Major Transaction
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Kerry Properties Limited, you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s). The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular. website: www.kerryprops.com (Stock Code: 00683) MAJOR TRANSACTION A letter from the board of directors of Kerry Properties Limited is set out on pages 5 to 25 of this circular. * For identification purpose only 29 December 2004 CONTENTS Page Definitions ........................................................ 1 Letter from the Board ............................................... 5 Appendix I – Accountants’ Report on Treasure Lake................ 26 Appendix II – Accountants’ Report on Eas HK .................... 33 Appendix III − Accountants’ Report on the Eas PRC Group ........... 51 Appendix IV – Financial Information of the Group .................. 93 Appendix V – Unaudited Pro Forma Financial Information of the Enlarged Group ........................... 196 Appendix VI – Property Valuation Report ......................... 203 Appendix VII – General Information .............................. 287 −i− DEFINITIONS In this circular, unless the context otherwise requires, the following expressions have the following meanings: “Acquisition” the proposed acquisition by Kerry Logistics from Huatong of (a) Treasure Lake Shares and (b) Eas PRC Shares in accordance with the terms and conditions of the Sale and Purchase Agreement “Agreed Rate” the exchange rate of HK$1.00 to RMB1.06, being the exchange rate agreed between Kerry Logistics and Huatong for the purpose of the Sale and Purchase Agreement, and unless otherwise stated adopted for use for convenience for the purpose of this circular “associates” has the meaning as ascribed to it under the Listing Rules “Beijing Huatong” (Beijing Huatong Chuangzhan Investment Consultancy Co., Ltd.), a wholly foreign owned enterprise established in the PRC on 12 November 2004 and an indirect wholly-owned subsidiary of Eas PRC “Board” or “Director(s)” the director(s) of the Company “Business Day” a day on which banks are open for business in Hong Kong (excluding Saturday) “Company” Kerry Properties Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange “connected person” has the meaning as ascribed to it under the Listing Rules “Consideration” the aggregate consideration of the Acquisition in the sum of RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment in accordance with the terms of the Sale and Purchase Agreement “DTII” Da Tong International Investments Holdings Ltd. , a company incorporated in Samoa on 23 August 2004 and an indirect wholly-owned subsidiary of Eas PRC −1− DEFINITIONS “Eas HK” Eas Da Tong International Aircargo Company Limited ( ), a company incorporated in Hong Kong with limited liability on 11 November 1993 and wholly owned by Treasure Lake “Eas PRC” (Eas International Transportation Ltd.), a sino-foreign joint venture company established in the PRC on 27 February 1985 and owned as to 50% by Eas HK and 50% by Huatong “Eas PRC Group” Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices as detailed in the Sale and Purchase Agreement “Eas PRC Shares” 20% equity interest in Eas PRC “Enlarged Group” the Company and its subsidiaries upon completion of the Acquisition “First Announcement” the Company’s announcement dated 24 September 2004 in relation to the Sale and Purchase Agreement and the Acquisition “First Closing” completion of the sale and purchase of Treasure Lake Shares “First Closing Conditions” pre-conditions for First Closing as referred to in paragraph (1) of the section headed “Conditions” in the letter from the Board set out in this circular “First Closing Longstop Date” 31 December 2004 “Group” the Company and its subsidiaries “HK$” and “HK cents” Hong Kong dollars and cents respectively, the lawful currency of Hong Kong “HK GAAP” accounting principles generally accepted in Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Huatong” (Huatong Industrial Development Co., Ltd.), a state-owned limited liability company established in the PRC −2− DEFINITIONS “Kerry Holdings” Kerry Holdings Limited, a company incorporated in Hong Kong with limited liability, which, as at the Latest Practicable Date, was interested in 750,842,646 Shares of the Company as disclosed in the register maintained by the Company under the SFO, representing approximately 62.00% of the 1,211,116,330 issued Shares of the Company as at the Latest Practicable Date “Kerry Logistics” Kerry Logistics Network Limited, an exempted company incorporated in Bermuda with limited liability and a wholly-owned subsidiary of the Company “Latest Practicable Date” 24 December 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “MOU” the legally binding memorandum of understanding dated 24 December 2004 between Huatong and Kerry Logistics “NAV” the consolidated net asset value of the Eas PRC Group as at the date of the First Closing, assuming completion of the Restructuring, as certified by a firm of accountants appointed by Kerry Logistics in accordance with PRC GAAP and in accordance with the provisions of the Sale and Purchase Agreement “PRC” The People’s Republic of China, excluding, for the purpose of this circular, Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan “PRC GAAP” relevant accounting rules and regulations applicable in the PRC “Restructuring” the restructuring of the Eas PRC Group (before the Restructuring) by transferring certain companies, assets and liabilities, into and out of the Eas PRC Group (before the Restructuring) in accordance with the terms and conditions of the Restructuring Agreement “Restructuring Agreement” the agreement dated 10 November 2004 between Huatong and Eas PRC in relation to the Restructuring −3− DEFINITIONS “RMB” Renminbi, the lawful currency of the PRC “Sale and Purchase Agreement” an agreement dated 20 September 2004 entered into between Huatong and Kerry Logistics in relation to the sale and purchase of Treasure Lake Shares and Eas PRC Shares “Second Closing” completion of the sale and purchase of Eas PRC Shares “Second Closing Conditions” pre-conditions for Second Closing as referred to in paragraph (2) of the section headed “Conditions” in the letter from the Board set out in this circular “Second Closing Longstop Date” the date which is 270 days after the date on which all the First Closing Conditions have been fulfilled or waived “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Shareholder(s)” holder(s) of the Shares of the Company “Shares of the Company” ordinary shares of HK$1.00 each in the share capital of the Company “Shortfall Amount” 70% of the amount by which the NAV is less than RMB357,594,000 (equivalent to about HK$337,352,830 based on the Agreed Rate) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Group” Treasure Lake, Eas HK and the Eas PRC Group (after the Restructuring) “Top Business” Top Business Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability on 16 April 2004 and wholly owned by Huatong “Treasure Lake” Treasure Lake Limited, a company incorporated in the British Virgin Islands with limited liability on 6 May 2004 and wholly owned by Top Business “Treasure Lake Shares” the entire issued share capital of Treasure Lake “%” per cent. −4− LETTER FROM THE BOARD website: www.kerryprops.com (Stock Code: 00683) Executive Directors: Registered Office: Mr. ANG Keng Lam (Chairman) Canon’s Court Mr. WONG Siu Kong 22 Victoria Street (Deputy Chairman and Managing Director) Hamilton HM 12 Mr. HO Shut Kan Bermuda Mr. MA Wing Kai, William Head Office and Principal Place Independent Non-executive Directors: of Business in Hong Kong: Mr. William Winship FLANZ 13-14/F., Cityplaza 3 Mr. LAU Ling Fai, Herald 14 Taikoo Wan Road Mr. Christopher Roger MOSS, O.B.E. Taikoo Shing Hong Kong 29 December 2004 To the Shareholders and for information only, the optionholders of Kerry Properties Limited Dear Sir or Madam, MAJOR TRANSACTION INTRODUCTION On 24 September 2004, the Company announced that Kerry Logistics and Huatong entered into the Sale and Purchase Agreement on 20 September 2004 pursuant to which Kerry Logistics shall purchase or procure the purchase of and Huatong shall sell or procure the sale of Treasure Lake Shares and Eas PRC Shares (as the case may be) at an aggregate consideration of RMB380,000,000 (equivalent to