NEW WORLD DEPARTMENT STORE CHINA 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.
CONTINUING CONNECTED TRANSACTIONS RENEWAL OF THE MASTER LEASING AGREEMENT AND THE MASTER SERVICES AGREEMENTReferences are made to (i) the announcement of the Company in respect of the Master Leasing Agreement and the Former Master Services Agreement dated 11 April 2014; and (ii) the circular of the Company in relation to, among other things, the Master Leasing Agreement dated 8 May 2014.
On 11 April 2014, the Company and NWD entered into the Master Leasing Agreement in respect of the Leasing Transactions. The Master Leasing Agreement is for a term of three years commencing from 1 July 2014 and expiring on 30 June 2017. Subject to the compliance of the Listing Rules by the Company, the Master Leasing Agreement will be automatically renewed for a successive period of three years from the Leasing Renewal Date. The Company and NWD agreed to renew the Master Leasing Agreement upon the expiry of its initial term on 30 June 2017 for a further term of three years, i.e., up to 30 June 2020.
On 10 April 2017, Mr. Doo and the Company entered into the Master Services Agreement in relation to the Services Transactions.
As at the date of this announcement, NWD is a substantial shareholder of the Company and hence a connected person of the Company. The Leasing Transactions therefore constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.
Mr. Doo is an associate of certain Directors and hence Mr. Doo and the Services Group are connected persons of the Company. The Services Transactions therefore constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.
As the highest of the amounts and all the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) of the New Leasing Annual Caps are more than 5% and exceeds HK$10,000,000, the renewal of the Master Leasing Agreement is subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules for the Company. In view of the interests of NWD in the Leasing Transactions, NWD and its associates will abstain from voting in respect of the resolutions to be proposed at the EGM to approve the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps.
As the highest of the amounts and all the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) of the Services Annual Caps are less than 5% and exceeds HK$3,000,000, the Master Services Agreement is subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules for the Company.
The Company will convene the EGM for the purpose of seeking approval from the Independent Shareholders on, among other things, the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps. The Independent Board Committee has been established to consider the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps, and to advise the Independent Shareholders as to whether the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps are in the interests of the Company and the Shareholders as a whole. SPDB International Capital Limited has been appointed as an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.
As additional time is required to prepare the circular of the Company containing, amongst others, further information on (i) the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders; and (iv) the notice of the EGM, the circular is expected to be despatched to the Shareholders on or before 10 May 2017.
INTRODUCTIONReferences are made to (i) the announcement of the Company in respect of the Master Leasing Agreement and the Former Master Services Agreement dated 11 April 2014; and (ii) the circular of the Company in relation to, among other things, the Master Leasing Agreement dated 8 May 2014.
On 11 April 2014, the Company and NWD entered into the Master Leasing Agreement in respect of the Leasing Transactions. The Master Leasing Agreement is for a term of three years, commencing from 1 July 2014 and expiring on 30 June 2017. Subject to the compliance of the Listing Rules by the Company, the Master Leasing Agreement will be automatically renewed for a successive period of three years from the Leasing Renewal Date. The Company and NWD agreed to renew the Master Leasing Agreement upon the expiry of its initial term on 30 June 2017 for a further term of three years, i.e., up to 30 June 2020.
On 10 April 2017, Mr. Doo and the Company entered into the Master Services Agreement in relation to the Services Transactions.
The principal terms of the Master Leasing Agreement and the Master Services Agreement are set out below.
RENEWAL OF THE MASTER LEASING AGREEMENT BackgroundMembers of the Group and members of the NWD Group had in the past entered into certain leasing agreements for the leasing of premises by the relevant members of the Group from the relevant members of the NWD Group in accordance with the Master Leasing Agreement and certain of the leasing agreements have not expired as at the Leasing Renewal Date. The Group and the NWD Group wish to continue the leasing agreements and may from time to time enter into new leasing agreements for the leasing of premises by the Group from the NWD Group, and vice versa. The Master Leasing Agreement will expire on 30 June 2017 and will be automatically renewed for a successive period of three years thereafter subject to compliance with certain conditions, including the Listing Rules.
Date11 April 2014
Partiesthe Company; and
NWD
General terms for the Leasing TransactionsThe relevant members of the Group and the relevant members of the NWD Group may from time to time enter into Definitive Leasing Agreement(s) in relation to any Leasing Transactions upon, and subject to, the terms and conditions in compliance with the Master Leasing Agreement as may be agreed between the relevant members of the Group and the relevant members of the NWD Group. All existing agreements between the relevant members of the Group and the relevant members of the NWD Group in respect of the Leasing Transactions (to the extent which covers the Leasing Transactions after the Leasing Renewal Date) will be treated as Definitive Leasing Agreements made pursuant to the Master Leasing Agreement as from the Leasing Renewal Date.
With effect from the Leasing Renewal Date, the Leasing Transactions shall be conducted:
in the usual and ordinary course of business of the Company and NWD;
on normal commercial terms; and
in compliance with all applicable provisions of the Listing Rules (including the New Leasing Annual Caps), the applicable laws, the Master Leasing Agreement and the relevant Definitive Leasing Agreement.
The consideration for each Definitive Leasing Agreement will be determined in the following manner: a quote will be provided by lessor about which the lessee may, through its operational and technical departments, consider either to accept the quote and proceed with the lease or reject the quote and decline to proceed further, in accordance with the relevant policies and based on other quote(s) for comparable property(ies) obtained from independent third parties in the market.
ConditionalityThe renewal of the Master Leasing Agreement is conditional upon the approval by the Independent Shareholders of the renewal of the Master Leasing Agreement, the Leasing Transactions and the New Leasing Annual Caps at the EGM.
DurationThe Master Leasing Agreement shall continue to be effective up to and including 30 June 2020. Subject to compliance with the then relevant requirements of the rules of any stock exchange to which either party to the Master Leasing Agreement is subject to, including, but not limited to, the Listing Rules or, alternatively, any waiver obtained from strict compliance with such requirements, upon expiration of the initial term or subsequent renewal term, the Master Leasing Agreement will be automatically renewed for a successive period of three years thereafter (or such other period permitted under the Listing Rules), unless terminated earlier in accordance with the Master Leasing Agreement.
Historical figures and the New Leasing Annual CapsThe aggregate transaction amounts under the Master Leasing Agreement for the Company for each of the two financial years ended 30 June 2016 and the six months ended 31 December 2016 were approximately RMB315,398,000, RMB275,604,000 and RMB127,700,000, respectively.
The New Leasing Annual Caps for each of the three financial years ending 30 June 2020 are RMB355,660,000, RMB373,178,000 and RMB384,374,000, respectively, and have been determined based on historical transaction amounts under the Master Leasing Agreement, the terms of the leases and the expected growth in the number of new Stores.
Reasons for and benefits of the renewal of the Master Leasing AgreementGiven that the relevant Stores have been operating at the premises owned by the NWD Group (save and except for certain of the premises which are for use as the office and car parks of the Group) for a number of years and the cost to be incurred and the adverse impact on the operation of the Stores in the event of their relocation will be substantial, the Directors believe that maintaining the lease agreements with the NWD Group will ensure the Group's stability in using the relevant premises. The Directors also believe that it is in the interests of the Company to renew the Master Leasing Agreement so that the Group may regulate the existing and future leasing agreements with the NWD Group under a common framework agreement.
The Directors (excluding the independent non-executive Directors who will provide their views after considering the opinion of the independent financial adviser) consider that the renewal of the Master Leasing Agreement have been negotiated on an arm's length basis, are fair and reasonable, on normal commercial terms and within the ordinary and usual course of business of the Group, and are in the interests of the Group and the Shareholders as a whole, and that the New Leasing Annual Caps are fair and reasonable and in the interests of the Group and the Shareholders as a whole.
THE MASTER SERVICES AGREEMENT BackgroundOn 11 April 2014, Mr. Doo and the Company entered into the Former Master Services Agreement, pursuant to which the relevant members of the Services Group may from time to time enter into definitive agreement(s) with the relevant members of the Group in respect of any transaction as contemplated under the Former Master Services Agreement.
The initial term of the Former Master Services Agreement will expire on 30 June 2017. On 10 April 2017, Mr. Doo, the Company, FSE Engineering and FSE Management entered into the Services Termination Agreement, pursuant to which the parties agree to terminate the Former Master Services Agreement upon the Master Services Agreement becoming effective on the Services Effective Date. Accordingly, Mr. Doo and the Company agree to enter into the Master Services Agreement.
Date10 April 2017
Partiesthe Company; and
Mr. Doo
General terms for the Services Transactions
The relevant members of the Group and the relevant members of the Services Group may from time to time enter into Definitive Services Agreement(s) in relation to any Services Transactions upon, and subject to, the terms and conditions in compliance with the Master Services Agreement as may be agreed between the relevant members of the Group and the relevant members of the Services Group. All existing agreements between the relevant members of the Group and the relevant members of the Services Group in respect of the Services Transactions (to the extent which covers the Services
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