TVB<0511> - 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.
Television Broadcasts Limited
(Incorporated in Hong Kong with limited liability)
MAJOR, DISCLOSEABLE AND CONNECTED TRANSACTIONS
1. ENTRY INTO JOINT VENTURE AGREEMENT RELATING TO GALAXY
SATELLITE BROADCASTING LIMITED
2. ENTRY INTO GEM AGREEMENT
I. Joint Venture with Astro relating to Galaxy
On 29 March, 2000, TVB and Astro agreed to subscribe for
shares in Galaxy pursuant to the Joint Venture Agreement,
with MBNS acting as guarantor in respect of Astro's
obligations. It is intended that TVB will initially have an
attributable 70.6% interest in Galaxy on Completion and
Astro will have a 29.4% interest and that such interest may
be increased to 40%, whereupon TVB will hold a 60% interest.
The parties anticipate that the joint venture will combine
the expertise of TVB and Astro in DTH subscription satellite
television services in Hong Kong, Asia, Australia, USA and
Europe.
Listing Rules Implications
The entry into the Joint Venture Agreement by TVB constitutes
a major transaction and a connected transaction under
Chapter 14 of the Listing Rules and requires the approval
of the shareholders of TVB.
II. GEM Agreement
On 29 March, 2000, TVB, MBNS, iTVB, MBNS(BVI), HomeNet, Astro
and Pacific agreed to pursue the establishment of NewCo in
accordance with the GEM Agreement. It is intended that the
parties to the GEM Agreement will use NewCo as a listing
vehicle, for the sole purpose of acquiring and holding all
the issued shares in TVB.COM, Galaxy and East Asia and to
seek the listing of NewCo on GEM subject to, and upon the
terms and conditions, of the GEM Agreement. It is intended
that the parties' interests in NewCo will be as follows: TVB
62.13% (49.66% held directly and 12.47% held through iTVB,
a wholly owned subsidiary of TVB); MBNS (BVI), 3.56%; HomeNet,
1.78%; Astro, 16.55% and Pacific 15.98%. Astro, Pacific
and/or MBNS(BVI)'s interest may be altered depending on
which party among them provides the additional capital
funding under the GEM Agreement. Shaw Brothers (Hong Kong)
Limited, a substantial shareholder of TVB, has an option to
purchase an effective one-third interest in East Asia for
HK$200,000,000. Should this option be exercised by Shaw
Brothers (Hong Kong) Limited, it would have a 4.57%
shareholding interest in NewCo and Pacific's interest would
be reduced to 11.41%.
The parties to the GEM Agreement believe that there are
significant synergies and benefits of a strategic alliance
in respect of NewCo.
Listing Rules Implications
The entry into the GEM Agreement by TVB constitutes a
discloseable transaction and a connected transaction under
Chapter 14 of the Listing Rules and requires the approval
of the shareholders of TVB.
A circular containing, amongst other things, details of the
Joint Venture Agreement and the GEM Agreement will be
forwarded to shareholders of TVB. These agreements are
subject to shareholders' approval and a notice of
extraordinary general meeting will be included with the
circular.
I. JOINT VENTURE AGREEMENT WITH ASTRO RELATING TO GALAXY
1. Background and Corporate Structure
On 29 March, 2000, TVB, MBNS, Astro and Galaxy entered into
the Joint Venture Agreement.
Galaxy is an indirectly held wholly owned subsidiary of TVB
which provides satellite uplink services in Hong Kong for
television channels and which has applied for a Pay TV
Licence in Hong Kong. One of the conditions of the Joint
Venture Agreement is the satisfactory completion of the
Galaxy Restructuring. The Galaxy Restructuring will involve,
inter alia, transfer of various assets and the video rental
business of TVB (UK) Limited to a wholly owned subsidiary
of TVB.
After the Galaxy Restructuring, Galaxy will hold all of TVB's
DTH subscription satellite television services (except
those in Taiwan) and the corporate structure will be as set
out below:
2. The Joint Venture Agreement
Initial Subscriptions
Pursuant to the Joint Venture Agreement, Galaxy will allot
and issue:
(i) 35,099,998 Shares (70.6%) to TVB or its Affiliate at par
by way of capitalisation of an existing loan from TVB in the
sum of HK$35,099,998; and
(ii) 14,625,000 Shares (29.4%) to Astro or its Affiliate or
nominee at a price of HK$50 per Share. Astro will pay for
its shares in 3 tranches as follows:
(a) on Completion HK$365,625,000 (50%);
(b) 121 days after Completion HK$182,812,500 (25%); and
(c) 241 days after Completion HK$182,812,500 (25%).
Accordingly, the relative contributions to the capital of
Galaxy by each of TVB and Astro will be HK$35,099,998 and
HK$731,250,000 respectively (totalling HK$766,349,998).
The differential in contributions represents a premium
payable for Astro's entry into Galaxy.
Conditions to Completion
The Joint Venture Agreement is conditional upon, inter alia:
(i) the approval of the shareholders of TVB and any other
requirement under the Listing Rules and the Television
Ordinance;
(ii) the grant of a Pay TV Licence to Galaxy in a form and
substance reasonably acceptable to the parties, (and the
grant of any other licences, permits, consents or approvals
requisite for other members of the Galaxy Group to carry on
the business contemplated by the parties);
(iii) the approval of the Broadcasting Authority of Hong
Kong in respect of the Galaxy Restructuring and the
completion of the Galaxy Restructuring; and
(iv) the approval of the board of directors and shareholders
of MBNS and Astro or Astro's nominee or Affiliate as
appropriate, and their respective lenders (if required)
provided that if the conditions above are not satisfied (or
waived or the time for satisfaction extended or alternatives
found by agreement of the parties to the Joint Venture
Agreement) on or before the date which is 90 days after the
date of signature of Joint Venture Agreement (save for the
condition referred to in (ii) above, where such time period
is extended by a further 90 days), the Joint Venture
Agreement will lapse and be of no further force or effect.
Additional Subscriptions
Galaxy is entitled under the Joint Venture Agreement to have
the option to issue and allot an additional 8,775,000 new
shares in Galaxy ("Option Shares") to a third party investor
("Third Party Investor") within the first 18 months
following Completion (the "Option Period") subject to:
(i) the consent of Astro;
(ii) Galaxy having a post-investment valuation following the
investment by the Third Party Investor of at least
HK$3,656,250,000; and
(iii) any Third Party Investor first executing an
instrument of ratification and accession to the Joint
Venture Agreement.
In addition, TVB has the right during the Option Period for
either itself or a nominated Affiliate to subscribe for the
Option Shares at the subscription price of not less than
HK$50 per share. If TVB exercises the option to subscribe
for the Option Shares, Astro or its nominee or Affiliate has
the option to subscribe for one third of such Option Shares.
If during the Option Period, Galaxy does not issue and allot
the Option Shares to the Third Party Investor and TVB does
not subscribe for the Option Shares, Astro or its nominee
or Affiliate will be required to subscribe for the Option
Shares within 3 months following the expiry of 18 months from
Completion at a subscription price of HK$50 per share for
a total consideration of HK$438,750,000 in cash. The total
contribution of Astro or its related parties, aggregating
the initial subscription and the additional subscription
monies from the Option Shares, would then total
HK$1,170,000,000 and should this additional subscription be
made, its percentage holding in Galaxy (when aggregated with
its nominee or Affiliate, as the case may be) would increase
to 40% and TVB's holding in Galaxy would decrease to 60%.
If Gem Completion (as described below) takes place, the
provisions relating to subscription for the Option Shares
will cease to apply and TVB will subscribe for shares in
Galaxy at par for cash to increase its interest to 75%, as
described below.
Further provisions of the Joint Venture Agreement
The Joint Venture Agreement also provides for the
establishment of the Galaxy Share Option Scheme for the grant
of options to subscribe for Shares of up to 10% of the issued
share capital of Galaxy (it being agreed between the parties
to the Joint Venture Agreement that a minimum of 20% of
options for such Shares will be allocated to the managing
director of TVB). The price per share under the Galaxy Share
Option Scheme will not be less than HK$50.
The Joint Venture Agreement contains normal shareholder
pre-emption rights, and in addition, there is a "lock-in"
period of 3 years from the date of Completion within which
time no shareholder can transfer or dispose of its interest
in Galaxy.
The Joint Venture Agreement also contains non-competition
provisions preventing the parties thereto having an interest
in any area related to satellite subscription or pay
television programme services predominantly in the Chinese
language similar to or which directly competes with the
business of the Galaxy Group in relevant territories.
As regards the composition of the board of directors of
Galaxy, the maximum number of directors will be seven, of
whom four will be appointed by TVB and two will be appointed
by Astro. Following the subscription for the Option Shares
by Astro or a Third Party Investor or TVB, one additional
director will be nominated by Astro or its nominee or
Affiliate or the Third Party Investor or TVB as the case may
be, provided that in the event any shareholder holds less
than 13% of the total issued Shares in Galaxy, they are not
entitled to nominate any director.
During the first 10 years of the operation of the Joint
Venture Agreement, there are certain "reserved" matters
(stated in the Joint Venture Agreement) which may only be
passed by the unanimous vote of all the shareholders (acting
by their corporate representative), or directors of the
board (as appropriate), of Galaxy, appointed by TVB or Astro.
After the first 10 years there are no longer any reserved matters.
3. Reasons for entering into the Joint Venture Agreement
The parties recognise the significant synergies and benefits
that a strategic alliance between TVB and Astro will bring
to the subscription satellite television services of the
Galaxy Group as well as the joint venture arrangement
previously announced between TVB and Astro to establish a
Chinese language internet web portal business through
TVB.COM which will be the gateway to a spectrum of world wide
web broadcasts and interactive services and to the
distribution of TVB programming content by Astro through its
"ASTRO" satellite subscription service in Malaysia.
II GEM AGREEMENT
1. Background
TVB, MBNS, iTVB, MBNS(BVI) and HomeNet entered into a joint
venture agreement on 11 November 1999 to participate in
TVB.COM to, inter alia, undertake an internet web portal
business primarily in the Chinese Language.
TVB and Astro have also entered into the Joint Venture
Agreement, as more particularly described above.
On 15 March 2000, East Asia entered into a conditional
agreement to acquire the film library of Shaw Brothers (Hong
Kong) Limited. East Asia is a wholly-owned subsidiary of
Pacific, which is an independent third party not connected
with the directors, chief executive officer or substantial
shareholders of TVB or any of its subsidiaries or their
respective associates.
The parties to the GEM Agreement have agreed, subject to the
terms and conditions of the GEM Agreement, to establish NewCo
as a listing vehicle for the purpose of acquiring and holding
all the issued shares in TVB.COM, Galaxy and East Asia and
for the purpose of listing NewCo on GEM.
2. The GEM Agreement
Pursuant to the GEM Agreement, TVB will appoint professional
financial and legal advisers (the "Professional Advisers")
to report and recommend whether the parties should proceed
to raise capital on the GEM.
If, following consultation with the Professional Advisers,
the parties fail to agree in writing within thirty working
days on the listing exercise of NewCo, the GEM Agreement will
lapse and be of no further force or effect, other than in
relation to any antecedent rights or remedies.
Following consultation with the Professional Advisers and
if all the parties agree in writing to proceed with
implementing the listing of NewCo shares on GEM, the parties
agree jointly to use all reasonable endeavours to procure
the listing of NewCo pursuant to the GEM Agreement.
Conditions to Completion
The provisions of the GEM Agreement are conditional upon,
inter alia:
(i) the approval of the shareholders of TVB and any other
requirement under the Listing Rules and the Television
Ordinance;
(ii) the grant of all consents and approvals required
for a listing of NewCo on GEM;
(iii) completion of the Joint Venture Agreement and the
execution of the definitive agreement referred to in the East
Asia Program Acquisition Agreement; and
(iv) the approval of the board of directors and shareholders
of MBNS(BVI), MBNS, HomeNet, Astro and Pacific, and their
respective lenders (if required)
provided that if the conditions above are not satisfied (or
waived) on or before 120 days from the date of the GEM
Agreement (or such later date as the parties shall agree in
writing), the GEM Agreement will lapse and be of no further
force or effect, other than in respect of any antecedent
breaches.
Incorporation and Restructuring
Following the agreement in writing of all parties to proceed
with the listing of NewCo, the parties will procure the
incorporation and establishment of NewCo, as a special
purpose company, without assets or liabilities and for the
sole purpose of listing on GEM. On incorporation each party
will hold initially one NewCo share or shares in such
proportions as agreed by the parties.
Within three days of the fulfillment of the last of the
conditions contained in the Gem Agreement, ("Gem
Completion"), TVB.COM's shareholders, Galaxy's
shareholders and Pacific will exercise all voting rights and
other powers or control available to them in relation to the
TVB.COM Agreement, the Joint Venture Agreement and East Asia
respectively, and transfer all their shares in TVB.COM,
Galaxy and East Asia respectively, to NewCo in exchange for
NewCo shares by way of a share swap arrangement (the "NewCo
Reconstruction").
As part of the NewCo Reconstruction, any outstanding
subscriptions of shares to be made under the TVB.COM
Agreement, Joint Venture Agreement (other than for the
Option Shares, the provisions in respect of which cease to
apply) and any outstanding payment to be made under the East
Asia Program Acquisition Agreement will crystallise on Gem
Completion and the TVB.COM Agreement and the Joint Venture
Agreement will terminate. Further, upon the payment by Astro
of outstanding amounts under the Galaxy Agreement, TVB will
subscribe for such number of shares in Galaxy at par for cash
(HK$8,775,000) so that TVB's and Astro's respective equity
shareholding interest in Galaxy is 75% and 25% respectively.
Further, prior to or simultaneously on Gem Completion,
Pacific, Astro and MBNS(BVI) have the following options, at
the discretion of Pacific:
(i) Pacific or its nominee or Affiliate shall make available
by way of subscription of equity, additional funding to East
Asia of HK$100,000,000, to rank pari passu in all respects
with all existing shares of East Asia on terms that such
subscription equity will be exchanged for NewCo shares on
Gem Completion under the NewCo Reconstruction so that the
equity interest of Pacific in NewCo is 15.98%; or
(ii) Astro or MBNS(BVI) or their respective nominee or
Affiliate shall purchase NewCo shares by way of subscription
in the sum of HK$100,000,000 to rank pari passu in all
respects with all existing NewCo shares so that the NewCo
shares will be subscribed by Astro or MBNS(BVI) or their
respective nominee or Affiliate on the same basis with the
other parties under the Gem Reconstruction, so that the
equity interest of Astro in NewCo will be 18.83% or the equity
interest of MBNS(BVI) will be 5.84%.
After the NewCo Reconstruction, the NewCo corporate
structure will be as set out below:
NewCo Structure following the NewCo Reconstruction
Note: * These figures represent the percentage interests
to be held by the parties if Pacific provides the additional
funding to East Asia pursuant to the GEM Agreement and the
figures in brackets and square brackets repectively
represent the interest to be held by MBNS (BVI), Astro and
Pacific if Astro or MBNS (BVI), as the case may be, provides
the additional funding to NewCo pursuant to the GEM
Agreement.
Shareholdings in NewCo following the NewCo Reconstruction
Following the NewCo Reconstruction the parties' respective
shareholding interests in NewCo would be as follows:
TVB 49.66%
iTVB 12.47%
MBNS (BVI) 3.56% (3.56%) [5.84%]
HomeNet 1.78%
Astro 16.55% (18.83%) [16.55%]
Pacific 15.98% (13.70%) [13.70%]
100%
Note: please see the note to the chart above with respect
to the potential shareholding interests shown in brackets
above.
Under the terms of the East Asia Program Acquisition
Agreement, Shaw Brothers (Hong Kong) Limited, a substantial
shareholder of TVB, has an option to purchase for
HK$200,000,000 an effective one-third interest in East Asia.
Should this option be exercised by Shaw Brothers (Hong Kong)
Limited it would have a 4.57% shareholding interest in NewCo
and Pacific's interest would be reduced to 11.41%.
Further Provisions of the Gem Agreement
If NewCo does not list on GEM, following the completion of
the NewCo Reconstruction the parties will enter into a joint
venture and shareholders' agreement, substantially in the
form of the joint venture agreements relating to Galaxy and
TVB.COM.
The GEM Agreement also provides for the establishment of a
share option scheme for the benefit of eligible participants
as permitted by the GEM Listing Rules for the grant of options
to subscribe shares in NewCo of up to 10% of the issued share
capital of NewCo, conditional upon the listing of NewCo on GEM.
The GEM Agreement provides that the present managing
director of TVB will be entitled to subscribe for 2.5% of
the enlarged issued share capital of NewCo prior to a listing
of NewCo on GEM at a price equivalent to the valuation of
NewCo shares issued pursuant to the NewCo Reconstruction.
This entitlement will be subject to appropriate
shareholders' approval.
3. Reasons for entering into the Gem Agreement
The parties recognise the significant synergies and benefits
of a strategic alliance in respect of their business
arrangements, in particular, the raising of funds in the
capital markets and have agreed to establish NewCo as a
listing vehicle, for the sole purpose of acquiring and
holding all the issued shares in TVB.COM, Galaxy and East
Asia and to seek a listing on the GEM subject to and upon
the terms and conditions of the GEM Agreement.
III. PRINCIPAL ACTIVITIES OF TVB, iTVB, MBNS, MBNS(BVI),
HOMENET, EAST ASIA, GALAXY, PACIFIC AND ASTRO
The principal activity of TVB is television broadcasting,
together with programme production and other broadcasting
related activities. iTVB is a British Virgin Islands
incorporated intermediate holding company of TVB's
interests in TVB.COM.
MBNS owns and operates a multi-ethnic and multi-lingual DTH
digital subscription satellite television broadcast
business and is the exclusive DTH television and radio
broadcast operator in Malaysia. MBNS(BVI) is a British
Virgin Islands incorporated intermediate holding company
for MBNS's interests in TVB.COM.
HomeNet is an investment holding company incorporated for
the sole purpose of holding shares in TVB.COM.
East Asia is a company which invests in programme content
and undertakes the business of, inter alia, programme
content and rights acquisition.
Galaxy provides satellite uplink services in Hong Kong for
television channels and has been doing so since 1998.
Astro is an investment holding company formed for the purpose
of holding MBNS's interests in Galaxy.
Pacific is an investment holding company formed for the
purpose of holding East Asia. The ultimate holding company
of Pacific is Usaha Tegas Sdn. Bhd., a Malaysian company.
IV. IMPLICATIONS UNDER THE LISTING RULES
MBNS is a connected person of TVB by virtue of its
shareholding interests in two subsidiaries of TVB, Hsin Chi
Broadcast Company Limited and TVB.COM. Astro is an Associate
of MBNS as defined in the Listing Rules and on final
subscription for shares in TVB.COM HomeNet is expected to
become a connected person of TVB by virtue of its
shareholding interest in TVB.COM. Accordingly, the entry by
TVB into both the Joint Venture Agreement to which both Astro
and MBNS are parties and into the GEM Agreement to which Astro,
MBNS and HomeNet are parties will constitute connected
transactions of TVB under Chapter 14 of the Listing Rules.
The Galaxy Restructuring of certain of TVB's subsidiaries
in connection with the Joint Venture Agreement also
constitutes a connected transaction of TVB under Chapter 14
of the Listing Rules. The entry by TVB into the Joint Venture
Agreement also constitutes a major transaction, and the
entry of TVB into the GEM Agreement also constitutes a
discloseable transaction of TVB under Chapter 14 of the
Listing Rules.
A circular containing, amongst other things, details about
the Joint Venture Agreement and the GEM Agreement and a
letter from an independent financial advisor will be
despatched to shareholders of TVB as soon as practicable,
and in accordance with the provisions of the Listing Rules.
The transactions contemplated under the Joint Venture
Agreement and the GEM Agreement, including the share option
schemes referred to above and listing of NewCo, are
conditional upon the approval of the shareholders of TVB at
an extraordinary general meeting ("EGM") to be convened as
soon as practicable and which will be held after the
Company's Annual General Meeting, expected to be held on 24
May 2000. The circular to be despatched shall contain a
notice convening an EGM for that purpose.
The directors of TVB, including the independent non-
executive directors, consider that the Joint Venture
Agreement and the GEM Agreement are on normal commercial
terms, that such terms are fair and reasonable to TVB and
that the Joint Venture Agreement and the GEM Agreement are
in the best interests of TVB and its shareholders.
Definitions used in this Announcement
"Affiliate" means, in relation to any person,
any other person that, directly
or indirectly controls, is under
common control with or is
controlled by that person and for
the purpose of this definition,
"control" shall mean the
possession, directly or
indirectly, of the power to
direct or cause the direction of
the management policies of such
person
"Astro" Astro Broadcast Corporation
(BVI) Limited, a company
incorporated in the British
Virgin Islands, which is an
Affiliate of MBNS, a connected
person of TVB by virtue of its
shareholdings in certain TVB
subsidiaries
"Completion" completion of the Joint Venture Agreement
"DTH" direct-to-home
"East Asia" East Asia Filmed Entertainment
Limited, a company incorporated
in Hong Kong, which is an
independent third party not
connected with the directors,
chief executive officer or
substantial shareholders of TVB
or any of its subsidiaries or
their respective associates
"East Asia Program an agreement between Shaw
Acquisition Agreement" Brothers (Hong Kong) Limited and
East Asia, dated 15 March, 2000
"Galaxy" Galaxy Satellite Broadcasting
Limited, a company incorporated
in Hong Kong, being currently a
wholly-owned subsidiary of TVB
"Galaxy Group" Galaxy and its wholly-owned and
non-wholly owned subsidiaries
after the Galaxy Restructuring
"Galaxy Restructuring" the re-organisation and transfer
of all the issued and paid up
shares beneficially owned by TVB
in TVB (UK) Limited, The Chinese
Channel (Holdings) Ltd. and TVB
(Australia) Proprietary Ltd. to
indirectly wholly-owned
subsidiaries of Galaxy
"Galaxy Share the share option scheme to
Option Scheme" be established for the benefit of
eligible participants with
respect to shares in Galaxy
"GEM" the Growth Enterprise Market of
the Stock Exchange
"GEM Agreement" the agreement relating to NewCo
dated 29 March, 2000, between
TVB, MBNS, iTVB, MBNS(BVI),
HomeNet and Pacific
"HomeNet" Home Net N.V., a company
incorporated in the Netherlands
Antilles, which is expected to be
a substantial shareholder in
TVB.COM
"iTVB" iTVB Limited, a company
incorporated in the British
Virgin Islands which is a wholly
owned subsidiary of TVB
"Joint Venture Agreement" the Joint Venture and
Shareholders' Agreement dated 29
March, 2000 between TVB, MBNS,
Astro and Galaxy
"Listing Rules" Rules Governing the Listing of
Securities on the Stock Exchange
"MBNS" MEASAT Broadcast Network Systems
Sdn. Bhd., a company
incorporated in Malaysia, which
is a connected person of TVB by
virtue of its shareholding
interests in TVB subsidiaries
"MBNS(BVI)" MEASAT Broadcast Network Systems
(BVI) Limited, a company
incorporated in the British
Virgin Islands, which is an
Affiliate of MBNS and
consequently a connected person
of TVB
"NewCo" a Hong Kong incorporated company
to be established by TVB, MBNS,
iTVB, MBNS(BVI), Astro, HomeNet
and Pacific
"NewCo Shares" means any share in the capital of
NewCo with a par value to be
agreed by the parties
"Pacific" Pacific Investments (BVI)
Limited, a company incorporated
in the British Virgin Islands,
which is an independent third
party not connected with the
directors, chief executive
officer or substantial
shareholders of TVB or any of its
subsidiaries or any of their
respective associates
"Pay TV Licence" a licence granted by the
Government of the Hong Kong SAR
for the provision of
subscription or pay television
programme service in the Hong
Kong SAR under the Television
Ordinance (Cap.52) as amended,
re-enacted or modified from time
to time
"Shares" ordinary shares of HK$1 each in
the capital of Galaxy
"Stock Exchange" The Stock Exchange of Hong Kong
Limited
"TVB" Television Broadcasts Limited, a
company incorporated in Hong
Kong, the shares of which are
listed on the Stock Exchange
"TVB.COM" TVB.COM Limited, a private
limited company incorporated in
Hong Kong, and owned by MBNS,
MBNS(BVI),TVB, iTVB and HomeNet
"TVB.COM Agreement" the joint venture and
shareholders agreement relating
to TVB.COM made between TVB,
iTVB,
MBNS, MBNS (BVI) and HomeNet
dated 11 November, 1999
By Order of the Board
Television Broadcasts Limited
Ho Ting Kwan
Company Secretary
Hong Kong, 29 March 2000
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