity interest in Chengdu Subsidiary and its shareholder’s loan to Chengdu Subsidiary to the Vendor. If the Purchaser is unable to pay the Cash Consideration on each payment date, the Vendor has the right to sell such interest and shareholder’s loan by public auction, and to pay any sum owing to the Vendor from the proceeds of such auction;

• (ii) if the Purchaser is unable to pay the Cash Consideration on each payment date, the Purchaser agrees and authorises the Vendor to sell the Property (other than the Consideration Property) by public auction, and to pay any sum owing to the Vendor from the proceeds of such auction; and

• (iii) the Guarantor has agreed to guarantee the obligations of the Purchaser and provide valid board resolution to guarantee the performance of all the obligations of the Purchaser under the Agreement.

Completion:

After fulfilment (or waiver by the Vendor) of all the conditions precedent, Completion shall take place on the first business day after the Vendor’s receipt of the Cash Consideration in full and the approval of the transfer of the Consideration Property to the Vendor by the relevant property ownership registration authority, or any other date as the Vendor and the Purchaser may otherwise agree. The Company will cease to hold any interest in Chengdu Subsidiary and Chengdu Subsidiary will cease to be a subsidiary of the Company upon Completion. The whole amount of the Loan will be assigned to the Purchaser upon Completion.

INFORMATION ABOUT THE PURCHASER AND THE GUARANTOR

The Purchaser is a company incorporated in the PRC and is controlled by Mr. Wang Junlin. Other than his interest in Chengdu Subsidiary, Mr. Wang Junlin is an independent third party and is not connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates. The Purchaser holds 49% equity interest in Chengdu Subsidiary and 80% interest in the Guarantor.

Save as disclosed herein, neither the Purchaser nor the Guarantor is connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates.

INFORMATION ABOUT THE GROUP AND CHENGDU SUBSIDIARY

The Group is principally engaged in printing and property investment. The printing business focuses on two major sectors: books and paper products printing. The books printing division is the Group’s exporting arm serving clients in the United States, Europe, Australia and New Zealand. The paper products printing division provides services to manufacturers in the PRC and greeting cards and paper products printing services to customers overseas and in Hong Kong. The Group’s property investments provide a stable source of rental income.

Chengdu Subsidiary is incorporated in the PRC and is owned as to 51% and 49% by the Vendor (which is a wholly-owned subsidiary of the Company) and the Purchaser respectively. Chengdu Subsidiary holds the entire interest in the Property, which is Chengdu Subsidiary’s principal assets. Prior to Completion, the Vendor and the Purchaser have appointed four directors and three directors to the board of Chengdu Subsidiary respectively. Such directors appointed by the Vendor will resign upon Completion.

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As at 31 December 2003, the audited net asset value of Chengdu Subsidiary amounted to approximately RMB19.0 million (equivalent to approximately HK$17.8 million). For the year ended 31 December 2002, both the audited net loss before taxation and the audited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB0.8 million (equivalent to approximately HK$0.7 million). For the year ended 31 December 2003, both the audited net loss before taxation and the audited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB3.2 million (equivalent to approximately HK$3.0 million). For the nine months ended 30 September 2004, both the unaudited net loss before taxation and the unaudited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB1.1 million (equivalent to approximately HK$1.0 million).

INFORMATION OF THE PROPERTY

The Property has a gross floor area of 42,730 sq. m. comprising a 7-storey commercial podium and three levels of basement. The Consideration Property is the entire 6th floor of the commercial podium with an aggregate floor area of about 4,255 sq. m.. The carparks and commercial podium of the Property (including the Consideration Property) are leased to an independent third party for a respective term of three years and ten years expiring on March 2006 and October 2012.

REASONS FOR AND BENEFITS OF THE TRANSACTION AND USE OF PROCEEDS

The Group’s core printing business has shown continuous growth in turnover and profit. For the year ended 31 December 2003, the Group’s turnover increased by 18% to HK$675.2 million and net profit increased by 5% to HK$52.4 million. As referred to in the interim report of the Company for the six months ended 30 June 2004, the turnover of the Group increased by 12% to HK$307.7 million whereas the unaudited consolidated net profit of the Group amounted to approximately HK$22.2 million, representing an increase of approximately 9.4%.

The Group is optimistic about the sales and business environment for printing business as the export trend to overseas market is increasing gradually and the domestic growth rate in the PRC market is steadily increasing. To enrich its core competence, the Group has monitored the market demand and technological requirements and will continue to invest in new technology in prepress, additional printing and post-press machines, and expansion of plants and staff quarters. The Group is exploring the feasibility of investment in printing business and the establishment of new plants in other areas of the PRC.

The Property is held by the Group for investment purpose. The Directors are of the view that the sale of Chengdu Subsidiary could allow the Group to consolidate its resources in the continuing development of the Group’s printing business. The Directors believe that the disposal of the Group’s interest in Chengdu Subsidiary represent an opportunity that would effectively allow the Group to realize its interest in the Property at a selling price which is comparable to the prevailing market valuation.

In addition, given that (i) the disposal of the Group’s interest in Chengdu Subsidiary would give rise to an estimated gain of approximately HK$8.2 million based on the Consideration of approximately HK$113.1 million, the Group’s book costs of approximately HK$98.9 million as at 30 September 2004 and PRC taxes and transaction costs of approximately HK$6.0 million; and (ii) the Consideration Property is currently subject to a tenancy with annual rental of approximately RMB0.8 million (equivalent to approximately HK$0.7 million) per annum and will be escalated for the remaining lease term, the Directors are of the view that the Agreement and the transactions contemplated thereunder are in the interest of the Group and the Shareholders as a whole. It is currently expected that the estimated gain of HK$8.2 million will be realized in the books of the Company for the financial year ended 31 December 2005.

The proceeds from the disposal of the Group’s interest in Chengdu Subsidiary, before expenses, amounted to RMB100 million (equivalent to about HK$93.5 million) will be used for working capital purpose for expansion of its existing core businesses. The Group intends to hold the Consideration Property for investment purpose.

GENERAL INFORMATION

The Agreement constitutes a major transaction of the Company under Rule 14.06 of the Listing Rules. As Chengdu Subsidiary is a non wholly-owned subsidiary of the Company in which the Vendor and the Purchaser own 51% and 49% of its equity interest respectively, the Purchaser is a connected person of the Company under Rule 14A.11 of the Listing Rules. The Guarantor is a subsidiary of the Purchaser, and is therefore also a connected person of the Company. As such, the Agreement and the transactions contemplated thereunder (including the proposed loans by Chengdu Subsidiary to the Purchaser for payment of the Cash Consideration to the Vendor and the Guarantor’s role) also constitute connected transactions of the Company under the Listing Rules.

The Agreement and the transactions contemplated thereunder are subject to the approval of the independent Shareholders at the EGM in accordance with the requirements of the Listing Rules, which will be taken by poll. So far as the Company is aware, no Shareholder is required to abstain from voting on the resolution regarding the Agreement and the transactions contemplated thereunder. The Independent Board Committee will be established to provide recommendation to the independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder. An independent financial adviser will be appointed to advise the Independent Board Committee and the independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder.

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A circular containing, among other things, further details of the Agreement and the transactions contemplated thereunder, a letter of recommendation from the Independent Board Committee to the independent Shareholders, a letter of advice from the independent financial adviser to the Independent Board Committee and the independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder, the Property Valuation and the notice of EGM, will be despatched to Shareholders in accordance with the Listing Rules.

DISCLOSURE PURSUANT TO RULE 13.13 OF THE LISTING RULES

Pursuant to the requirements under Rule 13.13 of the Listing Rules, where any of the percentage ratios of the relevant advance to an entity exceeds 8%, a general disclosure obligation for the Company will arise.

The Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to deposit the proceeds from any sales of the Property into a designated bank account to be operated and controlled by the Vendor. As part of the terms of the Agreement, the Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to advance the aforesaid proceeds (after deducting relevant taxes and other expenses) to the Purchaser for the purpose of satisfying the Cash Consideration, which amount shall be paid from such bank account directly to the Vendor until the Cash Consideration has been settled in full. Such advances will be made when there shall be any proceeds received by Chengdu Subsidiary from sales of the Property and there are no fixed payment dates. Such loans to be advanced by Chengdu Subsidiary to the Purchaser will therefore not exceed the Cash Consideration, being RMB100 million (equivalent to approximately HK$93.5 million). The loans to be provided by Chengdu Subsidiary to the Purchaser will be interest-free and unsecured in nature.

The Company will comply with the continuing disclosure obligations under Rule 13.20 of the Listing Rules (if applicable) in its subsequent annual and interim reports.

TRADING SUSPENSION AND RESUMPTION

Trading in the shares of the Company has been suspended with effect from 9:30 a.m. on Friday, 29 October 2004 pending the publication of this announcement as a result of the conclusion of the Agreement. An application has been made by the Company to the Stock Exchange for the resumption of trading of the shares of the Company with effect from 9:30 a.m. on Tuesday, 2 November 2004.

DEFINITIONS

DEFINITIONS
“Agreement”	the conditional agreement dated 28 October 2004 between the Vendor,
	the Purchaser, the Guarantor and the Chengdu Subsidiary relating to
	the sale and purchase of the Sale Shares and the Loan
“Board”	the board of Directors
“Cash Consideration”	the cash consideration in a sum of RMB100 million (equivalent to
	approximately HK$93.5 million), being part of the Consideration
“Chengdu Subsidiary”	Chengdu Chuang’s Centre Development Company Limited (成都莊 士中心開發有限公司), a company established in the PRC and a
	non wholly-owned subsidiary of the Company in which the Vendor
	and the Purchaser own 51% and 49% of the equity interest respectively
“Company”	Midas International Holdings Limited, a company incorporated in the
	Cayman Islands and the shares of which are listed on the Stock
	Exchange
“Completion”	completion of the Agreement
“Consideration”	the Cash Consideration and the Consideration Property, being the
	consideration under the Agreement
“Consideration Property”	the 6th floor of the Property with an aggregate floor area of
	approximately 4,255 sq. m., being part of the Consideration
“Director(s)”	director(s) of the Company
“EGM”	an extraordinary general meeting of the Company to be convened to
	consider and, if thought fit, approve, among other things, the
	Agreement and the transactions contemplated thereunder
“Group”	the Company and its subsidiaries
“Guarantor”	Sichuan Langjiu Group Company Limited (四川郎酒集團有限公 司), a company established in the PRC and a subsidiary of the
	Purchaser
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	an independent committee of the Board to be established for the
	purpose of advising the independent Shareholders in relation to the
	terms of the Agreement and the transactions contemplated thereunder
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange

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“Loan”	the remaining shareholder’s loan and accrued interest due to the Vendor
	by Chengdu Subsidiary of approximately RMB41.7 million (equivalent
	to approximately HK$39.0 million) after partial set off by the transfer
	of the Consideration Property by Chengdu Subsidiary to the Vendor
	as described in the Agreement
“PRC”	the People’s Republic of China, which, for the purpose of this
	announcement, excludes Hong Kong, the Macau Special Administrative
	Region of the PRC and Taiwan
“Property”	the commercial podium and basement of Chengdu Chuang’s Centre (成都莊士中心) at No. 1, Renmin South Road, Wuhou District,
	Chengdu, PRC
“Property Valuation”	the valuation on the Property prepared by an independent property
	valuer, which will be contained in the circular to be issued by the
	Company to the Shareholders
“Purchaser”	Luzhou Baoguang Group Company Limited (瀘洲寶光集團有限 公司), a company established in the PRC and the holding company
	of the Guarantor
“RMB”	Renminbi, the lawful currency of the PRC
“Sale Shares”	51% equity interest in Chengdu Subsidiary currently owned by the
	Vendor
“Shareholder(s)”	holder(s) of ordinary share(s) of HK$0.10 each in the issued capital
	of the Company
“sq. m.”	square metre(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendor”	Chuang’s Development (Chengdu) Limited (莊士發展（成都）有 限公司), a wholly-owned subsidiary of the Company
“%”	per cent.

For the purpose of illustration only, amounts denominated in RMB have been translated into HK$ at the rate of HK$1.00 = RMB1.07. Such translation should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate or at all.

If there is any inconsistency between the Chinese names of the PRC entities mentioned in this announcement and their English translations, the Chinese version shall prevail.

As at the date of this announcement, Mr. Chan Sheung Chiu, Mr. Kwong Tin Lap, Mr. Kwok Chi Fai, Ms. Li Mee Sum, Ann, Mr. Tang Chow Ming, Paul and Mr. Wong Chi Sing are executive Directors, Mr. Lee Sai Wai and Mr. Dominic Lai are non-executive Directors, Mr. Shek Lai Him, Abraham, Dr. Li Sau Hung, Eddy and Mr. Yau Chi Ming are independent non-executive Directors.

By order of the Board of MIDAS INTERNATIONAL HOLDINGS LIMITED Chan Sheung Chiu Chairman

Hong Kong, 1 November 2004

“Please also refer to the published version of this announcement in The Standard.”

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