SHOUGANG INTL<0697>,SHOUGANG GRAND<0730>& SHOUGANG TECH<0521> - Joint 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.
Shougang Concord International Enterprises Company Limited
(incorporated in Hong Kong with limited liability)
CONNECTED TRANSACTION
Shougang Concord Grand (Group) Limited
(incorporated in Bermuda with limited liability)
DISCLOSEABLE AND CONNECTED TRANSACTION
Shougang Concord Technology Holdings Limited
(incorporated in Hong Kong with limited liability)
The respective boards of directors of Shougang International,
Shougang Grand and Shougang Technology announced that on 31st May,
1999 the Sale and Purchase Agreement was entered into between
Shougang International and Shougang Grand whereby Shougang Grand has
conditionally agreed to acquire or procure the acquisition of each
of the entire issued share capital of Upper Nice and Jeckman, the
beneficial owners of a total of approximately 46.7 per cent. of the
existing issued share capital of Shougang Technology, from Shougang
International's wholly-owned subsidiary for a total consideration of
approximately HK$163.5 million.
The Sale and Purchase Agreement is conditional, see "Conditions"
below.
The respective directors of Shougang International and Shougang
Grand believe that the Proposed Transaction is in the interests of
their respective companies and the terms of the Sale and Purchase
Agreement are fair and reasonable so far as the shareholders of
their respective companies are concerned as explained in the section
headed "Reasons for the Proposed Transaction" below.
The Proposed Transaction constitutes a discloseable and share
transaction for Shougang Grand under the Listing Rules. By virtue of
Shougang International's interest of approximately 55.3 per cent. in
Shougang Grand, such transaction also constitutes a connected
transaction for each of Shougang International and Shougang Grand
under the Listing Rules and is subject to approval by their
respective independent shareholders.
The Securities and Futures Commission has granted Shougang Grand a
waiver from its obligation to make a general offer under the Code
for the Technology Shares (other than those held by Upper Nice and
Jeckman) upon completion of the Sale and Purchase Agreement.
Shougang International and Shougang Grand will each send a circular
containing further details of, among other things, the Proposed
Transaction to their respective shareholders as soon as practicable.
SALE AND PURCHASE AGREEMENT DATED 31st MAY, 1999
Parties
Vendor: Shougang International
Purchaser: Shougang Grand
Assets involved
one share of US$1.00 in Upper Nice and sixteen shares of US$1.00
each in Jeckman, representing their respective entire issued share
capital, which are held by a wholly-owned subsidiary of Shougang
International.
Upper Nice and Jeckman are the beneficial owners of 240,342,569
Technology Shares and 131,306,500 Technology Shares respectively.
Apart from their aggregate 46.7 per cent. interests in the existing
issued share capital of Shougang Technology, neither Upper Nice nor
Jeckman have any other material assets or liabilities.
Shougang Technology and its subsidiaries are principally engaged in
the manufacture and sale of telephone cords and accessories, power
cords, adaptors and electronic products, printed circuit boards,
high precision components for computers and the provision of freight
forwarding and delivery services and telecommunications business.
The audited consolidated profit before and after taxation of
Shougang Technology for the year ended 31st December, 1998 was
approximately HK$22.5 million and HK$24.4 million respectively. The
audited consolidated profit before and after taxation of Shougang
Technology for the year ended 31st December, 1997 was approximately
HK$27.2 million and HK$28.3 million respectively. The audited
consolidated net asset value of Shougang Technology as at 31st
December, 1998 was approximately HK$522.8 million.
Consideration
approximately HK$163.5 million, which was based on normal commercial
terms determined after arm's length negotiations between the parties
thereto and is equivalent to HK$0.44 per Technology Share, which
represents (i) a premium of approximately 0.7 per cent. to the
average closing price per Technology Share of HK$0.437 for the 50
trading days immediately prior to and including 31st May, 1999 as
quoted on the Stock Exchange; (ii) a discount of approximately 23.6
per cent. to the average closing price per Technology Share of
HK$0.576 for the 10 trading days immediately prior to and including
31st May, 1999; (iii) a discount of approximately 13.7 per cent. to
the closing price per Technology Share of HK$0.51 on 31st May, 1999
as quoted on the Stock Exchange; and (iv) a discount of
approximately 32.9 per cent. to the audited net asset value of
HK$0.656 per Technology Share as at 31st December, 1998.
Payment terms
Of the total consideration of approximately HK$163.5 million, HK$100
million of which will be satisfied by Shougang Grand in cash and the
balance by the issue and allotment of 144,376,341 Consideration
Shares credited as fully paid by Shougang Grand to Shougang
International or as it may directs at an issue price of HK$0.44 each
on completion of the Sale and Purchase Agreement.
The Consideration Shares
The issue price of the Consideration Shares of HK$0.44 each
represents a discount of approximately 2.2 per cent. to the closing
price of HK$0.45 per Grand Share on 31st May, 1999 as quoted on the
Stock Exchange and is equivalent to the average closing price of
HK$0.44 per Grand Share traded on the Stock Exchange for the 10
trading days up to and including 31st May, 1999.
The Consideration Shares will rank pari passu in all respects with
the Grand Shares in issue.
The Consideration Shares will represent approximately 21.1 per cent.
of the existing issued share capital of Shougang Grand (based on
683,491,573 Grand Shares in issue as at the date of this
announcement) and approximately 17.4 per cent. of the issued share
capital of Shougang Grand as enlarged by the issue of the
Consideration Shares. Shougang International is currently interested
in approximately 55.3 per cent. of the issued share capital of
Shougang Grand. Upon completion of the Sale and Purchase Agreement,
Shougang International will be interested in approximately 63.1 per
cent. of the issued share capital of Shougang Grand as enlarged by
the issue of the Consideration Shares.
An application to the Listing Committee of the Stock Exchange will
be made for the listing of and permission to deal in the
Consideration Shares. The Consideration Shares will be issued
pursuant to the ordinary resolution to be approved by the
independent shareholders of Shougang Grand at the special general
meeting.
Conditions
Completion of the Sale and Purchase Agreement is conditional upon,
amongst other things, the following conditions:-
(i) the approval of the shareholders of Shougang Grand other than
Shougang International and its associates of the Sale and Purchase
Agreement and the Proposed Transaction as required by the Listing
Rules;
(ii) the approval of the shareholders of Shougang International of
the Sale and Purchase Agreement and the Proposed Transaction as
required under the Listing Rules;
(iii) the approval by the shareholders of Shougang Grand of an
increase in its authorised share capital from HK$10,000,000 to
HK$20,000,000;
(iv) the approval of the Bermuda Monetary Authority in respect of
the allotment and issue of the Consideration Shares;
(v) the Stock Exchange granting the listing of and permission to
deal in the Consideration Shares;
(vi) the grant of the waiver by the Securities and Futures
Commission in favour of Shougang Grand from the obligation to make a
general offer for the Technology Shares in issue (other than
Technology Shares held by Upper Nice and Jeckman) under Rule 26 of
the Code; and
(vii) the Technology Shares not being suspended from listing or
trading on the Stock Exchange at any time from the date hereof to
the date on which completion would, but for this condition (vii)
take place in accordance with the Sale and Purchase Agreement, save
for any temporary suspension and no indication being received on or
before such date from the Securities and Futures Commission in Hong
Kong or the Stock Exchange to the effect that the listing of the
Technology Shares on the Stock Exchange will or may be withdrawn or
objected to (or conditions will or may be attached thereto) as a
result of completion or in connection with the terms of or any
transaction contemplated by the Sale and Purchase Agreement provided
that this condition shall be deemed to have been satisfied in the
event of such an indication if the Securities and Futures Commission
in Hong Kong or the Stock Exchange (as the case may be) informs
Shougang Technology in writing that the continued suspension,
possible withdrawal, or objection is caused by any matter not
relating to Shougang International or Shougang Technology.
If the above conditions are not fulfilled by 30th July, 1999 (or
such later date as the parties thereto may agree), the Sale and
Purchase Agreement will terminate (subject to certain provision
therein).
The Securities and Futures Commission has granted Shougang Grand a
waiver from its obligation to make a general offer under the Code
for the Technology Shares (other than those held by Upper Nice and
Jeckman) upon completion of the Sale and Purchase Agreement.
Expected date of completion
The Completion Date is the seventh business day after satisfaction
of the above conditions (or such later date as may be agreed between
the parties thereto).
INFORMATION ON SHOUGANG INTERNATIONAL
Shougang International, its subsidiaries and associated companies
are principally engaged in the manufacture and sale of steel
products, rebar stockholding and trading of steel products,
manufacture and sale of electrical and electronic products, metallic
products, ferrous and non-ferrous metals and minerals; property
investment and management; and transportation and shipping.
The audited consolidated loss before and after taxation of Shougang
International for the year ended 31st December, 1998 was
approximately HK$461.4 million and HK$469.3 million respectively.
The audited consolidated profit before and after taxation of
Shougang International for the year ended 31st December, 1997 was
approximately HK$39.0 million and HK$27.0 million respectively. The
audited consolidated net asset value of Shougang International as at
31st December, 1998 was approximately HK$1,507.9 million.
INFORMATION ON SHOUGANG GRAND
Shougang Grand and its subsidiaries are principally engaged in
property investment, management and development; and the provision
of financial services.
The audited consolidated profit before and after taxation of
Shougang Grand for the year ended 31st December, 1998 was
approximately HK$24.4 million and HK$20.2 million respectively. The
audited consolidated profit before and after taxation of Shougang
Grand for the year ended 31st December, 1997 was approximately
HK$43.9 million and HK$40.5 million respectively. The audited
consolidated net asset value of Shougang Grand as at 31st December,
1998 was approximately HK$543.5 million.
INTENTIONS OF SHOUGANG GRAND
It is the present intention of Shougang Grand that (i) the existing
business activities of Shougang Technology and its subsidiaries be
maintained; and (ii) the board of directors and senior management of
Shougang Technology remain unchanged following completion of the
Sale and Purchase Agreement.
REASONS FOR THE PROPOSED TRANSACTION
Shougang International
As part of its long-term strategy for development, the Group has
been exploring various options to rationalise its operations and
funding structure in order to utilise its resources at an optimal
level, reduce operating costs and strengthen its income and asset
base.
In June 1998, the Group restructured its shipping business by
transferring its vessels and related businesses to a joint venture,
Associated Bulk Carriers Limited, which was formed between the
Group, The Peninsular & Oriental Steam Navigation Company and
Shougang Holding (Hong Kong) Limited, the controlling shareholder of
Shougang International, to increase its competitive edge through
controlling one of the largest modern capsize fleets.
The directors of Shougang International consider that the Proposed
Transaction will better streamline the current group structure and
allow Shougang International to continue to capture any upside
growth potential of Shougang Technology, via Shougang Grand, whilst
refocusing its resources to its core businesses. It is anticipated
that Shougang Technology will be able to enjoy stronger financial
support from Shougang Grand with the proposed shareholding
structure.
In the longer term, as part of the rationalisation exercise, the
Group is also exploring possibilities of disposing certain of the
non-performing business units of the Group to and acquiring better
quality business units/assets with steady income stream from the
controlling shareholder of Shougang International. It is presently
intended that any business units/assets to be acquired will be in
similar line of businesses and/or complementary with the existing
businesses of the Group. As at the date of this announcement, the
Group has not identified any business units/assets for acquisition
and the Group has no concrete plans for disposal of its non-
performing assets as they are both in the conceptual stages. Any
future acquisition and/or disposal of business units/assets by the
Group will be made in compliance with the Listing Rules.
It is presently proposed that net cash proceeds of approximately
HK$99 million from the disposal of Shougang Technology will be used
by Shougang International as to approximately HK$70 million to
reduce bank borrowings and the balance of approximately HK$29
million for working capital. The Proposed Transaction will improve
the cash flow situation of the Group and reduce its debt level. The
directors of Shougang International (including the independent non-
executive directors other than Mr. Chow Kun Chee, Roland, who is not
in Hong Kong and cannot be contacted) are also of the view that the
Proposed Transaction would be for the long-term strategy and
development of the Group and in the best interest of Shougang
International and that the terms of which are fair and reasonable so
far as its shareholders are concerned.
Shougang Grand
Shougang Grand is currently enjoying a steady rental income stream.
The directors of Shougang Grand are of the view that the Proposed
Transaction will provide Shougang Grand with an opportunity for any
potential upside gain given the growth prospects of the industry in
which Shougang Technology operates. The directors of Shougang Grand
consider that the market prices for the Technology Shares are
sufficiently attractive and as the Asian economies are now slowly
recovering, the Proposed Transaction will be a good opportunity for
Shougang Grand to diversify its source of income and strengthen its
asset base. It is intended that Shougang Grand will settle the cash
consideration of the Proposed Transaction from its internal
resources and by way of external bank financing.
The directors of Shougang Grand (including the independent non-
executive directors) are of the view that the Proposed Transaction
is in the best interest of Shougang Grand and that the terms of
which are fair and reasonable so far as its shareholders are
concerned.
GROUP STRUCTURE
For the group structure chart of the listed entities of
the Group before and after the Proposed Transaction, please refer to the
press announcement today.)
GENERAL
Shougang International and its associates will abstain from voting
in respect of their shareholding interests in Shougang Grand at the
special general meeting of Shougang Grand to approve the Proposed
Transaction.
Shougang Holding (Hong Kong) Limited and its associates, who were
interested in an aggregate of 710,530,929 shares of HK$0.20 each in
Shougang International, representing about 39.1 per cent. of the
issued share capital of Shougang International (based on
1,818,826,454 existing issued shares of HK$0.20 each in Shougang
International), as at the date of this announcement, have undertaken
to vote in favour of the ordinary resolution on the Proposed
Transaction at the extraordinary general meeting of Shougang
International.
An independent board committee for each of Shougang International
and Shougang Grand will be formed to advise their respective
independent shareholders, and an independent financial adviser for
each of Shougang International and Shougang Grand will also be
appointed to advise their respective independent board committees,
in respect of the Proposed Transaction.
DEFINITIONS
"associates" has the meaning ascribed to it in the Listing Rules
"Code" Code on Takeovers and Mergers
"Completion Date" being the seventh business day after
satisfaction of the conditions to the Sale and Purchase Agreement
(or such later date as may be agreed between the parties thereto)
"Consideration Shares" 144,376,341 Shares to be issued by
Shougang Grand to Shougang International as part consideration
pursuant to the Sale and Purchase Agreement
"Grand Share(s)" ordinary share(s) of HK$0.01 each in the capital
of Shougang Grand
"Group" Shougang International, its subsidiaries and
associated companies
"Jeckman" Jeckman Holdings Ltd., a company incorporated in the
British Virgin Islands and an indirect wholly-owned subsidiary of
Shougang International
"Listing Rules" The Rules Governing the Listing of Securities on
the Stock Exchange
"Proposed Transaction" the proposed acquisition by Shougang
Grand of the entire issued share capital of each of Jeckman and
Upper Nice from Shougang International's wholly-owned subsidiary
pursuant to the Sale and Purchase Agreement
"Sale and Purchase Agreement" a conditional sale and purchase
agreement dated 31st May, 1999 entered into between Shougang
International and Shougang Grand pursuant to which Shougang
International has conditionally agreed to sell or procure the sale
of, and Shougang Grand has conditionally agreed to acquire or
procure the acquisition of, the entire issued share capital of each
of Jeckman and Upper Nice
"Shougang Grand" Shougang Concord Grand (Group) Limited
"Shougang International" Shougang Concord International
Enterprises Company Limited
"Shougang Technology" Shougang Concord Technology Holdings
Limited
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Technology Share(s)" ordinary share(s) of HK$0.25 each in the
capital of Shougang Technology
"Upper Nice" Upper Nice Assets Ltd., a company incorporated in the
British Virgin Islands and an indirect wholly-owned subsidiary of
Shougang International
By order of the Board
Shougang Concord International Enterprises Company Limited
Su Genqiang
Managing Director
By order of the Board
Shougang Concord Grand (Group) Limited
Liu Hua
Managing Director
By order of the Board
Shougang Concord Technology Holdings Limited
Ye Ruiling
Chairman
31st May, 1999
|
