Pacific Online Limited — Capital/Financing Update 2000

Jan 31, 2000

Listed Company Information

DEZHONG ENT INV<0310> - Announcement 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. DEZHONG ENTERPRISES INVESTMENTS LIMITED (Incorporated in Hong Kong with limited liability) PROPOSED RIGHTS ISSUE, INCREASE IN AUTHORISED SHARE CAPITAL, ADOPTION OF SHARE OPTION SCHEME AND GENERAL MANDATES Summary: The Company proposes to raise approximately $45 million before expenses by issuing 45,000,000 Rights Shares at a price of $1.00 per Rights Share. The Company will provisionally allot 3 Rights Shares, in nil-paid form, for every 2 Shares held by Qualifying Shareholders on the Record Date. The Rights Issue is not available to Overseas Shareholders. The Rights Issue is subject to the conditions set out under the section headed `Conditions of the Rights Issue' below. The Rights Issue is fully underwritten by the Underwriter. The Directors believe that the Rights Issue will enlarge the capital base of the Company and will allow Shareholders to participate in the growth of the Company. The estimated net proceeds of the Rights Issue is about $42.5 million and will be used as general working capital of the Company and for possible future investments in the high growth industries in the PRC, Hong Kong, Macau and Taiwan when suitable opportunities arise. The Company also proposes to seek the approval of the Shareholders at the EGM for the Increase in Authorised Share Capital, the adoption of the Share Option Scheme and the renewal of general mandates to repurchase and issue Shares. The Company is expecting to send a circular containing, among other things, further details of the Rights Issue, the Increase in Authorised Share Capital, the adoption of the Share Option Scheme, the renewal of general mandates to repurchase and issue Shares and a notice convening the EGM, to Shareholders on or about 18th February 2000 and subject to the approval of the Rights Issue by Shareholders at the EGM, to send the prospectus, provisional allotment letter and form of application for excess Rights Shares to all Qualifying Shareholders on or about 13th March 2000. WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES Existing Shares will be dealt with on an ex-rights basis from 2nd March 2000. Rights Shares will be dealt with in their nil-paid form from 15th March 2000 to 23rd March 2000 (both dates inclusive). If the Underwriter terminates the Underwriting Agreement (see `Termination of the Underwriting Agreement' below) or the conditions of the Rights Issue (see `Conditions of the Rights Issue' below) are not fulfilled, the Rights Issue will not proceed. PROPOSED RIGHTS ISSUE Issue Statistics Basis of the Rights Issue: 3 Rights Shares for every 2 Shares held on the Record Date Number of existing Shares in 30,000,000 Shares (as at 28th issue: January 2000) Number of Rights Shares 45,000,000 Rights Shares (Based on the number of existing Shares in issue): Outstanding share options Nil granted: Qualifying Shareholders The Company will send provisional allotment letters and forms of application for excess Rights Shares to Qualifying Shareholders only. Qualifying Shareholder must: 1. be registered as a member of the Company on the Record Date; 2. have an address in Hong Kong which appears on the register of members of the Company on the Record Date. In order to be registered as members of the Company on the Record Date, Shareholders must lodge any transfers of Shares (together with the relevant share certificates) with the Company's share registrars by 4:00 p.m. on 3rd March 2000. The share registrars of the Company is: Secretaries Limited of 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong. The register of members of the Company will be closed from 6th March 2000 to 13th March 2000, both dates inclusive. No transfers of Shares will be registered during this period. Basis of the Rights Issue The Company will provisionally allot 3 Rights Shares, in nil-paid form, for every 2 Shares held by Qualifying Shareholders on the Record Date payable in full on acceptance. Based on 30,000,000 Shares in issue as at the date hereof, 45,000,000 Rights Shares will be issued under the Rights Issue. Subscription Price $1.00 per Rights Share, payable in full upon acceptance. The Subscription Price represents: 1. a discount of about 50% to the closing price of $2 per Share as quoted on the Stock Exchange on 28th January 2000; 2. a discount of about 35.9% to the average closing price of $1.56 per Share for the 10 trading days up to and including 28th January 2000; and 3. a discount of about 28.5% to the theoretical ex-rights price per Share of $1.4 based on the closing price as quoted on the Stock Exchange on 28th January 2000. The Subscription Price was agreed after arm's length negotiation between the Company and the Underwriter. Expected timetable 2000 Despatch of circular with notice of the EGM Friday, 18th February Last day of dealings in Shares on a cum-rights basis Wednesday, 1st March Commencement of dealings in Shares on an ex-rights basis Thursday, 2nd March Latest time for lodging transfer of Shares in order to qualify for the Rights Shares 4:00 p.m. on Friday, 3rd March Register of members closes from Monday, 6th March to Monday, 13th March Latest time for lodging proxy forms for the EGM 9:30 a.m. on Saturday, 11th March Record Date for the Rights Issue Monday, 13th March Expected date of the EGM 9:30 a.m. on Monday, 13th March Despatch of Rights Issue prospectus, provisional allotment letters and forms for application of excess Rights Shares Monday, 13th March Register of members re-opens Tuesday, 14th March First day of dealings in nil-paid Rights Shares Wednesday, 15th March Latest time for splitting nil-paid Rights Shares 4:00 p.m. on Monday, 20th March Last day of dealings in nil-paid Rights Shares Thursday, 23rd March Latest time for payment and acceptance of Rights Shares 4:00 p.m. on Tuesday, 28th March Latest time for the Rights Issue to become unconditional 4:00 p.m. on Thursday, 30th March Announcement of results of the Rights Issue Friday, 31st March Despatch of refund cheques in respect of unsuccessful or partially unsuccessful applications for excess Rights Shares Monday, 3rd April Despatch of certificates for Rights Shares Monday, 3rd April Dealing of fully paid Rights Shares commences Thursday, 6th April Warning of the Risks of Dealing in the Shares and Rights Shares Existing Shares will be dealt with on an ex-rights basis from 2nd March 2000. Rights Shares will be dealt with in their nil-paid form from 15th March 2000 to 23rd March 2000 (both dates inclusive). If the Underwriter terminates the Underwriting Agreement (see `Termination of the Underwriting Agreement' below) or the conditions of the Rights Issue (see `Conditions of the Rights Issue' below) are not fulfilled, the Rights Issue will not proceed. Any dealing in Shares or Rights Shares in their nil-paid form between 15th March 2000 to 23rd March 2000 is accordingly at the investors' own risk. If in any doubt, investors should consider obtaining professional advice on this. Status of the Rights Shares The Rights Shares (when fully paid) will rank pari passu in all respects with the Shares in issue on the date of issue of the Rights Shares. Holders of the Rights Shares (when fully paid) will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment and issue of the Rights Shares. Share Certificates Subject to the fulfilment of the conditions of the Rights Issue, share certificates for all fully-paid Rights Shares are expected to be posted by 3rd April 2000 to those Shareholders at their own risk who accepted or applied and paid for the Rights Shares. Rights of Overseas Shareholders Documents to be issued in connection with the Rights Issue will not be registered under the applicable securities legislation of any jurisdictions other than Hong Kong. Accordingly, no provisional allotment of Rights Shares will be made to the Overseas Shareholders. The Company will send a Rights Issue prospectus to Overseas Shareholders for their information only. The Company will not send provisional allotment letters or forms of application for excess Rights Shares to Overseas Shareholders. If a premium (net of expenses) can be obtained, the Company will sell each Overseas Shareholder's provisional allotment of Rights Shares once dealings in the nil-paid Rights Shares start. The proceeds of each sale, less expenses, which amount to $100 or more will be paid by cheque to the relevant Overseas Shareholder in Hong Kong dollars as soon as practicable. The Company will retain individual amount of less than $100 for its own benefit. Fractional Entitlements Any fractional entitlements to the Rights Shares will not be allotted to the Shareholders but will be aggregated and sold and retained for the benefit of the Company. Application for excess Rights Shares Qualifying Shareholders may apply (using forms for application of excess Rights Shares) for any unsold entitlement for the Overseas Shareholders and any Rights Shares provisionally allotted but not accepted. The Company will allocate excess Rights Shares at their sole discretion, on a fair and equitable basis. Application for listing The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms. Dealing in the Rights Shares (in both their nil-paid and fully-paid forms) will be subject to the payment of stamp duty in Hong Kong. UNDERWRITING ARRANGEMENTS Undertaking Neverhalt, a company which is controlled by Mr. Pang Chun Sing, Joseph, the chairman of the Company, is beneficially interested in 3,300,000 issued Shares (representing 11% of the existing issued share capital of the Company) and has irrevocably undertaken to the Company and the Underwriter that it will take up its provisional allotment of, and subscribe for, 4,950,000 Rights Shares. Underwriting Agreement dated 28th January 2000 Underwriter: Chung Nam Securities Limited, a dealer registered under the Securities Ordinance (Chapter 333) of the Laws of Hong Kong, which is principally engaged in dealings in securities and is an independent third party and not connected with the directors, chief executive, substantial shareholders of the Company or its subsidiaries or any of their respective associates (as defined in the Listing Rules) Number of Shares 40,050,000 Rights Shares underwritten: (Note) Commission: 2.5% of the total issue price of the Rights Shares underwritten by the Underwriter. Note: Excluding the 4,950,000 Rights Shares to be provisionally allotted to Neverhalt under the Rights Issue. Termination of the Underwriting Agreement It should be noted that the Underwriting Agreement contains provisions granting the Underwriter the right, exercisable by notice in writing given by the Underwriter to the Company at any time prior to 4:00 p.m. on the second business day immediately after the last day for acceptance of the Rights Issue, to terminate the Underwriting Agreement if in the reasonable opinion of the Underwriter: 1. the success of the Rights Issue or the taking up of the Rights Shares by the Shareholders would be materially and adversely affected by: (i) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may materially and adversely affect the business or the financial position or prospects of the Group as a whole; or (ii) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic, currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the United States of America) or other nature (whether or not sui generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market or the occurrence of any combination of circumstances which may materially and adversely affect the business or the financial position or prospects of the Group as a whole; or 2. there has been a change in market conditions or combination of circumstances in Hong Kong occurs which affect the success of the Rights Issue (such success being the taking up of the Rights Shares by the Shareholders) or otherwise in the reasonable opinion of the Underwriter makes it inexpedient or inadvisable or inappropriate for the Company or the Underwriter to proceed with the Rights Issue; or 3. there has been a change in the circumstances of any member of the Group which may materially and adversely affect the prospect of the Company; or 4. the Company commits any breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement; or 5. the Underwriter receives notification or becomes aware of the fact that any of the representations or warranties contained in the Underwriting Agreement was, when given, untrue or inaccurate or would in any respect be untrue or inaccurate if repeated as provided in the Underwriting Agreement and the Underwriter will determine that any such nature representation or warranty represents or is likely to represent a material adverse change in the financial or trading position or prospects of the Group taken as a whole or is likely to have a material prejudicial effect on the Rights Issue. If the obligations of the Underwriter are so terminated, the Rights Issue will not proceed. Conditions of the Rights Issue The Rights Issue is conditional upon, amongst other things, the following conditions being fulfilled on or before 4:00 p.m. on the business day following the last day for acceptance of the Rights Issue: 1. the approval of the Increase in Authorised Share Capital by Shareholders at the EGM; 2. the approval of the Rights Issue by the Shareholders at the EGM; 3. the Listing Committee of the Stock Exchange granting, the listing of, and permission to deal in, the Rights Shares in nil-paid and fully paid forms; 4. the delivery to the Stock Exchange and registration with the Registrar of Companies in Hong Kong one copy of the prospectus, the provisional allotment letter and form of application for excess Rights Shares in compliance with the Listing Rules and Hong Kong Companies Ordinance; and 5. the delivery to the Underwriter of the irrevocable undertaking by Neverhalt in relation to the Rights Issue referred to in the section headed `Underwriting Arrangements' above. Reasons for the Rights Issue and Use of Proceeds The principal activities of the Group are the holding of equity and equity-related investments in companies engaged in the industrial sector in the PRC, Hong Kong, Macau and Taiwan and the provision of management services to these companies. The Directors believe that the Rights Issue will enlarge the capital base of the Company and will allow Shareholders to participate in the growth of the Company. The estimated net proceeds of the Rights Issue is about $42.5 million and will be used as general working capital of the Group and for possible future investments in the high growth industries in the PRC, Hong Kong, Macau and Taiwan when suitable opportunities arise. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL, ADOPTION OF SHARE OPTION SCHEME AND RENEWAL OF GENERAL MANDATES In order to facilitate the Rights Issue and to accommodate future expansion and growth of the Company, the Directors propose to increase its authorised share capital from $50,000,000 to $300,000,000 by the creation of an additional 250,000,000 new Shares. The Directors have no present intention to issue any part of the unissued share capital of the Company except for the purpose of issuing the Rights Shares under the Rights Issue and any Shares which may fall to be issued upon exercise of the options granted under the Share Option Scheme. The Directors consider that it is in the interests of the Company that employees and executive directors of the Group should be given the opportunity to obtain equity holdings in the Company, thus enabling them to participate in the Company's prosperity and consequently providing them with an incentive to contribute further to the success of the Company. The Directors therefor propose to seek the approval of the Shareholders at the EGM for the adoption of the Share Option Scheme. Under the Share Option Scheme, the maximum number of Shares in respect of which options may be granted (together with options exercised and options then outstanding) under the Share Option Scheme (when aggregated with Shares subject to any other share option scheme) shall not exceed such number of Shares as such represent 10% of the nominal value of the issued share capital of the Company from time to time, excluding for this purpose any Shares issued pursuant to the Share Option Scheme. In connection with the enlarged share capital as a result of the Rights Issue, the Directors will also seek the approval of Shareholders at the EGM for general mandates to repurchase Shares and to issue further Shares not exceeding 10% and 20% respectively of the share capital of the Company as adjusted by the Rights Issue. GENERAL A circular containing, among other things, further details of the Rights Issue, the Increase in Authorised Share Capital, the adoption of the Share Option Scheme, the renewal of the general mandates to repurchase and issue Shares and the notice convening the EGM will be despatched to Shareholders as soon as practicable. TERMS USED IN THIS ANNOUNCEMENT `Company' Dezhong Enterprises Investments Limited, a company incorporated in Hong Kong with limited liability, the Shares of which are listed on the Stock Exchange `Directors' directors of the Company `EGM' the extraordinary general meeting of the Company to be held on or about 13th March 2000 `Group' the Company and its subsidiaries `Hong Kong' the Hong Kong Special Administrative Region of the PRC `Increase in Authorised Share the proposal relating to the Capital' increase of the authorised share capital of the Company from $50,000,000 to $300,000,000 by the creation of an additional 250,000,000 new Shares `Listing Rules' Rules Governing the Listing of Securities on the Stock Exchange `Macau' the Macau Special Administrative Region of the PRC `Neverhalt' Neverhalt Limited, a company incorporated in the British Virgin Islands and controlled by Mr. Pang Chun Sing, Joseph, the chairman of the Company `Overseas Shareholders' Shareholders whose names appear on the register of members of the Company as at the close of the business on the Record Date and whose addresses as shown on such register are outside Hong Kong `PRC' the People's Republic of China and for the purpose of this announcement, excluding Hong Kong and Macau `Qualifying Shareholders' Shareholders other than the Overseas Shareholders `Record Date' 13th March 2000, the record date by reference to which entitlements to the Rights Issue will be determined `Rights Issue' the proposed issue by way of rights of 45,000,000 Rights Shares at a price of $1.00 per Rights Share on the basis of 3 Rights Shares for every 2 Shares then held on the Record Date `Rights Shares' 45,000,000 Shares to be issued in respect of the Rights Issue `Share(s)' ordinary share(s) of $1.00 each in the share capital of the Company `Share Option Scheme' the new employee share option scheme proposed to be adopted at the EGM `Shareholder(s)' holder(s) of the Shares `Stock Exchange' The Stock Exchange of Hong Kong Limited `Subscription Price' subscription price of $1.00 per Rights Share `Underwriter' Chung Nam Securities Limited `Underwriting Agreement' the underwriting agreement in relation to the Rights Issue dated 28th January 2000 between the Company and the Underwriter `$' Hong Kong dollars By Order of the Board Dezhong Enterprises Investments Limited Pang Chun Sing, Joseph Chairman Hong Kong, 28th January 2000