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MELCO CHINA RESORTS (HOLDING) LIMITED
May 28, 2008
TRADING SYMBOL: “MCG” AND “MCG.WT” TSXV
NEWS RELEASE
Melco China Resorts (Holding) Limited completes reverse take-over; adds to experienced management team
Completes reverse take-over of Virtual China Travel Services Co., Ltd.
Appoints Paul Zhang as Chief Financial Officer and Edward Chow as Director
Melco China Resorts (Holding) Limited (“Melco China Resorts” or “MCR”) is pleased to announce that today it completed its reverse take-over (the “Transaction”) of Virtual China Travel Services Co., Ltd. (“VCTS”) (formerly NEX: CTX.H), an important step in MCR’s plans to further develop its position as China’s premier year-round destination mountain resort network.
In connection with the Transaction, Melco China Resorts has also completed the exchange of subscription receipts offered by way of a private placement (the “Private Placement”) for common shares and warrants of Melco China Resorts and the net proceeds of approximately $68 million have been released from escrow to Melco China Resorts. Canaccord Adams acted as lead agent in a syndicate that included CIBC World Markets Inc. for the Private Placement. CIBC World Markets Inc. also acted as sponsor for the Transaction.
The common shares and warrants of Melco China Resorts commenced trading today on the TSX Venture Exchange (the “Exchange”) under the symbol MCG and MCG.WT.
The Business
Immediately prior to the Transaction, Melco China Resorts completed its acquisition of Melco China Resort Investment Limited (“Melco Cayman”), which through its wholly-owned subsidiary owns five ski resorts in China that are located in Beijing, Heilongjiang Province and Jilin Province, namely: (1) the Sun Mountain Yabuli Resort; (2) the Star Mountain Beijing Resort; (3) the Adventure Mountain Changchun; (4) the Lotus Mountain Club; and (5) Sky Mountain Beidahu. Melco China Resorts plans to develop each resort in accordance with its distinct setting and to expand the range and variety of mountain resort experiences offered by its
Suite 1202-03, Tower B, TYG Center, 2-Bing North Street, East Third Ring Road, Chaoyang district, Beijing, P.R.C., Post Code: 100-027 Phone: 86.10.84464588 Fax: 86.10.84464388 Website: www.melcochinaresorts.com
- 2 - properties. This development is expected to attract and maintain resort customer interest and position Melco China Resorts as a leading owner and operator of village centred destination mountain resorts in China.
According to the China Ski Association, the total number of ski visits in China increased at a rate of 109% per annum to over 4 million between 1999 and 2004 and is expected to increase to 10 million by 2010. Seeking to capture this tremendous opportunity, Melco China Resorts owns the largest portfolio of existing China ski resorts possessing location advantages, market position and healthy expansion potential. Melco China Resorts has plans to secure additional ski areas and develop further resorts in the coming years. When fully redeveloped the resorts will include the highest international standards, an abundance of international standard on-mountain and resort activities for both accomplished skiers and beginners, and unique “four season” facilities and attractions.
Mr Lawrence Ho, Chairman of MCR and Chairman and CEO of Melco International Development Limited (“Melco”), who through a wholly-owned subsidiary, is a significant shareholder of MCR, said, “We are delighted to announce the completion of our listing in Canada which supports the strategic expansion of our business with MCR in developing, operating and managing world-class four season, village centred mountain resorts in China. Our move into the mountain resort business in China enables our expansion in the mainland and provides an exceptional range of new experiences to address the growing need for up-market recreational activities among the country’s fast growing middle and upper classes. This is consistent with our desire to attract and retain a discerning customer base that is actively seeking and willing to pay for a great leisure experience”.
“The market demand for quality skiing and world-class facilities in China far surpasses the product that is currently offered,” said Graham Kwan, CEO of MCR. “There are limited quality ski destinations available for the more than five million annual skier visits in the country and as China’s middle class continues to grow, we believe that MCR is set to capitalize on this growing demand by providing the best facilities with the highest international standards”.
In addition to the ski facilities and year-round activities, MCR’s plans include the development of four- and five-star accommodations, including full service hotels, apartment hotels, and slope side luxury resort vacation homes. Pedestrian villages that provide for a complete vacation experience with a variety of restaurants, retail shops, spa amenities and entertainment are already under construction.
The first phase of the development project is underway at MCR’s Sun Mountain Yabuli resort in Heilongjiang Province, with new hotels, heated ski lifts, a full-service spa, retail shops and restaurants now under construction. Initial improvements at the Sky Mountain Beidahu and Star Mountain Beijing resorts will begin in summer 2008, while planning for MCR’s Adventure Mountain Changchun resort, as well as their private Lotus Mountain Club, is now underway.
Mr. Kwan noted “Unlike most of the mountain resort developers in North America, we chose to immediately acquire five premium resorts in the country. The alternative of acquiring a single resort every few years would effectively see us buying our own value as we enhance the quality of ski resorts in the country. In each of our resorts we plan to have operational control over all of
- 3 - our recurring revenue businesses that include lodging, dining, bars, retail, activities, and spa operations. Most North American and European resorts usually include third party tenants but our strategy allows us to control the quality offered, with more flexibility in packaging our vacation experiences, and developing and retaining our own concepts and profitability.”
“MCR’s management team has extensive experience in the ski and hospitality industry, with a proven business record in China,” said Mr. Kwan, a former Intrawest executive who led the North American resort company’s China strategy. “We know the market, we understand the business environment and we have developed a sound business plan to leverage this virtually untapped market.”
“We are in a unique position as compared to our North American competitors due to China’s high growth economy,” said Mr. Kwan. “Not only does MCR benefit from the accelerated pace of business, but we are able to take advantage of lower construction costs and greater real estate margins, requiring less capital investment to deliver on our promise to establish world-class four season destination resorts.”
MCR expects to benefit from the experience of significant shareholder Melco. Melco has a successful track record of operating hospitality businesses in China and throughout Asia, including, through its major associate, catering to China’s ongoing prosperity through its 6 star Crown Macau Casino, the highest grossing casino worldwide in terms of gaming revenue. In addition, MCR expects to host the China Entrepreneurs Forum at its Yabuli resort each winter that gathers China’s leading business figures.
The Transaction
On May 15, 2008, the shareholders of VCTS approved, amongst other matters: (i) the continuance of VCTS from Alberta to British Columbia; (ii) a two-for-one share consolidation of the then existing VCTS common shares; and (iii) the Transaction including the amalgamation of VCTS with Melco China Resorts. The Transaction was completed by way of an amalgamation pursuant to the Business Corporations Act (British Columbia) on May 28, 2008.
As a result of the completion of the Transaction, on a non-diluted basis, the shareholders of Melco China Resorts are as follows:
Freely tradeable Non-voting Shareholder Common shares Percentage common shares (1) Class B Shares Former VCTS Shareholders 1,186,576 1.4% 1,186,576 - Shareholders of Hillwide Technology Limited (2) 3,480,000 4.0% 870,000 - Shareholders of Ying Wah Consultants Limited (3) 17,620,000 20.2% 4,405,000 - Melco (through its wholly owned subsidiary) (4),(5) 43,109,134 49.3% 12,277,284 8,437,565 Other placees and agents from the Private Placement 22,043,634 25.2% 22,043,634 - Total 87,439,344 100.0% 40,782,494 8,437,565
(1) Means those MCR common shares which have been released from or are not subject to Exchange escrow requirements. (2) Hillwide Technology Limited (“Hillwide”), a company controlled by the management of MCR. (3) Ying Wah Consultants Limited (“Ying Wah”) is a company controlled by management and senior employees, consultants and agents of Melco China Resorts group. The shareholders of Ying Wah are not acting jointly or in concert with one another. (4) Melco has acquired the above-noted securities of MCR for investment purposes only and may, depending on market and other
- 4 - conditions, increase or decrease its beneficial ownership, control or direction over the securities of MCR through market transactions or private agreements, exercise of warrants, convertible securities or otherwise. (5) Approximately 3.48 million common shares held beneficially by shareholders of Hillwide have been pledged to a subsidiary of Melco as collateral to secure certain obligations. Up to 3.5 million of the common shares held beneficially by shareholders of Ying Wah may also be pledged to a subsidiary of Melco as collateral to secure certain obligations.
In aggregate, approximately 87.4 million common shares will be listed and outstanding, of which approximately 40.8 million will be freely tradeable and the remaining common shares will be subject to Exchange escrow requirements.
Appointment of Paul Zhang as Chief Financial Officer
Melco China Resorts is pleased to announce the appointment of Paul Zhang as Chief Financial Officer effective June 1, 2008. Mr Kwan stated, “We are delighted that Paul has joined our senior management team. Paul brings to Melco China Resorts his years of experience and discipline leading the financial affairs of TSX-listed companies combined with his valued operating and business experience in China.”
Mr. Zhang is a member of the Institute of Chartered Accountants of Ontario, the Institute of Chartered Accountants of British Columbia, and is a Certified Public Accountant in the United States. From May 2006 to March 2008, Mr. Zhang was the Chief Financial Officer of Migao Corporation (TSX: MGO). From November 2005, Mr. Zhang was the Chief Financial Officer of the operating subsidiary of Migao Corporation. In addition, from March 2003 until November 2005, Mr. Zhang was the Managing Partner of Zhang & Du, LLP Chartered Accountants. From November 2001 to March 2003, Mr. Zhang was the Controller and Manager of Accounting of Retirement Residences Real Estate Investment Trust, which was a TSX-listed entity.
Appointment of Edward Chow as Director
Melco China Resorts is also pleased to announce the appointment of Edward Chow as Director effective May 28, 2008. Mr. Chow is a fellow member of The Institute of Chartered Accountants in England and Wales and a past president of the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Before elected president, he chaired the HKICPA’s Corporate Governance Committee and Professional Accountants in Business (“PAIB”) Committee. He is also Chairman of the PAIB Committee of the International Federation of Accountants (“IFAC”), a core member of the OECD/World Bank Asian Corporate Governance Roundtable and a Deputy Chairman of both The Hong Kong Institute of Directors and the Business and Professionals Federation of Hong Kong.
Mr. Chow was recently appointed an expert advisor of the Accounting Standards Committee of the Ministry of Finance, Peoples Republic of China. He is also a member of The Chinese People’s Political Consultative Conference – Zhejiang Province and The Election Committee of the Hong Kong Special Administrative Region. Mr. Chow is currently the Chairman of China Infrastructure Group and CIG Yangtze Ports PLC, listed in Hong Kong. He is an independent director and chairman of the audit committee and remuneration committee of COSCO Pacific Limited, a company listed on the stock exchange of Hong Kong, and an independent director of China Merchants Bank Co., Ltd., which is listed on the stock exchanges of Hong Kong and Shanghai. Between 1988 and 1996, he was the Managing Director of a conglomerate which had companies listed on the stock exchanges of Hong Kong and Thailand. Prior to entering the
- 5 - commercial sector, Mr. Chow spent 11 years working for two major accounting firms, Deloitte Haskins & Sells and Price Waterhouse (as they were then known), respectively in London and Hong Kong.
Financial Information
The audited interim financial statements of Melco Cayman for the nine-month period ended September 30, 2007, the interim financial statements of MCR for the quarter ended March 31, 2008, as well as the required pro forma financial statements relating to the acquisition of the five ski resorts and to give effect to the Transaction were included in the information circular for the VCTS shareholders’ meeting to approve, among other things, the Transaction. Interim financial statements of Melco Cayman for the quarter ended March 31, 2008 and audited financial statements of Melco Cayman for the year ended December 31, 2007 have been filed on SEDAR and are available at www.sedar.com under Melco China Resorts (Holding) Limited.
ABOUT MELCO CHINA RESORTS
Melco China Resorts is China’s largest ski resort developer and operator with five premier resort properties. The portfolio includes Sun Mountain Yabuli, host for the 2009 World University Games; Sky Mountain Beidahu, host of the 2007 Asian Winter Games; The Lotus Mountain Club, to be developed as an ultra-exclusive private mountain resort club; Adventure Mountain Changchun, an experiential mountain adventure centre retreat; and Star Mountain Beijing, MCR’s first ski area in the major Beijing market and home to MCR’s ski school headquarters, known as The Perfect Turn. MCR is committed to developing the five properties and transforming them into world-class, four season luxury mountain resorts with excellent real estate investment opportunities for discerning buyers.
MCR’s leadership team boasts a proven record of resort development success both internationally and in China. Several of its management and a director held key positions at a leading resort and hospitality company, Intrawest - the developer behind Whistler Blackcomb and Mont Tremblant in Canada.
ABOUT MELCO LEISURE AND MELCO
Melco Leisure and Entertainment Group Limited, the largest beneficial shareholder of Melco China Resorts, is a wholly-owned subsidiary of Melco. Melco has one of longest histories of companies in Hong Kong. Founded in 1910, Melco was among the first one hundred companies established in the city and was listed on the Hong Kong Stock Exchange in 1927. Today, under the leadership of its Chairman and Chief Executive Officer Lawrence Ho, Melco is a dynamic New Generation Asian Conglomerate that leads in the leisure and entertainment industry in Asia. Under his stewardship, the Melco Group now has significant interests in six listed entities, including newly listed MCR in Canada, two in the US and three in Hong Kong, with a total market capitalization over US$8 billion. Its promising performance and distinctive leadership in the industry are also well recognized worldwide. It was granted the Asia’s Best Managed Companies 2007 Award issued by FinanceAsia. For more information about Melco Leisure and Melco, please visit www.melco-group.com.
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For more information, please contact:
Melco China Resorts Graham Kwan, Chief Executive Officer Tel: 86.10.84464588 Fax: 86.10.84464388 Email: [email protected]
The TSX Venture Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
FORWARD LOOKING INFORMATION
Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, and actual results may vary from the forward-looking information. Implicit in this information are assumptions regarding future operations, plans, expectations, anticipations, estimates and intentions, such as the plans to develop the ski resorts in China.
These assumptions, although considered reasonable by Melco China Resorts at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of Melco China Resorts are subject to a number of risks and uncertainties, including general economic, market and business conditions, uncertainty relating to land use rights, adverse industry events for the ski and real estate industries, Melco China Resorts’ ability to make and integrate acquisitions, the requirements of recent Chinese regulations relating to cross-border mergers and acquisitions, the inability to obtain required approvals or approvals may be subject to conditions that are unacceptable to the parties, changing industry and government regulation, as well as Melco China Resorts’ ability to implement its business strategies, and to raise sufficient capital, seasonality, weather conditions, competition, currency fluctuations and other risks, and could differ materially from what is currently expected as set out above.
Forward-looking information contained in this press release is based on current estimates, expectations and projections, which MCR believes are reasonable as of the date of this press release. Melco China Resorts uses forward-looking statements because it believes such statements provide useful information with respect to the operation and financial performance of Melco China Resorts, and cautions readers that the information may not be appropriate for other purposes. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Melco China Resorts may elect to, it does not undertake to update this information at any particular time.