Suncorp Technologies Limited — M&A Activity 1999

Nov 17, 1999

Listed Company Information

DVB (HOLDINGS)<0500>-Announcement & Resumption of Trading 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. DVB (HOLDINGS) LIMITED (incorporated in Bermuda with limited liability) DISCLOSEABLE TRANSACTION SUMMARY The Directors of DVB (Holdings) Limited (the `Company') are pleased to announce the entering into of the following agreements on 13 November 1999: Shareholders Agreement DVB (Group) Limited (`DVB (Group)', a wholly-owned subsidiary of the Company), STR International (H.K.) Company Limited (`STR'), and Space Pilot International Limited (`SPI') have agreed to set up STR Broadcom Limited, a Cayman company (`Broadcom') to invest in a PRC Sino-foreign cooperative joint venture (the `CJV') which will make available equipment to PRC entities to assist them with image, sound, and interactive data transmission business and provide encryption technology, consultancy services and other related technical support. The CJV will initially carry on such business in the Eastern China area of the People's Republic of China (the `PRC'). In this connection DVB (Group), STR, SPI and Broadcom have entered into a Shareholders Agreement dated 13 November 1999 (the `Shareholders Agreement') to regulate the relationship of DVB (Group), STR and SPI as shareholders of Broadcom. Pursuant to the terms of the Shareholders Agreement, each of DVB (Group), STR and SPI (each a `Shareholder') will initially subscribe for 3,600,000 shares in Broadcom of HK$1 each representing 33.3% of the then issued share capital of Broadcom. The total consideration payable by DVB (Group) for the shares is a sum of HK$3,600,000 in cash. DVB (Group) intends to finance the consideration from its own resources. Cooperative Joint Venture Contract Broadcom (through one of its wholly owned subsidiaries) and Shanghai Broadcasting and Television Technology System Limited (`SBT', a PRC state owned enterprise which is an associated company of STR) have entered into a Sino-foreign joint venture contract on 13 November 1999 to set up the CJV. Under the joint venture contract, the after tax profit (after the statutory contributions) of the CJV will be distributed as to 70% to Broadcom's wholly owned subsidiary and as to 30% to SBT. The term of the joint venture is for a period of 30 years. After the completion of the share subscription by the Shareholders, it is contemplated that Broadcom will offer 1,200,000 new shares of Broadcom to a number of specified management personnel who are expected to join Broadcom and to stay with Broadcom for at least 3 years. Supplementary Agreement DVB (Group), STR, SPI, Broadcom, the Company, Shanghai Broadcasting Information Network Company Limited (`SBIN'), Shanghai Broadcasting and Television Material and Equipment Supplies Company (`SBTM') and STR International Holdings Ltd. (`STR International') have entered into a Supplementary Agreement on 13 November 1999 (the `Supplementary Agreement'). Pursuant to the Supplementary Agreement, SBIN, SBTM, STR International and the Company agree to assume certain of their respective obligations expressed to be assumed by them in the Shareholders Agreement. The principal obligation for the Company assumed under the Supplementary Agreement is as follows. Under the Shareholders Agreement, DVB (Group) agrees, subject to certain conditions to be fulfilled by 31 August 2001, to grant to STR a put option such that STR may elect to sell to DVB (Group) its 30% shareholding in Broadcom (based on its enlarged issued share capital following the issuance of the new shares to the management personnel). If STR were to exercise the put option, the total consideration payable for the 30% shareholding will be 22,700,000 new shares in the share capital of the Company. Another obligation assumed under the Supplementary Agreement is an undertaking given by the Company not to compete with the CJV in respect of its intended business in the Eastern China area of the PRC. In the Supplementary Agreement, the Company has agreed to assume, inter alia, the obligation to fulfil the payment of such consideration. The aggregate value of the consideration to be given by the Company in case STR were to exercise the put option represents 15% or more (but less than 50%) of the consolidated assets of the Company. Accordingly, under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the `Stock Exchange') (the `Listing Rules'), the acquisition of STR's 30% shareholding in Broadcom pursuant to the Shareholders Agreement will constitute a discloseable transaction for the Company. THE SHAREHOLDERS AGREEMENT Date 13 November 1999 Parties Shareholders (1) STR International (H.K.) Company Limited (2) DVB (Group) Limited (3) Space Pilot International Limited Broadcom STR Broadcom Limited Incorporation of Broadcom DVB (Group) is a wholly owned subsidiary of the Company. DVB (Group), STR, and SPI have agreed to set up Broadcom which will invest in the CJV along with SBT. Each of STR, SPI, SBT, SBIN, SBTM and STR International is a third party independent from the directors, chief executive, substantial shareholders of the Company and their respective associates. DVB (Group), STR, SPI and Broadcom have entered into the Shareholders Agreement on 13 November 1999 to regulate the relationship of DVB (Group), STR and SPI as shareholders of Broadcom. Cooperative Joint Venture Contract Broadcom (through one of its wholly owned subsidiaries) and SBT have entered into a cooperative joint venture contract and an articles of association (together the `CJV Agreement') in connection with the establishment of the CJV. Reserved Shareholder Matters Under the Shareholders Agreement, the Shareholders will procure that board of the directors of Broadcom shall refrain from taking any action or decision relating to a list of matters, including the change of the business of Broadcom, appointment and removal of its auditors, and the incurring of capital expenditure or borrowing beyond certain set thresholds. Such matters are to be decided by Broadcom's shareholders in accordance with the Shareholders Agreement. Business of Broadcom and CJV The Shareholders intend that the CJV will make available equipment to PRC entities (including cable television companies and financial institutions in the PRC) to assist them with image, sound, and interactive data transmission business and provide encryption technology, consultancy services and other related technical support. The CJV will initially carry on the business in the Eastern China area of the PRC. Under the CJV Agreement, the after tax profit (after the statutory contributions) of the CJV will be distributed as to 70% to Broadcom's wholly owned subsidiary and as to 30% to SBT. The term of the joint venture is for a period of 30 years. Terms of Subscription Pursuant to the terms of the Shareholders Agreement, each of DVB (Group), STR and SPI will initially subscribe for 3,600,000 shares in Broadcom of HK$1 each representing 33.3% of the then issued ordinary share capital of Broadcom. The Shareholders' obligation to subscribe for the shares is conditional upon the fulfillment of the Conditions Precedent set out below. The total consideration payable by DVB (Group) for the shares is a sum of HK$3,600,000 in cash. DVB (Group) intends to finance the consideration from its own resources. Conditions Precedent Completion of the subscription for the shares in Broadcom is conditional on, inter alia, the CJV Agreement having received such regulatory approvals as set out in the CJV Agreement. Such approvals include the approval of the CJV Agreement from a local PRC approval authority and the issue of a business licence to the CJV. Completion Date The subscription shall be completed as soon as practicable and in any event, no later than 30 April 2000 or such other date as DVB (Group), STR and SPI may agree in writing. Management Shares After completion of the subscription for the shares by the Shareholders, it is contemplated that Broadcom will offer 1,200,000 new shares of Broadcom to a number of specified management personnel who are expected to join Broadcom and to stay with Broadcom for at least 3 years. The 1,200,000 new shares will represent 10% of the Company's enlarged issued share capital. The shares can be subscribed in cash at par by the personnel within 60 days after the completion of the share subscription by the Shareholders. Such offer is made on the condition that each of the personnel is expected to remain employed with Broadcom for a period of no less than 3 years. In the event any of the personnel terminates his employment before the period expires, he will be required to sell the shares that he has subscribed for to the Shareholders at the original subscription price. (For the subscription of shares by management personnel, please refer to the press announcement today.) Put Option In the Shareholders Agreement, DVB (Group) agrees to grant to STR an option to require DVB (Group) to purchase (the `Put Option') all but not some only of the 3,600,000 shares to be allotted to STR pursuant to the Shareholders Agreement (the `Option Shares'). Among other conditions, the exercise of the Put Option shall be subject to: (a) the shares of Broadcom not having been listed on an international stock exchange agreed upon by the Shareholders on 31 August 2001; and (b) where Broadcom has issued shares to new investor(s), the aggregate consideration for the issue or issues representing 30% (in aggregate) of the share capital of Broadcom as at 31 August 2001 being less than HK$300,000,000. STR may exercise the Put Option by giving DVB (Group) notice at any time during the seven day period commencing on 1 September 2001 that STR intends to exercise the Put Option. Completion of the sale and purchase of the Option Shares will take place within 14 days of STR exercising the Put Option. Consideration for Option Shares The consideration for the Option Shares shall be the allotment by the Company to STR of 22,700,000 ordinary shares in the share capital of the Company, credited as fully paid. The allotment represents 10.8% of the Company's existing share capital and 9.7% of the Company's enlarged issued share capital. The exercise of the Put Option shall (where applicable) be subject to the members of the the Company in general meeting granting a mandate to issue and allot the Option Shares and to all necessary regulatory approvals (including the approval of the Hong Kong Stock Exchange Limited) from any governmental or regulatory authorities. Supplementary Agreement Each of SBIN, SBTM, STR International and the Company was made a party to the Supplementary Agreement to confirm its agreement to certain obligations expressed to be assumed by it in the Shareholders Agreement. To the best knowledge of the Directors of the Company (the `Directors') SBTM and SBIN owns SBT as to 70%, and 30% respectively and STR International is the holding company for the STR group in relation to its business outside of Mainland China. In the Supplementary Agreement, each of SBTM, SBIN, STR International and the Company undertakes not to compete with the CJV in respect of its intended business in the Eastern China area of the PRC. Under the Supplementary Agreement, the Company has also agreed to issue 22,700,000 ordinary shares in the Company on the terms set out in the Shareholders Agreement. Value of the Consideration The average closing price of the shares of the Company for the last 10 trading days is HK$3.605. The closing price of the shares of the Company before suspension of trading was HK$4.0 Based on these values, the aggregate value of the consideration for the Option Shares to be given by the Company in case STR were to exercise the Put Option would amount to HK$81,833,500 and HK$90,800,000, respectiely. Under the Listing Rules, the acquisition of the Option Shares pursuant to the Shareholders Agreement (the `Acquisition') will constitute a discloseable transaction for the Company. The terms of the Shareholders Agreement (including the provisions of the Put Option) were negotiated on an arms length basis having given due regard: - to the net asset value of the Company; - to the anticipated growth prospects of the CJV business; - to the local market knowledge of the PRC partners; - to the market access the PRC partners could provide to the CJV; and - to CJV's competitive advantage in the marketplace. Based on the above, the Directors consider the consideration for the Option Shares to be fair. REASONS FOR THE ACQUISITION The Directors are of the view that the provision of equipment and technology related to image, sound and interactive data transmission used in the PRC is undergoing a period of rapid development and has significant potential for substantial growth. Part of the Company's business strategy is to take advantage of this growth potential by positioning itself for any further business opportunities in the data transmission market and to explore opportunities for further investments in related industries in the PRC. Based on the factors above, the Directors believe that the Shareholders Agreement will enhance the Company's growth prospects as well as further strength the Company's position in the image, sound and interactive data transmission sector in the PRC. EXISTING BUSINESS OF the Company The Company is principally engaged in the sale of computer monitors and related products and has since December 1998 diversified into the electronic and digital data transmission (the `EDT') business. The Company has been exploring opportunities for business collaborations and development of the EDT business in the Asia Region. Business collaborations in relation to EDT business may take the form of supply arrangements, manufacturing/sub-assembly arrangements, technical service arrangements and/or equity or joint venture participation. As indicated in the Company's interim report dated 9 September 1999 for the 6 months ended 30 June 1999, the Company has been seeking to divest from its investment in the computer monitor business. The financial impact of the intended disposal of the monitor business has already been accounted for in the interim report when the investment in the monitor business was reclassified as a short term investment. Accordingly, such reclassification of the investment has written down the investment to lower of costs and net realizable value, as indicated by the significant provisions made in the 1999 interim report. The situation of the investment in the monitor business has not changed since the issue of the 1999 interim report. As such we do not expect any further adverse financial impact to DVB, since the issuance of the 1999 interim report. A circular containing further details of the Shareholder Agreement and the Supplementary Agreement will be sent to the shareholders of the Company as soon as practicable. At the Company's request, trading in the shares of the Company has been suspended from 10:00 a.m. on 16 November 1999 pending release of this announcement and application has been made by the Company for the resumption of trading in the shares of the Company with effect from 10:00 a.m. tomorrow. By Order of the Board DVB (Holdings) Limited Wu Zheng, Bruno Executive Director Hong Kong, 16 November 1999