Kerry Properties Limited — M&A Activity 2001

Jun 6, 2001

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.

CONNECTED TRANSACTION

ACQUISITION OF THE CHARLICK GROUP OF COMPANIES

The Directors of the Company announce that on 5 June 2001, KLSA entered into a Sale and Purchase Agreement with KHL pursuant to which KLSA agreed to acquire from KHL the Sale Shares, being the entire issued share capital of Longstone which is the holding company of the Charlick Group of Companies, together with the Loan, for a total consideration of A$6,150,775 (equivalent to approximately HK$25,056,720) subject to the terms and conditions as set out therein.

KLSA is an indirect wholly-owned subsidiary of the Company. KHL is a substantial shareholder of the Company. Accordingly, KHL is a connected person of the Company as defined under the Listing Rules.

The entering into by KLSA of the Sale and Purchase Agreement constitutes a connected transaction of the Company under the Listing Rules. As the total consideration payable under the Sale and Purchase Agreement represents less than 3% of the book value of the net tangible assets of the Company as disclosed in the latest published audited consolidated accounts of the Company, the Acquisition falls under Rule 14.25(1) of the Listing Rules. Details of the Sale and Purchase Agreement will be included in the next published annual report and accounts of the Company in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules.

SALE AND PURCHASE AGREEMENT

A. Date: 5 June 2001

B. Parties:

(1) Vendor: KHL

(2) Purchaser: KLSA

C. Assets acquired:

(1) the Sale Shares, being the entire issued share capital of Longstone; and

(2) the Loan.

D. Consideration:

A total of A$6,150,775 (equivalent to approximately HK$25,056,720), comprising:

(1) A$198 (equivalent to approximately HK$807) for the Sale Shares; and

(2) A$6,150,577 (equivalent to approximately HK$25,055,913) for the Loan,

payable in cash to KHL upon the completion of the Sale and Purchase Agreement.

E. Completion:

The completion of the Sale and Purchase Agreement shall take place on 30 June 2001 or on such other date as KHL and KLSA may agree.

REASONS FOR THE ACQUISITION

One of the core areas of business of the Group is the provision of logistics services, warehouse operation and ownership through KLNL, a direct wholly-owned subsidiary of the Company. KLNL has been actively pursuing a strategy to build a network of logistics operations in Asia Pacific. At present, KLNL operates in Hong Kong, Shanghai, South Korea and Thailand. The Acquisition will add an Australian presence to KLNL's network and will enable KLNL to explore business synergies with the Charlick Group of Companies to further develop the business in Australia thus enhancing KLNL's profitability.

CONNECTION BETWEEN THE PARTIES TO THE SALE AND PURCHASE AGREEMENT

KLSA is an indirect wholly-owned subsidiary of the Company.

KHL is a substantial shareholder of the Company, which is directly or indirectly interested in approximately 64.09% of the voting rights attaching to the issued share capital of the Company. Accordingly, KHL is a connected person of the Company as defined under the Listing Rules.

INFORMATION ON THE CHARLICK GROUP OF COMPANIES

Longstone is a company incorporated in the British Virgin Islands on 16 June 1988 and is currently a direct wholly-owned subsidiary of KHL. The authorized share capital of Longstone is US$50,000 divided into 50,000 shares of par value US$1 each with 100 issued shares held by KHL. Longstone is the holding company of the Charlick Group of Companies.

COPL is a company incorporated in Australia on 4 June 1973 and is currently a direct wholly-owned subsidiary of Longstone. The authorized share capital of COPL is A$100 divided into 100 shares of par value A$1 each with 100 issued shares held by Longstone. COPL is the direct holding company of each of CTPL, MEFS and CNGL. Its audited consolidated net profits before and after taxation and extraordinary items for the year ended 31 December 2000 was A$183,476 (equivalent to approximately HK$747,435) (1999: loss of A$269,014 (equivalent to approximately HK$1,095,896)).

CTPL is a company incorporated in Australia on 3 March 1961 and is currently an indirect wholly-owned subsidiary of Longstone through COPL. The authorized share capital of CTPL is A$2,000,000 divided into 1,000,000 shares of par value A$2 each with 1,000,000 issued shares held by COPL. The Charlick Group of Companies, through CTPL, is mainly engaged in the provision of freight and logistics services, container depot services, interstate and local transport services, loading/unloading and storage services at rail terminals. CTPL has obtained certain bank facilities from Westpac Banking Corporation, such facilities having been secured by, amongst other things, the Deed of Guarantee and Indemnity. Pursuant to the Sale and Purchase Agreement, KLSA shall within three (3) months after completion of the Acquisition or such other period as may be agreed between KLSA and KHL, procure the unconditional release of KHL as guarantor under the Deed of Guarantee and Indemnity. If the said release of KHL has not been obtained by completion of the Acquisition, the Company shall, until the said release is obtained, indemnify KHL with respect to the Deed of Guarantee and Indemnity, and KLSA shall procure that the Company deliver a letter of indemnity to KHL upon completion of the Acquisition.

MEFS is a company incorporated in Australia on 9 May 1995 and is currently an indirect wholly-owned subsidiary of Longstone through COPL. The authorized share capital of MEFS is A$2 divided into 2 shares of par value A$1 each with 2 issued shares held by COPL. MEFS is a dormant company.

CNGL is a company incorporated in Papua New Guinea on 11 January 1957 and is currently an indirect subsidiary of Longstone through COPL. The authorized share capital of CNGL is PGK54,000 divided into 27,000 shares of par value PGK2 each with 26,997 shares held by COPL out of the total issued shares of 27,000 shares. The remaining 3 issued shares of CNGL are held by independent third parties respectively. CNGL is a dormant company.

Basis of the Consideration

The consideration has been determined after arm's length negotiations between KHL and KLSA and has taken into account, amongst other things, the unaudited net asset value of COPL as at 31 March 2001 of A$6,176,166.

GENERAL INFORMATION

The Sale and Purchase Agreement was entered into in the ordinary and usual course of business of KLSA on normal commercial terms. The Directors, including the independent non-executive directors of the Company, are of the opinion that the entering into by KLSA of the Sale and Purchase Agreement is fair and reasonable and in the best interests of the Group so far as the shareholders of the Company are concerned.

The total consideration payable under the Sale and Purchase Agreement will be financed by internal resources and/or bank loans made available to the Group.

The entering into by KLSA of the Sale and Purchase Agreement constitutes a connected transaction of the Company under the Listing Rules. As the total consideration payable under the Sale and Purchase Agreement represents less than 3% of the book value of the net tangible assets of the Company as disclosed in the latest published audited consolidated accounts of the Company, the Acquisition falls under Rule 14.25(1) of the Listing Rules. Details of the Sale and Purchase Agreement will be included in the next published annual report and accounts of the Company in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules.

DEFINITIONS:

"A$" Australian dollar

"Acquisition" the acquisition of the Sale Shares and the Loan

"Charlick Group of Companies" the group of companies headed by Longstone comprising COPL, CTPL, MEFS and CNGL

"CNGL" Charlicks New Guinea Ltd.

"Company" Kerry Properties Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on The Stock Exchange of Hong Kong Limited

"COPL" Charlick Operations Pty. Limited

"CTPL" Charlick Trading Pty. Limited

"Deed of Guarantee and Indemnity" the deed of guarantee and indemnity dated 27 December 1995 given by KHL in favour of Westpac Banking Corporation for the sum of A$5,146,000 (equivalent to approximately HK$20,963,518)

"Directors" the directors of the Company

"Group" the Company and its subsidiaries

"HK$" Hong Kong dollar

"KHL" Kerry Holdings Limited, a company incorporated in Hong Kong

"KLNL" Kerry Logistics Network Limited, a company incorporated in Bermuda

"KLSA" Kerry Logistics Services (Australia) Limited, a company incorporated in the British Virgin Islands

"Listing Rules" the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

"Loan" the interest-free shareholder's loan of US$3,000,000 (equivalent to approximately HK$23,400,750) due by Longstone to KHL, such loan having no fixed terms of repayment

"Longstone" Longstone Holdings Limited

"MEFS" MEFS Transport Pty. Ltd.

"PGK" Papua New Guinea Kina

"Sale and Purchase Agreement" the sale and purchase agreement dated 5 June 2001 made between KHL and KLSA relating to the Acquisition

"Sale Shares" 100 issued shares of par value US$1 each in Longstone

By Order of the Board

Chow Yin Ping, Anita

Company Secretary

Hong Kong SAR, 5 June 2001

For convenience only, Australian dollars and US dollars have been translated into Hong Kong dollars at the rates of A$1 to HK$4.07375 and US$1 to HK$7.80025, respectively.

"Please also refer to the published version of this announcement in the SCMP"