GREAT WALL PAN ASIA HOLDINGS LIMITED 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 Bermuda with limited liability) (Stock Code: 583)
On 19 October 2015, the Purchaser (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase and Subscription Agreement pursuant to which the Purchaser agreed conditionally to acquire and subscribe for in aggregate 56.65% of the enlarged issued share capital of the Target. At Completion, the Purchaser shall enter into the Shareholders' Agreement, which includes a put option pursuant to which the Purchaser may be required to acquire all of the remaining shares in the Target owned by the Seller.
As one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules in respect of Transaction exceed 5% but all are less than 25%, the entering into of the Sale and Purchase and Subscription Agreement and the Shareholders' Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.
To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, as at the date of this announcement, each of the Seller, the Target and the Guarantors and, where applicable, their ultimate beneficial owners, is an independent third party of the Company and its connected persons.
The Board is pleased to announce that on 19 October 2015, the Purchaser (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase and Subscription Agreement with the Seller, the Target and the Guarantors, pursuant to which the Purchaser has conditionally agreed to acquire 31% of the existing issued shares in the capital of the Target from the Seller and subscribe for a further 37.18% of the enlarged issued share capital of the Target and the Convertible Note.
Upon Completion, the Purchaser, the Seller and the Target, amongst others, shall enter into the Shareholders' Agreement and the Purchaser shall own 56.65% of the enlarged issued share capital of the Target. The Shareholders' Agreement includes a call option and a put option in favour of the Purchaser and the Seller, respectively, in relation to all of the Seller's shares in and shareholder loans to the Target.
SALE AND PURCHASE AND SUBSCRIPTION AGREEMENTThe principal terms of the Sale and Purchase and Subscription Agreement are as follows: Date: 19 October 2015
Parties: Purchaser, Seller, Target and the Guarantors
To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, as at the date of this announcement, each of the Seller, the Target and the Guarantors and, where applicable, their ultimate beneficial owners, is an independent third party of the Company and its connected persons. As at the date of this announcement, the Purchaser is a connected person of the Company by virtue of being a wholly-owned subsidiary of the Company.
Shares comprising 31% of the existing issued shares in the capital of the Target (the 'Sale Shares'), currently owned by the Seller. Shares comprising a further 37.18% of the enlarged issued share capital of the Target (the 'Subscription Shares') and the Convertible Note, each to be issued to the Purchaser by the Target.
The consideration payable by the Purchaser to the Seller for the Sale Shares shall be HK$13,632,366, payable by cashier order or telegraphic transfer upon Completion.
The consideration payable by the Purchaser to the Target for (i) the Subscription Shares shall be HK$23,024,626 and (ii) the Convertible Note shall be HK$3,000,000, in each case payable by cashier order or telegraphic transfer upon Completion.
The aggregate consideration payable in respect of the Sale Shares, the Subscription Shares and the Convertible Note was determined having reference to the nature of the e-commerce business of the Target, its business prospects, market environment and operating conditions, as well as its strategic synergies with the Group's existing business and may be adjusted based on the net asset value of the Target determined at Completion.
Completion is conditional upon certain matters, including the following, being satisfied or waived by the Purchaser on or before the Conditions Deadline:
there being no material adverse change in respect of the Target from the date of the Sale and Purchase and Subscription Agreement to the date on which the last of the conditions has been satisfied;
the warranties remaining true and accurate in all material respects and not misleading in any material respect immediately prior to Completion by reference to the facts and circumstances subsisting immediately prior to Completion;
each of the Key Management Persons having duly executed a Key Management Undertaking;
each of the Key Management Persons having duly entered into new employment contracts with the Target with a minimum employment period of three years from Completion on such terms as agreed in writing between each of the Key Management Persons, the Target and the Purchaser;
the conversion of certain balances due from the Target to its related parties into equity of the Target;
all necessary approvals in respect of the transactions contemplated, including all relevant consents and approvals from the Target and any third parties as which are necessary in conjunction with the proposed change in shareholding of the Target, having been obtained;
the licensing of certain trademark to the Target;
the registrations of certain domain names being assigned to the Target;
certain supply and other contracts currently in the name of the Seller being novated to the Target (in a form approved by the Purchaser) with effect from no later than Completion; and
the waiver by the Target and the Seller of any pre-emption or similar rights they may have in relation to the sale of the Sale Shares and allotment and issue of the Subscription Shares pursuant to the Sale and Purchase and Subscription Agreement whether under the articles of association of the Target or otherwise.
The Seller shall use its best endeavours to procure the satisfaction of the conditions as soon as reasonably practicable and in any event before the Conditions Deadline.
Subject to the various conditions having been satisfied or waived, Completion shall take place on the third business day after the date on which the last of the conditions has been fulfilled or on such other date as the Seller and the Purchaser shall agree. Upon Completion, the enlarged issued share capital of the Target shall be owned as to 56.65% by the Purchaser and as to 43.35% by the Seller.
The Seller and the Guarantors jointly and severally undertake to indemnify (i) the Target against any liability of the Target for taxation to the extent not fully and properly provided for in the Target's historical accounts arising from or out of or by virtue of the profits or income or expenditure or any act or omission of the Target in relation to any claims made up to and including three years after Completion and (ii) the Purchaser against any and all liability or claims against the Target attributable to periods prior to Completion, whether relating to taxation or otherwise.
The Guarantors jointly and severally guarantee the due and punctual performance by the Seller of all of its obligations and liabilities under the Sale and Purchase and Subscription Agreement and the Guarantors shall pay to the Purchaser on demand all monies which become due or owing by the Seller after demand of the Purchaser to or in favour of the Purchaser under or in connection with the Sale and Purchase and Subscription Agreement, together with all costs, charges and expenses on a full indemnity basis which may be incurred by the Purchaser by reason or in consequence of any default on the part of the Seller in performing or observing any of the obligations, terms, conditions, stipulations or provisions of the Sale and Purchase and Subscription Agreement.
SHAREHOLDERS' AGREEMENTAt Completion, the Purchaser, the Seller, the Target, Fully Plus Limited, Topost, Fireball, Autumn Star Ventures Limited, Ling Ching Wan, Jimmy and the Key Management Persons shall enter into the Shareholders' Agreement in relation to the management of the Target, the major terms of which are summarised below.
Unless otherwise agreed by the Purchaser and the Seller, the business of the Target shall be to primarily engage in e-commerce business of retailing apparel and accessories via the website MyDress.com and other websites. The Key Management Persons shall be primarily responsible for managing the day to day operations of the Target under the direction of and reporting to the board of the Target and in compliance with the Shareholders' Agreement.
Unless the Purchaser and Seller agree otherwise in writing, the number of directors on the board of the Target shall be six, four of whom may be appointed by the Purchaser and two of whom may be appointed by the Seller, each director shall be entitled to one vote at board meetings of the Target. Save for the matters mentioned below, resolutions shall be decided by a simple majority.
Certain actions shall not be taken and certain resolutions shall not be passed by the Target, any of its subsidiaries or the board of directors of any of the Target's subsidiaries without the prior approval of either (i) all of the Target's shareholders in writing or shareholders representing at least two-thirds of the total voting rights in a general meeting of the Target or (ii) five out of the six directors of the Target in writing or who are present at a quorate board meeting. These include, borrowing sums equal to exceeding 50% of capital or HK$28,000,000 (whichever is higher), changing the business of the Target, disposing of any shares in a subsidiary, acquiring any entity, diluting the Target's interest in any subsidiary, establishing new operations in any jurisdiction, altering or amending the articles of association of the Target or any of its subsidiaries, entering into any partnership, joint venture agreement, profit sharing arrangement, merger or reorganisation, disposing of or encumbering all or a substantial part of the Target's assets in certain circumstances, granting operating rights or rights of use to a third party over any assets other than in the ordinary course of business, giving any guarantee or indemnity to secure the liabilities of any person or providing credit to any person (other than normal bank deposits or approved in the Target's budget or in its ordinary course of business), implementing an initial public offering, entering into any agreement unrelated to the ordinary and proper course of business or not on arm's length terms or fair market terms, entering into any agreement with a shareholder or associate (including seeking shareholder loans), appointing or removing the auditors and passing any resolution or presenting or causing to be presented any resolution for the winding up, liquidation or dissolution of the Target or any of its subsidiaries.
FinancingIf additional financing is required to satisfy the working capital of the Target, the Target will consider appropriate action to meet its requirements, whether by the procurement of shareholder loans, external loans or issuing equity. In the event that additional financing is required, the Purchaser and the Seller shall have the opportunity to subscribe for additional equity or to advance shareholder loans pro rata to their holding of shares in the Target from time to time.
The Purchaser agrees to provide shareholder loans to the Target to enable it to meet its working capital requirements on an as-needed basis as deemed appropriate by the board of the Target at an interest rate of the higher of (i) three month HIBOR + 1.50% and (ii) the average cost of borrowing based on the short term banking facilities available to South China Morning Post Publishers Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of the Company.
The Purchaser and Seller agree not to mortgage their interest in any of their shares in the Target or enter into any agreement with respect to voting rights in those shares or agree, conditionally or otherwise, to do any such things.
In the event that the Purchaser or the Seller wishes to dispose of any of its shares or shareholder loans it shall grant to the other a right of first refusal to acquire those shares and shareholder loans. The Target grants each of the Purchaser and the Seller a right of first refusal with respect to future issue by the Target of any shares of any class and any shareholder loans.
The Shareholders' Agreement also includes certain tag along rights in the event that a shareholder serves notice of its intention to sell any of its shares and shareholder loans.
The Shareholders' Agreement includes a one-off call option granted by the Seller to the Purchaser pursuant to which the Purchaser may, at its sole discretion, purchase in one tranche all of the shares in the capital of the Target and shareholder loans to the Target owned by the Seller on the third anniversary of Completion. The Purchaser also grants to the Seller a one-off put option pursuant to which the Seller shall be entitled to require the Purchaser to acquire all of the shares in the capital of the Target and shareholder loans to the Target owned by the Seller on the third anniversary of Completion, the exercise of which is conditional upon certain valuation threshold being met.
The consideration payable under the call option or the put option shall be determined by reference to the market equity value of the Target and the value of the shareholder loans to the Target at the relevant date, provided that the maximum exercise price under the put option shall be capped at HK$700,000,000.
In the event that the Purchaser or the Seller (or in the Seller's case, one of its shareholders (who are also parties to the Shareholders' Agreement)) as shareholders of the Target upon Completion (i) commits any material breach of the Shareholders' Agreement and fails to remedy the same within 14 days of being notified, (ii) faces an action from a creditor and such action is not contested on valid grounds within 14 days, (iii) ceases payment of its debts or is unable to pay
its debts or begins negotiations with its creditor(s), (iv) is involved in any insolvency proceedings,
(v) suspends or ceases or threatens to suspend or cease to carry on its business or a material part thereof, (vi) disposes of or threatens to dispose of all or a substantial part of its assets or
(vii) undergoes a change in control without prior consent, an event of default shall be deemed to have occurred and the relevant party shall be deemed to have issued an irrevocable notice to the non-defaulting shareholder(s) offering to sell its shares and shareholder loans to the non-defaulting shareholder(s) at fair value.
The Shareholders' Agreement shall terminate (i) upon a successful initial public offering of the Target's shares, (ii) if all of the shares and shareholder loans relating to the Target are transferred to a third party, (iii) vis a vis each shareholder at such time as it ceases to own shares in the Target or (iv) upon liquidation or the making of an order for the winding up of the Target.
The terms of the Sale and Purchase and Subscription Agreement and the Shareholders' Agreement were arrived at after arm's length negotiations between the parties. The Directors, including the independent non-executive Directors of the Company, are of the view that the Transaction is conducted on normal commercial terms and in the ordinary and usual course of its business, is fair and reasonable so far as the Company and the shareholders of the Company are concerned and is in the interests of the Company and the shareholders of the Company as a whole.
The Company is an investment holding company. The principal activities of the Group consist of the publishing, printing and distribution of the South China Morning Post, Sunday Morning Post, various magazines and other related print and digital publications. The Group is also involved in property investment through its subsidiaries. The Purchaser is a wholly-owned subsidiary of the Company.
The Target is primarily engaged in e-commerce business of retailing apparel and accessories via the website MyDress.com and other websites.
Set out below is a summary of certain audited financial information of the Target for each of the two financial years ended 31 March 2014 and 31 March 2015:
2014 (HK$'000) | 2015 (HK$'000) | |
Net loss (before taxation) | 4,197 | 3,131 |
Net loss (after taxation) | 4,197 | 3,131 |
The audited net asset value of the Target (after conversion of certain related party balances, being a condition precedent to Completion) as at 31 March 2015 was approximately HK$6,843.
REASONS FOR AND BENEFITS OF THE TRANSACTIONThe Group intends to continue developing its digital business. Entering the Transaction enhances the Group's online presence and allows the Group to gain a firm foothold in the e-commerce space in the attractive market of Hong Kong. Furthermore, the Transaction will complement the Group's leading magazine titles, enabling further monetization of their premium content and existing audience base through acquisition synergies.
Upon Completion, the Target will be accounted for as a non wholly-owned subsidiary of the Company. The consideration payable by the Purchaser pursuant to the Sale and Purchase and Subscription Agreement to the Seller and the Target will be funded by the Group's internal resources.
As one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules in respect of Transaction exceed 5% but all are less than 25%, the entering into of the Sale and Purchase and Subscription Agreement and the Shareholders' Agreement constitute a discloseable transaction of the Company under Chapter 14 of the Listing Rules.
To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, as at the date of this announcement, each of the Seller, the Target and the Guarantors and, where applicable, their ultimate beneficial owners, is an independent third party of the Company and its connected persons.
'Board' the board of directors of the Company including independent non-executive Directors
'Company' SCMP Group Limited, a company incorporated in Bermuda with limited liability, whose shares are listed on the Main Board of the Stock Exchange
'Completion' completion of the sale and purchase of the Sale Shares and the
subscription of the Subscription Shares
'Conditions Deadline' two months after the signing of the Sale and Purchase and
Subscription Agreement or any other date as agreed by the Purchaser and the Seller
'connected person' has the meaning ascribed to it under the Listing Rules
'Convertible Note' the HK$3,000,000 note, convertible into shares in the Target,
to be subscribed for by the Purchaser pursuant to the Sale and Purchase and Subscription Agreement
'Directors' Directors of the Company including independent non-executive Directors
'Fireball' Fireball Combo P1 Limited, a company incorporated in the British Virgin Islands
'Group' Company and its subsidiaries
'Guarantors' Topost, Fireball, Qolala.com Company Limited, Wong Chun Yu,
Edmund and Lai Man
'HK$' the lawful currency of Hong Kong
'Hong Kong' Hong Kong Special Administrative Region of the People's
Republic of China
'Key Management Persons' Wong Chun Yu, Edmund and Lai Man
'Key Management Undertaking'
certain undertakings to be given by each of the Key Management Persons at Completion
'Listing Rules' the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
'Purchaser' Affleck Limited, a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of the Company
'Sale and Purchase and
Subscription Agreement'
agreement dated 19 October 2015 among the Purchaser, the Seller, the Target and the Guarantors in relation to the acquisition of the Sale Shares and the subscription for the Subscription Shares and Convertible Note
'Sale Shares' 1,550 shares in the capital of the Target, owned by the Seller
'Seller' MyDress AME Group Limited, a company incorporated in Hong Kong
'Shareholders' Agreement' the agreement in relation to the Target to be entered into among
the Purchaser, the Seller, the Target, Fully Plus Limited, Topost, Fireball, Autumn Star Ventures Limited, Ling Ching Wan, Jimmy and the Key Management Persons at Completion
'Stock Exchange' The Stock Exchange of Hong Kong Limited
'Subscription Shares' 2,959 shares in the capital of the Target to be allotted and issued
by the Target as fully paid up shares
'Target' MyDress Holdings Limited, a company incorporated in Hong Kong
'Topost' Topost Holdings Limited, a company incorporated in Hong Kong
'Transaction' the transactions contemplated by the Sale and Purchase and
Subscription Agreement and the Shareholders' Agreement, being the acquisition of the Sale Shares, the subscription for the Subscription Shares and the Convertible Note and the potential exercise of the call option or the put option
On behalf of the Board SCMP Group Limited David J. Pang
Chairman
Hong Kong, 19 October 2015
As at the date hereof, the Board comprises: Non-executive Directors
Dr. David J. Pang (Chairman) and Tan Sri Dr. Khoo Kay Peng
Independent Non-executive Directors
Dr. Fred Hu Zu Liu, Dr. the Hon. Sir David Li Kwok Po and Mr. Wong Kai Man
Executive Director
Ms. Kuok Hui Kwong
* For identification purposes only
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