THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION
HISTORY
The Company’s predecessor, Cheung Kong, became listed in Hong Kong in 1972, and the Group benefits from a long and successful track record of over 40 years. Through investment in the Cheung Kong Group and the Hutchison Group, Mr. Li Ka-shing, our founder and Chairman, expanded the Group’s property development business in Hong Kong. With over 40 years of refinement, we have become one of the largest developers of residential, office, retail, industrial and hotel properties in Hong Kong. Whilst maintaining a strategic focus on property development projects in Hong Kong, the Group expanded its presence to the PRC in the 1980s and to overseas markets in the 1990s. We have also developed a property and project management business to support our development and investment properties. With our expertise and strength in property development and investment, we also developed our business scope to include hotels and serviced suites operations and interests in listed REITs.
Key Milestones
Some of the key milestones of our development over the past 40 years are set out below:
Year Key Milestone
1972...... Listing of the Company’s predecessor, Cheung Kong, in Hong Kong
1977...... Acquisition of Hong Kong Hilton Hotel and shopping arcade, then a 5-star hotel of the Group, which was subsequently re-developed as Cheung Kong Center
1978...... Completion of Braemar Hill Mansions, a major residential property development project in Hong Kong in which the Group had a 50% interest
1978...... Completion of the redevelopment of China Building in Central, Hong Kong, where the headquarters of Cheung Kong was situated until the relocation of the headquarters to Cheung Kong Center after its completion in 1999
1980 ...... Completion of Admiralty Centre in Admiralty, Hong Kong, one of the first major commercial joint development property projects, which is close to the Admiralty MTR station
1982...... Completion of Aberdeen Centre in Hong Kong, a large scale housing estate of the Group
1985-1991 ...... Completion of Whampoa Garden in Hung Hom, Kowloon, a large scale residential estate comprising both residential towers and shopping complex of the Group, through the redevelopment of the former Hung Hom dockyards
1989...... Participation in the development of two former industrial sites at Ap Lei Chau and Kwun Tong in Hong Kong into two residential and commercial developments of the Group known as South Horizons and Laguna City
–73– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION
Year Key Milestone
1990-1993 ...... Completion of Hutchison Logistics Centre, a multi-storey drive-in freight distribution centre located in Kwai Chung Container Terminals in Hong Kong, one of the busiest container ports in the world
1995...... Completion of The Harbourfront, Grade A twin office towers adjacent to Whampoa Garden residential estate of the Group in Hong Kong
1995...... Opening of Harbour Grand Kowloon, formerly known as the Harbour Plaza Hotel, the first hotel built and managed by the Group in Hong Kong
1998...... Completion of The Center, a Grade A commercial building with a central core design located at a prime location in the business district of Hong Kong, a joint development of the Group
1999...... Completion of Cheung Kong Center, the Group’s flagship commercial complex and the Group’s first intelligent building utilising innovative design and sophisticated technology, located in the heart of Central, Hong Kong
1999...... Opening of Bahamas Grand Lucayan, the Group’s large scale resort in The Bahamas, earmarking the expansion of the Group’s development and operation of hotel businesses outside Hong Kong
2000-2004 ...... Completion of Beijing Oriental Plaza, one of the largest commercial complexes in the political and commercial heart of Beijing, the PRC, with a total GFA of 763,482 sq.m., comprising a shopping centre, office buildings, serviced apartment towers, a hotel and car parking spaces
2002-2007 ...... Awarded the tender for the residential and retail development project at Tiu Keng Leng Station along the Tseung Kwan O Line of the MTR, and awarded the tender for the development at Packages One, Two and Three of LOHAS Park Station, Tseung Kwan O Line of the MTR
2003...... Listing of Fortune REIT on Singapore Stock Exchange
2005...... Listing of Prosperity REIT on the Main Board of the Stock Exchange
2009...... Completion of 1881 Heritage, a new heritage revitalisation landmark for cultural tourism, shopping and leisure in Hong Kong, which was revitalised and redeveloped from the former Marine Police Headquarters
2010...... Listing of Fortune REIT on the Main Board of the Stock Exchange
2010-2013 ...... Completion of Phases 1 and 2 of La Grande Ville, a residential complex in Beijing, the PRC
2011...... TheGroup injected its interest in Beijing Oriental Plaza in Beijing into Hui Xian REIT upon the establishment of the REIT, the first RMB-denominated REIT listed on the Stock Exchange, and the first RMB-denominated equity security listed outside the PRC
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PRINCIPAL SUBSIDIARIES
The Group is one of Hong Kong’s largest property developers, with a leading market share in Hong Kong, strong penetration in the PRC and an international presence. We develop, own and/or manage residential, office, retail, industrial and hotel property in Hong Kong, the PRC, Singapore, the United Kingdom and The Bahamas. Due to the project-specific nature of our business, the Group established individual project companies for the holding, development and operation of different projects. Upon Listing, the Group will comprise over 1,000 companies.
Details of certain information on the Principal Subsidiaries upon Listing are set out in “Appendix VII – General Information – Further Information about the Company – Subsidiaries – Principal Subsidiaries”.
THE REORGANISATION
In preparation for the Listing, the following steps are being implemented to establish the Group:
1. Incorporation of various companies
Prior to the Latest Practicable Date, the Company and certain wholly-owned subsidiaries (being Mighty State Limited, Agate Glory Limited, Novel Trend Holdings Limited, CK Property Finance Limited and New Challenge Global Limited) were incorporated.
2. Cheung Kong Reorganisation
On 9 January 2015, Cheung Kong proposed a group reorganisation by way of a scheme of arrangement pursuant to Division 2 of Part 13 of the Companies Ordinance. The Cheung Kong Reorganisation was completed on [18 March] 2015 whereupon (i) the holding company of the Cheung Kong Group was changed from Cheung Kong to CKH Holdings, (ii) the shareholders of Cheung Kong (other than certain non-qualifying overseas shareholders of Cheung Kong) became shareholders of CKH Holdings, with the same shareholding proportion as they held shares in Cheung Kong as at the record time of [4:00] p.m. on [17 March 2015] and (iii) the listing of the shares of Cheung Kong on the Stock Exchange was withdrawn and the CKH Holdings Shares became listed on the Stock Exchange by way of introduction.
3. Merger Proposal
A. Husky Share Exchange
On 9 January 2015, the Husky Sale Shares Purchaser entered into a conditional agreement with the Husky Sale Shares Vendor for the acquisition of 61,357,010 Husky Shares, representing approximately 6.24% of the common shares of Husky in issue as at the date thereof. Pursuant to the Husky Share Exchange Agreement, the consideration for the acquisition will be satisfied by the issue of 84,427,246 new CKH Holdings Shares by CKH Holdings to the Husky Sale Shares Vendor (or as it may direct), representing a share exchange ratio of 1.376 new CKH Holdings Shares for every one Husky Share to be acquired. In the event that the acquisition of the 61,357,010 Husky Shares (whether on its own or together with the completion of the Hutchison Scheme) by the Husky Sale Shares Purchaser and the issue of the 84,427,246 new CKH Holdings Shares to the Husky Sale Shares Vendor (or as it may direct) would, after taking into account any other acquisition of shares by concert parties of the Trust (if any), result in the Trust incurring a
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mandatory general offer obligation under the Takeovers Code in respect of CKH Holdings, the 61,357,010 Husky Shares which are the subject of the Husky Share Exchange (and correspondingly the number of CKH Holdings Shares to be issued under the Husky Share Exchange) may be reduced to such number as may be agreed between the parties to the Husky Share Exchange at any time before completion of the Husky Share Exchange to the extent as would result in such mandatory general offer obligation not being incurred.
Completion of the Husky Share Exchange, which will take place immediately before the Hutchison Scheme becomes effective on the Listing Date, is conditional upon the fulfilment (or, where relevant, waiver) of the following conditions precedent:
(a) completion of the Cheung Kong Reorganisation (which [occurred] on [18 March] 2015);
(b) the conditions precedent to the Hutchison Proposal (other than the condition precedent relating to completion of the Husky Share Exchange) having been fulfilled or waived (as the case may be) and the Hutchison Proposal not having been terminated;
(c) the SFC Executive granting consent to the Husky Share Exchange as a special deal under Rule 25 of the Takeovers Code and such consent remaining in full force and effect;
(d) the approval of the issue of the CKH Holdings Shares under the Husky Share Exchange by the CKH Holdings Shareholders who do not have a material interest (which is different from that of all other CKH Holdings Shareholders) in any of the Husky Share Exchange, the Hutchison Proposal and the Spin-off, pursuant to the Listing Rules, at an extraordinary general meeting of CKH Holdings (such approval was obtained at the extraordinary general meeting of CKH Holdings which was held on [REDACTED] 2015);
(e) the approval of (1) the Husky Share Exchange (as a special deal under Rule 25 of the Takeovers Code) by the disinterested shareholders of Hutchison in accordance with the Takeovers Code at a general meeting of Hutchison, and (2) the Hutchison Proposal and the transactions contemplated thereunder by the disinterested shareholders of Hutchison in accordance with the requirements of the Companies Ordinance and the Takeovers Code at a court meeting and a general meeting of Hutchison (such approval was obtained at the Hutchison Court Meeting and the Hutchison General Meeting, both of which were held on [REDACTED] 2015);
(f) all authorisations, registrations, filings, rulings, consents, permissions and approvals (including approval in-principle) which may be required under any existing contractual arrangements or regulatory requirements having been obtained and all regulatory filing obligations having been complied with;
(g) the Listing Committee granting approval for the listing of, and permission to deal in, the CKH Holdings Shares to be issued as consideration for the Husky Share Exchange on the Main Board of the Stock Exchange and such approval not having been revoked prior to completion of the Husky Share Exchange;
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(h) the warranties, representations, undertakings and indemnities given by the Husky Sale Shares Vendor in the Husky Share Exchange Agreement remaining true and accurate in all material respects and not misleading in any material respect;
(i) the conditions precedent to the Spin-off (as further described in “The Distribution In Specie and the Spin-off – Distribution In Specie – Conditions Precedent to the Spin-off”) (other than the conditions precedent relating to completion of the Husky Share Exchange and the Hutchison Proposal) having been fulfilled or waived (as the case may be); and
(j) no mandatory general offer obligation under the Takeovers Code being incurred by the Trust in respect of CKH Holdings as a result of the completion of the Husky Share Exchange (whether on its own or together with the completion of the Hutchison Proposal), or if any such mandatory general offer obligation is incurred, a waiver of such obligation having been granted by the SFC Executive and the fulfilment of any conditions or requirements for the waiver.
Assuming that (i) there is no other change in the shareholding of Husky from the Latest Practicable Date to the date of completion of the Husky Share Exchange and (ii) there is no reduction of the 61,357,010 Husky Shares to be acquired and the corresponding 84,427,246 new CKH Holdings Shares to be issued under the Husky Share Exchange, the aggregate holding of common shares in Husky by the Hutchison Group will increase from approximately 33.96% to approximately 40.20% immediately upon completion of the Husky Share Exchange.
B. Hutchison Proposal
On [REDACTED] 2015, the Hutchison Proposal Offeror made a conditional share exchange offer to the Hutchison Scheme Shareholders for cancellation of all the Hutchison Shares held by them by way of a scheme of arrangement pursuant to Division 2 of Part 13 of the Companies Ordinance, and in consideration, each Hutchison Scheme Shareholders will receive 0.684 of a CKH Holdings Share for each Hutchison Scheme Share held at the Hutchison Scheme Record Time. Pursuant to the Hutchison Proposal, it is proposed that on the date upon which the Hutchison Scheme becomes effective in accordance with the Companies Ordinance:
(a) the share capital of Hutchison will be reduced by cancelling and extinguishing the Hutchison Scheme Shares (being all the Hutchison Shares in issue as at the Hutchison Scheme Record Time, other than those held by the Relevant CKH Holdings Subsidiaries);
(b) subject to and immediately upon such reduction of capital taking effect, the share capital of Hutchison will be increased to its former amount by the creation of such number of new Hutchison Shares as is equal to the number of Hutchison Scheme Shares cancelled;
(c) Hutchison will apply all credit arising in its books of account as a result of such capital reduction in paying up the newly created Hutchison Shares, which will be allotted and issued, credited as fully paid, to the Hutchison Proposal Offeror (which is a wholly-owned subsidiary of CKH Holdings); and
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(d) in consideration for the cancellation and extinguishment of the Hutchison Scheme Shares, the Hutchison Scheme Shareholders (other than the Non-Qualifying Hutchison Overseas Shareholders) will receive CKH Holdings Shares (which will rank pari passu with each other), credited as fully paid, in the share exchange ratio of 0.684 of a CKH Holdings Share for each Hutchison Scheme Share held at the Hutchison Scheme Record Time.
Completion of the Hutchison Proposal, which will take place immediately after completion of the Husky Share Exchange and immediately prior to completion of the Property Businesses Combination on the Listing Date, is subject to the fulfillment (or, where relevant, waiver) of the following conditions precedent:
(a) the Hutchison Scheme being approved by the Disinterested Hutchison Shareholders representing at least 75% of the voting rights of the Disinterested Hutchison Shareholders present and voting, in person or by proxy, at the Hutchison Court Meeting, with votes cast against the Hutchison Scheme at the Hutchison Court Meeting not exceeding 10% of the total voting rights attached to all disinterested shares (as respectively defined in Note 6 to Rule 2 of the Takeovers Code and Division 2 of Part 13 of the Companies Ordinance) of Hutchison (such approval [was] obtained at the Hutchison Court Meeting which was held on [REDACTED] 2015);
(b) the passing of a special resolution by the Hutchison Shareholders at the Hutchison General Meeting to approve (1) the Hutchison Scheme and (2) the implementation of the Hutchison Scheme, including, in particular, the reduction of the issued share capital of Hutchison by cancelling and extinguishing the Hutchison Scheme Shares and the issue of the new Hutchison Shares to the Hutchison Proposal Offeror (such special resolution [was] passed at the Hutchison General Meeting which was held on [REDACTED] 2015);
(c) the passing of an ordinary resolution by the CKH Holdings Shareholders who do not have a material interest (which is different from that of all other CKH Holdings Shareholders) in any of the Husky Share Exchange and the Hutchison Proposal, at an extraordinary general meeting of CKH Holdings to approve the Hutchison Proposal and all transactions contemplated thereunder (such ordinary resolution [was] passed at the extraordinary general meeting of CKH Holdings which was held on [REDACTED] 2015);
(d) the Hutchison Scheme, with or without modification, being sanctioned and the proposed reduction of capital provided for in the Hutchison Scheme being confirmed by the Court, and an office copy of the Court order together with the minute and a return that comply with subsections (2) and (3) of section 230 of the Companies Ordinance respectively being registered by the Companies Registrar;
(e) the Listing Committee granting approval for the listing of, and permission to deal in, the CKH Holdings Shares to be issued as consideration under the Hutchison Scheme on the Main Board of the Stock Exchange and such approval not having been revoked prior to the Hutchison Scheme becoming effective;
(f) completion of the Husky Share Exchange having occurred;
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(g) the fulfilment (or, where relevant, waiver) of all the conditions precedent to the Spin-off (as further described in “The Distribution In Specie and the Spin-off – Distribution In Specie – Conditions Precedent to the Spin-off”) (other than the condition precedent relating to the Hutchison Proposal having been completed);
(h) all applicable filings, notices and waivers required in connection with the Hutchison Proposal and its implementation from or with any competent governmental or regulatory body being made, and if applicable, any waiting periods under any applicable antitrust or similar laws and regulations having expired or terminated; and
(i) all other authorisations, registrations, filings, rulings, consents, permissions and approvals (including approval in-principle) which may be required in connection with the Hutchison Proposal under any existing contractual arrangements, including loan and other finance documentation, or regulatory requirements having been obtained and all regulatory filing obligations having been complied with.
Upon completion of the Hutchison Proposal, (i) Hutchison will become a wholly-owned subsidiary of CKH Holdings and (ii) the listing of Hutchison Shares on the Stock Exchange will be withdrawn and the CKH Holdings Shares to be issued as consideration under the Hutchison Scheme will be listed on the Stock Exchange.
4. Property Businesses Combination
In preparation for the Listing and before the commencement of dealings in the Shares on the Stock Exchange, a number of pre-completion and reorganisation steps have been or will be taken, pursuant to which interests in the Combined Property Businesses currently under the CKH Holdings Group and/or the Hutchison Group will be reorganised under the Group. The reorganisation steps include the following:
(a) shares in a number of the CPB Companies will be reorganised to form part of the Group pursuant to the Reorganisation Agreement; and
(b) loans owing by certain CPB Companies to the Cheung Kong Group or the Hutchison Group at Completion (as defined below) will be assigned to the Group pursuant to the Reorganisation Agreement and the Specified Loans Purchase Agreement.
Further details of the reorganisation steps are set out below.
A. The Specified Loans Purchase Agreement
On [¼] 2015, the Company entered into the Specified Loans Purchase Agreement with certain members of the Cheung Kong Group and the Hutchison Group and CKH Holdings, pursuant to which the Company conditionally agreed to accept the assignment from a number of members of the Cheung Kong Group and the Hutchison Group of certain interest-bearing loans owing by certain CPB Companies to them as at Completion (the “Specified Loans”).
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(1) Conditions to Completion of the Assignment of the Specified Loans
Completion of the assignment of the Specified Loans is conditional upon the fulfilment (or, where applicable, waiver) of the conditions which are summarised below:
(a) the fulfilment (or, where applicable, waiver) of the conditions to completion of the Reorganisation Agreement Transactions (as referred to in “– The Reorganisation Agreement” below), other than the condition relating to the fulfilment (or, where applicable, waiver) of the conditions to completion of the Specified Loans Purchase Agreement; and
(b) the warranties given by relevant members of the Cheung Kong Group and the Hutchison Group and CKH Holdings under the Specified Loans Purchase Agreement remaining true and accurate in all material respects and not misleading in any material respects.
The condition in (a) cannot be waived. The Company has the right to waive the condition in (b) in whole or in part. Subject to the fulfilment (or, where applicable, waiver) of the conditions above, completion of the assignment of the Specified Loans will take place simultaneously with completion of the Reorganisation Agreement Transactions (as defined below) (together referred to in this “History and Reorganisation” section as “Completion”) immediately after the Hutchison Scheme becomes effective and before completion of the Distribution In Specie on the Listing Date (referred to in this “History and Reorganisation” section as the “Completion Date”).
(2) Consideration
The consideration for the assignment of the Specified Loans will be an amount equal to the outstanding principal amounts of the Specified Loans as at the Completion Date plus any unpaid interest accrued thereon up to and excluding the Completion Date, such consideration will in aggregate be HK$55,000,000,000.
(3) Settlement of Consideration
At Completion, the aggregate consideration for the assignment of the Specified Loans will be settled by way of the issue of a promissory note in the principal amount of HK$55 billion by the Company to CKH Holdings (the “Specified Loans Promissory Note”). Such promissory note is to be settled by payment of cash on or before the fifth business day following the Completion Date (the “Payment Date”) and is non-interest bearing (except for any amount which remains unpaid after the Payment Date, after which interest will be payable at the rate of one-month HIBOR plus 1% per annum until the date of payment of all outstanding amount). The Group intends to enter into a HK$55 billion syndicated loan facility with a group of lenders (the “Loan Facility”), the proceeds of which will be used to settle the Specified Loans Promissory Note. To cater for the event that the Loan Facility is not available to settle the Specified Loans Promissory Note when it becomes due, The Hongkong and Shanghai Banking Corporation Limited and Bank of America Merrill Lynch have entered into commitment letters with the Group for a bridge facility of HK$55 billion (the “Bridge Facility”), such that the proceeds of the Bridge Facility may be used to settle the Specified Loans Promissory Note, with the proceeds of the Loan Facility when and if it becomes available then being used to repay the Bridge Facility.
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(4) Guarantee
CKH Holdings will guarantee the performance by the relevant members of the Cheung Kong Group and the Hutchison Group of their respective obligations under or pursuant to the Specified Loans Purchase Agreement.
(5) Representations and Warranties and Related Liability
The Specified Loans Purchase Agreement contains representations and warranties given severally by the relevant members of the Cheung Kong Group and the Hutchison Group and representations and warranties given by CKH Holdings subject to limitations. The aggregate liability of the relevant members of the Cheung Kong Group and the Hutchison Group and CKH Holdings under the Specified Loans Purchase Agreement, the Reorganisation Agreement and the Deed of Tax Indemnity (each as further described in “− The Reorganisation Agreement” and “− Deed of Tax Indemnity” below) is subject to a maximum amount of US$7 billion.
B. The Reorganisation Agreement
On [¼] 2015, the Group entered into the Reorganisation Agreement with certain members of the Cheung Kong Group and the Hutchison Group and CKH Holdings, pursuant to which:
(a) shares and/or other interests in a number of the CPB Companies will be reorganised to form part of the Group (the “CPB Companies Share Reorganisation”); and
(b) loans owing by certain CPB Companies to the Cheung Kong Group or the Hutchison Group (other than the Specified Loans) at Completion will be assigned to the Group (the “Reorganisation Agreement Loans Assignment”).
The transactions in (a) and (b) above are together referred to as the “Reorganisation Agreement Transactions”.
The principal terms and conditions of the Reorganisation Agreement are summarised below.
(1) Conditions to Completion of the Reorganisation Agreement Transactions
Completion of the Reorganisation Agreement Transactions is conditional upon the fulfilment (or, where applicable, waiver) of a number of conditions which are summarised below:
(a) the Hutchison Scheme having become effective;
(b) all authorisations which may be required in connection with the transactions contemplated under the Reorganisation Agreement under any existing contractual arrangements having been obtained and all regulatory filing obligations having been complied with;
(c) the warranties given by the relevant members of the Cheung Kong Group and the Hutchison Group and CKH Holdings under the Reorganisation Agreement (together, the “CKH Holdings Warranties”) remaining true and accurate in all material respects and not misleading in any material respect and there being no material adverse change or effect on the CPB Companies as a whole resulting from any of the CKH Holdings Warranties not being true and accurate or being misleading;
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(d) there being no material breach of any terms of the Reorganisation Agreement on the part of the relevant members of the Cheung Kong Group and the Hutchison Group resulting in material adverse change or effect on the CPB Companies as a whole; and
(e) the fulfilment (or, where applicable, waiver) of the conditions to completion of the assignment of the Specified Loans, other than the condition relating to the fulfilment (or, where applicable, waiver) of the conditions to completion of the Reorganisation Agreement Transactions.
The conditions in (a) and (e) cannot be waived. The Company has the right to waive any of the conditions in (b) to (d) above in whole or in part and either generally or in respect of any particular matter.
Subject to the fulfilment (or, where relevant, waiver) of the conditions referred to above, completion of the Reorganisation Agreement Transactions will take place simultaneously with completion of the assignment of the Specified Loans immediately after the Hutchison Scheme becomes effective and before completion of the Distribution In Specie on the Listing Date.
(2) Consideration
(i) Consideration for the CPB Companies Share Reorganisation
The consideration for the CPB Companies Share Reorganisation will be an amount equal to the aggregate of the net asset values attributable to ordinary / common shareholders of the CPB Companies as at the Completion Date based on (i) the unaudited consolidated net asset value attributable to ordinary / common shareholders as at [REDACTED] 2015 of the relevant CPB Companies and (ii) the estimated changes in the unaudited consolidated net asset value attributable to ordinary / common shareholders of the relevant CPB Companies during the period from [REDACTED] 2015 to the day immediately preceding the Completion Date, as agreed between CKH Holdings and the Company.
(ii) Consideration for the Reorganisation Agreement Loans Assignment
The consideration for the Reorganisation Agreement Loans Assignment will be an amount equal to the aggregate of the outstanding principal amounts of the relevant loans as at the Completion Date (if applicable, plus any unpaid interest accrued thereon up to and excluding the Completion Date).
(3) Settlement of Consideration
The aggregate consideration for the Reorganisation Agreement Transactions will be settled by way of the issue of a promissory note (the “Reorganisation Promissory Note”) by the Company to CKH Holdings, and the debt due from the Company to CKH Holdings pursuant to such promissory note will be settled at Completion through the issue of one new Share by the Company to CKH Holdings credited as fully paid at a premium, with the premium equal to the principal amount of that promissory note less HK$1 (being the par value of one Share).
(4) Passing of Economic Interests
The reorganisation of the shares of certain CPB Companies to form part of the Group will require third party consents (the “Third Party Consents”). In the event that, in respect of any CPB Companies, the relevant Third Party Consent cannot be obtained to the satisfaction of the Company on or before 10 business days prior to the Completion Date (the “CPB Specified Companies”), the
–82– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION relevant members of the Cheung Kong Group and the Hutchison Group will, pursuant to arrangements entered into, pass the economic interests in and obligations in respect of such CPB Specified Companies to the Group, upon Completion, with the remaining steps of the Reorganisation Agreement Transactions in respect of the CPB Specified Companies to take place within five business days (a) after the Completion Date (in relation to the CPB Specified Companies the Third Party Consents of which are obtained within 10 business days prior to the Completion Date) or (b) after the date when the relevant Third Party Consents are obtained (in relation to the CPB Specified Companies the Third Party Consents of which are obtained on or after the Completion Date).
(5) Representations and Warranties and Related Liability
The Reorganisation Agreement contains representations and warranties given severally by the relevant members of the Cheung Kong Group and the Hutchison Group, and representations and warranties given by CKH Holdings subject to limitations.
No claim shall be brought by the Group under the Reorganisation Agreement unless each claim exceeds US$120 million. The aggregate liability of the relevant members of the Cheung Kong Group and the Hutchison Group and CKH Holdings under the Specified Loans Purchase Agreement, the Reorganisation Agreement and the Deed of Tax Indemnity (as further described in “– Deed of Tax Indemnity” below) is subject to a maximum amount of US$7 billion.
(6) Guarantees
Under the Reorganisation Agreement:
(a) CKH Holdings has agreed to guarantee the performance by the Cheung Kong Group and the Hutchison Group of their respective obligations under or pursuant to the Reorganisation Agreement; and
(b) the Company has agreed to guarantee the performance by the relevant members of the Group of their obligations under or pursuant to the Reorganisation Agreement.
(7) Undertakings
The Company will use all reasonable endeavours to procure that, as from Completion (and, in the case of the CPB Specified Companies, the completion of the reorganisation of the relevant CPB Specified Companies to form part of the Group), all members of the CKH Holdings Group are released from all guarantees and indemnities given by any of them in respect of any obligations of any CPB Companies and, pending such release, the Company will indemnify such members of the CKH Holdings Group against all liabilities arising under the above guarantees and indemnities in respect of, or attributable to, the period after Completion.
C. Deed of Tax Indemnity
On [¼] 2015, the Company entered into a deed of tax indemnity (the “Deed of Tax Indemnity”) with CKH Holdings, Cheung Kong and HIL, under which Cheung Kong and HIL severally covenanted, conditional upon Completion having taken place and subject to limitations, to indemnify and pay for certain tax liabilities of the CPB Companies owned by Cheung Kong Group and Hutchison Group respectively before the Property Businesses Combination including, among other things, tax liabilities arising from events occurring on or before Completion or in respect of any gains accrued on or before
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Completion or any tax liabilities arising as a result of the pre-completion reorganisation, the assignment of the Specified Loans, the Reorganisation Agreement Transactions, the Distribution In Specie or the Spin-off. CKH Holdings has agreed to guarantee the performance by Cheung Kong and HIL of their respective obligations under the Deed of Tax Indemnity.
No claim shall be brought in respect of the covenant and indemnity given by each of Cheung Kong and HIL (the “indemnifying parties”) under the Deed of Tax Indemnity unless the claim against such indemnifying party exceeds US$120 million. The aggregate liability of the relevant members of the Cheung Kong Group and the Hutchison Group and CKH Holdings under the Specified Loans Purchase Agreement, the Reorganisation Agreement and the Deed of Tax Indemnity is subject to a maximum amount of US$7 billion.
CORPORATE STRUCTURE PRIOR TO THE MERGER PROPOSAL AND THE SPIN-OFF
Below is a simplified corporate structure of CKH Holdings, Cheung Kong, Hutchison, Husky, and the Company as at the Latest Practicable Date:
Mr. Li Ka-shing Other The Trust and Mr. Li Tzar Kuoi, Victor shareholders(1)
40.43% 2.99% 56.58%
CKH Holdings Other (listed on the Stock Exchange) shareholders(2)
0.27% 2.25%
100.00% 47.51%
Cheung Kong
49.97%
100.00% 35.56% Hutchison (listed on the The Company Stock Exchange) 33.96%
Husky (listed on the Toronto Stock Exchange) Combined Combined Property Non- (3) Property Businesses Businesses (3)
–84– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION
Notes:
(1) The other shareholders of CKH Holdings include certain core connected persons of CKH Holdings (including, among others, certain directors of CKH Holdings (other than Mr. Li Ka-shing and Mr. Li Tzar Kuoi, Victor)), who are not regarded as public shareholders of CKH Holdings under the Listing Rules.
(2) The other shareholders of Hutchison include certain core connected persons of Hutchison (including, among others, certain directors of Hutchison (other than Mr. Li Ka-shing and Mr. Li Tzar Kuoi, Victor)), who are not regarded as public shareholders of Hutchison under the Listing Rules.
(3) Prior to the Property Businesses Combination, the Combined Property Businesses and the Combined Non-Property Businesses are businesses jointly and/or separately owned by the CKH Holdings Group and the Hutchison Group.
(4) Some percentage figures may not add up due to rounding differences.
CORPORATE STRUCTURE IMMEDIATELY AFTER COMPLETION OF THE PROPOSALS AND THE LISTING
The simplified shareholding and corporate structure of the Group immediately after completion of the Proposals and the Listing is set out below:
Mr. Li Ka-shing Other The Trust and shareholders(1) Mr. Li Tzar Kuoi, Victor
26.66% 3.49% 69.85%
The Company (listed on the Stock Exchange)
Combined Property Businesses
Notes:
(1) The other shareholders of the Company include certain core connected persons of the Company (including, among others, certain directors of the Company (other than Mr. Li Ka-shing and Mr. Li Tzar Kuoi, Victor)), who are not regarded as public shareholders of the Company under the Listing Rules.
(2) Details of certain information on the Group’s non-wholly owned subsidiaries as at the Latest Practicable Date (assuming completion of the Proposals) are set out in “Appendix VII – General Information – Further Information about the Company – Subsidiaries – Non-wholly Owned Subsidiaries”.
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