Tomson Group Limited — M&A Activity 2000

Feb 21, 2000

Listed Company Information

PO WING KWAN<0149> - 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 in this announcement. PO WING KWAN INTERNATIONAL (HOLDINGS) LIMITED (Incorporated in Bermuda with limited liability) (the "Company") CONNECTED TRANSACTION Further to the Company's announcement dated 20th January, 2000, on 18th February, 2000, China-HK International Securities Limited (the "Purchaser"), a wholly-owned subsidiary of the Company and Mr. Lam Kwok Fai, Alfred ("Mr. Lam") have entered into a conditional sale and purchase agreement (the "Agreement") for the acquisition of 37.25% interest in the capital of each of Berich Holdings Limited ("Berich Holdings") and Trade One Limited ("Trade One") ("Proposed Acquisition") for the aggregate consideration of HK$45 million (the "Consideration"). Mr. Chung Chi Wah ("Mr. Chung"), a director and the chairman of the Company, holds 40% of the issued share capital of both Berich Holdings and Trade One. Mr. Lam is an independent third party not connected with the directors, chief executive and substantial shareholders of the Company, any of its subsidiaries and their respective associates (as defined in the Listing Rules). The Proposed Acquisition constitutes a connected transaction for the Company under Rule 14.23(1)(b) of the Listing Rules and is subject to disclosure by way of a press announcement. Berich Holdings and its subsidiaries (the "Berich Holdings Group") are principally engaged in the business of money lending as a licensed money lender, property holding and provision of management services to the Trade One Group (as defined below). Trade One and its subsidiary (the "Trade One Group") are principally engaged in securities brokerage business. Completion of the Proposed Acquisition is expected to take place on or before 31st March, 2000 ("Completion"). 1. ACQUISITION 1.1 Details of the Agreement Date: 18th February, 2000. Vendor: Mr. Lam, an independent third party not connected with the directors, chief executive and substantial shareholders of the Company, any of its subsidiaries and their respective associates (as defined in the Listing Rules). Purchaser: China-HK International Securities Limited, a wholly-owned subsidiary of the Company. Assets Acquired: 3,725 shares of HK$1.00 each in the capital of each of Berich Holdings and Trade One, representing 37.25% of the issued share capital of each of Berich Holdings and Trade One. Consideration and Payment: HK$45 million which shall be paid in the following manner: (a) a refundable deposit of HK$10,000,000 has been paid to Mr. Lam upon the signing of the Agreement; and (b) the balance of HK$35,000,000 shall be paid to Mr. Lam upon Completion. The Consideration will be payable in cash and is financed by internal resources of the Company. If Completion is to take place after 31st March, 2000, the Consideration will be adjusted by such amount (the "Adjusted Amount") as equal to the aggregate of 37.25% of the consolidated profit after taxation but before extraordinary items of each of Berich Holdings and Trade One for the period from 1st April, 2000 up to and including the date of Completion. The Adjusted Amount will be determined by reference to the completion management accounts, which will be reviewed by the Purchaser's auditor (the "Completion Accounts") of each of Berich Holdings and Trade One for the period from 1st April, 2000 up to and including the date of Completion. The Adjusted Amount will be paid to Mr. Lam within 10 days of the determination of the Adjusted Amount by reference to the Completion Accounts by the auditors of the Purchaser. No adjustment to the Consideration will be made if the Completion Accounts do not show any consolidated profit after taxation but before extraordinary items. The Consideration of the Proposed Acquisition is arrived at after arm's length negotiation between the parties and the earning potentials of the Berich Holdings Group and the Trade One Group with reference to the audited financial statements of the Berich Holdings Group and Berich Brokerage Limited, the wholly-owned subsidiary of Trade One Group for the year ended 31st March, 1999 and the management accounts of the Berich Holdings Group for the period from 1st April, 1999 to 31st December, 1999 and the management accounts of Trade One Group for the period from 1st April, 1999 to 31st January, 2000. Conditions: Completion of the Agreement is conditional upon fulfillment of the following conditions (the "Conditions") on or before 30th March, 2000 (or such later date to be agreed by the parties): (a) obtaining the approval of the Securities and Futures Commission (the "Commission") for the Purchaser to become a "substantial shareholder" of Trade One and Berich Brokerage Limited, as defined in the Securities and Futures Commission Ordinance (Chapter 24 of the Laws of Hong Kong) (the "SFC Ordinance") in compliance with the requirement of Section 26A of the SFC Ordinance; (b) obtaining any requisite approval, consent and waiver from the relevant regulatory authorities or shareholders of the Company or The Stock Exchange of Hong Kong Limited (the "Stock Exchange") or any other third party(ies) (if necessary) in relation to the entering into the Agreement by Mr. Lam and the Purchaser, the transaction contemplated under the Agreement and the performance of their respective obligations under the Agreement; (c) the aggregate value of the businesses of Berich Holdings and Trade One and their respective subsidiaries (the "Business") as at 31st January, 2000 according to a valuation of the Business conducted by an independent valuer to be appointed by the Purchaser shall be no less than HK$109 million; (d) completion of a due diligence investigation of the financial and legal affairs of the Berich Holdings Group and the Trade One Group with result to the satisfaction of the Purchaser. Completion: Completion is expected to take place on the business day next following the fulfillment of the Condition last in time to be fulfilled, but in any event no later than 31st March, 2000 (or such later date as the parties may agree). In the event, the Condition a) and/or b) are not fulfilled by 30th March, 2000 and the parties cannot agree on an extension of the time, either party can notify the other party of its intention to extend the time for fulfillment of the Conditions to 29th June, 2000 (or such later date as the parties may agree) and the date of Completion will be extended to the business day next following the fulfillment of the Condition last in time to be fulfilled, but in any event no later than 30th June, 2000 (or such later date as the parties may agree). 2. INFORMATION ON BERICH HOLDINGS AND TRADE ONE Berich Holdings is an investment holding company and is owned as to 37.25% by Mr. Lam, as to 40% by Mr. Chung, the chairman and director of the Company and as to 22.75% by Mr. K.C. Luk, who is an independent third party not connected with the directors, chief executive and substantial shareholders of the Company, any of its subsidiaries and their respective associates (as defined in the Listing Rules). Trade One is an investment holding company and is owned as to 37.25% by Mr. Lam, as to 40% by Mr. Chung, the chairman and director of the Company and as to the remaining 22.75% by Mr. K.C. Luk. Both Berich Holdings and Trade One are investment holding companies. The Berich Holdings Group is principally engaged in the business of money lending as a licensed money lender, property holding and provision of management services to the Trade One Group. The Trade One Group, through Berich Brokerage Limited, is principally engaged in securities brokerage business. The audited consolidated profit before and after taxation for Berich Holdings Group for the year ended 31st March, 1998 were HK$9,521,822 and HK$8,081,426. The audited consolidated loss before and after taxation for Berich Holdings Group for the year ended 31st March, 1999 were HK$1,009,913 and HK$886,982. The consolidated net assets of Berich Holdings Group as at 31st March, 1998 and 31st March, 1999 were HK$4,548,525 and HK$855,040. Berich Brokerage Limited was transferred from Berich Holdings to Trade One in December 1998. Trade One was incorporated on 22nd July, 1998. 3. REASONS FOR THE ACQUISITION The Company is an investment holding company listed on the Stock Exchange. The Company and its subsidiaries (together, the "Group") are principally engaged in property trading and development, hotel operation and toll-road project development. The directors of the Company (the "Directors") intend to diversify the Group's business portfolio and broaden its income base by reducing the extent of its reliance on property investments in the People's Republic of China as its major source of income by acquiring assets or investments which might generate additional income to the Group. The Proposed Acquisition, if proceed, will be held by the Group as a strategic investment. The Directors believe that the Proposed Acquisition will not just broaden the income base of the Group, but also enable the Group to benefit from the growth in Hong Kong stock market. The proposed Acquisition constitutes a connected transaction for the Company and is subject to the disclosure requirements in Rule 14.25(1) of the Listing Rules. Details of the Proposed Acquisition will be published in the next annual report of the Company. The Directors (including the independent non-executive directors) are of the view that the terms of the Proposed Acquisition are fair and reasonable so far as the shareholders are concerned. By Order of the Board Po Wing Kwan International (Holdings) Limited Ng Kwan Sau, Mona Company Secretary Hong Kong, 18th February, 2000