The Stock Exchange 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.

 

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Kwong Hing International Holdings (Bermuda) Limited.

 

 

Kwong Hing International Holdings (Bermuda) Limited

(Incorporated in Bermuda with limited liability)

 

SHARE TRANSACTION

 

On 25th November, 2002, a conditional sale and purchase agreement was entered into by the Company, ATX and the Vendor. The Agreement is for the purchase of an approximately 9.80% interest in the issued share capital of Yakudo. Yakudo is an investment holding company. Its 100%-owned subsidiary in the PRC, Yakudo Foodstuff (China) Co. Ltd., is principally engaged in the production, selling and distribution of lactobacillus drinks.

 

The total consideration payable by ATX to the Vendor is HK$39,975,000, and will be satisfied by the allotment and issue to the Vendor of a total of 533,000,000 new shares in the Company at the issue price of HK$0.075 per share. The issue price per share represents (i) a discount of approximately 61.73% to the closing price of HK$0.1960 per share as quoted on the Stock Exchange on 22nd November, 2002, being the last day of trading in the shares of the Company on the Stock Exchange before the signing of the Agreement; (ii) a discount of approximately 29.04% to the average closing price of approximately HK$0.1057 per share for the last ten trading days up to and including 22nd November, 2002; (iii) a premium of approximately 13.81% to the average closing price of approximately HK$0.0659 per share for the last thirty trading days up to and including 22nd November, 2002; and (iv) a premium of approximately 48.51% to the average closing price of approximately HK$0.0505 per share for the last sixty trading days up to and including 22nd November, 2002.

 

The 533,000,000 shares to be issued to the Vendor represent approximately 13.79% of the issued share capital of the Company as at the date of the Agreement, and approximately 12.12% of the issued share capital of the Company, as enlarged by the issue of the Consideration Shares.

 

Each of Yakudo and the Vendor is an independent third party not connected with, or acting in concert with, the chief executive, directors and substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Listing Rules).

 

The Agreement constitutes a share transaction for the Company under Chapter 14 of the Listing Rules.

 

At the request of the Company, trading in the shares of the Company on the Stock Exchange was suspended from 9:42 a.m. on 25th November, 2002 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the shares of the Company with effect from 9:30 a.m. on 27th November, 2002.

 

THE AGREEMENT

 

Date

 

25th November, 2002

 

Parties

 

1.       ATX (as purchaser), a wholly-owned subsidiary of the Company;

 

2.       Mr. Lee Tao Kuang (as Vendor), who is one of the founders and a director of Yakudo; and

 

3.       the Company.

 

Each of Yakudo and the Vendor is an independent third party not connected with, or acting in concert with, the chief executive, directors and substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Listing Rules).

 

Asset to be acquired

 

The Sale Shares, which represent an approximate 9.80% interest in the issued share capital of Yakudo.

 

Consideration

 

A total of HK$39,975,000, which was arrived at based on arm's length negotiations between the parties with reference to the Vendor's estimated business value of Yakudo of HK$430,000,000 as at the date of the Agreement. As the consideration represents a discount of approximately 5.14% to the estimated business value of HK$42,140,000 (calculated as the product of HK$430,000,000 and 9.80%, this being the percentage interest of the Sale Shares in the issued share capital of  Yakudo), the board of Directors considers it to be fair and reasonable.

 

The consideration is to be satisfied by the issue and allotment of 533,000,000 Consideration Shares, credited as fully paid at the issue price of HK$0.075 each, to the Vendor. The issue price per Consideration Share is determined by reference to the average closing price of the Company's shares for the last thirty and sixty trading days up to and including 22nd November, 2002 and represents (i) a discount of approximately 61.73% to the closing price of HK$0.1960 per share as quoted on the Stock Exchange on 22nd November, 2002, being the last day of trading in the shares of the Company on the Stock Exchange before the signing of the Agreement; (ii) a discount of approximately 29.04% to the average closing price of approximately HK$0.1057 per share for the last ten trading days up to and including 22nd November, 2002; (iii) a premium of approximately 13.81% to the average closing price of approximately HK$0.0659 per share for the last thirty trading days up to and including 22nd November, 2002; and (iv) a premium of approximately 48.51% to the average closing price of approximately HK$0.0505 per share for the last sixty trading days up to and including 22nd November, 2002.

 

The Consideration Shares will be issued under the general mandate granted by shareholders of the Company to the Directors to allot and issue shares at the annual general meeting held on 23rd August, 2002.

 

The Consideration Shares represent approximately 13.79% of the existing issued share capital of the Company as at the date of the Agreement, and approximately 12.12% of the Company's issued share capital as enlarged by the issue of the Consideration Shares. Upon Completion, the Vendor will become a substantial shareholder of the Company.

 

Completion date

 

Completion shall take place at 12:00 noon (Hong Kong time) on the third Business Day after the Company or ATX shall have given notice to the Vendor that all the Conditions have been satisfied or on such other time and date as the Company, ATX and the Vendor may agree in writing.

 

Conditions

 

Completion of the Agreement is subject to the following conditions being fulfilled on or before the Longstop Date:

 

(a)      the Stock Exchange granting listing of and permission to deal in the Consideration Shares on the Stock Exchange;

 

(b)      if so required by law, the Bermuda Monetary Authority granting its consent to the allotment and issue of the Consideration Shares;

 

(c)      the obtaining by the Company of all necessary consents, authorisations or other approvals of any kind in connection with the entering into and performance of the terms of the Agreement by the Company which may be required under the Listing Rules;

 

(d)      ATX being satisfied with the results of the legal and financial due diligence exercise to be conducted on Yakudo;

 

(e)      the obtaining by ATX of a valuation report issued by a reputable valuer to be agreed between ATX and the Vendor which confirms that in the opinion of such valuer, the value of Yakudo is not less than HK$430,000,000; and

 

(f)       there being no material breach of the warranties, undertakings and representations given by the Vendor in the Agreement.

 

Each party to the Agreement has agreed to use its respective reasonable endeavours to the extent within its power and control to procure fulfilment of the Conditions at or before 5:00 p.m. on the Longstop Date.

 

If the Conditions are not fulfilled by 5:00 p.m. on the Longstop Date (or such other date as the parties to the Agreement may agree in writing), ATX may: (i) defer Completion to a date which is not more than 28 days later than the date of Completion; or (ii) proceed to Completion so far as practicable; or (iii) rescind the Agreement.

 

Other terms

 

The Vendor has warranted to each of ATX and the Company that, as at the date of the Agreement, Yakudo has an issued but unpaid share capital of HK$54,139,486. The Vendor has undertaken to each of ATX and the Company that he shall pay or procure the payment to the Company in cash or by way of asset injection of all the outstanding issued but unpaid share capital of the Company of HK$54,139,486 on or before 30th June, 2003.

 

SHAREHOLDING STRUCTURE

 

The approximate shareholding structure of Yakudo can be summarised as follows:

 

 

Before completion

 

After completion

 

of the Agreement

 

of the Agreement

ATX

-

 

9.80%

The Vendor

69.14%

 

59.34%

Other independent third parties

30.86%

 

30.86%

 

 

 

 

 

100.00%

 

100.00%

 

 

 

 

 

Upon Completion, the Company will not appoint any representative to the board of Yakudo.

 

The approximate shareholding structure of the Company can be summarised as follows:

 

 

Before completion

 

After completion

 

of the Agreement

 

of the Agreement

Rayten Limited and its associates

45.13%

 

39.66%

The Vendor

-

 

12.12%

Public

54.87%

 

48.22%

 

 

 

 

 

100.00%

 

100.00%

 

 

 

 

 

RANKING OF THE CONSIDERATION SHARES

 

The Consideration Shares when issued will rank pari passu in all respect with the existing issued shares of the Company on the date of issue of the Consideration Shares.

 

INFORMATION ON THE VENDOR AND YAKUDO

 

The Vendor is a businessman in Taiwan engaged in the production and sale of consumer products.

 

Yakudo is an investment holding company. Its 100%-owned subsidiary in the PRC, Yakudo Foodstuff (China) Co. Ltd., is principally engaged in the production, selling and distribution of lactobacillus drinks in the PRC.

 

Yakudo was incorporated in Hong Kong on 16th May, 2001. As at the date of the Agreement, Yakudo has an issued share capital of HK$80,000,000, which comprises HK$25,860,514 divided into 258,605,140 fully paid shares of HK$0.10 each and HK$54,139,486 divided into 541,394,860 nil paid shares of HK$0.10 each.

 

According to the audited financial statements of Yakudo for the period commencing from the date of its incorporation on 16th May, 2001 and ended on 30th June, 2002, Yakudo had accumulated losses of HK$5,971,676 and its consolidated net asset value was HK$74,028,324.

 

REASONS FOR THE ACQUISITION

 

The Company and its subsidiaries are principally engaged in the manufacture in the PRC and sale in Hong Kong of knitted fabrics and dyed yarns, the provision of dyeing, bleaching, setting and finishing services and investment holding.

 

The Directors believe that the consumer market for health-related beverages such as lactobacillus drinks in the PRC has a good prospect and a promising outlook due to the improving living standard in the PRC as well as the increasing attention placed on nutrition and health. The Directors further believe that the acquisition of the Sale Shares represents a good opportunity for the Company to invest in and capitalise on such a fast growing PRC consumer market.

 

GENERAL

 

The transaction contemplated under the Agreement constitutes a share transaction for the Company under the Listing Rules.

 

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

 

SUSPENSION AND RESUMPTION OF TRADING

 

At the request of the Company, trading in the shares of the Company on the Stock Exchange was suspended from 9:42 a.m. on 25th November, 2002 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the shares of the Company with effect from 9:30 a.m. on 27th November, 2002.

 

DEFINITIONS

 

"Agreement"

the conditional sale and purchase agreement dated 25th November, 2002 entered into by the Company, ATX and the Vendor in relation to the sale and purchase of an approximately 9.80% interest in Yakudo

"ATX"

ATX Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company

"Business Day"

a day (other than a Saturday) on which licensed banks are open for business in Hong Kong

"Company"

Kwong Hing International Holdings (Bermuda) Limited

"Completion"

the completion of the sale and purchase of the Sale Shares pursuant to the provisions of the Agreement

"Conditions"

the conditions to the Completion set out in the section above headed "Conditions"

"Consideration Shares"

the 533,000,000 new shares of HK$0.01 each in the Company to be allotted and issued to the Vendor, credited as fully paid, as consideration for the purchase of the Sale Shares

"Directors"

directors of the Company

"Hong Kong"

the Hong Kong Special Administrative Region of the PRC

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock Exchange

"Longstop Date"

31st December, 2002, or any other date as may be agreed in writing between the Company, ATX and the Vendor

"PRC"

the People's Republic of China

"Sale Shares"

78,400,000 fully paid shares of HK$0.10 each in the capital of Yakudo

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

"Vendor"

Mr. Lee Tao Kuang, being the vendor of the Sale Shares

"Yakudo"

Yakudo Group Holdings Limited, a company incorporated in Hong Kong with limited liability

 

By order of the board of directors of

Kwong Hing International Holdings (Bermuda) Limited

Li Man Ching

Chairman

Hong Kong, 26th November, 2002

 

Please also refer to the published version of this announcement in the China Daily dated 27 November 2002.