Regent Pacific Group Limited — M&A Activity 1999

Nov 11, 1999

Listed Company Information

REGENT PACIFIC<0575> - 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. REGENT PACIFIC GROUP LIMITED (Incorporated in the Cayman Islands with limited liability) DISCLOSEABLE TRANSACTION The Directors announce that on 10th November, 1999, Daeyu Regent Securities Company Limited ("DRS") (a non-wholly owned subsidiary of the Company) entered into the Agreement whereby DRS has agreed to acquire from Mr Young Sam Jeong, his family members and close associates (the "Vendors") 3,605,440 Shares in the capital of Kyungsu Merchant Bank ("Kyungsu"), representing approximately 25.75% of its issued share capital. The Group held approximately 5.88% of Kyungsu prior to the execution of the Agreement, and 31.63% after the completion. The remaining 68.37% are held by third parties independent of the Company, or any of its subsidiaries, directors or substantial shareholders or their associate as defined in the Listing Rules. The Consideration amounts to KRW54,081,600,000 (US$45,677,000), representing a consideration of KRW15,000 per Sale Share. Due to the size of the consideration attributable to the Group and the percentage of the net asset value of Kyungsu that will be held by the Group, the Acquisition constitutes a discloseable transaction pursuant to Rule 14.12 of the Listing Rules. Definitions In this Announcement, the following terms and expressions have the following meanings: "Acquisition" the acquisition of the Sale Shares pursuant to the terms of the Agreement "Agreement" the Share Purchase Agreement entered into between DRS, the Vendor and Kyungsu dated 10th November, 1999 relating to the Acquisition "Company" Regent Pacific Group Limited "Conditions" the conditions referred in the paragraph headed "Conditions Precedent" below "Consideration" being KRW54,081,600,000 (US$45,677,000), the consideration for the Sale Share "DRS" Daeyu Regent Securities Company Limited, a company duly organised and validly existing under the laws of Korea whose shares are listed on the Korea Stock Exchange, a 64% owned subsidiary of Regent Korea Limited, which is in turn a 60% owned subsidiary of the Company "Directors" the directors of the Company "Group" the Company and its subsidiaries "KRW" Korean Won, the lawful currency of Korea "Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited "Kyungsu" Kyungsu Merchant Bank Co. Limited, a company duly organised and validly existing under the laws of Korea whose shares are listed on the Korea Stock Exchange "Sale Shares" being 3,605,440 shares of Kyungsu "SEHK" The Stock Exchange of Hong Kong Limited "US$" United States dollars, the lawful currency of the United States of America The Parties Agreement: 10th November, 1999 Vendors: Young-Sam Jeong, Woo-Seok Jeong, Won-Seok Jeong, Hye-Shin Jeong, Ji-Ja Hong, Young-Wan Jeong, In-Soon On, Kumwonsa Co., Dongju Suryuk Co., Jowon Tourist Co., Kumbo Development Co., Jung-Hyun Kim, Hee-Do Kang, Nam-Doo Jeong, Nambu CC Association, Folk Village Association Purchaser: DRS Target Company: Kyungsu, a company duly organised and validly existing under the laws of Korea with its address at 11-7, Paldal-Ro-1-Ka, Paldal-Ku, Suwon, Kyungkido Korea The Vendors and Kyungsu and their respective associates are independent third parties which are not connected with the Company, or with any of its subsidiaries, directors, substantial shareholders or their associates as defined in the Listing Rules. Acquisition of interests in Kyungsu DRS has agreed to purchase from the Vendors 3,605,440 Sale Shares which represent in aggregate 25.75% of the total shares in issue. Consideration and Completion The Consideration for the Acquisition is KRW54,081,600,000 (or US$45,677,000) which has been translated at the exchange rate of KRW1,184 to US$1 as at the close of business on 9th November, 1999, representing a consideration of KRW15,000 (or USD12.67) per Sale Share. DRS will fund the Acquisition using internal resources and banking facilities. DRS shall pay the Vendors an amount of KRW16,224,480,000 (or US$13,703,000) upon the execution of the Agreement, representing 30% of the Consideration. The remaining 70% of the Consideration shall be paid within 14 days after the completion of the due diligence of Kyungsu. Conditions Precedent Completion of the Acquisition is conditional upon the completion of a due diligence exercise on the financial and general matters of Kyungsu by DRS. DRS is permitted 30 calendar days to perform the due diligence exercise. The completion is also conditional upon the approval of the Financial Supervisory Commission of Korea. Information relating to Kyungsu Kyungsu has a valid and full merchant bank licence in Korea to conduct merchant banking activities including but not limited to lending, note and bond issuing, lease financing, underwriting, managing consulting, secondary distribution of securities and cash management. The audited accounts of Kyungsu for the year ended 31st March, 1999 showed a profit before taxation of KRW3,310,000,000 (US$2,796,000), compared to KRW1,400,000,000 (US$1,182,000) for the full year ended 31st March 1998. After taking into account income tax of KRW952,000,000 (US$804,000), the net reported earnings for the fiscal year ended 31st March, 1999 were KRW2,360,000,000 (US$1,993,000), increased from KRW1,160,000,000 (US$980,000) for fiscal year ended 31st March 1998. The audited net asset value of Kyungsu as at 31st March, 1999 was KRW98,300,000,000 (US$83,024,000), compared to KRW64,000,000,000 (US$54,054,000) as at 31st March 1998. Kyungsu will not be a subsidiary of the Group. Reasons for the Acquisition The Group's principal activities consist of asset management, provision of investment advisory services, corporate finance and advisory services, corporate investment and brokerage. The Acquisition is in line with the Group's overall business strategy to seek investment opportunities as a way to widen and strengthen its earnings base. It is considered that Kyungsu will provide regular income to the Group, as evident by the profits made in the past two fiscal years. The Acquisition is part of a long term plan for the Group to build a financial services group in Korea. DRS will seek board representation on Kyungsu subject to shareholders' approval at the next annual general meeting of Kyungsu. At present, neither the Company nor DRS has any intention to increase the stake in Kyungsu and the stake in Kyungsu will be treated as a long-term investment of the Group. The Consideration was calculated based on a 113% premium of the net book value of Kyungsu as at 31st March. It was negotiated on an arm's length basis and the Directors consider that the Consideration and other terms of the Agreement are fair and reasonable and that it is in the interests of the Group as a whole to enter into the Agreement. The Acquisition constitutes a discloseable transaction pursuant to Rule 14.12 of the Listing Rules. A circular containing, amongst other things, details about the Acquisition and the Agreement will be dispatched shortly to shareholders for their information. By Order of the Board Jim Mellon Chairman Hong Kong, 10th November, 1999