Kerry Properties Limited — Capital/Financing Update 2016

Aug 12, 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability 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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(Incorporated in Bermuda with limited liability)

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website: www.kerryprops.com (Stock Code: 683)

CONNECTED TRANSACTION IN RELATION TO THE SALE AND PURCHASE OF THE ENTIRE INTERESTS IN COASTLINE INTERNATIONAL LIMITED

On 12 August 2016, Wealth Luck entered into the Coastline SPA with Armada Property, pursuant to which Armada Property as seller agreed to sell, and Wealth Luck as purchaser agreed to purchase, the Sale Shares representing the entire issued share capital of Coastline for an aggregate amount of HK$930,000,000. Subject to the Conditions having been satisfied or waived by Wealth Luck, Completion will take place on the fifth (5th) Business Day after the Conditions have been satisfied and waived (as the case may be), or at such other time and on such other date as Armada Property and Wealth Luck may agree.

Upon Completion, Coastline will become an indirect wholly-owned subsidiary of the Company.

KGL is the controlling shareholder of the Company and Armada Property is an associate of KGL. Accordingly, Armada Property is a connected person of the Company and the Coastline Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio applied in accordance with Rule 14.07 of the Listing Rules for the Company in respect of the Coastline Transaction is more than 0.1% but less than 5%, the Coastline Transaction is subject to announcement and reporting requirements but is exempt from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

BACKGROUND

On 12 August 2016, KML entered into the Armada SPA with Great Wall pursuant to which KML has agreed to sell, and Great Wall has agreed to purchase approximately 74.19% of the total number of issued shares in Armada. As a condition to completion under the Armada SPA, Armada Property has agreed to dispose of its entire interest in Coastline.

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THE COASTLINE SPA

On 12 August 2016, Wealth Luck entered into the Coastline SPA with Armada Property, pursuant to which Armada Property as seller agreed to sell, and Wealth Luck as purchaser agreed to purchase, the Sale Shares representing the entire issued share capital of Coastline at an aggregate amount of HK$930,000,000. In connection with the Coastline SPA, KML has agreed to provide a deed of indemnity in favour of Armada in relation with the sale of the Sale Shares (the Company not being a party to such a deed of indemnity).

Upon Completion, Coastline will cease to be a subsidiary of Armada and will become an indirect wholly-owned subsidiary of the Company.

The principal terms of the Coastline SPA are set out below:

Date: 12 August 2016 Parties: Armada Property as seller Wealth Luck as purchaser

Assets to be The Sale Shares, representing the entire issued share capital of acquired: Coastline. Consideration: HK$930,000,000

The Consideration shall be payable in cash upon Completion.

Wealth Luck will fund the Consideration from its internal cash reserves and/or bank borrowings.

Conditions: Wealth Luck’s obligation to purchase the Sale Shares under the terms of the Coastline SPA is in all respects conditional on:

• (a) the Executive of the SFC granting its consent to the Coastline SPA and the Coastline Transaction in accordance with Rule 25 of the Takeovers Code;

• (b) all amounts owed by Coastline to Armada Property having been capitalised;

• (c) the Coastline SPA and the Coastline Transaction being approved by independent shareholders of Armada in accordance with the requirements of the Listing Rules and the Takeovers Code (if applicable) within five (5) months from the date of the Coastline SPA;

• (d) Wealth Luck being notified in writing by KML that the conditions to completion of the Armada SPA other than the conditions relating to the sale of the Sale Shares contemplated in the Coastline SPA are satisfied (or waived as the case may be);

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• (e) Armada Property (i) remaining the legal owner of the Sale Shares (except for the one Share held by Armada Nominees Limited on trust for Armada Property) and (ii) remaining the beneficial owner of the Sale Shares free from all encumbrances; and

• (f) save as disclosed to Wealth Luck in accordance with the Coastline SPA, Coastline remaining the sole legal and beneficial owner of the TV City Property on Completion and Coastline not having encumbered the TV City Property since the date of the Coastline SPA.

Representations and Warranties:

The Coastline SPA contained representations and warranties which are usual and customary for a transaction of this nature and scale. However, Armada Property shall not have any liability in connection with the warranties provided by it under the Coastline SPA and any other claims or threatened action made by Wealth Luck in respect of the Coastline SPA; provided that Wealth Luck shall not be restricted from claiming from Armada Property in relation to any matter attributable to fraud on the part of Armada Property.

Go-Shop Right and Go-Shop Right Price-Matching Right:

Notwithstanding anything in the Coastline SPA, Armada Property shall be permitted to solicit, discuss and negotiate a sale of the Sale Shares with any third party during the Go-Shop Period provided that, if by the end of the Go-Shop Period, no binding Third Party Agreement is entered into, all such solicitation, discussion and negotiation shall cease immediately.

The Coastline SPA shall terminate immediately upon Armada Property entering into a Third Party Agreement with the Third Party Purchaser.

Price-Matching Right

Upon being notified of a bona fide offer made by a potential Third Party Purchaser to Armada Property, Wealth Luck shall have a right to match any higher offer made by such potential Third Party Purchaser by notifying Armada Property and provided that such notification is within the requisite time period, Armada Property has undertaken to enter into an amendment agreement with Wealth Luck to reflect any increased consideration received by Armada Property.

Completion: Subject to the Conditions having been satisfied or waived by Wealth Luck, Completion will take place on or before 3:00 p.m. Hong Kong time on the fifth (5th) Business Day after the Conditions have been satisfied and waived (as the case may be), or at such other time and on such other date as Armada Property and Wealth Luck may agree.

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BASIS OF THE CONSIDERATION

The Consideration was determined after arm’s length negotiations between Wealth Luck and Armada Property with reference to the book value of the TV City Property of HK$893,000,000 as set out in the audited accounts of Coastline for the year ended 31 December 2015. The original acquisition cost of the TV City Property to Coastline in 1991 was HK$213,000,000.

INFORMATION ON COASTLINE AND THE TV CITY PROPERTY

Coastline was established as an International Business Company in accordance with the laws of The Bahamas. As at the date of this announcement, Coastline is an indirect wholly-owned subsidiary of Armada. Coastline is principally engaged in property investment and development. Its sole asset is the TV City Property. The TV City Property was acquired by Coastline in 1991 (and Armada acquired Coastline in 1996) and Armada has been taking active steps to enhance the value of the property, including exploring options to develop it into a residential project.

Upon Completion, Coastline will cease to be a subsidiary of Armada and will become an indirect wholly-owned subsidiary of the Company.

Financial information of Coastline

The net asset value of Coastline based on unaudited management accounts as of 31 July 2016 is HK$679,455,000. The net asset value is arrived at after deducting an amount of HK$201,630,000 due to its immediate holding company, Armada Property. Coastline is in the process of capitalising the amount to equity, which is one of the conditions precedent to the Coastline SPA.

Set out below is certain audited financial information of Coastline for each of the two years ended 31 December 2014 and 2015:

	For the year ended	For the year ended
	31 December 2015	31 December 2014
	HK$’000	HK$’000
Profit / (loss) before taxation	72,007	(4,540)
Profit / (loss) attributable to the	72,575	(4,022)
shareholder

The book value of the TV City Property as set out in the audited accounts of Coastline for the year ended 31 December 2015 was HK$893,000,000.

Upon Completion, Coastline will be 100% owned by Wealth Luck and will become an indirect wholly-owned subsidiary of the Company.

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REASONS FOR AND BENEFITS OF THE TRANSACTION

In view of the TV City Property having redevelopment potential into a residential development, the Directors considered that the TV City Property is compatible with the Group’s portfolio of properties. After reviewing its own capability, expertise and financial resources, the Group considered it will be beneficial for the Group to develop the TV City Property. Taking into account the terms and conditions of the Coastline SPA, including the Consideration, the Directors are of the view that the Coastline Transaction provides a good opportunity for the Group to increase its land bank for development at a reasonable consideration.

The Directors (including the independent non-executive directors of the Company) take the view that the terms of the Coastline Transaction are fair and reasonable, and the Coastline Transaction is on normal commercial terms, in the ordinary and usual course of business of the Group, and is in the interests of the Company and its shareholders as a whole.

The Board confirms that none of the Directors had any material interest in the Coastline Transaction and accordingly none of the Directors was required to abstain from voting on the resolutions in relation to the Coastline Transaction.

INFORMATION ON THE GROUP AND ARMADA PROPERTY

The Group is principally engaged in (i) property development, investment and management in Hong Kong, the PRC and the Asia Pacific region; and (ii) hotel ownership in Hong Kong, and hotel ownership and operations in the PRC.

Armada Property is a company incorporated under the laws of the British Virgin Islands, principally engaged in the business of investment holding. Armada Property is directly wholly-owned by Armada and an indirect subsidiary of KGL.

IMPLICATIONS UNDER THE LISTING RULES

KGL is the controlling shareholder of the Company and Armada Property is an associate of KGL. Accordingly, Armada Property is a connected person of the Company and the Coastline Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio applied in accordance with Rule 14.07 of the Listing Rules for the Company in respect of the Coastline Transaction is more than 0.1% but less than 5%, the Coastline Transaction is subject to announcement and reporting requirements but is exempt from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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DEFINITIONS

“Armada” Armada Holdings Limited (南潮控股有限公司)[] (formerly known as SCMP Group Limited ( 南華早報集團有限公司 )[] ), a company incorporated under the laws of Bermuda, the shares of which are listed on the Main Board of the Stock Exchange

“Armada Armada Property Investment Limited, a company incorporated under Property” the laws of the British Virgin Islands, a wholly-owned subsidiary of Armada as at the date of this announcement “Armada SPA” a sale and purchase agreement entered into between KML, as seller and Great Wall, as purchaser, relating to a sale of approximately 74.19% interest in Armada by seller to purchaser under such agreement “Board” the board of directors of the Company “Business Day” any day (excluding a Saturday or Sunday or public holiday) on which banks are generally open for business in Hong Kong and The Bahamas and no typhoon signal No. 8 or above and no Rainstorm Black Warning is hoisted in Hong Kong “Coastline” Coastline International Limited, a company incorporated under the laws of The Bahamas, an indirect wholly-owned subsidiary of Armada “Coastline SPA” the share purchase agreement dated 12 August 2016 between Armada Property as seller and Wealth Luck as purchaser in relation to the sale and purchase of the entire issued share capital of Coastline “Coastline the transaction contemplated under the Coastline SPA Transaction” “Company” Kerry Properties Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange “Completion” completion of the sale and purchase of the entire issued share capital of Coastline in accordance with the terms and conditions of the Coastline SPA “Conditions” conditions precedent to Completion in accordance with the terms and conditions of the Coastline SPA

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“Consideration” total consideration payable by Wealth Luck for the purchase of the Sale Shares under the terms and conditions of the Coastline SPA, being HK$930,000,000 payable in cash “Directors” the directors of the Company

“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director as stipulated in the Takeovers Code “Go-Shop Period” a period of twenty-one (21) days from the date of the Coastline SPA “Great Wall” Great Wall Pan Asia International Investment Co., Limited, a company incorporated under the laws of Hong Kong, being the purchaser to the Armada SPA “Group” the Company and its subsidiaries “KGL” Kerry Group Limited, a company incorporated in the Cook Islands, being the ultimate holding company of the Company “KML” Kerry Media Limited, a company incorporated under the laws of the British Virgin Islands, being the seller to the Armada SPA “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “PRC” the People’s Republic of China “Sale Shares” all the issued ordinary shares as at Completion of Coastline, representing the entire issued share capital of Coastline “SFC” the Securities and Futures Commission of Hong Kong “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” The Hong Kong Code on Takeovers and Mergers “Third Party a sale and purchase agreement entered into between Armada Property Agreement” and a third party purchaser in relation to the Sale Shares containing terms identical to those of the Coastline SPA (except for the Consideration (which must be higher than HK$930,000,000), the exclusion of an equivalent of the “go-shop right” and the “pricematching right” and any amendments required by the Listing Rules or the Takeovers Code) as permitted under the Coastline SPA

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“Third Party Purchaser”

a third party purchaser other than Wealth Luck who will purchase the Sale Shares in accordance with the Third Party Agreement

“TV City Property”

an investment property held by Coastline and the sole asset of Coastline, located at Clear Water Bay Studio, Clear Water Bay Road, A Kung Wan, Hang Hau, New Territories, Hong Kong

“Wealth Luck”

Wealth Luck Holdings Limited, a company incorporated under the laws of the British Virgin Islands, a wholly-owned subsidiary of the Company

By order of the Board Kerry Properties Limited Li Siu Ching, Liz Company Secretary

Hong Kong, 12 August 2016

As at the date of this announcement, the Directors are:

Executive Directors:

Messrs. Wong Siu Kong, Ho Shut Kan, Chin Siu Wa, Alfred and Bryan Pallop Gaw

Non-executive Director: Mr. Kuok Khoon Hua

Independent Non-executive Directors: Mr. Ku Moon Lun, Ms. Wong Yu Pok, Marina, JP and Mr. Chang Tso Tung, Stephen

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 enquiries, 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 statements in this announcement misleading.

* For identification purpose only

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