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.
eSun Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code: 571) Major Transaction in relation to the Acquisition of an 85% Interest in Kadokawa Intercontinental Group Holdings Limited
The Board is pleased to announce that on 5 July 2013, the Company entered into the Agreement with KHAL and LHL pursuant to which it has conditionally agreed to acquire the Sale Shares for a total consideration of HK$212.5 million. Upon Completion, KIGHL will become 85% owned by the Company and 15% owned by LHL.
The KIGHL Group is engaged in the sale and distribution of films, DVDs, Blu-ray discs, video games, as well as operating cinemas in Hong Kong and the PRC.
As one of the applicable Percentage Ratios for the Proposed Acquisition exceeds 25% but is less than 100%, the Proposed Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification, publication and shareholders' approval requirements as set out in Chapter 14 of the Listing Rules.
A circular containing, among other things, further details of the Proposed Acquisition and the notice convening the SGM to approve the Proposed Acquisition, will be despatched to the Shareholders on or before 25 July 2013.
The Board is pleased to announce that on 5 July 2013, the Company entered into the Agreement with KHAL and LHL pursuant to which it has conditionally agreed to acquire (a) from KHAL the KHAL Sale Shares for a consideration of HK$175 million; and (b) from LHL the LHL Sale Shares for a consideration of HK$37.5 million. Upon Completion, KIGHL will become
85% beneficially owned by the Company and 15% owned by LHL.
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Details of the Agreement are as follows:
Date5 July 2013
PartiesSellers: KHAL and LHL;
Purchaser: the Company.
As at the date of this announcement, KIGHL is legally and beneficially owned as to 70% by KHAL and 30% by LHL. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, KHAL and LHL and their respective ultimate beneficial owners are independent of the Company and its connected persons.
Assets to be acquired
The assets to be acquired are the KHAL Sale Shares and the LHL Sale Shares, representing
70% and 15%, respectively, of the entire issued share capital of KIGHL. Upon Completion, the Company will beneficially own 85% of the entire issued share capital of KIGHL, and KIGHL together with its subsidiaries will become indirect non wholly-owned subsidiaries of the Company.
The Consideration for the Sale Shares will be HK$212.5 million, of which HK$175 million shall be payable for the KHAL Sale Shares and HK$37.5 million shall be payable for the LHL Sale Shares. The Consideration will be satisfied in cash upon Completion.
As at the date of the Agreement, the Company has paid the Deposit of HK$12.5 million to the
Escrow Agent.
On Completion, the Parties will instruct the Escrow Agent to release the KHAL Deposit and the LHL Deposit to KHAL and LHL, respectively, and the Company shall pay (i) the balance of the Consideration payable for the KHAL Sale Shares, being HK$175 million less the KHAL Deposit, to KHAL; and (ii) the balance of the Consideration payable for the LHL Sale Shares, being HK$37.5 million less the LHL Deposit, to LHL.
The Consideration was determined after arm's length negotiations between the Parties with reference to the net asset value and the earnings of KIGHL. The Directors consider that the terms and conditions of the Proposed Acquisition, including the Consideration, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
The Consideration to be paid to the Sellers will be financed by the Group's internal resources.
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Conditions precedent to Completion
Completion of the Proposed Acquisition is subject to, among others, the following conditions having been fulfilled or waived:
(1) the Company having obtained shareholders' approval as required under the Listing Rules in relation to and in connection with the transactions contemplated under the Agreement;
(2) on or prior to the date of the Completion, the internal reorganisation of the KIGHL Group having been completed;
(3) each of the warranties given by the Sellers under the Agreement remaining true, correct and complete in all material respects as of the date of the Agreement and at Completion;
(4) each of the warranties given by the Company under the Agreement remaining true, correct and complete in all material respects as of the date of the Agreement and at Completion;
(5) there having been since the date of the Agreement no material adverse change in the business, operations, financial position and results of operation of the KIGHL Group as a whole;
(6) there being no governmental authority or other person that has commenced or instituted any legal proceedings, arbitration or regulatory proceedings or inquiry against any member of the KIGHL Group to restrain, prohibit or otherwise challenge the sale and purchase of the Sale Shares under the Agreement; and
(7) there being no governmental authority that has enacted any statute or regulation which would prohibit, materially restrict or materially delay implementation of the sale and purchase of the Sale Shares under this Agreement or the operation of the KIGHL Group as a whole.
The Company may in its absolute discretion waive either in whole or in part any of the above conditions precedent (other than conditions precedent (2) and (4) above). The Sellers may in their absolute discretion waive either in whole or in part condition precedent (4) above. The Parties may by mutual consent in writing waive either in whole or in part at any time condition precedent (2) above. In the event that any of the conditions precedent shall not have been fulfilled (or waived pursuant to the Agreement) prior to the Long Stop Date, the Company shall not be bound to proceed with the purchase of any of the Sale Shares and shall be entitled to terminate the Agreement, in which case the KHAL Deposit and the LHL Deposit shall be refunded to the Company and save for any antecedent breach, none of the Parties shall have any further claim against any other Parties.
If any of the conditions precedent shall not have been fulfilled prior to the Long Stop Date due to the default or deliberate inaction of the Company, the Parties shall instruct the Escrow Agent to release the KHAL Deposit and the LHL Deposit to KHAL and LHL, respectively.
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CompletionCompletion will take place as soon as practicable after the date of actual fulfilment of the above conditions precedent (1) and (2) (or such later date as may be agreed in writing between the Parties). On Completion, the Company may nominate a wholly-owned subsidiary to acquire the Sale Shares, provided that such nomination shall not affect the Company's obligations under the Agreement.
Shareholders' agreementWhile the entering into of a shareholders' agreement between the Company and LHL is not a condition precedent to the Completion, in the event that the Company and LHL decide to enter into a shareholders' agreement, the Company will comply with all the applicable requirements under the Listing Rules.
INFORMATION ON THE KIGHL GROUP Principal activities of the KIGHL Group
KIGHL is an investment holding company incorporated in the Cayman Islands with limited
liability. As at the date of this announcement, it is owned as to 70% by KHAL and 30% by LHL. The KIGHL Group is engaged in the sale and distribution of films, DVDs, Blu-ray discs, video games, as well as operating cinemas in Hong Kong and the PRC.
Set out below is the audited consolidated financial information of the KIGHL Group for the years ended 31 December 2011 and 2012, respectively, which were prepared in accordance with the Hong Kong Financial Reporting Standards:
Year ended 31 December2011 | 2012 | |
Net profit before tax | HK$'000 30,982 | HK$'000 31,573 |
Net profit after tax | 25,560 | 27,623 |
The audited consolidated net asset value of the KIGHL Group as at 31 March 2013 was approximately HK$179,837,000.
INFORMATION ON THE SELLERS AND THE COMPANY
KHAL is a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of KADOKAWA Corporation which is listed on the Tokyo Stock Exchange Inc. It is principally engaged in the publishing of a variety of books and magazines as well as the production of movies, videos, game software and internet/digital products.
LHL is an investment holding company incorporated in the Cayman Islands with limited liability.
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The Company is an exempted company incorporated in Bermuda with limited liability, the issued Shares of which are listed and traded on the Main Board of the Stock Exchange. The Company acts as an investment holding company and the principal activities of the Group include the development and operation of and investment in media, entertainment, music production and distribution, the investment in and production and distribution of television programs, film and video format products, the provision of advertising agency services, the sale of cosmetic products and property development for sale and property investment for rental purposes.
REASONS FOR, AND THE BENEFITS OF, THE PROPOSED ACQUISITION
In line with the Group's strategy, the Proposed Acquisition would add immediate scale to the Group's cinema operations as the KIGHL Group is one of the leading multiplex cinema operators in Hong Kong through its ownership of the MCL chain of cinemas, and its joint venture interest in The Grand Cinema. The KIGHL Group has also begun to expand its cinema operations in the PRC with two multiplex cinemas in Shenzhen. The added cinema operations will provide a complementary distribution channel for the Group's film production and distribution business. The KIGHL Group's established ties with major studios in Hollywood, the PRC, Korea and Japan will also bolster the Group's film and video distribution business in Hong Kong and Macau. The cinemas of the KIGHL Group also provide additional venues for the Group's live events and recorded programs.
Having taken into account the above reasons and benefits, the Board is of the view that the terms and conditions of the Agreement are fair and reasonable; and the Proposed Acquisition is conducted under normal commercial terms and is in the interests of the Company and the Shareholders as a whole.
As one of the applicable Percentage Ratios for the Proposed Acquisition exceeds 25% but is less than 100%, the Proposed Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification, publication and shareholders' approval requirements as set out in Chapter 14 of the Listing Rules.
GENERAL
The SGM will be held to consider, and if thought fit, pass the requisite resolution to approve the Agreement.
A circular containing, among other things, further details of the Proposed Acquisition and the notice convening the SGM to approve the Proposed Acquisition, will be despatched to the Shareholders. As the Company expects that it will need time to prepare the financial information to be included in the circular, it is expected that the circular will be despatched to the Shareholders on or before 25 July 2013.
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DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the meanings set opposite them below:
"Agreement" the agreement dated 5 July 2013 entered into between the Company and the Sellers in relation to the Proposed Acquisition;
"Board" the board of Directors;
"Business Day" a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in both Hong Kong and Tokyo;
"Company" eSun Holdings Limited, an e x empted compan y incorporated in Bermuda with limited liability, the issued Shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 571);
"Completion" completion of the Proposed Acquisition;
"connected person(s)" has the meaning ascribed thereto in the Listing Rules;
"Consideration" HK$212.5 million, the sale and purchase price of the Sale
Shares;
"Deposit" the amount of HK$12.5 million (together with the interest accrued thereon) deposited by the Company with the Escrow Agent;
"Director(s)" the director(s) of the Company;
"Escrow Agent" an independent escrow agent jointly appointed by the
Sellers and the Company;
"Group" the Company and its subsidiaries;
"HK$" Hong Kong dollar, the lawful currency of Hong Kong; "Hong Kong" the Hong Kong Special Administrative Region of the PRC; "KHAL" Kadokawa Holdings Asia Limited, a company incorporated
in Hong Kong with limited liability and a wholly-owned subsidiary of KADOKAWA Corporation which is listed on the Tokyo Stock Exchange Inc.;
"KHAL Deposit" 70% of the Deposit;
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"KHAL Sale Shares" 35,000 ordinary shares of US$1.00 each in the share capital of KIGHL, representing 70% of the entire issued share capital of KIGHL;
"KIGHL" Kadokawa Intercontinental Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability and is owned as to 70% by KHAL and 30% by LHL;
"KIGHL Group" KIGHL and its subsidiaries;
"LHL" Lai's Holdings Limited, an investment holding company incorporated in the Cayman Islands with limited liability;
"LHL Deposit" 30% of the Deposit;
"LHL Sale Shares" 7,500 ordinary shares of US$1.00 each in the share capital of KIGHL, representing 15% of the entire issued share capital of KIGHL;
"Listing Rules" the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited;
"Long Stop Date" 30 November 2013, or such later date as may be agreed in writing by the Parties;
"Macau" the Macau Special Administrative Region of the PRC;
"Parties" collectively, the Company and the Sellers, and a "Party"
shall mean any of them;
"PRC" the People's Republic of China and for the purpose of this announcement, excluding Hong Kong, Macau and Taiwan;
"Percentage Ratios" has the meaning ascribed thereto in Rule 14.07 of the
Listing Rules;
"Proposed Acquisition" the purchase by the Company of the KHAL Sale Shares from KHAL and the LHL Sale Shares from LHL subject to the terms and conditions of the Agreement;
"Sale Shares" collectively, the KHAL Sale Shares and the LHL Sale
Shares;
"Sellers" collectively, KHAL and LHL;
"SGM" the special general meeting of the Company to be held to approve the Agreement and the transactions contemplated thereunder;
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"Share(s)" the ordinary share(s) with a par value of HK$0.50 each in the share capital of the Company;
"Shareholder(s)" the duly registered holder(s) of the Share(s);
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"US$" United States dollar, the lawful currency of the United
States of America; and
"%" per cent.
By Order of the Board eSun Holdings Limited Lui Siu Tsuen, Richard
Executive Director and Chief Executive Officer
Hong Kong, 5 July 2013
As at the date of this announcement, the Board comprises four Executive Directors, namely Dr. Lam Kin Ngok, Peter and Messrs. Lui Siu Tsuen, Richard (Chief Executive Officer), Chew Fook Aun and Lam Hau Yin, Lester; two Non-executive Directors, namely Madam U Po Chu and Mr. Andrew Y. Yan; and four Independent Non-executive Directors, namely Messrs. Low Chee Keong (Chairman), Alfred Donald Yap and Lo Kwok Kwei, David and Dr. Ng Lai Man, Carmen.
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