Macau E&M Holding Limited — M&A Activity 2000

Feb 21, 2000

Listed Company Information

SHUM YIP INV<0604> - 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. SHUM YIP INVESTMENT LIMITED (Incorporated in Hong Kong under the Companies Ordinance) CONNECTED TRANSACTION Shum Yip Investment Limited (the ``Company'', together with its subsidiaries, the ``Group'') has entered into a conditional agreement (the ``Agreement'') with Shum Yip Holdings Company Limited (``Shum Yip Holdings''), the controlling shareholder of the Company, to acquire the entire voting issued share capital of Shum Yip Telecommunications Investment Limited (``SYT'') from Shum Yip Holdings for HK$165 million (the ``Acquisition''). The consideration for the Acquisition of HK$165 million will be satisfied by cash from the internal resources of the Group. The consideration, which represents about a 15 times multiple of the adjusted net profit for the year ended 31st December, 1999, has been agreed after arm's length negotiations and is based on normal commercial terms. The directors of the Company (the ``Directors'') believe that the Acquisition represents a good investment opportunity as it will enhance the Group's earning base and can provide the Group with ample opportunities for future development in broad band internet services business. The Acquisition constitutes a connected transaction for the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ``Listing Rules''), which requires approval from the independent shareholders of the Company (the ``Independent Shareholders'') at an extraordinary general meeting of the Company (``EGM''). A circular containing further information will be sent to the shareholders of the Company as soon as practicable. CONDITIONAL AGREEMENT DATED 18th February, 2000 Parties: Vendor : Shum Yip Holdings Purchaser : the Company Assets acquired : 100% of the voting issued share capital of SYT Information on SYT: SYT was established in 1995 in Hong Kong as an investment holding company. The sole investment of SYT is a 21.1% issued share capital in \raster(55%,p)="c01" Shenzhen Topway Video Communication Co., Ltd. (``Topway'', together with its subsidiaries, the ``Topway Group''). The balance of 78.9% issued share capital of the Topway is held by five independent third parties who are not connected with the Company or any of its subsidiaries or the directors, chief executives and substantial shareholders of the Company or their respective associates. The Topway Group is principally engaged in the provision of network technology services to cable television in Shenzhen and other network consultancy services in relation to the information and media industry in the People's Republic of China (the ``PRC''). The cable television network in Shenzhen commenced installation in 1994 and currently has the fibre-optic network which has a total length of more than 1,000 kilometers, which is approximately 68,000 fibre kilometers, covering approximately 600,000 households. As at 31st December, 1999, there were about 320,000 subscribers. The services provided by (Shenzhen Cable Television) through the network which the Topway Group provides services to include (i) transmission of programmes produced or edited by Shenzhen Cable Television and from external sources; (ii) transmission and processing of digital information such as online stock trading, provision of internet services and intellectual property management; and (iii) television shopping. Topway provides technology support in connection with installation, content processing and customer services. The board of directors of Topway currently comprises 8 directors, two of which are appointed by SYT. Upon the completion of Acquisition, all 2 directors appointed by SYT, will be nominated by the Company. The consolidated net tangible asset value of Topway as at 31st December, 1999 according to Topway's management accounts was about RMB447 million (equivalent to about HK$414 million). The table below sets out the consolidated profit before and after taxation and minority interests of SYT prepared and audited in accordance with PRC accounting standards and adjusted by the Company, but not audited in accordance with HK GAAP for the year ended 31st December, 1998 and the unaudited consolidated profit before and after taxation and minority interests of SYT in accordance with PRC accounting standards and adjusted, but no yet audited, in accordance with HK GAAP for the year ended 31st December, 1999. Year ended Year ended 31st December, 1998 31st December, 1999 RMB (equivalent to RMB (equivalent to about HK$) about HK$) Profit before taxation 63.2 58.5 66.8 61.9 and minority interest million million million million Profit after taxation 53.3 49.4 56.6 52.4 and minority interest million million million million (``Adjusted Net Profit'') Consideration and payment terms: The consideration payable by the Company is HK$165 million, all of which will be satisfied by cash from the internal resources of the Group. The consideration was arrived at based on a 15 times multiple of the attributable Adjusted Net Profit. The terms of the Acquisition including, inter alia, the consideration, were arrived at after arm's length negotiations based on normal commercial terms. Condition of Agreement: Completion of the Agreement is conditional upon the approval of the Agreement and the transactions contemplated thereunder by an ordinary resolution of the Independent Shareholders at an EGM. If the above condition is not fulfilled within 60 days after signing of the Agreement or such later date as may be agreed between the parties, the Agreement shall terminate. Completion of the Acquisition : Expected to be completed on the third business day after the satisfaction of the above condition. Reasons for the Acquisition The Group is principally engaged in property development and investment, provision of transportation services and investment in infrastructure. The Directors believe that in recent years, Shenzhen Municipal Government has put substantial efforts to support the development of high-tech industries in Shenzhen. Being a subsidiary of Shum Yip Holdings, the representative organisation of Shenzhen Municipal Government, the Company, in addition to its existing business, will also be engaged in high-tech industries. The Directors believe that with the prominent growth in the net profit of Topway, the Acquisition will enhance the Group's earning base and enrich the Group's investment portfolio. Accordingly, the Acquisition is in the best interest of the Company. Furthermore, the Directors believe that with increased importance of development of the information industry in the internet arena, the Acquisition will provide the Group with ample opportunities for future development in broad band internet services business as the cable network can be used as backbone infrastructure for internet services. General Currently, Shum Yip Holdings holds about 57.28% of the Company's issued share capital. The Acquisition constitutes a connected transaction for the Company under the Listing Rules, which requires approval from Independent Shareholders at an EGM, in which Shum Yip Holdings will abstain from voting. Mr. Wong Po Yan (``Mr. Wong''), an independent Director has been appointed to advise the Independent Shareholders in respect of the terms of the Acquisition. An independent financial adviser has been appointed to advise Mr. Wong in respect of the terms of the Acquisition. A circular containing further details of the Acquisition, together with the recommendation from Mr. Wong, the advice from the independent financial adviser and a notice convening an EGM of the Company to consider and, if thought fit, to approve the Acquisition, will be despatched to the shareholders of the Company as soon as possible. Note: In this announcement, Renminbi has been converted into Hong Kong dollars at the rate of HK$1 = RMB 1.08 for indication purpose only. By order of the Board Shum Yip Investment Limited Sun Ju Yi Deputy Managing Director Hong Kong, 18th February, 2000