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SOCAM Development Limited
(Incorporated in Bermuda with limited liability)
(Stock Code: 983 and Debt Stock Code: 4518)
MAJOR TRANSACTION
ACQUISITION OF COMMERCIAL BUILDING IN HONG KONG
The Board announces that on 13 November 2018, the Purchaser (an indirect wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement with the Vendor and the Guarantor, pursuant to which (i) the Purchaser has agreed to acquire and the Vendor has agreed to sell the Sale Share, representing the entire issued share capital of the Target Company; and (ii) the Purchaser has agreed to assume and the Vendor has agreed to assign the Sale Loan for the Consideration of HK$303.5 million (subject to upward or downward adjustments).
The principal asset of the Target Company is the Property, which is a commercial building situated in Kwun Tong, Kowloon, Hong Kong.
As one of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Acquisition is more than 25% but less than 100%, the Acquisition constitutes a major transaction of the Company, which is subject to the reporting, announcement and shareholders' approval requirements under Chapter 14 of the Listing Rules.
To the best of knowledge, information and belief of the Directors having made all reasonable enquiries, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Acquisition. Shui On Company Limited and its wholly-owned subsidiary, namely Shui On Finance Company Limited, which together constitute a closely allied group ofShareholders, hold 232,148,000 Shares and 2,233,000 Shares respectively, representing an aggregate of approximately 60.97% of the issued share capital of the Company as at the date of this announcement. The Company has obtained the written approval of these Shareholders for the Acquisition pursuant to Rule 14.44 of the Listing Rules. Accordingly, no general meeting will be convened by the Company for considering the Acquisition.
Pursuant to Rule 14.41(a) of the Listing Rules, a circular containing, amongst other things, further details relating to the Acquisition is required to be despatched to all the Shareholders within 15 Business Days after publication of this announcement. As the Company requires time for compiling the information for inclusion in the circular pursuant to the requirements of the Listing Rules, the Company will apply to the Stock Exchange for a waiver from strict compliance with Rule 14.41(a) of the Listing Rules. The Company will publish an announcement in relation to the despatch of the circular as and when appropriate.
Completion is subject to the Conditions having been satisfied or (where applicable) waived by the Purchaser and the respective obligations of the Vendor and the Purchaser under the Sale and Purchase Agreement having been fulfilled. As such, the Acquisition may or may not materialise. Securities holders and potential investors should therefore exercise caution when dealing in the securities of the Company.
INTRODUCTION
The Board announces that on 13 November 2018, the Purchaser (an indirect wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement in respect of the Acquisition.
THE SALE AND PURCHASE AGREEMENT
Date
13 November 2018
Parties
(1) Purchaser: Talent Reach Group Limited, an indirect wholly-owned subsidiary of the Company
(2) Vendor: Profit Mastery Investments Limited
(3) Guarantor: Mr. Cheung Siu Wing
To the best of knowledge, information and belief of the Directors having made all reasonable enquiries, the Vendor and its ultimate beneficial owner as well as the Guarantor are independent of the Company and its connected persons.
Subject Matter
Pursuant to the Sale and Purchase Agreement, (i) the Purchaser has agreed to acquire and the Vendor has agreed to sell the Sale Share, representing the entire issued share capital of the Target Company; and (ii) the Purchaser has agreed to assume and the Vendor has agreed to assign the Sale Loan.
Consideration and Payment Terms
The Consideration is HK$303.5 million, subject to adjustment in accordance with the terms of the Sale and Purchase Agreement based on the Proforma Adjusted NAV (the "Adjusted Purchase Price") on Completion. The Adjusted Purchase Price shall be subject to further adjustment (the "Post Completion Adjustment"), if any, for any difference between the Proforma Completion Accounts and the Audited Completion Accounts after Completion. Such Post Completion Adjustment shall be determined following the delivery of the Audited Completion Accounts by the Vendor within 30 days after Completion and the adjustment payment, if any, shall be made within 7 Business Days thereafter.
Pursuant to the terms of the Sale and Purchase Agreement, in the event that consent from the Bank to the change of control of the Target Company to the Purchaser in relation to the Outstanding Bank Loan is obtained prior to Completion, the Consideration shall be adjusted downward by approximately HK$130 million, being the amount of the Outstanding Bank Loan.
To the best estimation of the Company, the upward adjustments to the Consideration will not exceed an aggregate amount of HK$1 million. As such, it is currently contemplated that such adjustments will not result in a change in the classification of the Acquisition as a major transaction under the Listing Rules. However, the Company will comply with the relevant requirements of the Listing Rules if there is an upward change in the classification of the transaction due to any adjustment to the Consideration.
The Adjusted Purchase Price shall be settled by the Purchaser in cash in the following manner:-
(a) a deposit of HK$15.5 million that has been paid to the Vendor's solicitors prior to the date of the Sale and Purchase Agreement and a further deposit of HK$14.85 million which shall be paid to the Vendor's solicitors on the next Business Day following the execution of the Sale and Purchase Agreement (collectively, the "Deposit") shall be released to the Vendor by the Vendor's solicitors at Completion; and
(b) the remaining balance of the Adjusted Purchase Price (after deducting the repayment of the Outstanding Bank Loan by the Purchaser upon Completion, if applicable) shall be paid to the Vendor or its designated party at Completion.
The Consideration was determined after arm's length negotiations between the Purchaser and the Vendor with reference to (i) the net asset value of the Target Company; and (ii) the market value of the Property.
The Group intends to finance the Acquisition by its internal resources and banking facilities available to the Group.
Conditions
Completion is conditional, amongst other things, upon the satisfaction or (as applicable) waiver of the following Conditions:
(a) no legal or disciplinary proceedings being instituted or threatened against the Target Company or any director or any of the officers of the Target Company by any regulatory authority prior to Completion; and
(b) there are no outstanding construction costs owed by the Target Company in relation to the Property.
Completion
Completion shall take place on a date on or before 18 January 2019 or such other date as the parties to the Sale and Purchase Agreement may agree in writing.
In the event that any Conditions have not been satisfied or (where applicable) waived by the Purchaser at any time prior to Completion, either the Vendor or the Purchaser shall have the right to terminate the Sale and Purchase Agreement by written notice to the other, upon which the Vendor's solicitors shall refund the Deposit in full but without any interest to the Purchaser as soon as possible and in no event later than 7 Business Days from the date of termination of the Sale and Purchase Agreement, and neither the Purchaser nor the Vendor shall have any right to claim any damages and/or other remedies thereafter.
If either the Purchaser or the Vendor fails to comply with its respective obligations under the Sale and Purchase Agreement, the Sale and Purchase Agreement will be terminated, upon which the Vendor's solicitors shall refund the Deposit in full but without any interest to the Purchaser as soon as possible and in no event later than 5 Business Days from the date of termination of the Sale and Purchase Agreement, and neither the Purchaser nor the Vendor shall have any right to claim any damages and/or other remedies thereafter.
Following Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and the financial results of the Target Company will be consolidated into the financial statements of the Group.
Guarantee
The Guarantor has unconditionally and irrevocably agreed to guarantee as primary obligor to the Purchaser the due and punctual performance and observance by the Vendor of all its obligations and undertakings under the Sale and Purchase Agreement until the same thereunder have been satisfied in full.
INFORMATION ON THE TARGET COMPANY AND THE PROPERTY
The Target Company is a company incorporated in the British Virgin Islands with limited liability. As at the date of this announcement, the Target Company is legally and beneficially owned by the Vendor.
The principal asset of the Target Company is the Property, which is a commercial building situated in Kwun Tong, Kowloon, Hong Kong.