Pacific Online Limited — M&A Activity 2000

Apr 7, 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) DISCLOSEABLE TRANSACTION Summary On 5th April 2000, Sun Kai Yip entered into the Heads of Agreement with Shanghai Light Industry whereby, Sun Kai Yip will dispose of its entire interest in 26.8% of the paid-up registered capital of Shanghai White Cat to the Third Party Purchaser. The consideration for the Disposal is RMB108 million (equivalent to about HK$100.9 million). The Heads of Agreement provides that Shanghai Light Industry shall nominate the Third Party Purchaser within 15 days after the signing of the Heads of Agreement. The Heads of Agreement further provides that Shanghai Light Industry shall procure the Third Party Purchaser shall enter into the Transfer Agreement with Sun Kai Yip within 15 days of the nomination of the Third Party Purchaser by Shanghai Light Industry. In the event that Shanghai Light Industry fails to nominate the Third Party Purchaser or the Third Party Purchaser fails to enter into the Transfer Agreement with Sun Kai Yip within the aforesaid periods, Shanghai Light Industry shall enter into the Transfer Agreement with Sun Kai Yip in lieu of the Third Party Purchaser. The Disposal constitutes a discloseable transaction for the Company under the Listing Rules. The Company will send a circular containing further information on the Disposal to its shareholders soon. HEADS OF AGREEMENT DATED 5TH APRIL 2000 Parties Vendor: Sun Kai Yip, a wholly owned subsidiary of the Company. Purchaser: A third party purchaser to be nominated by Shanghai Light Industry. Shanghai Light Industry is a PRC corporation and the ultimate holding company of Shanghai White Cat Group, which holds the remaining 73.2% interest in the paid-up registered capital of Shanghai White Cat. Shanghai Light Industry and Shanghai White Cat Group are and, to the best of the knowledge and belief of the Directors after making due and careful enquiries, the Third Party Purchaser (and its beneficial owner(s)) will be independent third parties not connected with the directors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates (as defined under the Listing Rules). Assets involved Sun Kai Yip will transfer its entire interest in 26.8% of the paid-up registered capital of Shanghai White Cat to the Third Party Purchaser. Consideration The consideration for the Disposal is RMB108 million (equivalent to about HK$100.9 million) and will be payable in cash in the following manner: (i) as to RMB75 million (equivalent to about HK$70.1 million), within 30 days after the signing of the Transfer Agreement; and (ii) as to the balance of RMB33 million (equivalent to about HK$30.8 million), within 150 days after the signing of the Transfer Agreement. The consideration for the Disposal was determined after arm's length negotiations between the parties and based on the audited net profit before taxation of Shanghai White Cat for the year ended 31st December 1999 of RMB41,502,412 (equivalent to about HK$38,787,301) and a historical price earnings multiple of about 9.7 times and the Directors believe that the consideration is fair and reasonable. Signing of Transfer Agreement The Heads of Agreement provides that Shanghai Light Industry shall nominate the Third Party Purchaser within 15 days after the signing of the Heads of Agreement. The Heads of Agreement further provides that Shanghai Light Industry shall procure the Third Party Purchaser shall enter into the Transfer Agreement with Sun Kai Yip within 15 days of the nomination of the Third Party Purchaser by Shanghai Light Industry. In the event that Shanghai Light Industry fails to nominate the Third Party Purchaser or the Third Party Purchaser fails to enter into the Transfer Agreement with Sun Kai Yip within the aforesaid periods, Shanghai Light Industry shall enter into the Transfer Agreement with Sun Kai Yip in lieu of the Third Party Purchaser. Other material terms Sun Kai Yip shall not be entitled to share in the distribution of the profits by Shanghai White Cat for the financial year ended 31st December 1999. Shanghai Light Industry shall procure Shanghai White Cat Group shall waive all pre-emption rights over Sun Kai Yip's equity interest in Shanghai White Cat under the constitutional documents of Shanghai White Cat. Shanghai Light Industry shall also procure Shanghai White Cat shall obtain all necessary approvals from the PRC government authorities relating to the transfer of Sun Kai Yip's equity interest in Shanghai White Cat to the Third Party Purchaser. INFORMATION ON SHANGHAI WHITE CAT Shanghai White Cat is a Sino-foreign equity joint venture enterprise established in the PRC for a term of 30 years from 1993. Shanghai White Cat is principally engaged in the production and distribution of household and personal cleaning products. The PRC joint venture partner is Shanghai White Cat Group, which holds the remaining 73.2% interest in the paid-up registered capital of Shanghai White Cat. The book value of the Group's investment in Shanghai White Cat amounted to about HK$60 million as at 31st December 1998. Based on the audited accounts of Shanghai White Cat for the two years ended 31st December 1998 and 31st December 1999, prepared under accounting policies accepted in the PRC, the audited profit before taxation of Shanghai White Cat was RMB45,115,276 (equivalent to about HK$42,163,809) and RMB41,502,412 (equivalent to about HK$38,787,301) respectively. Based on the audited accounts of Shanghai Whtie Cat for the year ended 31st December 1999, prepared under accounting policies accepted in the PRC, the audited net asset value of Shanghai White Cat as at 31st December 1999 was RMB247,579,709 (equivalent to about HK$231,382,906). REASON FOR AND BENEFIT OF THE DISPOSAL The principal activities of the Group are the holding of equity and equity-related investments in the PRC, Hong Kong, Macau and Taiwan. The Directors believe that the Disposal represents a good opportunity for the Group to realise its investment in Shanghai White Cat at a reasonable price and is in the interest of the Company and its shareholders. It is expected that the Group will realise a gain (subject to audit) of about HK$40 million upon completion of the Disposal. The Directors intend to use the net proceeds of the Disposal of about HK$100 million for funding possible future equity and equity-related investments and for the Group's general working capital requirements. There is currently no negotiation relating to any possible future equity and equity-related investments by the Group. GENERAL The Disposal constitutes a discloseable transaction for the Company under the Listing Rules. The Company will send a circular containing further information on the Disposal to its shareholders soon. TERMS USED IN THIS ANNOUNCEMENT `Company' Dezhong Enterprises Investments Limited, a public company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange `Directors' directors of the Company `Disposal' the disposal of Sun Kai Yip's entire interest in 26.8% of the paid-up registered capital of Shanghai White Cat pursuant to the Heads of Agreement `Group' the Company and its subsidiaries `Heads of Agreement' a legally binding heads of agreement dated 5th April 2000 made between Sun Kai Yip and Shanghai Light Industry relating to the Disposal `Listing Rules' the Rules Governing the Listing of Securities on the Stock Exchange `Shanghai Light Industry' Shanghai Light Industry Company (Group) , a PRC corporation and the ultimate holding company of Shanghai White Cat Group `Shanghai White Cat' Shanghai White Cat Company Limited , a Sino-foreign equity joint enterprise in which the Group holds a 26.8% equity interest `Shanghai White Cat Group' Shanghai White Cat (Group) Co. Ltd. (formerly known as Shanghai He Sheng Detergent Factory ), the PRC joint venture partner of Shanghai White Cat `Stock Exchange' The Stock Exchange of Hong Kong Limited `Sun Kai Yip' Sun Kai Yip (Shanghai) Industrial Investments Limited, a wholly owned subsidiary of the Company `Third Party Purchaser' a third party purchaser, which will be an independent third party not connected with the directors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates (as defined under the Listing Rules), to be nominated by Shanghai Light Industry `Transfer Agreement' the formal transfer agreement to be entered into between Sun Kai Yip and the Third Party Purchaser relating to the Disposal `HK$' Hong Kong dollars, the lawful currency of Hong Kong `RMB' Renminbi, the lawful currency of the PRC By Order of the Board of Dezhong Enterprises Investments Limited Pang Chun Sing, Joseph Chairman Hong Kong, 6th April 2000 In this announcement, RMB is converted into HK$ at the exchange rate of RMB107: HK$100.