CITYCHAMP WATCH & JEWELLERY GROUP LIMITED 
By 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 this announcement.
CHINA HAIDIAN HOLDINGS LIMITED(Incorporated in the Cayman Islands with limited liability) (Stock Code: 256)
DISCLOSEABLE AND CONNECTED TRANSACTION Financial Adviser to China Haidian Holdings Limited
On 22 April 2013, Starlex, a wholly-owned subsidiary of the Company, and Fujian Fengrong entered into the Share Disposal Agreement, pursuant to which Starlex conditionally agreed to sell and Fujian Fengrong conditionally agreed to acquire not less than 55,000,000 and not more than 58,000,000 Citychamp Shares through the Shanghai Stock Exchange block trading system after normal trading hours. Pursuant to the Share Disposal Agreement, the selling price per Citychamp Sale Share will be determined based on the closing price of the Citychamp Shares on the date of transaction and the Minimum Selling Price, whichever is higher, provided that such selling price is within the Permissible Price Range. Based on the Minimum Selling Price, the Consideration will range between approximately RMB330.0 million (equivalent to approximately HK$412.5 million) and approximately RMB348.0 million (equivalent to approximately HK$435.0 million).
Starlex currently owns 173,989,058 Citychamp Shares, representing approximately 14.78% of the issued share capital of Citychamp. Upon Completion, Starlex's interest in Citychamp will range between approximately 9.86% and approximately 10.11%.
The Share Disposal constitutes a discloseable transaction of the Company under Chapter
14 of the Listing Rules. Fujian Fengrong is owned as to approximately 68.5% by Ms. Sit and 31.5% by Ms. Lu. Ms. Sit is an executive Director. Ms. Sit and Mr. Lu are daughters- in-law of Mr. Hon Kwok Lung, an executive Director and the controlling Shareholder. As such, Fujian Fengrong is a connected person of the Company. The Share Disposal also constitutes a connected transaction of the Company pursuant to Chapter 14A of the Listing Rules and is subject to the approval by the Independent Shareholders at the EGM by way of poll.
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The EGM will be convened at which a resolution will be proposed to seek the Independent Shareholders' approval of the transactions contemplated under the Share Disposal Agreement. Fujian Fengrong, its ultimate beneficial owners and its associates as well as Mr. Hon Kwok Lung and his associates are required to abstain from voting at the EGM.
The Independent Board Committee, comprising the independent non-executive Directors, will be formed to advise the Independent Shareholders on the terms of the Share Disposal Agreement. An independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.
A circular containing, among other things, (i) details of the Share Disposal; (ii) a letter from the Independent Board Committee; (iii) a letter of advice from an independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Share Disposal; and (iv) the notice of the EGM will be despatched to the Shareholders as soon as practicable.
The Board announces that on 22 April 2013, Starlex, a wholly-owned subsidiary of the Company, and Fujian Fengrong entered into the Share Disposal Agreement. The major terms of the Share Disposal Agreement are set forth below:
THE SHARE DISPOSAL AGREEMENT Date22 April 2013
Parties
Vendor: Starlex, a wholly-owned subsidiary of the Company
Purchaser: Fujian Fengrong
The principal activity of both Starlex and Fujian Fengrong is investment holding.
Fujian Fengrong is the single largest shareholder of Citychamp. As at the date of this announcement, Fujian Fengrong owns 297,104,078 Citychamp Shares, representing approximately 25.25% of the issued share capital of Citychamp.
Fujian Fengrong is owned as to approximately 68.5% by Ms. Sit and 31.5% by Ms. Lu. Ms. Sit is an executive Director and hence a connected person of the Company. In addition, both Ms. Sit and Ms. Lu are daughters-in-law of Mr. Hon Kwok Lung. Mr. Hon Kwok Lung, an executive Director, together with his wife collectively controlled approximately 62.7% of the Company as at the date of this announcement. Hence, Ms. Lu is also a connected person of the Company. Fujian Fengrong, being an associate of Ms. Sit and Ms. Lu, also constitutes a connected person of the Company pursuant to Chapter 14A of the Listing Rules.
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Pursuant to the Share Disposal Agreement, Starlex conditionally agreed to sell and Fujian
Fengrong conditionally agreed to acquire not less than 55,000,000 and not more than
58,000,000 Citychamp Shares through the Shanghai Stock Exchange block trading system after the normal trading hours.
Pursuant to the dealing restrictions of the Shanghai Stock Exchange on block trades, the selling price of the Citychamp Sale Shares shall be determined within the range of plus or minus 10% of the closing price of the Citychamp Shares on the last trading day prior to the date of transaction ("Permissible Price Range"). Pursuant to the Share Disposal Agreement, the selling price per Citychamp Sale Share will be determined based on the closing price of the Citychamp Shares on the date of transaction and the Minimum Selling Price, whichever is higher, provided that such selling price is within the Permissible Price Range. For the avoidance of doubt, in the event that the higher of the closing price of the Citychamp Shares on the date of transaction and the Minimum Selling Price does not fall within the Permissible Price Range, the Share Disposal will not proceed. Based on the Minimum Selling Price, the Consideration will range between approximately RMB330.0 million (equivalent to approximately HK$412.5 million) and approximately RMB348.0 million (equivalent to approximately HK$435.0 million).
The Minimum Selling Price was arrived at after arm's length negotiations between Starlex and Fujian Fengrong taking into consideration the prevailing closing prices of the Citychamp Shares and the possible change in market condition. The Minimum Selling Price represents:
(i) a discount of approximately 11.2% to the closing price of RMB6.76 (equivalent to approximately HK$8.45) per Citychamp Share on 22 April 2013, being the last trading day of the Citychamp Shares prior to the date of the Share Disposal Agreement;
(ii) a discount of approximately 10.6% to the average closing price of approximately RMB6.71 (equivalent to approximately HK$8.39) per Citychamp Share for the five trading days up to and including 22 April 2013;
(iii) a discount of approximately 6.0% to the average closing price of approximately RMB6.38 (equivalent to approximately HK$7.98) per Citychamp Share for the 30 trading days up to and including 22 April 2013;
(iv) a p r e mium of approximately 6.8% to the average closing price of approximately RMB5.62 (equivalent to approximately HK$7.03) per Citychamp Share for the 180 trading days up to and including 22 April 2013; and
(v) a premium of approximately 12.8% to the average closing price of approximately RMB5.32 (equivalent to approximately HK$6.65) per Citychamp Share for the 360 trading days up to and including 22 April 2013.
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The Minimum Selling Price provides flexibility for the Company to accommodate change in market condition and enables the Company to dispose of the Citychamp Sale Shares at the lowest acceptable price. The Directors (other than the independent non-executive Directors whom will give their view after considering the advice of an independent financial adviser) consider that terms of the Share Disposal Agreement are fair and reasonable.
The Share Disposal is conditional upon the fulfillment of the following conditions: (i) the approval of the Share Disposal Agreement and the transactions contemplated thereunder by the Independent Shareholders having been obtained at the EGM; and (ii) the higher of the closing price of the Citychamp Shares on the date of transaction and the Minimum Selling Price falls within the Permissible Price Range.
The Share Disposal shall take place after the conditions above have been fulfilled. Completion shall take place and Starlex will receive the Consideration in full on the date of completion of the registration of the transfer of the Citychamp Sale Shares pursuant to the relevant PRC securities regulations and procedures.
The Citychamp Shares are listed on the Shanghai Stock Exchange. The Citychamp Group is principally engaged in property development and investment, and manufacture and sale of enamelled copper wires in the PRC. The property development projects of the Citychamp Group are mainly located in Beijing, Nanjing, Suzhou, Fuzhou and Guilin. The enamelled copper wire production plants of the Citychamp Group are located in Fujian and Jiangsu provinces, the PRC. The enamelled copper wires produced by the Citychamp Group are mainly used in colour display, colour picture tube, televisions conversion machinery, air- conditioning compressors, electrical machinery and equipment, automobiles, electrical tools and transformers.
Financial information
The Citychamp Shares held by Starlex are recorded as available-for-sale financial assets in the Group's accounts. The carrying value of the Citychamp Shares held by Starlex amounted to approximately HK$807.6 million and approximately HK$1,409.1 million as at 31
December 2011 and 31 December 2012 respectively. The Group received dividend income of approximately HK$6.6 million and approximately HK$17.2 million from Citychamp for each of the two years ended 31 December 2012 respectively. The Group also received bonus shares of 65,245,897 Citychamp Shares during the year ended 31 December 2012 pursuant to a bonus issue of Citychamp.
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The following table sets out the consolidated financial information of the Citychamp Group as extracted from Citychamp's annual report for the year ended 31 December 2012 and quarterly report for the three months ended 31 March 2013.
(Audited) RMB'000 | (Audited) RMB'000 | (Unaudited) RMB'000 | |
Revenue | 9,320,059 | 6,256,272 | 1,208,958 |
Net profit before taxation | 1,146,110 | 1,143,878 | 743,631 |
Net profit after taxation | 824,438 | 861,742 | 680,132 |
As at 31 December 2012, the audited net asset value of the Citychamp Group was approximately RMB3,578.2 million. As at 31 March 2013, the unaudited net asset value of the Citychamp Group was approximately RMB4,259.6 million.
FINANCIAL EFFECT OF THE SHARE DISPOSAL
For illustration purposes only, based on the attributable proportion of the Citychamp Sale Shares to the total carrying value of the Group's investment in Citychamp of approximately HK$1,409.1 million and total corresponding investment revaluation reserve of approximately HK$725.4 million as at 31 December 2012, the Consideration for the Citychamp Sale Shares of range between approximately RMB330.0 million (equivalent to approximately HK$412.5 million) and approximately RMB348.0 million (equivalent to approximately HK$435.0 million), and the related withholding tax and transaction costs, the gain from the Share Disposal would range between approximately HK$180.8 million and approximately HK$190.6 million. The actual gain on the Share Disposal will be calculated on the date of Completion.
As at the date of this announcement, Starlex owns 173,989,058 Citychamp Shares, representing approximately 14.78% of the issued share capital of Citychamp. Upon Completion, Starlex's interest in Citychamp will range between approximately 9.86% and approximately 10.11%. The remaining Citychamp Shares to be held by Starlex will continue to be recorded as available-for-sale financial assets in the Group's accounts.
The Group is principally engaged in the manufacture and distribution of watches and timepieces, property investment, and the distribution of yachts.
The Share Disposal provides a good opportunity for the Group to partially realise its interest in Citychamp, a non-core asset, at a gain and to strengthen its financial position. Based on the Minimum Selling Price, the aggregate net proceeds from the Share Disposal is estimated to range between approximately HK$396.9 million and approximately HK$418.6 million. It is intended that the net proceeds from the Share Disposal will be used to finance any strategic acquisitions or investments in watches and timepieces business and as general working capital
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for the Group. This is in line with the Group's strategy as stated in the 2012 annual report that the Group would keep on identifying and evaluating opportunities and undertake mergers, acquisitions and alliances deals that are in the interests of the Shareholders.
Fujian Fengrong and Starlex are the largest and second largest shareholder of Citychamp respectively. Pursuant to annual report of Citychamp for the year ended 31 December 2012, Fujian Fengrong and Starlex are parties acting in concert. The Directors consider that it is in the interest of the Company to sell the Citychamp Sale Shares to Fujian Fengrong instead of independent third parties as any reduction of the aggregate shareholding interests of Fujian Fengrong and Starlex may be perceived as bad news by shareholders and potential investors of Citychamp, which might adversely affect prices of Citychamp Shares and therefore affect the value of the remaining Citychamp Shares held by Starlex after Completion.
In light of the foregoing, the Directors (other than the independent non-executive Directors whom will give their view after considering the advice of an independent financial adviser) consider that the Share Disposal is in the interests of the Company and the Shareholders as a whole.
The Share Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Fujian Fengrong is owned as to approximately 68.5% by Ms. Sit and
31.5% by Ms. Lu. Ms. Sit is an executive Director. Ms. Sit and Mr. Lu are daughters-in- law of Mr. Hon Kwok Lung, an executive Director and the controlling Shareholder. As such, Fujian Fengrong is a connected person of the Company. The Share Disposal also constitutes a connected transaction of the Company pursuant to Chapter 14A of the Listing Rules and is subject to the approval by the Independent Shareholders at the EGM by way of poll.
The EGM will be convened at which a resolution will be proposed to seek the Independent Shareholders' approval of the transactions contemplated under the Share Disposal Agreement. Fujian Fengrong, its ultimate beneficial owners and its associates as well as Mr. Hon Kwok Lung and his associates are required to abstain from voting at the EGM.
The Independent Board Committee, comprising the independent non-executive Directors, will be formed to advise the Independent Shareholders on the terms of the Share Disposal Agreement. An independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders in this regard. Mr. Hon Kwok Lung and Ms. Sit, the executive Directors, have abstained from voting on the board resolution approving the Share Disposal.
A circular containing, among other things, (i) details of the Share Disposal; (ii) a letter from the Independent Board Committee; (iii) a letter of advice from an independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Share Disposal; and (iv) the notice of the EGM will be despatched to the Shareholders as soon as practicable.
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In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
"associates" has the meaning ascribed thereto in the Listing Rules
"Board" the board of Directors
"Citychamp" n:nkmHX%tf
