CONNECTED TRANSACTION
ACQUISITION OF INTERESTS IN A NON-WHOLLY OWNED SUBSIDIARY
| The Directors of Herald Holdings Limited (the "Company") announce that on 26 October, 1999, Herald (Hong Kong) Limited ("HHK"), an indirect wholly owned subsidiary of the Company, has entered into an agreement (the "Agreement") with the below-mentioned connected persons of the Company (the "Vendors") for the acquisition of 190,000 shares representing 16.8% of the issued share capital of Herald Datanetics Limited ("HDL"), an indirect 69.2% non-wholly owned subsidiary of the Company, for a total consideration as described below.
The Vendors are directors, substantial shareholders or their associates of the Company or its subsidiaries and hence the transaction constitutes a connected transaction for the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). As the acquisition represents less than 3% of the consolidated net tangible assets of the Company as at 31 March, 1999, shareholders' approval of the transaction is not required. |
DETAILS OF THE ACQUISITION
DATE OF AGREEMENT : 26 OCTOBER, 1999
| Parties: | |
| Vendors: | Myrgo Inc., an associate of Mr. George Bloch, a director of the Company Dr. Cheung Tsang Kay Stan, a substantial shareholder and a director of the Company Goldfinch Investments Limited, a substantial shareholder of the Company and a company owned by a family trust in which Dr. Cheung Tsang Kay Stan is a beneficiary Mr. Robert Dorfman, a director of the Company Mr. Gershon Dorfman, a director of some of the Company's subsidiaries Mr. Kwok Nam Po, a director of some of the Company's subsidiaries |
| Purchaser: | HHK, an indirect wholly owned subsidiary of the Company |
The Company is an investment holding company and its principal subsidiaries are engaged in the manufacture and sale of toys, computer heads, aluminium houseware, clocks and watches.
Assets Acquired:
190,000 shares of HK$10 each in HDL, representing 16.8% of the issued share capital of HDL.
HDL, a company incorporated in Hong Kong, is currently engaged in the manufacture and sale of computer heads. HDL owns and operates a production plant in Zhuhai and its products are mainly sold to the United States, Europe and Japan.
The audited net profit of HDL before and after taxation for the year ended 31 March, 1999 were HK$7,061,672 and HK$6,168,213 respectively, whereas the audited net loss of HDL before and after taxation for the year ended 31 March, 1998 were HK$48,463,603 and HK$47,093,883 respectively. There were no extraordinary items for the years ended 31 March, 1999 and 1998. Based on the audited accounts of HDL as at 31 March, 1999, the audited net tangible asset value of 16.8% equity interest in HDL acquired by HHK amounted to approximately HK$12,737,000.
Consideration :
The total consideration for the shares acquired is HK$13,490,000 representing HK$71 per share of HDL and a discount of 2.4% to the net tangible asset value per share of HDL based on the management accounts of HDL as at 30 September, 1999.
The Vendors warrant that the audited net tangible asset value per share of HDL as at 31 March, 2000 ("NAV") will not be less than HK$71 and undertake that the consideration be adjusted to NAV if the NAV is less than HK$71.
The number of shares acquired and the consideration paid to each vendor are as follows:
No. of shares
Vendors acquired Consideration
HK$
Goldfinch Investments Limited 93,000 6,603,000
Myrgo Inc. 67,000 4,757,000
Dr. Cheung Tsang Kay Stan 9,500 674,500
Mr. Robert Dorfman 8,500 603,500
Mr. Gershon Dorfman 8,500 603,500
Mr. Kwok Nam Po 3,500 248,500
-------- ----------
190,000 13,490,000
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The directors of the Company including the independent non-executive directors consider that the terms and conditions of the acquisition are fair and reasonable and in the best interest of the Company.
Payment terms :
The consideration will be paid in cash within 10 days following the execution of the Agreement. (i.e. on or before 5 November, 1999)
Completion of the Acquisition:
Completion of the acquisition has taken place unconditionally and simultaneously after the signing of the Agreement.
REASON FOR THE TRANSACTION
The acquisition serves to consolidate HHK's control of HDL in which on completion of the acquisition, the Company's interests in HDL through HHK, has increased from 69.2% to 86.1%.
The directors of the Company are confident of the prospects and future earnings potential of HDL. The acquisition will increase the Company's overall share of profits in HDL.
SHAREHOLDING STRUCTURE
Upon completion of the acquisition, the equity interest in HDL held by HHK and the connected persons of the Company as defined under the Listing Rules (the "Connected Persons") are 86.1% and 9.9% respectively. The remaining equity interest of 4% in HDL is held by independent shareholders.
Set out below is the equity interest in HDL held by the Connected Persons before and after completion of the acquisition.
Before After
completion of completion of
Shareholders the acquisition the acquisition
Shares % Shares %
Goldfinch Investments Limited 93,000 8.3 - -
Myrgo Inc. 67,000 5.9 - -
Dr. Cheung Tsang Kay Stan 36,000 3.2 26,500 2.3
Mr. Robert Dorfman 28,250 2.5 19,750 1.8
Mr. Gershon Dorfman 28,250 2.5 19,750 1.8
Mr. Kwok Nam Po 5,500 0.5 2,000 0.2
Other connected persons 43,000 3.8 43,000 3.8
-------- ---- ------- ---
301,000 26.7 111,000 9.9
======== ==== ======= ===
GENERAL
Vendors are directors, substantial shareholders or their associates of the Company or its subsidiaries and hence the transaction constitutes a connected transaction for the Company under the Listing Rules. As the acquisition represents less than 3% of the consolidated net tangible assets of the Company as at 31 March, 1999, shareholders' approval of the transaction is not required.
Details of this connected transaction will be included in the next published annual report and accounts of the Company for the year ending 31 March, 2000.
By Order of the Board
Thong Yeung Sum Michael
Secretary
Hong Kong, 26 October, 1999
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