Medlive Technology Co., Ltd. — M&A Activity 1999

Aug 12, 1999

Listed Company Information

GUANGDONG KELON<0921> - Announcement GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED (a joint stock limited company incorporated in the People's Rupublic of China with limited liability) ANNOUNCEMENT The Board announces that not all of the conditions precedent of the Huabao Agreement are fulfilled within one year from the date of the Huabao Agreement (i.e. 11th August, 1999) (the "Long Stop Date"). The Company intends to extend the deadline for the fulfillment of all the conditions precedent of the Huabao Agreement for another 12 months to 11th August, 2000. Moreover, the Board is pleased to announce that, as of 2nd August, 1999, approvals have been obtained from all the relevant PRC authorities for the transfer of 59.28 million State-owned shares in Huayi Compressor to the Company in satisfaction of the consideration payable under the Huayi Agreements as supplemented by the Huayi Supplemental Agreement. As a result, the Company will own approximately 25% equity interests in the issued share capital of Huayi Compressor. Shareholders are advised to exercise caution in dealing in the shares of the Company. Reference is made to the announcement of the Company dated 14th April, 1998 (the "Huayi Announcement") regarding, inter alia, the Disposal, the announcement of the Company dated 11th August, 1998 (the "Announcement") and the circular of the Company dated 3rd September, 1998 (the "Circular") both regarding, inter alia, the Acquisitions, and the announcement of the Company dated 21st November, 1998 (the "Processing Announcement") regarding, inter alia, the Processing Agreement. THE HUABAO AGREEMENT It was disclosed in the Circular that, inter alia, the Company would acquire the Transfer Assets from the Huabao Subsidiaries for an estimated aggregate consideration of not more than approximately RMB849.1 million (approximately HK$793.6 million) pursuant to the Huabao Agreement. All the conditions precedent of the Huabao Agreement have been fulfilled save for the condition relating to the obtaining of written consent from the lending banks of the Huabao Subsidiaries for the transfer of the Transfer Assets pursuant to the Huabao Agreement (the "Outstanding Condition"). The Board has been informed by the Vendors that the Outstanding Condition cannot be fulfilled by the Long Stop Date. The Huabao Agreement provides that if all the conditions precedent of the Huabao Agreement are not fulfilled by the Long Stop Date, the Huabao Agreement may be terminated upon written request by either the Company or the Vendors. No such request for termination has been given by either of the parties. It was disclosed in the Announcement and the Circular that, inter alia, certain supplementary arrangements have been made, for the transfer of labour from the Huabao Subsidiaries to the Company, for the usage of the registered (or applied to be registered) trademark "Huabao" by the Company, for the transfer of air-conditioner installation and after sales service obligations from the Vendors to the Company and regarding, inter alia, how the Transfer Assets are to be handled and the business of the Huabao Subsidiaries relating to the Transfer Assets are to be conducted during the period commencing from 31st December, 1997 and ending on the Completion Date (excluding such date), and a management agreement was entered into between Guangdong Kelon Rongsheng and Guangdong Huabao on 1st August, 1998. Pursuant to such management agreement, Guangdong Kelon Rongsheng has commenced managing the Transfer Assets since the Management Changeover Date and will continue such management until the date on which all the conditions precedent of the Huabao Agreement are fulfilled. As disclosed in the Processing Announcement, pursuant to the Processing Agreement, Guangdong Kelon Rongsheng was engaged by Guangdong Kelon Air-conditioner to produce or assemble air-conditioners by, inter alia, making use of the exclusive right to use the "Huabao" trademarks granted to the Company and its subsidiaries and the production capacity of the Fixed Assets prior to completion of the Huabao Agreement (the "Processing Arrangement"). In view of the benefits to be derived from, the Acquisitions and the transitional management arrangement between Guangdong Kelon Rongsheng and Guangdong Huabao as disclosed in the Announcement, and the Processing Arrangement as disclosed in the Processing Announcement, the Company intends to extend the deadline for the fulfillment of all the conditions precedent of the Huabao Agreement for another 12 months to 11th August, 2000. THE HUAYI AGREEMENTS It was disclosed in the Huayi Announcement that, inter alia, the Company would dispose of 30% equity interests in each of Rongsheng Plastic and Kelon Mould to Huayi Electrical for an aggregate consideration of approximately RMB255.3 million (approximately HK$238.6 million) pursuant to the Huayi Agreements. Such consideration would be satisfied by way of transfer of 45.6 million State-owned shares in Huayi Compressor, with a value of approximately RMB255.3 million (approximately HK$238.6 million) from Huayi Electrical within 10 days from 19th June, 1999. Pursuant to the Huayi Supplemental Agreement, the number of State-owned shares in Huayi Compressor to be transferred as consideration has been changed from 45.6 million to 59.28 million. Such adjustment, as mutually agreed between the Company and Huayi Electrical, is required due to the increase in the issued share capital of Huayi Compressor since the date of the Huayi Announcement. The Board is pleased to announce that approvals by all relevant PRC authorities for the transfer of such State-owned shares in Huayi Compressor have been obtained on 2nd August, 1999. As a result, the Company will be interested in approximately 25% of the issued share capital of Huayi Compressor and will become the second largest shareholder of Huayi Compressor. Pursuant to the Huayi Agreements, the Company will appoint two directors to the board of directors of Huayi Compressor. GENERAL Further announcement(s) will be made by the Company if there is any material development with regard to completion of the Huabao Agreement. Shareholders are advised to exercise caution in dealing in the shares of the Company. Terms used in this announcement: "Acquisitions" the acquisition of the Transfer Assets pursuant to the Huabao Agreement and the Guangdong Kelon Air-Conditioner Acquisition "Board" the board of directors of the Company "Completion Date" the first Working Day following the date on which all the conditions precedent of the Huabao Agreement have been fulfilled, and the aggregate consideration for the Transfer Assets and all the relevant arrangements contemplated under the Huabao Agreement is agreed in writing "Company" Guangdong Kelon Electrical Holdings Company Limited "Disposal" the disposal of the Company's 30% equity interests in each of Rongsheng Plastic and Kelon Mould to Huayi Electrical for an aggregate consideration of approximately RMB255.3 million (approximately HK$238.6 million) pursuant to the Huayi Agreements "Fixed Assets" the fixed assets to be acquired by the Company pursuant to the Huabao Agreement, which include certain plant and machinery, land and buildings, construction in progress and land use rights of the Huabao Subsidiaries "Group" the Company and its subsidiaries "Guangdong Huabao" [*], a PRC enterprise independent of the Company "Guangdong Kelon Agreement" the agreement entered into by the Company and Guangdong Kelon Rongsheng on 11th August, 1998 in relation to the Guangdong Kelon Air-Conditioner Acquisition "Guangdong Kelon Air-conditioner" Guangdong Kelon Air-conditioner Co., Ltd., a Sino-foreign equity joint venture owned as to 60% by the Company and 40% by Grand Moment Investments Holdings Limited "Guangdong Kelon Air- the acquisition of the 60% equity interests Conditioner Acquisition" in Guangdong Kelon Air-conditioner by the Company from Guangdong Kelon Rongsheng pursuant to the Guangdong Kelon Agreement "Guangdong Kelon Rongsheng" Guangdong Kelon (Rongsheng) Group Company Limited, a limited liability company established under the laws of the PRC and the controlling shareholder holding approximately 34.06% of the issued share capital of the Company "Huabao Agreement" the agreement entered into by the Company, the Huabao Subsidiaries and Guangdong Huabao on 11th August, 1998 in relation to the Company's proposed acquisition of the Transfer Assets "Huabao Subsidiaries" [*] and [*], both being wholly-owned subsidiaries of Guangdong Huabao and registered owners of the Transfer Assets "Huayi Agreements" the two agreements entered into between Huayi Electrical and the Company that were approved by the Board on 14th April, 1998 in relation to the Disposal "Huayi Compressor" Huayi Compressor Holdings Company Limted, a limited liability company established under the laws of the PRC which shares are listed on the Shenzhen Stock Exchange "Huayi Electrical" Huayi Electrical Company, a company established under the laws of the PRC and the controlling shareholder of Huayi Compressor "Huayi Supplemental Agreement" the agreement entered into between Huayi Electrical and the Company on 1st June, 1999 to, inter alia, amend the number of State-owned shares in Huayi Compressor to be transferred as consideration from 45.6 million to approximately 59.28 million "Kelon Mould" Guangdong Kelon Mould Co., Limited, a Sino-foreign equity joint venture which is owned as to 70% and 30% by the Group and Huayi Electrical respectively "Management Changeover Date" the first Working Day immediately following the date on which the aggregate value of the Transfer Assets is agreed between Guangdong Kelon Rongsheng and Guangdong Huabao, and the preparatory materials for the issue of new A shares of the Company are approved by the relevant PRC authorities "PRC" People's Republic of China "Processing Agreement" the agreement entered into between Guangdong Kelon Air-conditioner and Guangdong Kelon Rongsheng on 21st November, 1998 in relation to the Processing Arrangement "Rongsheng Plastic" Shunde Rongsheng Plastic Products Co., Limited, a Sino-foreign equity joint venture which is owned as to 70% and 30% by the Group and Huayi Electrical respectively "Transfer Assets" the Fixed Assets and the stock to be acquired by the Company pursuant to the Huabao Agreement, including certain plant and machinery, land and buildings, construction in progress, land use rights, raw materials, finished products, semi-finished products and consumables of the Huabao Subsidiaries "Vendors" Guangdong Huabao and the Huabao Subsidiaries "Working Day" Monday to Friday inclusive, excluding public holdings in the PRC By the order of the Board of Guangdong Kelon Electrical Holdings Company Limited Lee Kwok Ming, Don Company Secretary Hong Kong, 11th August, 1999 Unless otherwise specified, conversion of Renminbi into Hong Kong dollars is based on the exchange rate of HK$1.00 = RMB1.07. [*] For the Chinese name, please refer to the press announcement today.