Air China Limited
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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, you should consult a 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 of Air China Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee. 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 however arising from or in reliance upon the whole or any part of the contents of this circular. AIR CHINA LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 753) CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION: PURCHASE OF EQUITY INTEREST IN AIR CHINA CARGO FROM CITIC PACIFIC LIMITED Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders A letter from the Board is set out on pages 4 to 8 of this circular and a letter from the Independent Board Committee is set out on pages 9 to 10 of this circular. A letter of advice from BOCOM International, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the independent Shareholders of the Company is set out on pages 11 to 18 of this circular. 24 January 2008 CONTENTS Page Definitions ........................................................ 1 Letter from the Board ............................................... 4 Letter from the Independent Board Committee .......................... 9 Letter from the Independent Financial Adviser .......................... 11 Appendix – General Information ...................................... 19 –i– DEFINITIONS In this circular, the following expressions have the following meanings, unless the context requires otherwise: “A Shares” ordinary shares in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and traded in RMB on the Shanghai Stock Exchange “Air China Cargo” Air China Cargo Co., Ltd., a company with limited liability incorporated in the PRC, the registered share capital of which was owned by the Company, CITIC Pacific (through Fine Star) and Capital Airport Holding Company by 51%, 25% and 24%, respectively, immediately prior to the completion of the Transaction and is owned by the Company and Capital Airport Holding Company by 76% and 24% upon completion of the Transaction “Air Macau” Air Macau Company Limited, a company with limited liability incorporated under the laws of Macau and with 51% of its share capital owned by CNAC (Macau) as at the date of this circular “Ameco” Aircraft Maintenance and Engineering Corporation, Beijing ( ), a company with limited liability incorporated under the laws of the People’s Republic of China and with 60% of its registered capital owned by the Company as at the date of this circular “Associate(s)” has the meaning ascribed hereto under the Listing Rules “BOCOM International” or BOCOM International (Asia) Limited, a corporation licensed “Independent Financial to carry on type 1 (dealing in securities) and type 6 Adviser” (advising on corporate finance) of the regulated activities under the SFO, the independent financial adviser to the Independent Board Committee and independent Shareholders of the Company in respect of the Transaction “Board” the board of directors of the Company “Cathay Pacific” Cathay Pacific Airways –1– DEFINITIONS “CITIC Pacific” CITIC Pacific Limited, a company incorporated in Hong Kong “CNAC” China National Aviation Company Limited, a company incorporated under the laws of Hong Kong with limited liability “CNAC (Macau)” China National Aviation Corporation (Macau) Company limited, a company with limited liability incorporated under the laws of Macau and a wholly-owned subsidiary of CNAC as at the date of this circular “CNACG” China National Aviation Corporation (Group) Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC as at the date of this circular “CNAHC” China National Aviation Holding Company, a company incorporated under the laws of the People’s Republic of China “Company” Air China Limited, a company incorporated in the People’s Republic of China, whose H Shares are listed on the Stock Exchange as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A Shares are listed on the Shanghai Stock Exchange “Director(s)” the director(s) of the Company “Fine Star” Fine Star Enterprises Corp., a company incorporated in the British Virgin Islands, which held 25% equity interest in the registered capital of Air China Cargo immediately prior to the completion of the Transaction “Gold Leaf” Gold Leaf Enterprises Holdings Ltd., a company incorporated in the British Virgin Islands “Group” the Company and its subsidiaries and joint ventures “H Shares” overseas listed foreign shares of RMB1.00 each in the share capital of the Company –2– DEFINITIONS “Independent Board Committee” the independent board committee of the Company comprising Hu Hung Lick, Henry, Wu Zhipan, Zhang Ke and Jia Kang, all being independent non-executive Directors “Latest Practicable Date” 18 January 2008, being the latest practicable date prior to the printing of this circular “Listing Rules” The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited “PRC” the People’s Republic of China, excluding, for the purpose of this circular only, Hong Kong, Macau and Taiwan “Sale and Purchase Agreement” an agreement relating to the sale and purchase of the share in and the shareholder’s loan to Fine Star dated 3 January 2008 entered into among CNAC, Gold Leaf and CITIC Pacific pursuant to which, among other things, CNAC has agreed to purchase and Gold Leaf has agreed to sell the entire issued share capital of Fine Star “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “Shareholder(s)” registered holder(s) of the shares of the Company “Shareholder Loan” all the loans made by CITIC Pacific to Fine Star as at the close of business on the completion date for the Transaction, of which the amount as at 30 September 2007 was HK$ 518,213,209, and Gold Leaf undertakes in the Sale and Purchase Agreement to keep the responsibility of Fine Star regarding to the shareholder loan unchanged in any and all aspects until the completion date “Stock Exchange” The Stock Exchange of Hong Kong Limited “Supervisor(s)” the supervisor(s) of the Company “Transaction” the transactions contemplated under the Sale and Purchase Agreement –3– LETTER FROM THE BOARD AIR CHINA LIMITED (a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 753) Directors: Registered address: Non-executive Directors: 9th Floor, Blue Sky Mansion Kong Dong (Vice Chairman) 28 Tianzhu Road, Zone A Wang Shixiang (Vice Chairman) Tianzhu Airport Industrial Zone Yao Weiting Shunyi District Ma Xulun Beijing, PRC Christopher Dale Pratt Chen Nan Lok Philip Principal place of business in Hong Kong: Executive Directors: 5th Floor, CNAC House Cai Jianjiang 12 Tung Fai Road Fan Cheng Hong Kong International Airport Hong Kong Independent Non-Executive Directors: Hu Hung Lick, Henry Wu Zhi Pan Zhang Ke Jia Kang 24 January 2008 To the Shareholders Dear Sir or Madam, CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION 1. INTRODUCTION On 3 January 2008, CNAC, a wholly-owned subsidiary of the Company entered into the Sale and Purchase Agreement with Gold Leaf and CITIC PACIFIC, pursuant to which CNAC has agreed to purchase from Gold Leaf the entire issued share capital of Fine Star, which in turn holds 25% equity interest in the registered capital of Air China Cargo. The Transaction has been completed on 3 January 2008 as well. –4– LETTER FROM THE BOARD The Transaction constitutes a connected transaction and a discloseable transaction of the Company under the Listing Rules. The Independent Board Committee has been established to consider and advise the independent Shareholders of the Company in respect of the Transaction contemplated under the Sale and Purchase Agreement. BOCOM International has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the independent Shareholders of the Company as to whether or not the terms of the Sale and Purchase Agreement contemplated thereunder are fair and reasonable so far as the independent Shareholders of the Company are concerned and are in the interests of the Company and the Shareholders as a whole. The purposes of this circular are: (i) to set out further details of the Transaction; (ii) to set out the views from the Directors and the Independent Board Committee with regard to the Transaction; and (iii) to set out the letter of advice from BOCOM International to the Independent Board Committee and the Independent Shareholders of the Company in relation to the terms of the Transaction. 2. THE SALE AND PURCHASE AGREEMENT (1) Date of the Transaction 3 January 2008 (2) Parties to the Transaction (i) CNAC, a wholly-owned subsidiary of the Company, as the purchaser, the principal business activity of which is investment holding; (ii) Gold Leaf, a wholly-owned subsidiary of CITIC Pacific, as the vendor, the principal business activity of which is investing holding; and (iii) CITIC PACIFIC, which is engaged in a diversified range of businesses, including manufacturing of special steel, iron ore mining, property development and investment, infrastructure, marketing and distribution. –5– LETTER FROM THE BOARD Immediately prior to the completion of the Transaction, Gold Leaf wholly owned Fine Star, which in turn owns 25% equity interest in Air China Cargo.