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.
(Incorporated in Bermuda with limited liability) |
 CHINA TRAVEL INTERNATIONAL INVESTMENT HONG KONG LIMITED (Incorporated in Hong Kong under the Companies Ordinance) |
CONNECTED TRANSACTIONS ANNOUNCEMENT
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SUMMARY The respective boards of directors of Hing Kong Holdings Limited ("Hing Kong" and together with its subsidiaries, the "Hing Kong Group") and China Travel International Investment Hong Kong Limited ("CTII" and together with its subsidiaries, the "CTII Group") wish to announce that: (i) on 16th November, 1999, Longbarn International Limited ("Longbarn"), a wholly-owned subsidiary of Hing Kong, has entered into a joint development agreement ("JD Agreement") with Common Well Limited ("Common Well"), a wholly-owned subsidiary of CTII, whereby Longbarn will through a subsidiary jointly develop the Site (as defined below) with Common Well; and (ii) on 16th November, 1999, CPL Investments Limited ("CPL Investments"), a wholly-owned subsidiary of Hing Kong, has entered into a conditional sale and purchase agreement ("Sale and Purchase Agreement") with Goster Resources Limited ("Goster"), a wholly-owned subsidiary of CTII, whereby CPL Investments will acquire the property situate at 33rd Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road, Central, Hong Kong ("Property") from Goster. Consideration for the acquisition of the Property is HK$106 million ("Consideration"). Of the Consideration, HK$40 million will be satisfied by payment in cash ("Cash Consideration") and HK$66 million will be satisfied by the issue by Hing Kong of 10 convertible bonds in an aggregate maximum principal amount of HK$66 million ("Bonds") in accordance with the terms and conditions set out in a subscription agreement dated 16th November, 1999 entered into between Hing Kong as issuer and CTII as subscriber ("Subscription Agreement"). Assuming full conversion of the Bonds, the Conversion Shares would represent approximately 5.88% of the issued share capital of Hing Kong as enlarged by the issue of the Conversion Shares. As at the date of the JD Agreement, the Sale and Purchase Agreement and the Subscription Agreement (collectively, the "Agreements"), China Travel Service (Holdings) Hong Kong Limited ("CTS"), being the holding company of CTII, directly held approximately 10.10% of the issued share capital of Hing Kong and CTII itself also indirectly owned approximately 36.33% of the issued share capital of Hing Kong. Since CTII is a connected person of Hing Kong and Hing Kong is a connected person of CTII according to the definition of the Rules Governing the Listing of Securities ("Listing Rules") on The Stock Exchange of Hong Kong Limited ("Stock Exchange"), the entering into and implementation of the JD Agreement (the issue as to whether it will be subject to any relevant disclosure or shareholders' approval requirement under the Listing Rules can only be ascertained after the Before Value (as defined below) has been determined and the costs of the Development (as defined below) have been estimated), and the transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement (which are subject to approval of Hing Kong's independent shareholders) are connected transactions for Hing Kong under the Listing Rules. The transactions contemplated under the Agreements will constitute connected transactions of CTII under the Listing Rules, details of which will be set out in CTII's next annual report as required under the Listing Rules. |
(A) JOINT DEVELOPMENT AGREEMENT
Agreement date: 16th November, 1999
Parties:
Longbarn, a wholly-owned subsidiary of Hing Kong;
Common Well, a wholly-owned subsidiary of CTII;
Hing Kong; and
CTII
Particulars of the JD Agreement
Pursuant to the JD Agreement, Longbarn will, through a wholly-owned subsidiary ("Developer") jointly develop a site ("Site") known as Lot Nos. 2836R.P., 2837, 2838, 2840, 2846 and 2847 all in Demarcation District No.51, Fanling, New Territories which is currently owned by Common Well for residential use and/or such other purposes as Common Well and the Developer may agree ("Development"). Each of Common Well and the Developer shall bear 50% ("Agreed Ratio") of all costs, expenses and charges in carrying out and completing the Development and the sale thereof.
The Development shall (subject to prevailing market conditions and mutual agreement between Common Well and the Developer) be disposed of by way of sale as soon as possible after completion of the Development and the issue of the certificate of compliance in respect thereof or pre-sale as soon as the consent required for the pre-sale has been obtained.
The Developer shall also pay to Common Well within 3 months from the execution by Common Well of such documents as may be required to give effect to the surrender of the Site to, and the re-grant of the Site to Common Well by, the Government of the Hong Kong Special Administrative Region ("Government"), a sum equal to 50% of the amount of the land cost. The land cost shall be equal to the amount of the Site's value ("Before Value") which shall have been used by the Government in assessing the land premium payable in relation to the modification of the Site. The payment by the Developer to Common Well shall not be made before the payment of the land premium to the Government. It is expected that the Before Value cannot be determined within the next 15 months.
All costs and expenses to be incurred in relation to the application for town planning and other regulatory approvals and the surrender to and the re-grant of the Site to Common Well ("Application") shall be borne in the first instance by Longbarn. But Longbarn may be reimbursed of such costs and expenses, which shall form part of the expenditure of the Development, if the Application is successful and the surrender and re-grant of the Site to Common Well are effected. Longbarn is authorised for a period of 4 years from the date of the JD Agreement to make the Application on behalf of Common Well. In the event that the Application is successful and Longbarn and Common Well agree to accept the basic terms and the amount of land premium offerred by the Government, the parties to the JD Agreement and the Developer shall enter into a novation agreement so that the Developer will replace Longbarn to take up all the rights, interests, obligations and liabilities of Longbarn under the JD Agreement. Common Well and the Developer will then jointly develop the Site on the basis that all development and marketing expenditures will be contributed and all sale proceeds and any unsold units of the Development will be shared by Common Well and the Developer in the Agreed Ratio.
Each of CTII and Hing Kong has also guaranteed the due performance by (i) Common Well and (ii) Longbarn and the Developer respectively of their obligations under the JD Agreement.
Conditions of the JD Agreement
As the Before Value cannot be determined and the Development costs cannot be estimated until the Application is approved and the premium for the Site modification has been assessed by the Government, no payment is expected to be made within the next 15 months by Longbarn or the Developer to Common Well. If, after the Before Value has been determined and the Development costs has been estimated, both Longbarn and Common Well have accepted the land premium as well as the basic terms of the surrender and re-grant of the Site by the Government and the JD Agreement and transactions thereby contemplated are subject to the requirements as in Rule 14.26 of the Listing Rules or the Stock Exchange otherwise requires, the JD Agreement may then be subject to and conditional upon independent shareholders of Hing Kong ("Hing Kong Independent Shareholders") and of CTII ("CTII Independent Shareholders"), if required, passing at a special general meeting of Hing Kong and of CTII, if required, a resolution approving the JD Agreement and the transaction contemplated by the JD Agreement. Further announcement will be made by Hing Kong and CTII as soon as practicable after the Before Value has been determined and costs of the Development have been estimated.
(B) SALE AND PURCHASE AGREEMENT
Agreement date: 16th November, 1999
Parties:
Vendor: Goster, a wholly-owned subsidiary of CTII
Purchaser: CPL Investments, a wholly-owned subsidiary of Hing Kong
Property acquired:
The Property comprises the whole of the 33rd floor of the office block within China Merchants Tower of Shun Tak Centre, Central, Hong Kong and has a saleable area of approximately 20,800 square feet. The Property is currently vacant.
Consideration:
HK$106 million, of which HK$40 million will be satisfied by payment in cash to Goster and HK$66 million will be satisfied by the issue of the Bonds by Hing Kong to CTII, as directed by Goster.
The Cash Consideration will be funded by external borrowings.
The Consideration was ageed at arm's length negotiations with reference to an independent valuation by Chesterton Petty Limited of the Property of HK$106 million as at 1st November, 1999 as instructed by Hing Kong and an independent valuation by C.Y. Leung & Co of the Property of HK$106 million as at 16th November, 1999 as instructed by CTII. The board of directors of Hing Kong ("Hing Kong Board") considers that the acquisition of the Property was in the best interests of Hing Kong, and that the Consideration was fair and reasonable in light of the current market value of the Property.
Terms of payment:
The Cash Consideration is payable by CPL Investments to Goster on the date of completion ("Completion Date") by cash. The Bonds will be issued by Hing Kong to CTII on the Completion Date.
Completion date:
The 15th banking day after the fulfilment of the conditions precedent respectively set out in the Sale and Purchase Agreement and the Subscription Agreement (details of which are set out below), provided that the Completion Date must not be later than 29th February, 2000 (or such later date as the parties to the Sale and Purchase Agreement and the Subscription Agreement may agree).
Conditions:
Completion of the acquisition of the Property is conditional upon, among other things:
1. approval of the acquisition of the Property and of the transactions contemplated under the Subscription Agreement by the Hing Kong Independent Shareholders at a special general meeting of Hing Kong ("Property Acquisition SGM") to be convened for approving the transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement; and
2. the simultaneous completion of the Subscription Agreement.
(C) SUBSCRIPTION AGREEMENT
Agreement date: 16th November, 1999
Parties:
Issuer: Hing Kong
Subscriber: CTII
Issue of the Bonds:
Subject to the terms and conditions of the Subscription Agreement, CTII will subscribe for, and Hing Kong will issue to CTII, the Bonds.
The Bonds are convertible into an aggregate of 66,937,120 shares of HK$0.10 each ("Shares") in the capital of Hing Kong ("Conversion Shares"). Assuming full conversion of the Bonds, the Conversion Shares would represent approximately 6.25% of the issued share capital of Hing Kong as at the date of the Subscription Agreement and approximately 5.88% of the issued share capital of Hing Kong as enlarged by the issue of the Conversion Shares.
Principal terms of the Bonds:
The outstanding principal amount of the Bonds is repayable in accordance with the terms and conditions of the Bonds on the date immediately after the end of 30 calendar months from the date of issue of the Bonds ("Maturity Date").
Each Bond will bear interest from the date of issue thereof at a rate of 2% per annum on the principal amount of such Bond outstanding from time to time.
Any transfer of a Bond must be all and not only part of the principal amount of such Bond outstanding from time to time. CTII is required by the Stock Exchange to notify it of any transfer of the Bonds which may be made prior to the Maturity Date.
At any time prior to the Maturity Date, the holders of the Bonds may convert all but not only part of the principal amount of such Bond outstanding from time to time at a conversion price of HK$0.986 per Share (subject to adjustments in accordance with the terms and conditions of the Bonds), representing: (i) approximately 20% premium from the average closing price of the Shares as traded on the Stock Exchange for the last 14 trading days before 15th November, 1999, the day on which all the major terms of the Sale and Purchase Agreement and the Subscription Agreement were concluded; (ii) approximately 1.65% premium from the closing price of the Shares as traded on the Stock Exchange for the last trading day before suspension of trading of the Shares on 16th November, 1999; and (iii) approximately 20% discount from the closing price of the Shares as traded on the Stock Exchange just before the suspension of trading of the Shares in the afternoon on 16th November, 1999.
The Bonds will not be listed on the Stock Exchange or any other stock exchange.
Completion date:
The Completion Date of the Sale and Purchase Agreement.
Conditions:
Completion of the issue of the Bonds is conditional upon, among other things:
1. to the extent required by the Listing Rules, the approval of the issue of the Bonds and of the Conversion Shares by the Hing Kong Independent Shareholders who are permitted under the Listing Rules to vote at the Property Acquisition SGM;
2. the Listing Committee of the Stock Exchange granting (either unconditionally or subject only to conditions to which Hing Kong and CTII do not reasonably object) the listing of, and permission to deal in, the Conversion Shares;
3. if required, the Bermuda Monetary Authority having approved the issue of the Bonds and of the Conversion Shares; and
4. the simultaneous completion of the Sale and Purchase Agreement.
Reasons for entering into the JD Agreement
Hing Kong is principally engaged in property development and infrastructure investment. Completion of the JD Agreement will enable the Hing Kong Group to participate in the development of the Site.
The entering into the JD Agreement will enable the CTII Group to achieve synergy by utilising Hing Kong's expertise in property development in enhancing the value of the Site. The board of directors of CTII ("CTII Board") believes that the terms of the JD Agreement are fair and reasonable and are in the best interests of CTII.
Reasons for entering into the Sale and Purchase Agreement and the Subscription Agreement:
The Hing Kong Board presently intends to hold the Property for investment purposes. The Hing Kong Board believes that the commercial property market in Central District will recover in the medium term both in terms of rental and of property price. With the Property acquisition partially funded by the issue of the Bonds, which bear interest at a relatively low rate, it will greatly enhance the net rental yield of the Property.
The entering into of the Sale and Purchase Agreement and the Subscription Agreement will generate cashflow to CTII and enable CTII to remain focused on its core businesses. If the value of the Property increases, CTII can also gain benefit through the Bonds and its equity interest in Hing Kong. The cash consideration can also enhance the cash position for further development of CTII and the CTII Board believes that the terms of the sale of the Property and the subscription of the Bonds are fair and reasonable and are in the best interests of CTII.
Based on the current market value of the Property and the terms of the Sale and Purchase Agreement and the Subscription Agreement, the Hing Kong Board believes that the acquisition of the Property and the issue of the Bonds are fair and reasonable and are in the best interests of Hing Kong.
Connection between the parties
Set out below is a chart showing the simplified shareholding structure of Hing Kong as at the date of the Agreements (without taking into account the issue of the Conversion Shares):
* Mr. Chow is the managing director of Hing Kong.
Since CTII and parties acting in concert with it (including CTS and Mr. Chow) already held more than 50% of the issued share capital in Hing Kong and CTII alone held more than 35% of the issued share capital in Hing Kong as at the date of the Agreements and the conversion of the Bonds by CTII may result in CTII acquiring more than 5% of the issued share capital of Hing Kong in a 12 month period, which may be regarded as giving rise to an obligation to make a general offer under Rule 26 of the Hong Kong Code on Takeovers and Mergers ("Code"). Therefore, CTII may apply to the Securities and Futures Commission for a ruling and/or a waiver by the Executive of the Securities and Futures Commission that under Rule 26 of the Code, the issue of the Conversion Shares will not give rise to an obligation on CTII and parties acting in concert with it (including CTS and Mr. Chow) to make a general offer under Rule 26 of the Code to other Hing Kong Shareholders. In any event, CTII and parties acting in concert with it will fully comply with the Code during the conversion of the Bonds.
Since CTII indirectly owned approximately 36.33% of the issued share capital of Hing Kong as at the date of the Agreements, it is a connected person of Hing Kong within the definition of the Listing Rules. The transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement constitute connected transactions for Hing Kong under the Listing Rules and are therefore subject to, and conditional upon, approval by the Hing Kong Shareholders independent of CTII and its associates (as defined under the Listing Rules) who are required under the Listing Rules to abstain from voting at the Property Acquisition SGM in respect of resolutions approving the transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement. Mr. Chow Ming Kuen, Joseph, an independent non-executive director of Hing Kong ("Independent Director") has been appointed to advise the Hing Kong Independent Shareholders on the terms of the Sale and Purchase Agreement and the Subscription Agreement. An independent financial adviser will be appointed to advise the Independent Director on the terms of the Sale and Purchase Agreement and the Subscription Agreement.
Since CTS, the holding company of CTII, was directly holding approximately 10.10% of the issued share capital of Hing Kong as at the date of the Agreements and is the holding company of CTII, the transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement constitute connected transactions of CTII under Rule 14.23(1)(b) and are subject to the disclosure requirement under Rule 14.25 of the Listing Rules, i.e., by way of a press announcement and disclosure in CTII's next published annual report and accounts.
Information for Shareholders of Hing Kong
A circular containing, among other things, details of the Sale and Purchase Agreement and the Subscription Agreement, a letter from the Independent Director, a letter from the independent financial adviser, a valuation report on the Property and a notice to convene the Property Acquisition SGM will be despatched to the shareholders of Hing Kong as soon as practicable.
Trading of the Shares of Hing Kong was suspended at 2:44 p.m. on 16th November, 1999 at the request of Hing Kong and will remain suspended until further announcement in relation to a possible acquisition by Hing Kong as disclosed in an announcement by Hing Kong dated 16th November, 1999 is made.
Hing Kong Holdings Limited Lee Yip Wah, Peter Company Secretary |
China Travel International Investment Hong Kong Limited Woo Wai See, Alice Company Secretary |
Hong Kong SAR, 18th November, 1999
The directors of Hing Kong jointly and severally accept full responsibility for the accuracy of the information relating to the Hing Kong Group contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions relating to the Hing Kong Group expressed in this announcement have been arrived at after due and careful consideration and there are no other facts relating to the Hing Kong Group not contained in this announcement, the omission of which would make any statement relating to the Hing Kong Group in this announcement misleading.
The directors of CTII jointly and severally accept full responsibility for the accuracy of the information relating to the CTII Group contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions relating to the CTII Group expressed in this announcement have been arrived at after due and careful consideration and there are not other facts relating to the CTII Group not contained in this announcement, the omission of which would make any statement relating to the CTII Group in this announcement misleading.
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