Wang On Group Limited — M&A Activity 2000

Jan 6, 2000

Listed Company Information

WANG ON GROUP<1222> - Announcement WANG ON GROUP LIMITED MAJOR TRANSACTION DISPOSAL OF 280 CAR PARKING SPACES China Coin, a wholly-owned subsidiary of the Company, has entered into a provisional sale and purchase agreement (the "Agreement") with the Purchaser on 5th January 2000 pursuant to which China Coin will dispose its entire interests in 280 car parking spaces located at Tsui Chuk Garden to the Purchaser (the "Disposal") for a total cash consideration of HK$60 million (the "Consideration"). The Agreement further provides that the Purchaser will on completion of the Disposal lease the Car Parking Spaces to the Group for a term of 2 years ("Initial Term") with an option for the Group to renew the tenancy for another two years ("Further Term"). The rent payable during the Initial Term is HK$600,000 per month with an additional rent of 50% of the total monthly rent/licence fee actually received or receivable by the Group in respect of the Car Parking Spaces for any calendar month in excess of HK$700,000. The rent payable during the Further Term will be either (a) the total of HK$600,000 per month and the highest additional rent paid for any month during the Initial Term or (b) the then prevailing market rent for the Car Parking Spaces, whichever is higher. An additional rent of 50% of the total monthly rent/licence fee actually received or receivable by the Group for any calendar month in excess of the total sum of the monthly rent payable for the Further Term and HK$100,000 is also payable. The Consideration was determined after arm's length negotiations between the parties. The rent payable under the lease back arrangements was determined on arm's length basis. The Directors consider the terms of the Agreement, including the Consideration and the rent payable under the lease back arrangements, to be fair and reasonable and in the best interest of the Company and its shareholders. The Disposal constitutes a major transaction for the Company under the Listing Rules and will require shareholders' approval at a special general meeting to be convened. The completion of the Disposal is conditional on, amongst others, approval of the Company's shareholders. A circular containing further details of the Disposal and a valuation report in respect of the Car Parking Spaces together with the notice of the SGM will be despatched to the Company's shareholders as soon as possible. The Disposal The Agreement was entered into between China Coin and the Purchaser on 5th January 2000 pursuant to which China Coin agreed to dispose its entire interests in the Car Parking Spaces to the Purchaser. Parties Seller : China Coin, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company Purchaser : An independent third party not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). Car Parking Spaces The Car Parking Spaces are located at Tsui Chuk Garden. The Car Parking Spaces were acquired in May 1996, when the Group acquired a total of 467 parking and loading spaces at Tsui Chuk Garden for a total acquisition costs of approximately HK$155 million. Since the acquisition, the Group has disposed of 81 car parking/loading spaces at Tsui Chuk Garden during the period between 1st August and 1st September 1998 at an aggregate consideration of approximately HK$38 million, a car parking space on 17th December 1998 at a consideration of approximately HK$390,000 and 105 garage carparks on 31st December 1998 for a consideration of HK$42 million. The Car Parking Spaces being disposed of under the Agreement represent the Group's remaining interests in the 467 parking and loading spaces at Tsui Chuk Garden originally acquired in May 1996. Consideration Pursuant to the Agreement, the Consideration of HK$60 million is payable in cash as follows:* (a) an initial refundable deposit of HK$1,500,000 was paid on 5th January 2000; (b) a further refundable deposit of HK$4,500,000 is payable upon signing of the formal sale and purchase agreement which is scheduled to take place on or before 18th January 2000; and (c) the balance of HK$54,000,000 is payable on completion of the Disposal. The Consideration was determined after arm's length negotiations between the parties. The Directors considered the terms of the Agreement and the Consideration to be fair and reasonable and in the best interest of the Company and its shareholders. The book value of the Car Parking Spaces was approximately HK$62 million as at 31st March 1999. Based on this valuation, the Company will incur a loss before expenses of approximately HK$2 million on the Disposal. A valuation report on the Car Parking Spaces to be prepared by an independent valuer will be included in the circular to the Company's shareholders. Conditions The Disposal provided for in the Agreement is conditional upon, amongst other, the Company's shareholders approving the same at a special general meeting to be convened on or before 29th February 2000. Completion Subject to the conditions being satisfied, completion of the Disposal is scheduled to take place on or before 28th March 2000. Other Terms The Agreement provides that on completion of the Disposal the Purchaser will lease the Car Parking Spaces to the Group for a term of 2 years ("Initial Term") with an option for the Group to renew the tenancy for another two years ("Further Term"). This lease back arrangement will take place upon completion of the Disposal but is not subject to any other conditions. Parties Landlord : The Purchaser Tenant : China Coin or a member of the Group Rent The rent payable by the Group during the Initial Term is HK$600,000 per month with an additional rent of 50% of the total monthly rent/licence fee actually received or receivable by the Group in respect of the Car Parking Spaces for any calendar month in excess of HK$700,000. The rent payable during the Further Term will be either (a) the total of HK$600,000 per month and the highest additional rent paid for any month during the Initial Term or (b) the then prevailing market rent for the Car Parking Spaces, whichever is higher. An additional rent of 50% of the total monthly rent/licence fee actually received or receivable by the Group for any calendar month in excess of the total sum of the monthly rent payable for the Further Term and HK$100,000 is also payable. The terms of the lease back described above was determined on arm's length basis and the Directors consider the same to be fair and reasonable and in the best interests of the Company and its shareholders. Reasons for the Disposal The principal activities of the Group are the commercial management of wet markets, shopping centres and car parks, building-related contracting and property investment. As stated in the Company's interim results announcement dated 21st December 1999, the car park management business has, with the improvement in the economy, begun to show positive contribution. Nevertheless, the Directors take the view that this is an opportune time to dispose of the Car Parking Spaces so as to reduce bank loans, improve the gearing level and liquidity position of the Group. Under the Agreement, the Group will lease the Car Parking Spaces which will enable the Group to be interested in the car park management business without committing a substantial amount of capital. Approximately HK$58 million of the proceeds from the Disposal will be used to discharge bank debts secured by the Car Parking Spaces. The net proceeds remaining after such repayment and expenses incurred in connection with the Disposal are estimated to be approximately HK$1 million and will be used as working capital for the Group. With the improvement in the Group's liquidity position, the Directors are confident that the Company will be able to benefit from the improvement in the economy of Hong Kong. General The Disposal constitutes a major transaction of the Company for the purposes of the Listing Rules and will require shareholders' approval at a special general meeting to be convened. A circular containing further details of the Disposal and a valuation report in respect of the Car Parking Spaces together with the notice of the SGM will be despatched to the Company's shareholders as soon as possible. Terms used in this announcement "Car Parking Spaces" (i) 192 car parking spaces situated at parking sites nos 1-10, 12-15 (ii) goods loading and unloading spaces nos. L1, L3, L5, L8, L9, L10, L11, L12 and L13 (iii) car park nos. 1 to 22 on Ground Floor, 1 to 28 on First Floor, and 1 to 29 on Second Floor of Tsui Chuk Garden situate on the swimming pool complex "China Coin" China Coin Limited, a wholly-owned subsidiary of the Company "Company" Wang On Group Limited, a company incorporated in Bermuda with limited liability whose shares are listed on The Stock Exchange of Hong Kong Limited "Directors" directors of the Company (including the independent non-executive directors) "Group" the Company and its subsidiaries "Listing Rules" Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited "SGM" Special General Meeting of the Company to be held on or before 29th February 2000 "Tsui Chuk Garden" Tsui Chuk Garden, No. 8 Chui Chuk Street, Kowloon, Hong Kong erected on New Kowloon Inland Lot No.6023 By Order of the Board Wang On Group Limited Tang Ching Ho Chairman and Managing Director Hong Kong, 5th January 2000