China Merchants Port : CONNECTED TRANSACTION - FORMATION OF JOINT VENTURE IN CONNECTION WITH OLD PORT LAND REDEVELOPMENT PROJECT IN D...

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Hong Kong with limited liability under the Companies Ordinance)

(Stock Code: 00144)

CONNECTED TRANSACTION

FORMATION OF JOINT VENTURE IN CONNECTION WITH OLD PORT LAND REDEVELOPMENT PROJECT IN DJIBOUTI

SUMMARY

The Board is pleased to announce that on 29 December 2020, the Company entered into the Investment Agreement with GHIH, CMSK, Top Chief, PDSA and DPFZA in relation to the proposed formation of the Red Sea World Joint Venture in connection with the Redevelopment Project in Djibouti. Pursuant to the Investment Agreement, each of the Djibouti Newco (a direct wholly-owned subsidiary of GHIH), CMHD (an indirect, wholly-owned subsidiary of the Company) and OHD (an indirect, wholly-owned subsidiary of Top Chief) shall have a 60%, 23.5% and 16.5% interest in the Red Sea World Joint Venture, respectively.

LISTING RULE IMPLICATIONS

Each of Top Chief and OHD is a wholly-owned subsidiary of CMSK and CMSK, is an associate of CMG, the ultimate holding company of the Company, and therefore they are all connected persons of the Company. Accordingly, the Investment Agreement constitutes a connected transaction of the Company under the Listing Rules.

Since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the aggregate capital commitment by CMHD under the Investment Agreement exceeds 0.1% but are below 5%, the transaction is therefore exempt from the circular (including independent financial advice) and shareholders' approval requirements under Chapter 14A of the Listing Rules.

− 1 −

1. BACKGROUND

The Board is pleased to announce that on 29 December 2020, the Company entered into the Investment Agreement in relation to the Red Sea World Joint Venture in relation to the proposed formation of the Red Sea World Joint Venture in connection with the Redevelopment Project.

THE INVESTMENT AGREEMENT

The key terms of the Investment Agreement are set out below:

Date:	29 December 2020
Parties:	(1)	The Company
	(2)	GHIH
	(3)	CMSK
	(4)	Top Chief
	(5)	PDSA
	(6)	DPFZA
Purpose and scope	The Red Sea World Joint Venture shall be a company to be
of business:	established under the laws of Djibouti for the purpose of
	developing, operating and managing the Redevelopment
	Project and holding all assets thereof (including the Phase I
	Land).
	PDSA shall enter into a transfer agreement with the Red Sea
	World Joint Venture for the transfer of the Phase I Land as
	soon as possible after the establishment of the Red Sea
	World Joint Venture. The transfer price of the Phase I Land
	shall be US$69,870,000 (equivalent to approximately
	HKD544,986,000) which will be funded by the capital
	contribution by the shareholders of the Red Sea World Joint
	Venture.
Shareholding and	The registered share capital of the Red Sea World Joint
capital	Venture shall initially be an amount equivalent in DJF of
commitment:	US$14,000 (equivalent to approximately HKD109,200) of
	which, each of Djibouti Newco, CMHD and OHD shall hold

60%, 23.5% and 16.5%, respectively. The amount of capital contribution to be paid by each of Djibouti Newco, CMHD and OHD at this stage shall be US$8,400 (equivalent to approximately HKD65,520), US$3,290 (equivalent to approximately HKD25,662) and US$2,310 (equivalent to approximately HKD18,018), respectively.

− 2 −

Immediately after the incorporation of the Red Sea World Joint Venture, Djibouti Newco, CMHD and OHD shall increase the registered share capital of the Red Sea World Joint Venture and make a second capital contribution of

US$120,000,000 (equivalent to approximately HKD100,800,000) to the Red Sea World Joint Venture on a pro rata basis. The amount of capital contribution to be paid by each of Djibouti Newco, CMHD and OHD at this stage shall be US$72,000,000 (equivalent to approximately HKD561,600,000), US$28,200,000 (equivalent to approximately HKD219,960,000) and US$19,800,000

(equivalent to approximately HKD154,440,000), respectively.

In addition, Djibouti Newco, CMHD and OHD shall provide up to an aggregate amount of US$10,000,000 (equivalent to approximately HKD78,000,000) to the Red Sea World Joint Venture on a pro rata basis. The amount of additional capital contribution to be paid by each of Djibouti Newco, CMHD and OHD for shall be US$6,000,000 (equivalent to approximately HKD46,800,000), US$2,350,000 (equivalent to approximately HKD18,330,000) and US$1,650,000

(equivalent to approximately HKD12,870,000), respectively.

Board of directors: The board of the Red Sea World Joint Venture shall comprise of five directors. Djibouti Newco shall be entitled to nominate three directors, each of CMHD and OHD shall be entitled to nominate one director.

The quorum for any board meeting shall be at least four directors comprising at least one director nominated by each of CMHD and OHD and at least two directors nominated by Djibouti Newco upon first and second calls for a meeting. Should a meeting still be inquorate after the first two calls, the quorum upon third call shall be a majority of the directors.

The chairman of the board of directors shall be nominated by Djibouti Newco and the vice-chairman of the board of directors shall be jointly nominated by CMHD and OHD. Neither the chairman nor the vice-chairman shall have a casting vote.

− 3 −

	All matters of the board shall be decided by a simple
	majority of all directors attending a validly constituted
	meeting or represented, save for the reserved matters
	including inter alia, approving feasibility study, annual
	business plan and budget, financial plan, plans, activities
	and schemes to attract and promote investors, and
	contractors and subcontractors in connection with the
	Redevelopment Project which shall be decided by the
	unanimous vote of all directors attending.
Conditions for	The establishment of the Red Sea World Joint Venture is
taking effect:	subject to, inter alia, the obtaining of all necessary
	approvals and consents and land title to the Phase I Land
	being granted to PDSA.
Parent guarantee:	Each of the Company, Top Chief and GHIH has agreed to
	guarantee the performance by each of CMHD, OHD and
	Djibouti Newco, respectively, of their obligations under the
	Investment Agreement.

2. REASONS FOR THE TRANSACTION

The core business of the Group includes port and port-related business. In order to realise the Group's vision of being a world-class integrated port service provider, the Group has, in recent years, been actively exploring and, as and when deemed appropriate, capturing available opportunities overseas as one of the means to effectively add new growth drivers to its existing, sustainably growing ports business. The Company and CMSK jointly implemented the Group's 'Port-Park-City' strategy to realise business interaction and synergy within the Group, maximise benefits, and share benefits and risk with CMSK.

The Group sees great opportunities and economic benefits in developing, operating and managing the Redevelopment Project for the following key reasons. Djibouti has stable geo-political environment and the largest deep-water port in East Africa. The Redevelopment Project has prime location, as it is close to the Djibouti International Airport, the Nagad train station and one of the main highways in Djibouti. The market conditions of Djibouti are also in favour the Redevelopment Project due to the current low supply but high demand in residential properties, commercial properties, hotels and offices. Therefore, the Group is of the view that it will benefit from the Red Sea World Joint Venture.

− 4 −