Regent Pacific Group Limited — M&A Activity 2000

Mar 16, 2000

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) Major and Connected Transaction Proposed acquisition of Interman Holdings Limited, application for white-wash waiver, completion of placing of shares in KoreaOnline Limited proposed second interim dividend, and proposed change of name of the Company to Interman Limited The Company has entered into the Agreement with Mr. James Mellon, the Chairman of the Company, and the Vendor in relation to the acquisition of the entire issued share capital of Interman at an aggregate consideration of US$81,521,204 (or approximately HK$634,536,596) to be satisfied by the issue to the Vendor of 226,620,213 new Shares at an issue price of HK$2.80 per Share. Completion is conditional upon a number of conditions as set out below under the section headed ``Conditions of the Agreement''. An application will be made by the Vendor to the Executive for a White-wash Waiver, which if granted, would result in any requirement for the Vendor and parties acting in concert with the Vendor to make an unconditional general offer for the issued Shares being waived. It is intended that after Completion and subject to the approval of the Shareholders, the name of the Company will be changed to Interman Limited or such other name to be proposed in the circular to be issued by the Company. The Placing of KOL Shares has been completed. An aggregate of 9,000,000 new KOL Shares have been issued pursuant to the Placing to raise approximately US$117,000,000 (HK$910,260,000) for KOL before costs and placing commissions. Upon completion of the Placing, the Company is interested in approximately 46.2% of the share capital of KOL. Subject to the approval of Shareholders, the Directors have resolved to declare a cash dividend of HK$0.12 per Share. As an alternative to the cash dividend, Shareholders may elect to receive one share in Regent Europe for every Share of the Company held on the Record Date. The Directors also propose the Bonus Issue of Warrants to Shareholders on the basis of 1 Warrant for every 5 Shares held on the Record Date. THE SALE AND PURCHASE AGREEMENT DATED 15TH MARCH, 2000 Parties Issuer and Purchaser: The Company Vendor: Holmehead Limited, a company beneficially wholly-owned by a discretionary trust, the sole beneficiary of which is Mr. James Mellon, the Chairman of the Company Guarantor: Mr. James Mellon Assets to be acquired 41,500 shares in Interman, representing the entire issued share capital of Interman. Interman is an investment holding company. The principal assets of Interman at present are its approximately 74% interest in BigSave.com Limited (``BigSave.com''). The remaining assets of Interman comprise a portfolio of investment in a number of internet related companies. The Company currently owns 1% in BigSave.com and other directors of the Company own 3%. The remaining shares are held by independent third parties. All these directors, if also a shareholder of the Company, will, together with Mr. James Mellon, abstain from voting at the extraordinary general meeting to be convened to approve the Acquisition and other transactions. Consideration The consideration for the Acquisition is US$81,521,204 (or approximately HK$634,536,596). The consideration has been agreed between the parties based on arm's length negotiations with reference in particular to a price of US$3.00 per share in BigSave.com, which represents in excess of 90% of the value of the investments of Interman. The price of US$3.00 per share in BigSave.com is the price at which several placements aggregating a total of 2,700,000 new shares (representing 7% of its issued capital) of BigSave.com to independent institutional investors between August 1999 and March 2000 were conducted. BigSave.com had 34,928,423 shares of US$0.01 in issue as at 31st December, 1999. Shares to be issued An aggregate of 226,620,213 new Shares, representing approximately 25% of the existing issued share capital of the Company and approximately 20% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares, will be issued to the Vendor or its nominees pursuant to the Agreement. The Consideration Shares will rank pari passu in all respects with all existing Shares, including the right to receive all future dividends and distributions declared, made or paid by the Company on or after the date of the Agreement. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares to be issued under the Agreement. Issue price The issue price per Consideration Share of HK$2.80 was determined after arm's length negotiations with reference to the average closing price of HK$2.395 per Share over the 10 trading days up to and including 15th March, 2000, the last day of trading in the Shares prior to the issue of this announcement. The issue price of HK$2.80 per Consideration Share represents a premium of approximately 8.7% to the closing price of HK$2.575 per Share on 15th March, 2000. Such issue price of HK$2.80 per Consideration Share also represents a premium of approximately 207.7% of the audited net asset value as at 31st March, 1999 per Share of approximately HK$0.91. Reasons for the Acquisition The Group is well known for being a pioneer in the fund management business, for example in emerging markets and undervalued assets. In keeping with this forward-thinking philosophy, the Group has over the last two years been investing in the internet area, both through its business in Korea (now renamed KoreaOnline Limited) and by taking small positions in firms such as techpacific.com Limited, BigSave.com Limited, Exchangebet.com Holdings Limited and Educenter.com Limited. The Directors are pleased with the results of this strategy to-date and now consider it appropriate to take a more substantial step in this direction through the acquisition of Interman. The Directors consider that the strategy of Interman has been successful so far and that the acquisition of Interman will save the Company from going through the initial development stage for its online business and allow it to go directly into an already existing internet/e-commerce business. Conditions of the Agreement Completion of the Agreement is conditional upon, among other things, the following principal conditions being fulfilled: (a) the Executive granting the White-wash Waiver to the Vendor and persons acting in concert with it (as defined in the Takeovers Code) in respect of any obligation for it to extend a mandatory general offer under Rule 26 of the Takeovers Code to acquire all the Shares in issue other than those already held by the Vendor and persons acting in concert with it upon completion of the Agreement, subject to the approval of the Independent Shareholders in accordance with the Takeovers Code; (b) listing of and permission to deal in all the Consideration Shares being granted by the Listing Committee of the Stock Exchange; (c) approval by the Independent Shareholders for the transactions contemplated by the Agreement and such other matters as may be contemplated in any circular to be sent to shareholders of the Company in this regard; and (d) completion of due diligence by the Company on Interman without identification of any matters which would have a material adverse effect on the financial standing of Interman. Completion Completion will take place on the second Business Day after all conditions of the Agreement have been fulfilled. In the event that the above conditions of Agreement are not fulfilled by 30th June, 2000, it will lapse. Non-competition The Vendor and Mr. James Mellon confirm that they do not have any competing business with the Company after the Acquisition. Guarantee Mr. James Mellon has given warranties jointly and severally with the Vendor, and has agreed to guarantee the performance of the Vendor under the terms of the Agreement. SHAREHOLDING STRUCTURE Set out below is a table showing the Company's existing shareholding structure and the structure immediately after Completion: Existing shareholding Immediately upon structure Completion Number of Shares % Number of Shares % ('000) ('000) Mr. James Mellon 118,935 12.9 345,555 30.1 Mr. Peter Everington 49,291 5.3 49,291 4.3 Ms. Jayne Sutcliffe 38,727 4.2 38,727 3.4 Other Directors 1,250 0.1 1,250 0.0 ------- ---- ------- ---- 208,203 22.5 434,823 37.8 Public 714,072 77.5 714,072 62.2 ======= ==== ======= ==== Total issued share capital of the Company 922,275 100.0 1,148,895 100.0 ======= ===== ========= ===== INFORMATION ON THE GROUP The Group is principally engaged in asset management, provision of investment advisory services, corporate finance and advisory services, corporate investment and brokerage. For the year ended 31st March, 1999, the Group recorded a loss attributable to Shareholders of US$50,300,000. For the year ended 31st March, 1998, the Group recorded profit attributable to Shareholders of US$73,700,000. As at 31st March, 1999, the Group had net assets of approximately US$107,025,000 and as at 31st March, 1998, the Group had net assets of approximately US$150,400,000. For the six months ended 30th September, 1999, the Group recorded profit attributable to Shareholders of US$39,200,0000. The Directors do not expect that any change will be made to the composition of the Board as a result of the Acquisition. INFORMATION ON INTERMAN Interman is a company engaged in technology investment. Interman currently holds a portfolio of investment in internet related companies. The principal asset of Interman at present is its approximately 74% interest in BigSave.com. BigSave.com is a company incorporated in the Isle of Man on 6th April, 1999. BigSave.com is an internet discount superstore offering brand name products and services via the internet and the provision of consultancy services to customers mainly in the UK. BigSave.com retains its own site and also provides space for its own subsidiaries and other retailers in a virtual shopping mall. For the period from 6th April, 1999 to 31st December, 1999, BigSave.com incurred a loss for the period of GBP2,824,668 (or approximately HK$35,000,000). As at 31st December, 1999, BigSave.com had audited net assets of GBP4,883,851 (or approximately HK$60,000,000). In December 1999, the web site ``www.bigsave.com'' achieved up to 850,000 hits per day from more than 135,000 daily visitors, and achieved more than 220,000 registered users and other visitors. It currently offers 8,500 products on the web site. BigSave.com is in discussion with its financial advisers in preparation of a listing of its securities on an approved stock exchange, however no definite proposal has been agreed. The Company will make a further announcement when the listing plan is finalised. The remaining internet portfolio comprise interests in venture capital companies, internet portal companies, software and software solution companies and e-commerce companies. TAKEOVERS CODE IMPLICATIONS During the six-month period immediately preceding the date of this announcement, there were no dealings in the Shares by the Vendor and parties acting in concert with it. Mr. Peter Everington, Ms. Jayne Sutcliffe and other Directors, holding in aggregate 9.6% of the existing Shares, are parties acting in concert with the Vendor. Upon issuance of the Consideration Shares, the Vendor and parties acting in concert with it will be interested in approximately 37.8% of the then issued share capital of the Company. Under the Takeovers Code, the Vendor or parties acting in concert with it would be obliged to make an unconditional general offer to acquire all the Shares other than those already owned by it and parties acting in concert with it. An application will be made by the Vendor to the Executive for a White-wash Waiver, which, if granted, would be subject to the approval of the Independent Shareholders on a vote taken by way of a poll. The Executive may or may not grant the White-wash Waiver. Completion is conditional upon, inter alia, the granting of the White-wash Waiver by the Executive and the approval of the Independent Shareholders. COMPLETION OF PLACING On 29th December, 1999, the Directors announced a proposal to place a maximum of 12,000,000 new KOL Shares at a maximum price of US$16 per share. On 14th January, 2000, a circular containing details of the Placing was issued to the Shareholders. The arrangements for the Placing were approved by Shareholders at an extraordinary general meeting of the Company held on 31st January, 2000. The Directors have pleasure in announcing that the Placing has been completed and 9,000,000 new shares of KOL were issued at a price of US$13 per share, raising an aggregate of US$117,000,000 for KOL before costs and placing commissions. Following completion of the Placing, the Company holds a 46.2% interest in KOL. KOL will be accounted for as an associated company of the Company in the next audited accounts as at 31st March, 2000. As stated in the Company's circular dated 14th January, 2000, the net proceeds of the Placing will be used to finance various projects of KOL, including the construction of an online financial services business. The Company has recently acquired from independent third parties about 47% of Haedong Insurance Company Limited for a consideration of KRW13,800,000,000 (or approximatley HK$95,000,000), which will be a key component of its internet strategy in Korea. The acquisition of such interest did not constitute a notifiable transaction of the Company under the Listing Rules. PROPOSED SECOND INTERIM DIVIDEND Subject to the approval of Shareholders at the extraordinary general meeting referred to below, the Directors have resolved to declare the Dividend out of the distributable reserves of the Company. The Dividend will be satisfied in cash and as an alternative to Shareholders who are interested in the Eastern European business of the Company, by the distribution in specie of the entire share capital of Regent Europe on the basis of one share of Regent Europe for every Share of the Company. If the Dividend is approved, the Directors will consider in light of the results for the year ending 31st March, 2000, expected to be announced in around June 2000, whether or not to recommend any further dividend for that year. The dates for the closure of Register of Members and the distribution will be set out in detail in the circular. Reasons for the Dividend Regent Europe is a company incorporated in the Cayman Islands and a wholly-owned subsidiary of the Company which acts as the holding company for the Company's European interests. These include principally brokerage and investment activities in Russia, corporate finance activities based in London and certain fund management activities. For the year ended 31st March, 1999, activities in Eastern Europe and Russia now held under Regent Europe incurred losses of an aggregate of US$53,900,000. The net asset value of Regent Europe was approximately US$20,000,000 (HK$155,600,000) according to the management accounts of the Company for January 2000. The Directors believe that, while the financial position of Regent Europe has now stabilised, and it is able to fund its own operations, after Completion, its business will no longer be consistent with the Group's focus. Following the Dividend, Regent Europe will function as an independent financial services group. The Directors believe this step will clarify the structure of the Company and sharpen the focus of its business in terms of both geographical area and markets served. At the same time, the management of Regent Europe will be able to concentrate on its own specialised businesses and be incentivised by reference to the results from those businesses. The management will consider various possibilities of providing liquidity for the shares of Regent Europe after the Dividend, such as a potential listing on the GEM market in Hong Kong or the AIM market in the United Kingdom, but there is no guarantee that such arrangements will be made. The Company's shareholders will benefit directly in any improvement in the results of Regent Europe through their shareholding in Regent Europe following the Dividend to the extent they elect to receive shares in Regent Europe. The Directors holding approximately 22.4% of the Company's present share capital have stated that they will elect to receive shares in Regent Europe. PROPOSED CHANGE OF NAME Upon Completion, to reflect the change in focus of the Group, it is proposed that the name of the Company will be changed to Interman Limited or such other name to be proposed in the circular to be issued by the Company. The change of name is subject to approval by the Shareholders at an extraordinary general meeting. PROPOSED BONUS ISSUE OF WARRANTS The Directors propose to make the Bonus Issue of Warrants with the right to subscribe HK$2.80 in cash for new Shares at a price of HK$2.80 per Share in cash, subject to adjustment, at any time from the date of issue of the Warrants to 30th June, 2003 (both days inclusive) to all holders of Shares whose names appear on the Register of Members of the Company on the Record Date on the basis of one Warrant for every five existing Shares held on the Record Date. Full exercise of the Warrants at the initial subscription price of HK$2.80 per Share (on the basis of 1,148,895,688 Shares in issue upon Completion) would result in the issue of a total of 229,779,137 new shares and the receipt by the Company of approximately HK$643,400,000 before expenses. Fractional entitlements will not be allotted to Shareholders but will be aggregated and sold for the benefit of the Company. The proceeds raised will be used to invest in internet/e-commerce projects identified by the Company. The bonus issue of Warrants will be conditional upon the approval of the Shareholders of the Company in general meeting and on the Listing Committee of the Stock Exchange granting listings of and permission to deal in the Warrants and the new Shares falling to be issued upon exercise of the subscription rights attaching to the Warrants. Application will be made to the Listing Committee of the Stock Exchange in respect of such listings. The value of each board lot will be approximately HK$3,200. The Warrants will be issued on the same date when the Dividend is distributed. Each board lot will constitute 10,000 Warrants of the Company. The timetable on the Bouns Issue will be announced at a later date. GENERAL As Mr. James Mellon, the Chairman of the Company, is interested in the Vendor, the Acquisition constitutes a connected transaction of the Company under the Listing Rules and is conditional on the approval of the Independent Shareholders. Since Mr. James Mellon and the Vendor are interested in and will be benefiting from the Acquisition, an independent committee of the board of directors of the Company will be appointed to consider the White-wash Waiver and the Acquisition. An independent financial adviser will be appointed to advise the independent board committee regarding the White-wash Waiver, the Acquisition and the Dividend. Somerley Limited has been appointed to advise the Company in connection with the Acquisition and the Dividend. A composite document, containing, inter alia, details of the Acquisition, the White-wash Waiver, the Placing, the Dividend (including details of registration of the Regent Europe shares) and the Bonus Issue will be sent to the Shareholders as soon as practicable. The document will also contain notice of the extraordinary general meeting to be held to consider, inter alia, the Acquisition, the White-wash Waiver, the Dividend, the Bonus Issue and the change of name. DEFINITIONS In this announcement, the following expressions have the meanings set out below: ``Acquisition'' the proposed acquisition by the Company of 100% interest in Interman pursuant to the Agreement ``Agreement'' the sale and purchase agreement dated 15th March, 2000 between the Company and the Vendor relating to the sale and purchase of Interman ``Associate(s)'' has the meaning ascribed thereto under the Listing Rules ``Board'' the board of Directors ``Bonus Issue'' the proposed bonus issue of Warrants ``Business Day'' any day (including a Saturday) on which banks are generally open for business in Hong Kong ``Company'' or ``Regent'' Regent Pacific Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange ``Completion'' completion of the Agreement ``Consideration Share(s)'' 226,620,213 new Shares to be issued pursuant to the Agreement ``Directors'' Directors of the Company from time to time ``Dividend'' the proposed payment of the second interim dividend by way of distribution in specie of the Regent Europe Shares or in cash of HK$0.12 per Share ``Executive'' the Executive Director of the Corporate Finance Division of the SFC (or any delegate of the Executive Director) ``Group'' the Company and its subsidiaries ``HK$'' Hong Kong dollar(s), the lawful currency in Hong Kong ``Hong Kong'' Hong Kong Special Administrative Region of the People's Republic of China ``Independent Shareholders'' Shareholders who are not involved in or interested in the Acquisition ``Interman'' Interman Holdings Limited, a company incorporated in the British Virgin Islands with limited liability ``Mr. James Mellon'' Mr. James Mellon, the Chairman of the Company ``KOL'' KoreaOnline Limited, formerly known as Regent Korea Limited, a company incorporated in the Cayman Islands and a 60% owned subsidiary prior to the Placing ``KOL Shares'' shares of US$0.10 each in KOL ``KRW'' Korean Won, the lawful currency in Korea ``Listing Rules'' Rules Governing the Listing of Securities on the Stock Exchange ``Placing'' the placing of KOL Shares ``Record Date'' the date by reference to which the entitlements under the Dividend and the Bonus Issue are determined ``Regent Europe'' Regent Europe Limited (formerly known as Regent Fund Management (Cayman) Limited), a company incorporated in the Cayman Islands and a wholly owned subsidiary of the Company ``SFC'' Securities and Futures Commission ``Share(s)'' share(s) of US$0.01 each in the capital of the Company ``Shareholder(s)'' the holder(s) of the Share(s) ``Stock Exchange'' The Stock Exchange of Hong Kong Limited ``Takeovers Code'' The Hong Kong Code on Takeovers and Mergers ``US$'' United States dollar(s), the lawful currency in the United States of America ``Vendor'' Homlehead Limited, a company incorporated in the British Virgin Islands, which is wholly owned by a discretionary trust, the sole beneficiary of which is Mr. James Mellon, the Chairman of the Company ``Warrants'' warrants in subscription rights of HK$2.80 each to subscribe in cash for new Shares at an initial subscription price of HK$2.80 (subject to adjustment) ``White-wash Waiver'' A waiver from the obligation to extend a mandatory general offer under the Takeovers Code pursuant to Note 1 of the Notes on dispensations from Rule 26 of the Takeovers Code to be sought from the Executive On behalf of the Board of REGENT PACIFIC GROUP LIMITED Peter Everington Director Hong Kong, 15th March, 2000 The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, their opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any of their statements in this announcement misleading.