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Summary
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The AGREEMENT DATED 25TH AUGUST, 1998
Parties:
| Vendor
Purchaser |
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Supreme Goal
DH Bank |
Background:
On 25th April, 1997, a sale and purchase agreement (the "Principal Agreement") was entered into between Guoco Group (as purchaser), Land Development Corporation ("LDC") (as vendor) and Agrila Limited (as developer) for the sale and purchase of the ninth, tenth, eleventh, twelfth, fifteenth, sixteenth, seventeenth, eighteenth and seventy-third floors as well as the banking hall on the ground floor and part of the upper ground floor of The Center.
Completion of the Principal Agreement will occur within 6 weeks following the issue of the certificate of compliance in respect of the development of The Center or the receipt of the consent of the Director of Lands to assign (whichever is the earlier) and is expected to take place by 31st October, 1998.
On 12th June, 1997, a sub-sale and sub-purchase agreement (the "DH Bank Agreement") was entered into between Guoco Group (as vendor) and DH Bank (as purchaser) for the sale and purchase of the ninth, tenth and seventy-third floors as well as the banking hall on the ground floor and part of the upper floor of The Center.
On 12th June, 1997, a sub-sale and sub-purchase agreement (the "Guoco Land Agreement") was entered into between Guoco Group (as vendor) and Supreme Goal (as purchaser) for the sale and purchase of the eleventh, twelfth, fifteenth, sixteenth, seventeenth and eighteenth floors of The Center.
The Agreement
Under the Agreement, Supreme Goal has agreed to sell, and DH Bank has agreed to purchase the Property.
Property:
The Property comprises the eleventh floor of The Center which is a 80-storey commercial/office building. The Property has a total gross floor area of about 24,336 square feet. The Property is currently under renovation.
Consideration:
HK$185,000,000 in cash. HK$18,500,000 being 10% of the total was paid by DH Bank to Supreme Goal as deposit upon signing of the Agreement on 25th August, 1998. A further HK$37,000,000 (being 20% of the total) will be paid upon satisfaction of the Conditions (described below). The balance of the consideration of HK$129,500,000 shall be payable by DH Bank upon completion of the Agreement.
The consideration was determined with reference to the independent valuation by First Pacific Davies (Hong Kong) Limited of the Property of HK$185,000,000 as at 25th August, 1998. The directors of Guoco Group, Guoco Land and DH Bank Group (including their respective independent non-executive directors) consider that the Agreement was arrived at after arm's length negotiation, in the best interests of Guoco Group, Guoco Land and DH Bank Group and the consideration was fair and reasonable in light of the current market value of the Property.
The deposit received by Guoco Land will be applied to finance, in addition to the proceeds from the Rights Issue raised by the Company pursuant to a circular dated 16th June 1997, the completion of the Guoco Land Agreement. The consideration paid and to be paid by DH Bank under the Agreement has been and will be financed by internal resources.
Reasons for the Agreement:
DH Bank Group is principally engaged in banking. The purchase of certain floors of The Center under the DH Bank Agreement will enable DH Bank Group to establish a new headquarters and a principal banking hall in a modern office building in the Central district of Hong Kong. Owing to the expansion of DH Bank Group's banking operations, the directors of DH Bank Group consider that additional office space is required within its new headquarters. The purchase of the Property by DH Bank will further rationalise management functions and centralise business divisions in the adjacent ninth and tenth floors of the same building and so improve their operational effectiveness and efficiency.
Guoco Land and its subsidiaries are principally engaged in property development and investment in Hong Kong. The directors of Guoco Land consider that the commercial property market is expected to remain sluggish as current and projected supply exceeds demand which has been curbed by the economic slowdown. The directors of Guoco Land, (including independent non-executive directors) consider that it is prudent to reduce the interest of Guoco Land in The Center.
Loss on disposal:
The estimated loss on the disposal is about HK$2 million and will be provided for in the accounts of Guoco Land for the year ending 30th June, 1999.
Conditions:
The Agreement is conditional upon: -
| (i) | the written approvals of LDC and The Director of Lands Department for the Agreement; and | |
| (ii) | the approval by the shareholders of Guoco Land other than Guoco Group and its associates (as defined in the Listing Rules) (the "Independent Shareholders"). |
Completion:
Completion of the Agreement shall take place within seven days of the date of notification by Guoco Land to DH Bank that LDC is in a position validly to assign the Property to DH Bank, and is expected to take place by 31st October, 1998.
TENANCY AGREEMENTS DATED 25TH AUGUST, 1998
Part of the 12th Floor of The Center
Parties:
| Landlord | : | Supreme Goal | |||
| Tenants | : | (i) | Dao Heng Securities Limited ("DH Securities"), a wholly-owned subsidiary of Guoco Group | ||
| (ii) | Dao Heng Fund Management Limited ("DH Fund Management"), a wholly-owned subsidiary of Guoco Group |
Leased property:
Part of the twelfth floor of The Center
Gross floor area and rental
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Area (square feet) |
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| (i) | DH Securities |
16,730
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HK$468,440
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| (ii) | DH Fund Management |
6,978
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HK$195,384
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Leased terms
Two years commencing from 1st October, 1998 (or such later date as the Landlord obtains possession of the property) with an option to renew for two further years at a monthly rental to be agreed between the parties. The tenancy agreements were negotiated on an arm's length basis by reference to current market rentals as advised by First Pacific Davies (Hong Kong) Limited, an independent professional valuer. The directors of Guoco Land and Guoco Group (including their respective independent non-executive directors) consider the terms of the tenancy agreements to be fair and reasonable and to be in the best interest of Guoco Land and Guoco Group.
REIMBURSEMENT AGREEMENT DATED 25TH AUGUST, 1998
Parties:
| (i) | Supreme Goal | |
| (ii) | DH Securities | |
| (iii) | DH Fund Management | |
| (iv) | DH Bank |
Particulars:
To achieve maximum economies of scale and a better negotiating position with contractors, DH Bank has entered into agreements with relevant independent third parties for all building refurbishment and fitting out contracts for all the renovation work in respect of the banking hall on the ground floor and offices on the ninth to twelfth and seventy-third floors of The Center.
Under the reimbursement agreement, all parties agreed that the actual costs for renovation of the twelfth floor of The Center shall be apportioned between Supreme Goal, DH Securities and DH Fund Management.
Gross floor area
| Tenant | Area (sq. ft) | |
| Supreme Goal | 1,901 | |
| DH Fund Management | 6,978 | |
| DH Securities | 16,730 |
CONNECTED TRANSACTIONS
The Agreement
The Agreement constitutes a connected transaction for each of Guoco Group, DH Bank Group and Guoco Land.
The consideration under the Agreement represents less than 3% of the latest unaudited consolidated net tangible asset value of each of Guoco Group and DH Bank Group as at 31st December, 1997. Pursuant to Rule 14.25 of the Listing Rules, Guoco Group and DH Bank Group Limited are not required to seek any approval from their respective independent shareholders, but details of the Agreement will be included in their next published annual reports and accounts.
Pursuant to Rule 14.26, Guoco Land is required to convene an independent shareholders' meeting to approve the Agreement and a circular containing a letter from Pacific Challenge Capital Limited, an independent financial adviser, together with a notice of extraordinary general meeting will be despatched to the shareholders and, for information only, warrantholders of Guoco Land as soon as practicable.
Tenancy agreements
The tenancy agreements constitute connected transactions for each of Guoco Group and Guoco Land. The aggregate consideration under the tenancy agreements represents less than 3% of the latest unaudited consolidated net tangible asset value of Guoco Group as at 31st December, 1997 and the audited consolidated net tangible asset value of Guoco Land as at 30th June, 1998. Details of the tenancy agreements will be included in the next published annual report and accounts of each of Guoco Group and Guoco Land.
Reimbursement agreement
The reimbursement agreement constitutes a connected transaction for each of Guoco Group, Guoco Land and DH Bank Group. The aggregate consideration under the reimbursement agreement represents less than 3% of the latest unaudited consolidated net tangible asset value of each of Guoco Group and DH Bank Group as at 31st December, 1997 and the latest audited consolidated net tangible asset value of Guoco Land as at 30th June, 1998. Details of the reimbursement agreement will be included in the next published annual report and accounts of each of Guoco Group, Guoco Land and DH Bank Group.
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Hong Kong, 26th August, 1998