CHINA EB LTD<0165> - 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.
CHINA EVERBRIGHT LIMITED
(incorporated in Hong Kong with limited liability)
Discloseable and Connected Transaction
On 10th May, 1999, the Company conditionally agreed to acquire or
procure the acquisition of the entire issued share capital of and
the Loan to CESCL at an aggregate consideration of $1,232 million.
The only asset held by CESCL at Completion will be a 49% interest in
ESL, which is principally engaged in the provision of financial
services in the PRC. The China Securities Regulatory Commission has
granted approval for the proposed acquisition of the 49% interest in
ESL.
The Company will pay a consideration of $1,232,000,000 to China
Everbright (HK) for the Acquisition which represents an earnings
multiple of 9.35 times the audited profit after tax of ESL of
approximately $268.89 million for the year ended 31st December,
1998.
The Consideration will be satisfied as to:
(i) $432,000,000 by the issue of 106,299,000 new Shares at the
issue price of $4.064 per Share to China Everbright (HK) and/or its
nominees;
(ii) $300,000,000 by the issue of 5% redeemable convertible notes
due 2002 convertible into 63,237,774 new Shares at the initial
conversion price of $4.744 per Share (subject to adjustment); and
(iii) the balance of $500,000,000 in cash.
The Consideration Shares represent approximately 8.15% of the
existing issued share capital of the Company and approximately 7.54%
of the enlarged issued share capital of the Company. Following the
issue of the Consideration Shares, China Everbright (HK)'s interest
in the Company will increase from 59.63% to 62.67% (assuming there
is no exercise of the Warrants).
Assuming full conversion of the Convertible Notes at the Conversion
Price, the Conversion Shares represent approximately 4.85% of the
existing issued share capital of the Company and approximately 4.29%
of the enlarged issued share capital of the Company (including the
issue of the Consideration Shares). Following the issue of the
Consideration Shares and the Conversion Shares, China Everbright
(HK)'s interest in the Company will increase from 59.63% to 64.27%
(assuming there is no exercise of the Warrants).
The Acquisition constitutes a discloseable transaction for the
Company pursuant to the Listing Rules.
China Everbright (HK) is a controlling shareholder of the Company
with 59.63% interest, and a connected person as defined in the
Listing Rules. Accordingly, the Acquisition and the subscription of
the Convertible Notes constitute connected transactions for the
Company and are subject to the approval of the Independent
Shareholders at the EGM. China Everbright (HK) and its associates
will abstain from voting on the relevant resolutions to be proposed
at the EGM.
The Company will as soon as practicable issue to Shareholders a
circular containing details of the Acquisition and the Subscription,
a letter of advice from the Independent Board Committee, a letter of
advice from Vickers, and a notice of EGM.
THE ACQUISITION
The Agreement
Date: 10th May, 1999
Parties:
Vendor: China Everbright (HK)
Purchaser: The Company
Assets to be acquired
The entire issued share capital of and the Loan to CESCL which will
hold the only asset of a 49% interest in ESL The other shareholders
of ESL on Completion will be CEITIC and China Everbright (Beijing)
holding 18.6% and 32.4% respectively. Apart from the 49% interest in
ESL, CESCL will not have any other assets or investments on
Completion. The China Securities Regulatory Commission has granted
approval for the proposed acquisition of the 49% interest in ESL.
China Everbright (Beijing) is the ultimate holding company of all of
China Everbright group's investments undertaken by PRC established
entities, whereas China Everbright (HK) is the ultimate holding
company of all of China Everbright group's investments undertaken by
entities established in Hong Kong and overseas. Both companies are
under the supervision of the State Council of the PRC. China
Everbright (Beijing) currently owns 10.58% of CEITIC and has
management control of CEITIC. Except as disclosed herein, China
Everbright (HK) and CEITIC are not related to each other. Set out
below is the simplified shareholding structure of ESL immediately
before and after Completion (assuming there is no exercise of the
Warrants):
Information on ESL
ESL is a limited liability company incorporated in the PRC in April
1996 and is principally engaged in the provision of financial
services including securities brokerage, underwriting and
proprietary trading in the PRC which respectively accounted for
approximately 32%, 10% and 37% of the total turnover of ESL for the
year ended 31st December, 1998. There are at present 37
representative offices nation wide. The top ten offices in terms of
turnover are located in Shanghai, Beijing, Shenzhen, Chongqing,
Chengdu and Guangzhou.
Set out below is a summary of the audited results of ESL for the two
years ended 31st December, 1998 prepared in accordance with
International Accounting Standard :
For the year ended For the year ended
31/12/98 31/12/97
RMB'000 $'000 RMB'000 $'000
Profit before tax and
extraordinary item 433,856 405,473 292,417 273,287
Profit after tax and
extraordinary item 287,711 268,889 179,619 167,868
Net asset value 1,167,183 1,090,825 697,478 651,849
CONSIDERATION
The Consideration payable by the Company to China Everbright (HK)
for the Acquisition represents an earnings multiple of 9.35 times
the audited profit after tax of ESL of approximately $268.89 million
for the year ended 31st December, 1998. The Consideration was
arrived at after arm's length negotiation and with reference to the
Option Agreement between the Company and China Everbright (HK)
(details of which are stated in the Company's circular of 23rd
November, 1998).
The Consideration will be satisfied as to:
(i) $432,000,000 by the issue of the Consideration Shares;
(ii) $300,000,000 by the issue of the Convertible Notes; and
(iii) the balance of $500,000,000 in cash.
Consideration Shares
The issue price per Consideration Share of $4.064 was agreed after
arm's length negotiations and represents a discount of approximately
1.48% to the closing price of $4.125 per Share as quoted on the
Stock Exchange on 10th May, 1999. The Issue Price also represents a
premium of approximately 5% to the average closing price per Share
for the 10 trading days up to and including the date of the
Acquisition Agreement.
The issue of 106,299,000 Consideration Shares represent
approximately 8.15% of the existing issued share capital of the
Company and approximately 7.54% of the enlarged issued share capital
of the Company. Following the issue of the Consideration Shares,
China Everbright (HK)'s interest in the Company will increase from
59.63% to 62.67% (assuming there is no exercise of the Warrants).
The Consideration Shares, when issued, will rank equally with the
issued Shares existing at the date of allotment.
Principal terms of the Convertible Notes
The Subscription Agreement will be entered into between the Company
and China Everbright (HK) in respect of the issue of the Convertible
Notes upon Completion. Pursuant to the terms of the Subscription
Agreement, China Everbright (HK) or its wholly-owned subsidiaries
shall subscribe for the Convertible Notes subject to the following
principal terms:
Issuer: The Company
Principal amount: $300,000,000 divided into 6 Convertible Notes at
face value in the amount of $50,000,000 per Convertible Note.
Conversion Price: Initially $4.744 per Share (subject to
adjustments for, amongst other things, sub-division or consolidation
of Shares, bonus issues, rights issues and other dilutive events).
Interest: The Convertible Notes will bear interest at 5% per
annum on the principal amount outstanding from time to time and such
interest will be paid (subject to the provisions relating to
conversion described below) semi-annually in arrears in Hong Kong
dollars.
Maturity date: Third anniversary from the date of issue.
Right of conversion: Noteholder has the right at any time
during the period from and including the date of issue up to and
including the maturity date to convert any outstanding principal
amount of the Convertible Notes into Shares at an initial conversion
price of $4.744 per Share, subject to adjustments.
The Conversion Shares will rank equally with all other Shares issued
on the date of allotment.
Redemption: The Company may redeem all or part of the Convertible
Notes at any time prior to the maturity date with interest accrued
from and including the last interest payment date up to but
excluding the date of redemption notice.
At any time after the first anniversary of the date of issue of the
Convertible Notes, the Noteholder may require the Company to redeem
the principal amount outstanding under the Convertible Notes or any
part thereof.
The redemption price (expressed as percentages of the principal
amount of the Convertible Notes) is as follows:
Period during which the redemption date falls Redemption price
Date of issue to first anniversary of
the date of issue (only applicable to the Company) 100%
First anniversary of the date of issue to
second anniversary of the date of issue 103.5%
Second anniversary of the date of issue and thereafter 107%
Voting: Noteholder will not be entitled to receive notice of
or attend or vote at any general meetings of the Company by reason
only of being holder of the Convertible Notes.
Transferability: No assignment or transfer of the Convertible
Notes may be made, except to wholly-owned subsidiaries of the
Noteholders.
Listing: The Convertible Notes will not be listed on the Stock
Exchange.
The Conversion Price was determined on an arm's length basis and
represents a premium of approximately 15% to the closing price of
$4.125 per Share as quoted on the Stock Exchange on the date of the
Acquisition Agreement. The issue of the Convertible Notes will have
no immediate dilution effect on existing Shareholders. Assuming full
conversion of the Convertible Notes at the Conversion Price, a total
of 63,237,774 Conversion Shares will be issued by the Company,
representing approximately 4.85% of the existing issued share
capital of the Company and approximately 4.29% of the enlarged
issued share capital of the Company following the issue of the
Consideration Shares and the Conversion Shares. Following the issue
of the Consideration Shares and the Conversion Shares, China
Everbright (HK)'s interest in the Company will increase from 59.63%
to 64.27% (assuming there is no exercise of the Warrants).
The Consideration and the terms of the Acquisition are arrived at on
arm's length basis and normal commercial terms. The cash portion of
the Consideration will be financed by internal resources of the
Company. The Directors consider the terms of the Acquisition to be
fair and reasonable and in the best interest of the Company so far
as the Shareholders are concerned.
WARRANTY BY CHINA EVERBRIGHT (HK)
China Everbright (HK) has warranted to the Company that the net
asset value of ESL as at the date of Completion will not be less
than RMB1,130 million. China Everbright (HK) shall pay to the
Company an amount equal to 49% of any shortfall in the net asset
value within 30 business days following Completion and delivery of
the relevant asset verification. A further announcement will be made
if the asset warranty is not met.
CONDITIONS OF THE ACQUISITION
Completion of the Acquisition is conditional upon:
1. the Independent Shareholders passing at the EGM an ordinary
resolution approving (i) the Acquisition Agreement and the
transactions contemplated thereunder, (ii) the allotment and issue
of the Consideration Shares and (iii) the Subscription Agreement and
the issue of the Convertible Notes and the allotment and issue of
the Conversion Shares;
2. the Listing Committee of the Stock Exchange granting (either
unconditionally or subject only to conditions which are acceptable
to the Company) the listing of and permission to deal in the
Consideration Shares and the Conversion Shares and the Company shall
not have received any objection from the Stock Exchange in respect
of the issue of the Convertible Notes;
3. satisfactory completion of due diligence on ESL and CESCL;
and
4. the granting of approvals by the relevant PRC authorities.
If any of the above conditions are not fulfilled on or before 30th
September, 1999 (or such later date as may be agreed by the Company
and China Everbright (HK)), the Acquisition Agreement will
terminate.
REASONS FOR THE ACQUISITION
The Company is principally engaged in the provision of financial
services. Following the acquisition of the entire issued share
capital of China Everbright Financial Holdings Limited in December
1998, the Company is now engaging in the provision of financial
services in Hong Kong. The Acquisition will provide the opportunity
to explore the potential financial market in the PRC and is
consistent with the Company's stated strategy of engaging in
financial services business.
DISCLOSEABLE AND CONNECTED TRANSACTION
The Acquisition constitutes a discloseable transaction for the
Company under the Listing Rules. China Everbright (HK) is the
controlling shareholder of the Company and a connected person as
defined in the Listing Rules. Accordingly, the Acquisition and the
Subscription also constitute connected transactions for the Company
under the Listing Rules, which are subject to the approval of the
Independent Shareholders at the EGM.
EXTRAORDINARY GENERAL MEETING
The EGM will be convened as soon as practicable to approve the
Acquisition, the issue of the Consideration Shares, the Subscription
and the issue of the Conversion Shares. China Everbright (HK) and
its associates will abstain from voting in relation to the relevant
resolutions. The Independent Board Committee has been established to
advise the Independent Shareholders and Vickers has been appointed
as the independent financial adviser to advise the Independent Board
Committee.
GENERAL
Application will be made to the Listing Committee of the Stock
Exchange for the listing of, and permission to deal in, the
Consideration Shares and the Conversion Shares.
A circular containing, inter alia, details of the Acquisition and
the Subscription, the letter from the Independent Board Committee,
the letter from Vickers and the notice convening the EGM will be
despatched to Shareholders as soon as possible.
By Order of the Board
Zhu Xiaohua
Chairman
Hong Kong, 10th May, 1999
DEFINITIONS
"Acquisition" The acquisition of the Sale Share and
the Loan at Completion pursuant to
the Acquisition Agreement
"Acquisition Agreement" The conditional sale and purchase
agreement dated 10th May, 1999
between the Company and China
Everbright (HK) in connection with
the Acquisition
"associates" Shall have the same meaning ascribed to
it by the Listing Rules
"CEITIC" China Everbright International Trust
and Investment Corporation, a company
established in the PRC
"CESCL" China Everbright Securities (Cayman)
Limited, a company incorporated in the
Cayman Islands
"China Everbright (Beijing)" China Everbright Group Limited, a
company established in the PRC
"China Everbright (HK)" China Everbright Holdings Company
Limited, a company incorporated in Hong
Kong, being the controlling shareholder
of the Company
"Company" China Everbright Limited, a company
incorporated in Hong Kong, the
securities of which are listed on the
Stock Exchange
"Completion" Completion of the Acquisition Agreement
"Consideration" The aggregate consideration of
$1,232,000,000 payable by the Company
to China Everbright (HK) for the
Acquisition
"Consideration Shares" 106,299,000 new Shares to be issued by
the Company at the Issue Price to
satisfy part of the Consideration
"Conversion Price" $4.744 per Conversion Share (subject to
adjustment)
"Conversion Shares" Shares to be issued by the Company upon
conversion of the Convertible Notes
"Convertible Notes" The unlisted redeemable convertible
notes due 2002 to be issued by the
Company with an aggregate principal
amount of $300,000,000
"Directors" The directors of the Company (excluding
the independent non-executive
directors)
"EGM" The extraordinary general meeting of
the Company to be held to approve the
Acquisition, the issue of the
Consideration Shares, the Subscription
and the issue of the Conversion Shares
"ESL" Everbright Securities Company Limited,
a company incorporated in the PRC
"Independent Board Committee" The board committee comprising
Messrs. Chao Sze Bang, Frank, Ng Ming
Wah, Charles, and Tung Wai, David, all
being independent non-executive
directors of the Company
"Independent Shareholders" Shareholders other than China
Everbright (HK) and its associates
"Issue Price" Issue price of $4.064 per Consideration
Share
"Listing Rules" The Rules Governing the Listing of
Securities on the Stock Exchange, as
amended from time to time
"Loan" The entire shareholder's loan of
$1,232,000,000 owed by CESCL to China
Everbright (HK) at Completion
"Option Agreement" The option agreement dated 2nd
November, 1998 between the Company and
China Everbright (HK) in connection
with the option granted by China
Everbright (HK) to the Company to
acquire 49% interest in ESL
"PRC" The People's Republic of China
"RMB" Renminbi, the lawful currency used in
the PRC
"Sale Share" One share of US$1.00 in CESCL
beneficially owned by China Everbright
(HK) representing the entire issued
share capital of CESCL
"Share(s)" Share(s) of $1.00 each in the share
capital of the Company
"Shareholders" Shareholders of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Subscription" The subscription by China Everbright
(HK) or its wholly-owned subsidiaries
of the Convertible Notes pursuant to
the Subscription Agreement
"Subscription Agreement" The subscription agreement to be
entered into between the Company and
China Everbright (HK) on Completion in
respect of the issue of the Convertible
Notes
"Vickers" Vickers Ballas Capital Ltd., a
registered investment adviser
"Warrants" The existing outstanding warrants of
the Company entitling the holders
thereof to subscribe for Shares, full
conversion of which represents
approximately 9.37% of the existing
issued share capital, at a subscription
price (subject to adjustment) of $5.55
per Share up to and including 5th
January, 2000.
"$" or "cents" Hong Kong dollars and cents
respectively
Unless otherwise stated, conversions of Renminbi into Hong Kong
dollars have been calculated using an exchange rate of $1.00 = RMB
1.07.
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