ITC CORP<0372>,STAR EAST<0198>&PAC CENT CYBER<1186>-Joint Announcement
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy
or completeness and expressly disclaims any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of
the contents of this announcement.
This announcement appears for information purposes only and does not
constitute an invitation or offer to acquire, purchase or subscribe shares
in or other securities of Pacific Century CyberWorks Limited.
ITC CORPORATION LIMITED
(Incorporated in Bermuda with limited liability)
STAR EAST HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
Pacific Century CyberWorks Limited
(Incorporated in Hong Kong with limited liability)
Joint announcement
Share transaction
Issue of new shares by Star East Information Technology Corp.
Summary
* Star East Information Technology Corp., an associated company of
ITC Corporation Limited and Star East Holdings Limited has entered into a
subscription agreement with, amongst others, the following parties on 27th
September, 1999:
- ITC Corporation Limited, through a wholly owned subsidiary;
- Star East Holdings Limited, through a wholly owned subsidiary;
- Pacific Century CyberWorks Limited, through a wholly owned
subsidiary, an independent third party;
- A company owned by a group of entertainers; and
- Hikari Tsushin Inc. of Japan.
* Hikari Tsushin will exercise two previous call options to buy an
aggregate of 10% shares in Star East Information from ITC and a company
owned by a group of entertainers under two call option deeds both dated
2nd September, 1999. Details were set out in a previous joint announcement
dated 23rd August, 1999.
* Pacific Century CyberWorks has agreed to subscribe 100 new shares
in Star East Information for a cash consideration of about US$10.6
million, equivalent to about HK$81.8 million, representing 10% of the
enlarged issued share capital of Star East Information after the
completion of the subscription. Such cash consideration will be financed
by internal resources.
* ITC and a company owned by a group of entertainers have also
agreed to sell 70 and 30 shares in Star East Information respectively,
representing 7% and 3% of the enlarged issued share capital after the
completion of the subscription, to Pacific Century CyberWorks at a
consideration of about US$10.6 million, equivalent to about HK$81.8
million. The sale of shares in Star East Information will be satisfied by
the issue of 8,203,996 and 3,515,998 shares in Pacific Century CyberWorks
to ITC and a company owned by a group of entertainers respectively,
representing in aggregate of about 0.15% of the enlarged issued share
capital of Pacific Century CyberWorks, both at a price of HK$6.98 per
share. An amount of about HK$818,000, represents the subscription and the
sale of shares in Star East Information price per share payable by Pacific
Century CyberWorks in these transaction which is equivalent to the
weighted average price per share paid and payable by Hikari Tsushin.
* Pacific Century CyberWorks and Star East Holdings will form a
joint venture company which will become the largest single shareholder of
Star East Information after each has transferred to the joint venture
company 200 shares in Star East Information, representing in aggregate of
40% of the enlarged issued share capital of Star East Information after
the completion of the subscription.
* The exercise of the call options by Hikari Tsushin, the
subscription and the formation of the joint venture company will be
implemented simultaneously.
* Star East Information has agreed to grant Pacific Century
CyberWorks and Hikari Tsushin each, for a nominal consideration, a new
call option to subscribe 100 new shares each at a total option price of
US$13.7 million, equivalent to about HK$106.3 million within 12 months
from the date of the completion of the subscription agreement. The terms
and conditions of each option deed are identical.
* Following the completion of the subscription and assuming after
the exercise of the new call options, Star East Information will be held
as to approximately 33.3%, 23.3%, 22.7%, 8.8%, 3.6% and 8.3% by the joint
venture company, Hikari Tsushin, ITC, a company owned by a group of
entertainers, Star East Holdings and Pacific Century CyberWorks
respectively.
* Star East Information is considering a listing of its shares on
Nasdaq National Market and ITC has agreed to grant Pacific Century
CyberWorks, for a nominal consideration, a call option which will be
exercisable within a period of 24 months from the date of the completion
of the subscription agreement to purchase 5% of the issued share capital
of Star East Information beneficially owned by ITC at a discount of 15% to
the initial public offering price, which discount is arrived at under
arm's length negotiation.
* Star East Holdings is still within the offer period of a
conditional cash offer to repurchase Star East Holdings's preference
shares as set out in the announcement dated 15th July, 1999 and the offer
document dated 9th September, 1999.
Further to the joint announcement dated 6th September, 1999, separate
announcements made by ITC and Star East Holdings dated 15th September,
1999 and 20th September, 1999, the boards of directors of Pacific Century
CyberWorks, ITC and Star East Holdings announce the following agreements
have been entered into:
UNDER THE SUBSCRIPTION AGREEMENT DATED 27TH SEPTEMBER, 1999
ISSUE OF NEW SHARES
Issuer
Star East Information., presently a 45% and 27% owned associated company
of ITC and Star East Holdings respectively.
Subscriber
Pacific Century CyberWorks, an independent third party under the Listing
Rules and not connected with any directors, chief executive, substantial
shareholder of either ITC or Star East Holdings or any of their respective
associates, the shares of which are listed on the Stock Exchange of Hong
Kong.
Conditions of the subscription
The subscription agreement is conditional upon, among other things, the
following conditions precedent being fulfilled or waived:
* Pacific Century CyberWorks being satisfied with the results of a
legal due diligence review of the Star East Information group; and,
* the review of the financial position of the Star East Information
group not revealing any material and adverse deviation from its proforma
accounts up to 15th October, 1999.
Expected date of completion
The subscription agreement is expected to be completed on or before 30th
October, 1999.
Number of new shares to be issued and subscription price for new shares in
Star East Information
Pacific Century CyberWorks has agreed to subscribe for 100 new shares in
Star East Information for a cash consideration of about US$10.6 million,
equivalent to about HK$81.8 million, representing 10% of the enlarged
issued share capital of Star East Information after the completion of the
subscription. An amount of about HK$818,000 represents both the
subscription and the sale of shares in Star East Information price per
share payable by Pacific Century CyberWorks in this transaction which is
equivalent to the weighted average price per share paid and payable by
Hikari Tsushin. The subscription price was agreed after arm's length
negotiation between Star East Information and Pacific Century CyberWorks
and is considered to be fair and reasonable by the respective board of
directors of ITC, Star East Holdings and Pacific Century CyberWorks.
The cash consideration of approximately US$10.6 million will be financed
by internal resources of Pacific Century CyberWorks.
Rights of new shares
The new shares in Star East Information to be issued to Pacific Century
CyberWorks will be issued free of any third party rights and will rank
pari passu in all respects with all other existing shares in Star East
Information.
UNDER THE SALE AND PURCHASE AGREEMENTS DATED 27TH SEPTEMBER, 1999
Share exchange
ITC and a company owned by a group of entertainers, both of which are
independent, and not connected with Pacific Century CyberWorks, its
directors, chief executive or the substantial shareholder of Pacific
Century CyberWorks or any of its subsidiaries or an associate of any of
them, agreed to sell respectively 70 and 30 shares in Star East
Information, representing 7% and 3% of the enlarged issued share capital
after the completion of the subscription, to Pacific Century CyberWorks
for an aggregate consideration of about US$10.6 million, equivalent to
about HK$81.8 million. The sale of shares in Star East Information will be
satisfied by the issue of 8,203,996 and 3,515,998 shares in Pacific
Century CyberWorks respectively, representing in aggregate of about 0.15%
of the enlarged issued share capital of Pacific Century CyberWorks, both
at a price of about HK$6.98 per share which was based on the average
closing price of 5 trading days up to and including 24th September, 1999
plus a premium of 5.4% thereon. The exchange price per share of Pacific
Century CyberWorks represents a premium of about 7.9% to the average ten
trading day closing price for the ten trading days up to 24th September,
1999 of about HK$6.47 per share. The share exchanges are based on arm's
length negotiation between ITC and Pacific Century CyberWorks and are
considered to be fair and reasonable by the respective board of directors
of ITC and Pacific Century CyberWorks. The consideration shares in Pacific
Century CyberWorks to be issued to ITC and a company owned by a group of
entertainers shall be subject to a lock-up arrangement under the sale and
purchase agreements.
Conditions of the sale and purchase agreements
The sale and purchase agreements are conditional upon among other things:
* the simultaneous completion of the subscription agreement; and
* the listing committee of The Stock Exchange of Hong Kong Limited
granting approval to the listing of and permission to deal in the Pacific
Century CyberWorks shares.
UNDER THE MANAGEMENT AGREEMENT DATED 27TH SEPTEMBER, 1999
A joint venture company will be formed which will be equally owned by
Pacific Century CyberWorks and Star East Holdings. Each shareholder of the
joint venture company will transfer 200 shares in Star East Information to
the joint venture company, representing 20% of the enlarged issued share
capital of Star East Information after the completion of the subscription.
As a result, the joint venture company will be the largest single
shareholder of Star East Information holding 40% of its shares immediately
after the completion of the subscription and the sale and purchase
agreements. The joint venture company will enter into a management
agreement with Star East Information under which management services
including, amongst others, general administrative and accounting services
and repair and maintenance services, will be provided to Star East
Information at cost.
The board of directors of the joint venture company will have a maximum of
six members, three from Pacific Century CyberWorks and three from Star
East Holdings.
The joint venture company will have the right to nominate four directors
to the board of Star East Information on completion of the subscription.
General description of the issuer, existing shareholders of the issuer and
the subscriber and the financial effect on two existing shareholders which
are listed company in Hong Kong
Business activities of Star East Information
Star East Information intends to launch a global Chinese content provider
for entertainment and life style information. The content will include
official profiles of a number of entertainers, Net radio and Net TV shows,
real time conversations between entertainers and subscribers and daily
superstar feature updates. Star East Information has commenced its
business and officially launched its web site on 28th September, 1999.
Business activities of ITC
The current principal business of ITC group is the holding of significant
interests in a number of listed and unlisted companies.
Effect on ITC
Upon completion of the exercise of the call options by Hikari Tsushin
pursuant to the call option deeds dated 2nd September, 1999, details were
set out in the joint announcement dated 23rd August, 1999, and the current
subscription agreement and the sale and purchase agreements, ITC is
expected to record a direct profit and a deemed disposal profit of about
HK$83 million and about HK$25 million respectively in the financial year
ending 31st March, 2000.
Business activities of Star East Holdings
The Star East Holdings group is engaged principally in entertainment
related businesses including franchising of entertainment complexes
offering live entertainment, dancing, karaoke, games and bistro style
dining and theme cafes under the "Star East" name, trading of merchandise,
the provision of agency and talent management services for entertainers,
the provision of media agency services and, through Star East Information,
the development of a global Chinese content provider for entertainment and
life style information, mortgage financing, property investment and
development, and securities trading.
Effect on Star East Holdings
Upon completion of the subscription agreement, Star East Holdings is
expected to record a gain on deemed disposal of about HK$16 million in the
financial year ending 31st March, 2000.
Trading record
Star East Information was incorporated on 18th February, 1999 and has
commenced its business on 28th September, 1999. No turnover and trading
expenses have been recorded up to 27th September, 1999.
As at 2nd September, 1999, the net asset value of Star East Information
was about HK$70 million.
The repurchase offer
Somerley Limited, the independent financial adviser to the independent
board committee of Star East Holdings in relation to the preference shares
repurchase offer by Star East Holdings, has confirmed to the board of
directors of Star East Holdings that, after considering the terms of the
above transaction, they continue to hold the view that it is in the
interests of preference shareholders to have the opportunity to consider
whether or not to accept the offer and that preference shareholders should
therefore vote in favour of the resolution to approve the making of the
offer to be proposed at the preference shareholders' meeting. Somerley
Limited also continues to hold the view that the terms of exchange of
preference shares for ordinary shares implied in the offer are not fair
and reasonable to preference shareholders and that preference shareholders
as a body should not accept the offer, although individual preference
shareholders may take a different view because of their personal
investment strategies or needs. The full text of the letter of advice from
Somerley Limited is set out in the offer document of Star East Holdings
dated 9th September, 1999.
The subscription is conditional, and it may or may not proceed.
The preference shareholders' meeting of Star East Holdings which will be
held on 29th September, 1999 to vote for the resolution in relation to the
repurchase offer. The board of directors of Star East Holdings wishes to
remind the preference shareholders that the closing date of the offer,
assuming the offers becomes unconditional on 29th September, 1999, is at
4:00 p.m. on 11th October, 1999 and the issue of new ordinary shares to
the preference shareholders accepting the offer and commencement of
dealing in these ordinary shares on or before 16th October, 1999. The
details of the above resolution and the timetable are set out in the offer
document of Star East Holdings dated 9th September, 1999.
Business activities of Pacific Century CyberWorks
The principal activities of Pacific Century CyberWorks are (i) property
development in Hong Kong and the PRC; (ii) investment and development of
the Cyber-Port project (subject to entering into a binding contract with
the Government of the Hong Kong SAR); and (iii) technology-related
businesses. Pacific Century CyberWorks will be involved primarily in
technology businesses related to the internet and the delivery of
broadband internet service through an innovative satellite to cable
distribution system. It will soon launch a highly complementary
combination of business that together form an interactive broadband
platform for offering and enabling a wide variety of consumer services
through the internet and television. It will also provide broadband
internet connectivity services, offer interactive and compelling content
through the internet and television and enable e-commerce.
The investment in Star East Information will represent a long term
investment of Pacific Century CyberWorks and will be treated as an
associated company in the books of Pacific Century CyberWorks.
REASONS FOR THE SUBSCRIPTION
It has been one of the business strategies of Pacific Century CyberWorks
to invest in Asia-oriented internet related business with good prospects.
As Star East Information will become a global Chinese content provider
with a unique concept, the directors of Pacific Century CyberWorks
considered that the investment in Star East Information is beneficial to
Pacific Century CyberWorks.
The subscription will further strengthen the capital and shareholder base
of Star East Information. In addition, the network and telecommunication
facilities of the Pacific Century CyberWorks group may assist Star East
Information in the development and operation of its web site.
USE OF PROCEEDS
It is planned that of about HK$81.8 million the proceeds from the
subscription will be used by Star East Information for the development,
launching, production and promotion of a global Chinese content provider
for entertainment and life style information.
NEW CALL OPTION DEEDS
Upon completion of the subscription agreement, Star East Information will
enter into two new call option deeds with Pacific Century CyberWorks and
Hikari Tsushin respectively. Under each option deed which has identical
terms and conditions, Star East Information will grant Pacific Century
CyberWorks and Hikari Tsushin, for a nominal consideration, an option to
subscribe for 100 new shares each in Star East Information within 12
months from the date of the completion of the subscription agreement for a
total consideration of US$13.7 million each, equivalent to HK$106.3
million.
Star East Information is considering a listing of its shares on Nasdaq
National Market and ITC has agreed to grant Pacific Century CyberWorks,
for a nominal consideration, another new call option which will be
exercisable within a period of 24 months from the date of the completion
of the subscription agreement to purchase 5% of the issued share capital
of Star East Information beneficially owned by ITC at a discount of 15% to
the initial public offering price. The listing of shares in Star East
Information on Nasdaq National Market is only at a preliminary stage and
there is no concrete proposal at present.
SHAREHOLDING STRUCTURE CHART
(For the shareholding structure of Star East Information before the
subscription, share exchange and set up of the joint venture company,
please refer to the press announcement today.)
* The figures are based on the assumption that the previous call
options are exercised in full by Hikari Tsushin.
Note 1: Presently ITC and Star East Holdings hold an attributable interest
of 47.8% and 27% respectively in Star East Information before the exercise
of the previous call options by Hikari Tsushin.
The shareholding structure of Star East Information after the exercise of
the previous call options by Hikari Tsushin, subscription, share exchange
and set up of the joint venture company is as follows:
* The figures are based on the assumption that the new call option
deeds are exercised in full by Pacific Century CyberWorks and Hikari
Tsushin.
Note 1: ITC, Star East Holdings and Pacific Century CyberWorks will hold
an attributable interest of 24.8%, 20.3% and 25% respectively in Star East
Information after the exercise of the previous call options in full by
Hikari Tsushin and the exercise of the new call options in full by Hikari
Tsushin and Pacific Century CyberWorks, subscription and share exchange.
Note 2: ITC and Star East Holdings had not held any shares in Pacific
Century CyberWorks prior to these transaction.
GENERAL
The transactions contemplated under the sale and purchase agreements will
constitute a share transaction under the Listing Rules.
An application will be made by Pacific Century CyberWorks to the Listing
Committee of the Stock Exchange for the listing of, and permission to deal
in, the consideration shares to be issued pursuant to the sale and
purchase agreements.
ITC and Star East Holdings have been informed by a common director that
Star East Information is still under negotiations with two other
independent parties on possible co-operation as mentioned in the joint
announcement dated 6th September, 1999. In addition, America Online, Inc.
and Star East Information have preliminarily entered discussion to exploit
the possibility of co-operation between them and, in particular, for Star
East Information to provide an entertainment content on America Online,
Inc.. The content will feature, amongst other things, entertainment news,
and information and life style features. Star East Information is also in
negotiation with IBM China/Hong Kong Limited for any possible
co-operation. Negotiations with all the parties are only at preliminary
stage and no terms have been agreed by the parties. Investors and
potential investors are advised to exercise extreme caution in dealing in
the shares of Star East Holdings and the securities of ITC.
Save as disclosed herein, the board of directors of Star East Holdings
confirms in relation to Star East Holdings that they are not aware of
other reasons for the recent substantial increase in the share prices and
turnover volume of Star East Holdings and there are no negotiations or
agreements relating to intended acquisitions or realisations of Star East
Holdings which are discloseable under paragraph 3 of the Listing
Agreement, neither are the board of Star East Holdings aware of any matter
discloseable under the general obligation imposed by paragraph 2 of the
Listing Agreement in so far as it relates to Star East Holdings, which is
or may be of a price sensitive nature.
Resumption of trading
The boards of directors of ITC and Star East Holdings requested to suspend
trading in the securities of ITC and shares of Star East Holdings
respectively on the Stock Exchange from 10:00 a.m. on 28th September, 1999
pending the publication of this announcement. Application has been made by
ITC to request the resumption of trading in the securities of ITC from
10:00 a.m. on 29th September, 1999 and an application has been made by
Star East Holdings to request the resumption of trading in the shares of
Star East Holdings from 10:00 a.m. on 29th September, 1999.
By Order of the Board By Order of the Board
ITC Corporation Limited Star East Holdings Limited
Chau Mei Wah, Rosanna Wong Kun To, Philip
Managing Director Managing Director
By Order of the Board
Pacific Century CyberWorks Limited
Chu Mee Lai, Helen
Company Secretary
Hong Kong, 28th September, 1999
The directors of Star East Holdings jointly and severally accept full
responsibility for the accuracy of the information contained in this
announcement relating to Star East Holdings and confirm, having made all
reasonable enquiries, that to the best of their knowledge and belief, the
opinions expressed by them relating to Star East Holdings have been
arrived at after due and careful consideration, and there are no other
facts relating to Star East Holdings not contained in this announcement,
the omission of which would make any statement relating to Star East
Holdings in this announcement misleading.
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