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If you are in doubt as to any aspect of this circular, you should consult your licensed securities dealer orregistered institution in securities, bank manager, solicitor, professional accountant or other professionaladviser.
If you have sold or transferred all your shares in Guangdong Investment Limited, you should at once hand thiscircular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securitiesdealer, registered institution in securities or other agent through whom the sale or transfer was effected fortransmission to the purchaser or the transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take noresponsibility for the contents of this circular, make no representation as to its accuracy or completeness andexpressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole orany part of the contents of this circular.
This circular appears for information only and does not constitute an invitation or offer to acquire, purchase orsubscribe for any securities of the Company.
(Incorporated in Hong Kong with limited liability)
(Stock Code: 0270)
DISCLOSEABLE AND CONNECTED TRANSACTION
THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER
THE SPECIFIC MANDATERE-ELECTION OF DIRECTOR
ANDNOTICE OF EXTRAORDINARY GENERAL MEETING
Financial Adviser to Guangdong Investment Limited
Independent Financial Adviser tothe Independent Board Committee and the Independent Shareholders
SOMERLEY CAPITAL LIMITED
A letter from the Board (as defined in this circular) is set out on pages 7 to 27 of this circular. A letter from theIndependent Board Committee (as defined in this circular) to the Independent Shareholders (as defined in thiscircular) is set out on pages 28 and 29 of this circular. A letter from the Independent Financial Adviser (as definedin this circular) containing its advice to the Independent Board Committee and the Independent Shareholders isset out on pages 30 to 66 of this circular.
A notice convening the EGM (as defined in this circular) to be held at Concord Room, 8th Floor, RenaissanceHarbour View Hotel Hong Kong, One Harbour Road, Wanchai, Hong Kong on Monday, 20 March 2017 at 10:00a.m. is set out on pages 91 and 92 of this circular. A form of proxy for the EGM is enclosed with this circular.Whether or not you intend to attend the EGM in person, you are requested to complete the accompanying formof proxy in accordance with the instructions printed thereon and return it to the Company’s Share Registrar,Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible andin any event not less than 48 hours before the time scheduled for the EGM or any adjournment thereof.Completion and return of the form of proxy will not preclude you from attending and voting in person at theEGM or any adjournment thereof should you so wish.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
24 February 2017
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . 28
LETTER FROM SOMERLEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
APPENDIX I — VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 77
APPENDIX III — DETAILS OF THE DIRECTOR TO BE RE-ELECTED . . . . 90
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . 91
CONTENTS
Terms or expressions used in this circular shall, unless the context otherwise requires, have
the meanings ascribed to them below:
“Acquisition” the proposed acquisition of the Sale Shares by the
Company from the Vendor pursuant to the Sale and
Purchase Agreement;
“ASP” has the meaning ascribed to it under the section
headed “A.4. Reasons for and benefits of the
Acquisition” in the Letter from the Board contained in
this circular;
“associate(s)” has the meaning ascribed to it under the Listing Rules;
“Board” the board of Directors of the Company;
“Business Day” a day (other than a Saturday, a Sunday, a public
holiday or a day on which a tropical cyclone warning
signal numbered 8 or above or a “black” rainstorm
warning signal is hoisted in Hong Kong at any time
between 9:00 a.m. and 5:00 p.m.) on which banks in
Hong Kong are normally open for banking business to
the public;
“Buxin Project” has the meaning ascribed to it under the section
headed “A.3. Information on the GDL Group — The
GDL Group” in the Letter from the Board contained in
this circular;
“Buyer” has the meaning ascribed to it under the section
headed “D. Listing Rules and Takeovers Code
Implications” in the Letter from the Board contained
in this circular;
“Cash Consideration” has the meaning ascribed to it under the section
headed “A.2. The Sale and Purchase Agreement —
Consideration and basis of determination of
Consideration” in the Letter from the Board contained
in this circular;
“Company” Guangdong Investment Limited (粵海投資有限公司), a
company incorporated in Hong Kong with limited
liability and the Shares of which are listed on the Main
Board of the Stock Exchange;
DEFINITIONS
– 1 –
“Completion” the completion of the Acquisition in accordance with
the terms and conditions of the Sale and Purchase
Agreement;
“Completion Date” the date on which Completion shall take place;
“Conditions Precedent” has the meaning ascribed to it under the section
headed “A.2. The Sale and Purchase Agreement —
Conditions Precedent” in the Letter from the Board
contained in this circular;
“connected person(s)” has the meaning ascribed to it under the Listing Rules;
“Consideration” has the meaning ascribed to it under the section
headed “A.2. The Sale and Purchase Agreement —
Consideration and basis of determination of
Consideration” in the Letter from the Board contained
in this circular;
“Consideration Shares” 272,890,019 Shares to be issued by the Company to the
Vendor pursuant to the terms and conditions of the
Sale and Purchase Agreement;
“Deficient Amount” has the meaning ascribed to it under the section
headed “A.2. The Sale and Purchase Agreement —
Other terms” in the Letter from the Board contained
in this circular;
“Director(s)” the director(s) of the Company;
“Discount” has the meaning ascribed to it under the section
headed “A.2. The Sale and Purchase Agreement —
Consideration and basis of determination of
Consideration” in the Letter from the Board contained
in this circular;
“EGM” the extraordinary general meeting of the Company to
be held on Monday, 20 March 2017 at 10:00 a.m. to
consider and, if thought fit, approve, among others,
the Acquisition, the Specific Mandate and the
re-election of Mr. Cai;
“Executive” the Executive Director of the Corporate Finance
Division of the SFC or any delegate thereof;
DEFINITIONS
– 2 –
“GDL” Guangdong Land Holdings Limited (粵海置地控股有限公司), a company incorporated in Bermuda with
limited liability and the shares of which are listed on
the Main Board of the Stock Exchange;
“GDL Group” GDL and its subsidiaries;
“GDP” has the meaning ascribed to it under the section
headed “A. 4. Reasons for and benefits of the
Acquisition” in the Letter from the Board contained in
this circular;
“GFA” gross floor area;
“Group” the Company and its subsidiaries;
“Guangdong Holdings” has the meaning ascribed to it under the section
headed “D. Listing Rules and Takeovers Code
Implications” in the Letter from the Board contained
in this circular;
“HK GAAP” the generally accepted accounting principles,
standards and practices in Hong Kong (including all
applicable Hong Kong Financial Reporting Standards
issued by the Hong Kong Institute of Certified Public
Accountants), as amended from time to time;
“HK$” Hong Kong dollars, the lawful currency of Hong
Kong;
“Hong Kong” the Hong Kong Special Administrative Region of the
PRC;
“Independent Board
Committee”
an independent board committee comprising all of
the independent non-executive Directors, namely
Dr. CHAN Cho Chak, John, Dr. the Honourable LI
Kwok Po, David, Mr. FUNG Daniel Richard, Dr. the
Honourable CHENG Mo Chi, Moses and Mr. WU Ting
Yuk, Anthony, to advise the Independent Shareholders
in respect of the Acquisition and the Specific
Mandate;
DEFINITIONS
– 3 –
“Independent Financial
Adviser” or “Somerley”
Somerley Capital Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 6
(advising on corporate finance) regulated activities
under the SFO, being the independent financial
adviser appointed by the Company to advise the
Independent Board Committee and the Independent
Shareholders in respect of the Acquisition and the
Specific Mandate;
“Independent Shareholders” shareholders of the Company other than those who
are required to abstain from voting at the EGM
pursuant to the Listing Rules;
“Indirect Intermediate Holding
Companies”
Guangdong Trust Ltd. (粵海信托有限公司), Guangdong
Assets Management Ltd. (粵海資產管理有限公司),
Guangdong Assets Management (BVI) No. 43 Limited,
GD Assets Management (Custodian) Limited and
Guangdong Assets Management (BVI) No. 62 Limited,
all being direct or indirect wholly owned subsidiaries
of Guangdong Holdings; and “Indirect Intermediate
Holding Company” means any one of them;
“Issue Price” has the meaning ascribed to it under the section headed
“A.2. The Sale and Purchase Agreement —
Consideration Shares” in the Letter from the Board
contained in this circular;
“Latest Practicable Date” 20 February 2017, being the latest practicable date prior
to the printing of this circular for ascertaining certain
information for inclusion herein;
“Letter from the Board” the letter from the Board contained in this circular;
“Listing Rules” the Rules Governing the Listing of Securities on the
Stock Exchange, as amended from time to time;
“Minimum Year-end NAV” has the meaning ascribed to it under the section headed
“A.2. The Sale and Purchase Agreement — Other
terms” in the Letter from the Board contained in this
circular
“Model Code” the Model Code for Securities Transactions by Directors
of Listed Issuers as set out in Appendix 10 to the Listing
Rules;
“Parties” the Vendor and the Company; and “Party” means any
one of them;
DEFINITIONS
– 4 –
“PRC” or “China” the People’s Republic of China and, for the purpose of
this circular, excludes Hong Kong, the Macau Special
Administrative Region of the PRC and Taiwan;
“Reassessed NAV” has the meaning ascribed to it under the section headed
“A.2. The Sale and Purchase Agreement —
Consideration and basis of determination of
Consideration” in the Letter from the Board contained
in this circular
“RMB” Renminbi, the lawful currency of the PRC;
“Ruyingju Project” has the meaning ascribed to it under the section headed
“A.3. Information on the GDL Group — The GDL
Group” in the Letter from the Board contained in this
circular;
“Sale and Purchase Agreement” the sale and purchase agreement dated 19 January 2017
entered into between the Company and the Vendor in
respect of the Acquisition;
“Sale Shares” 1,263,494,221 ordinary shares of GDL representing
approximately 73.82% of the issued share capital of
GDL;
“Sale Shares Percentage” has the meaning ascribed to it under the section headed
“A.2. The Sale and Purchase Agreement — Subject
matter” in the Letter from the Board contained in this
circular;
“SFC” the Securities and Futures Commission of Hong Kong;
“SFO” the Securities and Futures Ordinance (Chapter 571 of
the Laws of Hong Kong);
“Shareholder(s)” the shareholder(s) of the Company;
“Shares” the ordinary shares in the share capital of the Company;
“Specific Mandate” the specific mandate proposed to be obtained from the
Independent Shareholders at the EGM to issue the
Consideration Shares to the Vendor;
“sq.m.” square metre(s);
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
DEFINITIONS
– 5 –
“Takeovers Code” the Code on Takeovers and Mergers issued by the SFC;
“Vendor” or “GDH” GDH Limited (粵海控股集團有限公司), a company
incorporated in Hong Kong with limited liability and
the controlling Shareholder and a connected person of
the Company;
“Year-end NAV” has the meaning ascribed to it under the section headed
“A.2. The Sale and Purchase Agreement — Other
terms” in the Letter from the Board contained in this
circular; and
“%” per cent.
Remarks:
(1) For the purpose of this circular, unless otherwise indicated, the exchange rate of RMB1.00=HK$1.1258 has been
used, where applicable, for purpose of illustration only and it does not constitute any representation that any
amount has been, could have been or may be exchanged at that rate or at any other rate.
(2) In this circular, the English name of the PRC entity marked with an asterisk(*) is translation of its Chinese name,
and is included herein for identification purposes only. In the event of any inconsistency, the Chinese name shall
prevail.
(3) Consolidated net asset value of GDL referred to in this circular means the consolidated equity attributable to
owners of GDL.
DEFINITIONS
– 6 –
(Incorporated in Hong Kong with limited liability)
(Stock Code: 0270)
Executive Directors:Mr. HUANG Xiaofeng (Chairman)Mr. WEN Yinheng (Managing Director)Mrs. HO LAM Lai Ping, Theresa (Company Secretary)Mr. TSANG Hon Nam (Chief Financial Officer)
Non-executive Directors:Mr. CAI Yong
Mr. WU Jianguo
Mr. ZHANG Hui
Ms. ZHAO Chunxiao
Mr. LAN Runing
Mr. LI Wai Keung
Independent Non-Executive Directors:Dr. CHAN Cho Chak, John GBS, JP
Dr. the Honourable LI Kwok Po, David
GBM, GBS, OBE, JP
Mr. FUNG Daniel Richard SBS, QC, SC, JP
Dr. the Honourable CHENG Mo Chi, Moses
GBM, GBS, OBE, JP
Mr. WU Ting Yuk, Anthony
Standing Committee Member of CPPCC National Committee, GBS, JP
Registered office:28th and 29th Floors
Guangdong Investment Tower
148 Connaught Road Central
Hong Kong
24 February 2017
To the Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTION
THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER
THE SPECIFIC MANDATERE-ELECTION OF DIRECTOR
ANDNOTICE OF EXTRAORDINARY GENERAL MEETING
LETTER FROM THE BOARD
– 7 –
A. THE ACQUISITION
1. Introduction
Reference is made to the announcement of the Company dated 19 January 2017 in
respect of the Acquisition. On 19 January 2017, the Company and the Vendor entered into
the Sale and Purchase Agreement, pursuant to which the Company has conditionally
agreed to acquire the Sale Shares from the Vendor.
2. The Sale and Purchase Agreement
A summary of the salient terms of the Sale and Purchase Agreement is set out below:
Date
19 January 2017
Parties
Vendor: GDH Limited (粵海控股集團有限公司)
Purchaser: The Company
Subject matter
Pursuant to the Sale and Purchase Agreement, the Company has conditionally
agreed to acquire the Sale Shares from the Vendor.
The Sale Shares represent approximately 73.82% (the “Sale Shares
Percentage”) of the issued share capital of GDL. Please refer to the section headed
“A.3. Information on the GDL Group — The GDL Group” in this letter from the
Board below for details of the GDL Group.
Consideration and basis of determination of Consideration
The consideration (the “Consideration”) for the Sale Shares in the amount of
RMB3,358,000,000 (equivalent to approximately HK$3,780,436,000) shall be settled
by the Company in the following manner:
(i) as to RMB2,518,500,000 (equivalent to approximately HK$2,835,327,000)
(being 75% of the Consideration) shall be settled by the allotment and
issue of the Consideration Shares by the Company to the Vendor on the
Completion Date and the difference between such amount and the value
of such Consideration Shares (being approximately RMB2.30) will be
settled in cash; and
LETTER FROM THE BOARD
– 8 –
(ii) as to RMB839,500,000 (equivalent to approximately HK$945,109,000)
(“Cash Consideration”, being 25% of the Consideration) shall be paid
by the Company in cash on the Completion Date.
Given the properties of GDL constitute the majority of its assets, the
Consideration was arrived at after arm’s length negotiations based on the net asset
value as adjusted with reference to the property valuation with a certain discount
and it represents a discount of approximately 28.2% to the unaudited consolidated
net asset value of GDL as at 30 September 2016 as adjusted by the said valuation (the
“Discount”).
RMB(million)
Approximate
The unaudited consolidated net asset value of GDL attributable
to the shareholders of GDL as at 30 September 2016 3,725.2*
Add: Revaluation surplus in the unaudited consolidated net
asset value of GDL attributable to the shareholders of
GDL (based on the market valuation of the properties
owned by the GDL Group as appraised by Vigers
Appraisal & Consulting Limited as of 30 November 2016
minus the related book value of the properties as of
30 November 2016), net of potential tax liabilities and
non-controlling interests of the Ruyingju Project 2,613.1
Reassessed net asset value of GDL attributable to the
shareholders of GDL 6,338.3
Less: Reassessed net asset value of GDL attributable to
non-controlling interests of GDL (1,659.4)
Reassessed net asset value of GDL attributable to the Vendor
(the “Reassessed NAV”) 4,678.9
Discount of the Consideration to the Reassessed NAV (Note) 28.2%
Consideration 3,358.0
* This is translated from approximately HK$4,326.8 million at the exchange rate of RMB1.00=HK$1.1615 as
quoted by the People’s Bank of China on 30 September 2016.
Note: With respect to the Discount, the Board has taken into account, among others, (i) the development
plan, quality and size of properties held by GDL; (ii) the future prospects of real estate business in
Shenzhen, the PRC; and (iii) the relevant market transactions concerning the property companies
listed on the Stock Exchange.
LETTER FROM THE BOARD
– 9 –
Having considered the above, the Board is of the view that the Consideration
is fair and reasonable and in the interest of the Company and its Shareholders as a
whole.
The Company has considered the market capitalisation of the GDL Group and
the prevailing trading prices of shares of GDL. The Consideration translates into
approximately HK$2.99 per Sale Share and represents a premium of approximately
47.3% over the per share closing trading price of GDL of HK$2.03 as of 18 January
2017 (the day before the date of the announcement of the Company in respect of the
Acquisition dated 19 January 2017). However, given the low trading volume of GDL
and the substantial discount of market capitalisation of the GDL Group to its net
asset value as adjusted with reference to the property valuation, the Company
believes that the market capitalisation does not reflect the intrinsic value of the
underlying assets of GDL Group and therefore prevailing trading prices of shares of
GDL was, in the Board’s opinion, not an appropriate benchmark in determining the
Consideration.
While the management of the Group considered that it was possible to satisfy
the entire Consideration in cash, after considering the funding requirements for
further investments in and development of the Group’s principal business segments
(i.e. namely, the water resources, property and infrastructure businesses), the
Group’s dividend policy and general working capital requirements, the
management of the Group was of the view that the Consideration should only be
satisfied as to one-fourth in cash and the remaining portion in other means. Having
considered (i) the disadvantages of other financing alternatives as discussed below;
and (ii) that the willingness of the Vendor to accept the Consideration Shares (as
opposed to pure cash or other form of consideration) demonstrates the confidence
of the Vendor and Guangdong Holdings in the prospects of both the Group and the
GDL Group and the Vendor ’s support to the Group in respect of the Acquisition, the
final form of payment of the Consideration comprising the Consideration Shares
and Cash Consideration was agreed amongst the Parties .
The Company has also considered other methods of equity financing.
Currently, the Issue Price of HK$10.39 per Consideration Share represents slight
discounts ranging from approximately 1.7% to 4.3% to the closing prices of the
Shares during the 10 consecutive trading days prior to the date of the Sale and
Purchase Agreement. In contrast, fund raising exercise by way of issue of new
Shares to independent third parties (e.g. new share placement) or to existing
Shareholders on a pro rata basis (e.g. rights issue or open offer) usually require a
deeper discount to the prevailing market prices of the Shares. Furthermore, fund
raising through rights issue or open offer would attract higher transaction costs
(such as underwriting and other fees) and the dilution effect on those
non-participating Shareholders would usually be greater as compared to the issue
of the Consideration Shares.
Debt financing would increase overall financing costs of the Group.
LETTER FROM THE BOARD
– 10 –
Thus, the current proposed financing structure proposal was arrived at after
due and careful consideration of the various alternatives by the management of the
Group, which considered that the proposed issue of the Consideration Shares under
the Specific Mandate and the payment of the Cash Consideration are suitable
financing/payment mechanisms for the Acquisition. While the issue of the
Consideration Shares will result in a minor dilution in the shareholdings in
percentage terms of the existing public Shareholders, having taken into account
various factors (details of which are set out in section 11 headed “Shareholding
structure of the Company before and after Completion” in the “Letter from
Somerley” contained in this circular), the dilution effects on the shareholding of the
existing public Shareholders are considered acceptable.
Consideration Shares
The Consideration Shares will be allotted and issued at the issue price of HK$10.39
per Consideration Share (the “Issue Price”), credited as fully paid, in the manner as set
out in the paragraph headed “Consideration and basis of determination of Consideration”
in this section above. The Consideration Shares, when allotted and issued, shall rank pari
passu in all respects with the Shares in issue on the date of allotment and issue of the
Consideration Shares.
The Consideration Shares comprise 272,890,019 Shares, which represent:
(i) approximately 4.36% of the existing issued share capital of the
Company as at the Latest Practicable Date; and
(ii) approximately 4.17% of the issued share capital of the Company as
enlarged by the allotment and issue of the Consideration Shares
(assuming there is no other change in the share capital of the Company
from the Latest Practicable Date to Completion).
The Consideration Shares will be issued pursuant to the Specific Mandate to
be obtained from the Independent Shareholders at the EGM. An application will be
made to the Listing Committee of the Stock Exchange for the listing of and
permission to deal in the Consideration Shares.
The Issue Price represents:
(i) a discount of approximately 4.3% to the closing price of HK$10.86 per
Share as quoted on the Stock Exchange on the date of the Sale and
Purchase Agreement;
(ii) a discount of approximately 2.7% to the average closing price of
HK$10.68 per Share as quoted on the Stock Exchange for the last 5
consecutive trading days immediately prior to the date of the Sale and
Purchase Agreement;
LETTER FROM THE BOARD
– 11 –
(iii) a discount of approximately 1.7% to the average closing price of
HK$10.57 per Share as quoted on the Stock Exchange for the last 10
consecutive trading days immediately prior to the date of the Sale and
Purchase Agreement;
(iv) a premium of approximately 0.2% over the average closing price of
HK$10.37 per Share as quoted on the Stock Exchange for the last 20
consecutive trading days immediately prior to the date of the Sale and
Purchase Agreement;
(v) the average closing price of HK$10.39 per Share as quoted on the Stock
Exchange for the last 30 consecutive trading days immediately prior to
the date of the Sale and Purchase Agreement;
(vi) a premium of approximately 0.7% over the closing price of HK$10.32
per Share as quoted on the Stock Exchange on the Latest Practicable
Date; and
(vii) a premium of approximately 101.7% over the net asset value per Share
of approximately HK$5.15 based on the net asset value attributable to
the Shareholders of approximately HK$32,233.6 million as at 30
September 2016 divided by 6,264,931,421 Shares in issue as at the Latest
Practicable Date.
The Issue Price was determined by the Board after arm’s length negotiations
with the Vendor with reference to, among others, the prevailing market prices of the
Shares and the current market conditions. The Directors (including the independent
non-executive Directors after taking into account the advice of the Independent
Financial Adviser), consider the Issue Price to be fair and reasonable and in the
interest of the Company and the Shareholders as a whole.
Conditions Precedent
Pursuant to the Sale and Purchase Agreement, the Acquisition is conditional
upon the fulfillment or, where applicable, waiver of the following conditions (the
“Conditions Precedent” and each of them a “Condition Precedent”):
(i) this circular having been approved by the Stock Exchange (or the Stock
Exchange having confirmed that it has no comment on this circular) and
despatched to the Shareholders, and there having been no requirement
by the Stock Exchange in respect of the Acquisition that is not
acceptable to the Company;
LETTER FROM THE BOARD
– 12 –
(ii) the relevant transactions under the Sale and Purchase Agreement,
including but not limited to the issue of the Consideration Shares,
having been approved by the Independent Shareholders of the
Company at the EGM in accordance with the requirements of the Listing
Rules;
(iii) the approval for the listing of and permission to deal in the
Consideration Shares by the Stock Exchange having been obtained by
the Company, and such approval not having been revoked or
withdrawn prior to the Completion Date;
(iv) the waiver having been obtained from the SFC by the Company from the
mandatory offer obligation of the Company under Rule 26.1 of the
Takeovers Code in respect of the relevant transactions under the Sale
and Purchase Agreement, and such waiver not having been revoked
prior to the Completion Date;
(v) the trading in the Shares not having been suspended for more than 20
consecutive days and on the Completion Date, except for the reason of
review of the announcement or this circular in relation to the
Acquisition by the relevant regulatory body;
(vi) the listing of the Shares on the Stock Exchange not having been
cancelled or withdrawn, and the SFC not having initiated any material
investigations that would lead to any suspension or cancellation or
withdrawal of the listing of the Shares on the Stock Exchange;
(vii) the Company having performed all relevant obligations, duties,
undertakings and warranties in accordance with the Sale and Purchase
Agreement on or before the Completion Date;
(viii) the representations and warranties by the Company being true, accurate
and not misleading in all material respects on or before the Completion
Date;
(ix) the Company having obtained all necessary approvals and
authorisations from any governmental or regulatory authorities for the
enforcement and completion of the transactions under the Sale and
Purchase Agreement, and the same remaining in full effect under the
applicable jurisdiction and the relevant laws and regulations;
(x) the trading in the shares of GDL not having been suspended for more
than 20 consecutive days and on the Completion Date, except for the
reason of the review of the announcement or this circular in relation to
the Acquisition by the relevant regulatory body;
LETTER FROM THE BOARD
– 13 –
(xi) the listing of the shares of GDL on the Stock Exchange not having been
cancelled or withdrawn, and the SFC not having initiated any material
investigations that would lead to any suspension or cancellation or
withdrawal of the listing of the shares of GDL on the Stock Exchange;
(xii) the Vendor having performed all relevant obligations, duties,
undertakings and warranties in accordance with the Sale and Purchase
Agreement on or before the Completion Date;
(xiii) the representations and warranties by the Vendor being true, accurate
and not misleading in all material respects on or before the Completion
Date; and
(xiv) the Vendor having made the relevant application to the relevant
state-owned assets administration authority and obtained all necessary
approvals and authorisations from any governmental or regulatory
authorities (if necessary) for the enforcement and completion of the
transactions under the Sale and Purchase Agreement, and the same
remaining in full effect under the applicable jurisdiction and the
relevant laws and regulations.
The Conditions Precedent under sub-paragraph (v) to (ix) above may be
waived by the Vendor at its discretion and those sub-paragraph (x) to (xiv) above
may be waived by the Company at its discretion.
As at the Latest Practicable Date, in respect of the Condition Precedent under
sub-paragraph (i) above, the Stock Exchange had confirmed that it had no comment
on this circular; and in respect of the Condition Precedent under sub-paragraph (iv)
above, the waiver had been obtained from the SFC by the Company (for details,
please refer to the section headed “D. Listing Rules and Takeovers Code
Implications” in this letter from the Board below). Save as set out above, none of the
Conditions Precedents has been satisfied (or waived) as at the Latest Practicable
Date.
If the Conditions Precedent cannot be satisfied (or waived) before 30 June
2017 (or such other date as agreed by the Parties in writing), the Sale and Purchase
Agreement shall terminate unless the Parties otherwise agree.
Completion
Completion shall take place on the 15th Business Day after the date on which
the last Condition Precedent is satisfied (or waived) and the issue of the
announcement by GDL of its preliminary results for the year of 2016 (whichever is
later), or at such other time as the Vendor and the Company shall agree in writing.
LETTER FROM THE BOARD
– 14 –
Other terms
The Vendor undertakes to the Company that the RMB equivalent of the
audited consolidated net asset value of GDL as at 31 December 2016 to be disclosed
in the announcement of GDL on its preliminary results for the year of 2016 (such net
asset value shall be referred to as the “Year-end NAV”) shall not be less than
RMB3,704,835,000 (the “Minimum Year-end NAV”) and in the event that the RMB
equivalent of the Year-end NAV falls below such amount (such difference shall be
referred to as the “Deficient Amount”), the Vendor shall pay to the Company the
portion of the Deficient Amount attributable to the Sale Shares Percentage after
applying the Discount to the same, and in such event, the Company will comply
with the disclosure requirements under the Listing Rules. The Minimum Year-end
NAV was determined after arm’s length negotiation between the Company and the
Vendor. The Parties have agreed that with the amount of the Consideration being
RMB3,358 million, the Consideration should represent a discount of at least 28.00%
to the reassessed net asset value of GDL attributable to the Vendor as at 31 December
2016. This translates into a required minimum net asset value of GDL attributable to
the shareholders of GDL of approximately RMB3,704,835,000 as at 31 December 2016
(without taking into account the revaluation surplus as set out under the section
headed “A.2. The Sale and Purchase Agreement — Consideration and basis of
determination of Consideration” in this letter above in the amount of approximately
RMB2,613.1 million).
3. Information on the GDL Group
The GDL Group
GDL is a subsidiary of the Vendor held as to approximately 73.82% as at the
Latest Practicable Date. The GDL Group is principally engaged in property
development and investment.
GDL is listed on the Main Board of the Stock Exchange since August 1997 with
stock code: 0124. It was formerly known as Kingway Brewery Holdings Limited and
was then engaged in the brewery business. Following the completion of the disposal
of the brewery business and related assets in 2013 (as more particularly set out in the
announcements of GDL dated 5 February 2013, 11 August 2013 and 17 September
2013, respectively, and the circular of GDL dated 9 April 2013), the principal
business of the GDL Group has been changed to property development and
investment.
The property projects engaged by the GDL Group are (i) the development of a
multi-module commercial complex with the jewellery products industry as its main
theme (the “Buxin Project”, for details, please refer to the announcement of GDL
dated 27 October 2016 in respect of the unaudited financial information of GDL for
the nine months ended 30 September 2016 and the circular of GDL dated 22 June
2016); and (ii) a residential property project in Panyu District, Guangzhou, the PRC
(the “Ruyingju Project”, for details, please refer to the announcement of GDL dated
27 October 2016 in respect of the unaudited financial information of GDL for the
nine months ended 30 September 2016 and the circular of GDL dated 2 April 2015).
LETTER FROM THE BOARD
– 15 –
The Vendor acquired the Sale Shares from 2003 to 2011 at the aggregate cost of
approximately HK$2,284,185,000.
The simplified shareholding structure of the Vendor, the Company and GDL
as at the Latest Practicable Date is set out below for illustrative purpose:
The Vendor
GDL
54.60% 73.82%
TheCompany
Upon Completion, the Vendor ’s shareholding in the Company will increase to
approximately 56.49% of the issued share capital of the Company (as enlarged by
the issue of the Consideration Shares and assuming that there is no other change in
the share capital of the Company) and, GDL will become a subsidiary of the
Company.
The simplified shareholding structure of the Vendor, the Company and GDL
immediately after Completion (if the Acquisition is completed and assuming that,
other than the issue of the Consideration Shares, there is no other change in the
share capital of the Company) is set out below for illustrative purpose:
The Vendor
GDL
56.49%
73.82%
TheCompany
LETTER FROM THE BOARD
– 16 –
Financial information of the GDL Group
Set out below is certain financial information of the GDL Group (prepared in
accordance with the HK GAAP), for each of the financial years ended 31 December
2014 and 31 December 2015, respectively.
For the year ended31 December 2014
For the year ended31 December 2015
(audited) (audited)
Profit before tax Approximately
HK$90,898,000
Approximately
HK$176,362,000
Profit after tax Approximately
HK$81,773,000
Approximately
HK$172,250,000
According to the results of GDL for the nine months ended 30 September 2016,
the unaudited consolidated equity attributable to owners of GDL (prepared in
accordance with the HK GAAP) as at 30 September 2016 was HK$4,326,781,000.
4. Reasons for and benefits of the Acquisition
The Acquisition is expected to have certain benefits to the Group as set out below:
(i) Strategic fit with the Company’s long term business development
As one of its core business activities, the Company has a long history and
proven track record of investing in and developing quality commercial properties.
Properties in the Group’s existing property portfolio are all strategically located in
the core central business districts of Guangdong Province, Tianjin and Hong Kong.
Taking into account the prime location of the Buxin Project, the Company believes
that the Acquisition is in line with the Group’s ongoing strategy of its property
investment and development segment and will greatly supplement the Group’s
existing property portfolio by further extending its footprint into Shenzhen, one of
the four Tier 1 cities in the PRC, as more particularly explained in the paragraph
headed “(ii) Broadening the geographic exposure of the Group’s property holding
and investment business to Shenzhen” below.
As disclosed in the circular of GDL dated 22 June 2016, the Buxin Project was
expected to (i) commence pre-sale of the properties in the Northwestern Land (as
defined in the said circular) in 2018; (ii) commence pre-sale of the commercial office
premises in the Northern Land (as defined in the said circular) in 2019 and introduce
leasing of the commercial properties with jewellery as the main theme in the
Northern Land in 2021; and (iii) introduce leasing of the properties in the Southern
Land (as defined in the said circular) in 2023. Whilst the pre-sale of properties of the
Buxin Project will help finance part of its ongoing capital expenditure, the Company
believes that, upon completion of construction, the Buxin Project will generate
LETTER FROM THE BOARD
– 17 –
stable and continuing revenue and cash flow to the Group in the long run, and
therefore the Acquisition aligns with the Group’s overall strategy to invest in stable
income-generating assets.
In addition, taking into account the timelines of development plan and
income streams of Buxin Project, the Company is of the view that it is in the interest
of the Company and its Shareholders to proceed with the Acquisition at this
moment, as the Acquisition would enable the Company to capture the opportunity
in securing a scarce land resource in the prime location in Shenzhen with a
consideration at a reasonable discount to market valuation and allow the Company
the ability to contribute positively to the development theme and schedule as well
as the marketing strategies at the appropriate stage of the development of this
project.
(ii) Broadening the geographic exposure of the Group’s property holding andinvestment business to Shenzhen
Shenzhen is a city with population net inflow, surging urbanisation rate and
strong social net worth accumulation. The size of downtown Shenzhen is relatively
small as compared to other Tier 1 cities, and new land supply is quite scarce in
downtown after rapid economic growth and intensive infrastructure investment
during the past 30 years. Most of the city’s land parcels sold in recent years are
located in suburban areas, including Bao’an, Longguang, Longhua and Pingshan
Districts. The scarcity of land parcels in prime location has driven developers to
search for more property redevelopment opportunities in downtown area. Thus,
undertaking the Buxin Project will enable the Company to capture Shenzhen’s
economic fundamentals and its growing commercial property market.
(1) Shenzhen is one of the only four Tier 1 cities in the PRC and has
continued to undergo substantial economic development in recent
years, and was ranked number one in gross domestic product (“GDP”)
per capita among all Tier 1 and major Tier 2 cities in the PRC in 2015 as
illustrated in the chart below:
Leading GDP per capita in 2015
Shenzhen
Suzhou
Guangzhou
Hangzhou
Tianjin
Beijing
Wuhan
Shanghai
Chengdu
Chongqing
National
157,985
136,300
134,066
112,268
106,908
105,822
104,132
103,000
74,273
52,330
49,351
0 50,000
Per capita GDP (RMB)
100,000 150,000 200,000
Source of GDP, GDP per capita and population of China and the above cities: Bureau of Statisticsof China and the respective cities
LETTER FROM THE BOARD
– 18 –
(2) Shenzhen was also ranked number four in total GDP among all cities in
the PRC in 2015 shown in the chart below:
No. 4 city in total GDP in 2015
Shanghai
Beijing
Guangzhou
Shenzhen
Tianjin
Chongqing
Suzhou
Wuhan
Chengdu
Hangzhou
2,496
2,297
1,810
1,750
1,654
1,572
1,450
1,091
1,080
1,005
0 500 1,000 1,500
GDP (RMBbn)
2,000 2,500 3,000
Source of GDP of the above cities: Bureau of Statistics of the respective cities
(3) Shenzhen is China’s first special economic zone, a major container port
and a manufacturing centre with strong purchasing power. The
following chart illustrates the per capital disposable income of urban
residents in Shenzhen as compared to the national average in the PRC:
Leading city with strong purchasing power in China
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2011
Shenzhen per capita disposable income of urban residents
36,50540,742
44,653
26,955
40,948
28,844
44,633
31,195
24,56521,810
2012 2013 2014 2015
National average
(RM
B)
Source of national and Shenzhen per capita disposable income of urban residents: Bureau of
Statistics of China and Shenzhen
(4) More importantly, since 2006, Shenzhen transited from “made in
Shenzhen” to “innovated by Shenzhen”, as it has been moving towards
a knowledge and technology-based development model. Shenzhen is
now home to the headquarters of a number of sizable and well-known
Chinese and global firms in high-tech, financial and logistics service
sectors.
LETTER FROM THE BOARD
– 19 –
The following chart illustrates the increasing contribution from tertiary
industries to the GDP of Shenzhen from 2005 to 2015:
Increasing contribution from tertiary industries in Shenzhen
% Shenzhen GDP by industries 2005 2015
Primary
Secondary
Tertiary
– Financial
– Real estate
– Whole and retail sales
– Info tech, info transfer and
software
0.2%
53.4%
46.4%
6.2%
9.0%
10.5%
3.4%
0.03%
41.2%
58.8%
14.5%
9.3%
11.5%
6.2%
Source of GDP by industries: Bureau of Statistics of Shenzhen
(5) The residential property market in Shenzhen has been booming for the
past five years with prices surging, particularly in 2016 where the
average selling price (“ASP”) rose to above RMB50,000 per sq.m., as
illustrated in the chart below:
Surging residential ASP in 2016
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
500
1,000
1,500
2,000
2,500
3,000
Q2
-12
Q3
-12
Q4
-12
Q1
-13
Q2
-13
Q3
-13
Q4
-13
Q1
-14
Q2
-14
Q3
-14
Q4
-14
Q1
-15
Q2
-15
Q3
-15
Q4
-15
Q1
-16
Q2
-16
Q3
-16
GFA sold (sq.m.) ASP (RMB/sq.m.)
Source: Vigers Research
Accordingly, the Company believes that Shenzhen’s property market will
continue to grow at a sustainable rate and the demand for high quality commercial
properties will likely increase in the foreseeable future.
(iii) Prime location of Buxin Project for further strategic growth
The land being redeveloped under the Buxin Project was previously the
largest plot of industrial land within the Buxin area in Shenzhen with a
well-established transportation network. In recent years, businesses engaging in
design, manufacture and sale of jewellery and costume jewellery products in the
LETTER FROM THE BOARD
– 20 –
PRC have congregated mainly in this area. The development of this area is also
currently supported by government initiatives which includes the 12th Five-Year
Plan for National Economic and Social Development in Luohu District. Therefore, a
demand has arisen for office space in the Buxin area for research, development and
exhibition purposes for jewellery businesses. Conversion of the uses of the land
under the Buxin Project has been substantially completed and the development of a
multi-module commercial complex with the jewellery products industry as its main
theme is underway. As such, the Company has reasons to believe that the
Acquisition would enable the Group to tap into the development opportunity of
Buxin area and enhance the Group’s future strategic growth.
(iv) Well-established asset on listed platform for future expansion of the Group
In order to formulate the strategic business and investment decision, the
Company has taken into account a number of factors including, among others, the
uncertainty in the PRC property market and the associated potential increase in
business risk as a result of the Acquisition. However, after conducting a
comprehensive risk and benefit assessment, in particular the positive factors and
potential benefits outlined above, the Company considers that the Acquisition is
complementary to its existing business and in line with the interest of the Company
and its Shareholders as a whole.
The Acquisition will bring into the fold a well-established listed platform,
with a valuable asset in a prime location of the PRC. As part of its broader
investment strategy, the Company continues to search for strategic acquisition
opportunities in order to enhance its long-term profit growth and expand its
investment portfolio that generates stable and continuing income. Upon
Completion, GDL, which is principally engaged in property investment and
development with the Buxin Project, will become a subsidiary of the Company.
As at 30 June 2016, GDL had approximately HK$2.6 billion cash on hand and
no financial borrowing, with the further cash inflow from the selling of the
remaining portion of Ruyingju Project at market value of approximately RMB327
million as at 30 November 2016, together with the phase by phase development plan
of Buxin Project and presale of properties planned in 2018 and 2019, the Company
believes that GDL can finance the development of Buxin Project by its internal
resources and/or bank borrowing, without relying on financial support by the
Company.
(v) Consolidation of management expertise and better deploy of resources for theproperty sector
The Group has extensive experience in property investment and development
in the PRC. Upon Completion, the Company is able to enjoy the benefits from the
growth potential of the Buxin Project whereas GDL may leverage on the Company’s
management expertise in property investment and development as well as
enhancing its brand name within the region to facilitate its development of the
Buxin Project. Subsequent to Completion, the Company will review the feasibility of
LETTER FROM THE BOARD
– 21 –
further integration of the resources of GDL with a view to improving the operational
quality, optimising internal allocation of resources, expanding the Group’s
operational scale and profitability in the property segment, and driving for
sustainable rapid growth in the coming years.
The Board (including the independent non-executive Directors after taking
into account the advice of the Independent Financial Adviser), considers that the
terms and conditions of the Acquisition are fair and reasonable, on normal
commercial terms or better and are in the interests of the Company and the
Shareholders as a whole.
Mr. HUANG Xiaofeng, Mr. CAI Yong, Mr. WU Jianguo, Mr. ZHANG Hui,
Ms. ZHAO Chunxiao, Mr. LAN Runing and Mr. LI Wai Keung, being Directors, are
also directors of the Vendor. All of the abovementioned Directors present at the
relevant Board meeting were not counted in the quorum and did not vote on the
Directors’ resolutions approving, among others, the entering into of the Sale and
Purchase Agreement by the Company. The Vendor and any of the abovementioned
Directors (if any) who shall be entitled to vote at the EGM, with a material interest in
the Acquisition, and the associates of each of them (who in aggregate held
3,428,911,137 Shares, representing approximately 54.73% of the issued share capital
of the Company as at the Latest Practicable Date), will abstain from voting at the
EGM in respect of the proposed resolutions relating to the Acquisition and the
Specific Mandate.
5. Corporate Strategy
Among the Group’s various business segments, the water resources segment,
comprising water distribution and sewage treatment in the Mainland China, has always
been a core business segment with strategic focus. Notwithstanding the Acquisition, the
Group will continue to source business opportunities in and expand the scale of the area
of water resources so as to enhance the long-term profit growth.
Furthermore, the Group has always strived to create long-term value for its
Shareholders and considers that dividend distribution forms an integral part of
shareholders’ return. The Company expects to continue with its stable dividend
distribution policy following the Completion.
B. INFORMATION ON THE GROUP
The Group is principally engaged in investment holding, water resources, property
holding and investment, hotel ownership and operation, hotel management, department
store operation and investments in other infrastructure projects.
C. INFORMATION ON THE VENDOR
The Vendor is the controlling Shareholder holding (directly and through various
wholly owned subsidiaries) approximately 54.60% of the issued share capital of the
Company as at the Latest Practicable Date, and, hence, a connected person of the
Company under Chapter 14A of the Listing Rules. The Vendor is principally engaged in
investment holding.
LETTER FROM THE BOARD
– 22 –
D. LISTING RULES AND TAKEOVERS CODE IMPLICATIONS
Since certain of the applicable percentage ratios in respect of the Acquisition exceed
5% but all of them are less than 25% as determined in accordance with Rule 14.07 of the
Listing Rules, the Acquisition constitutes a discloseable transaction of the Company for
the purpose of Chapter 14 of the Listing Rules. Further, since the Vendor is the controlling
Shareholder and, hence, a connected person of the Company, the Acquisition also
constitutes a connected transaction of the Company, which is subject to the reporting,
announcement and Independent Shareholders’ approval requirements under Chapter 14A
of the Listing Rules.
The Acquisition would lead to a mandatory offer obligation of the Company under
Rule 26.1 of the Takeovers Code unless it is waived by the Executive. As outlined under
the section headed “A.4. Reasons for and benefits of the Acquisition”, the Company
considers that the Acquisition represents a strategic and positive step of the Company’s
long term business development and it is in the interest of the Company and its
Shareholders that GDL maintains its well established listed platform after Completion. In
order to avoid any potential material change in the public float of GDL and increase in
acquisition cost as a result of a mandatory offer, the Company has applied to the Executive
for a waiver to dispense with its obligation to make a mandatory offer for all ordinary
shares of GDL pursuant to Rule 26.1 of the Takeovers Code in relation to the Acquisition
and the said waiver has been granted by the Executive pursuant to Note 6(a) to Rule 26.1
of the Takeovers Code.
In connection with the said waiver application and as a condition to the grant of the
said waiver, 廣東粵海控股集團有限公司 (Guangdong Holdings Limited*) (“Guangdong
Holdings”, the direct holding company of the Vendor) has undertaken to the SFC that,
unless with the prior written consent from the Executive, within three years from
Completion:
(i) Guangdong Holdings will not transfer or otherwise dispose of, or enter into
any agreement to transfer or otherwise dispose of, any shares of the Vendor to
any parties not acting in concert with Guangdong Holdings;
(ii) Guangdong Holdings will procure that none of the shares of the Indirect
Intermediate Holding Companies will be transferred or otherwise disposed of
to any parties not acting in concert with Guangdong Holdings, the Vendor
and/or the Company;
(iii) Guangdong Holdings will procure that the Vendor will not transfer or
otherwise dispose of, or enter into any agreement to transfer or otherwise
dispose of, any Shares to any parties not acting in concert with Guangdong
Holdings, the Vendor and/or the Company;
LETTER FROM THE BOARD
– 23 –
(iv) Guangdong Holdings will procure that Guangdong Trust Ltd. (粵海信托有限公司) (an Indirect Intermediate Holding Company) will not transfer or
otherwise dispose of, or enter into any agreement to transfer or otherwise
dispose of, any Shares to any parties not acting in concert with Guangdong
Holdings, the Vendor and/or the Company;
(v) Guangdong Holdings will procure that GD Assets Management (Custodian)
Limited (an Indirect Intermediate Holding Company) will not transfer or
otherwise dispose of, or enter into any agreement to transfer or otherwise
dispose of, any Shares to any parties not acting in concert with Guangdong
Holdings, the Vendor and/or the Company;
(vi) Guangdong Holdings will procure that Guangdong Assets Management (BVI)
No. 62 Limited (an Indirect Intermediate Holding Company) will not transfer
or otherwise dispose of, or enter into any agreement to transfer or otherwise
dispose of, any Shares to any parties not acting in concert with Guangdong
Holdings, the Vendor and/or the Company;
(vii) Guangdong Holdings will procure that the Company will not transfer or
otherwise dispose of, or enter into any agreement to transfer or otherwise
dispose of, any shares of GDL to any parties not acting in concert with
Guangdong Holdings, the Vendor and/or the Company; and
(viii) Guangdong Holdings will procure that the Company, the Vendor and the
Indirect Intermediate Holding Companies will not issue any new shares or
any convertible securities to any parties not acting in concert with Guangdong
Holdings, the Vendor and/or the Company,
which will lead to any person (the “Buyer”), who is not a concert party of Guangdong
Holdings, the Vendor and/or the Company obtaining statutory control of the Vendor
and/or the Indirect Intermediate Holding Companies and/or the Company, unless the
Buyer extends a general offer to acquire all relevant securities of GDL in compliance with
the Takeovers Code from shareholders who are not acting in concert with the Buyer.
After Completion, the Vendor will maintain statutory control over both GDL and the
Company on terms of the said undertaking. There is also no proposed change in the
composition of board of directors of GDL in connection with the Acquisition immediately
after Completion.
The said undertakings, among others, will restrict the Company from transferring
or disposing of shares of GDL or issuing new shares or convertible securities to any parties
not acting in concert with Guangdong Holdings, the Vendor and/or the Company, which
will lead to the Buyer obtaining statutory control, within three years from Completion.
LETTER FROM THE BOARD
– 24 –
Taking into account the development plan and income streams of the Buxin Project,
the Company views the Acquisition as a medium to long-term strategic investment and
therefore has planned to maintain statutory control over GDL on the terms of the said
undertakings. On the other hand, in view of the strong financial position of the Company
and the long-standing support from the Vendor, the Company considers that, among the
various possible options of financing alternatives, issuing new shares or convertible
shares to the extent where the Vendor will lose statutory control over the Company, is not
likely to happen during the term of the said undertakings. Having considered the above,
in the Board’s opinion, the said undertakings would not have any material impact on the
future corporate decision making process of the Company and/or any negative impact on
the Company’s future business plan on GDL.
In light of the abovementioned importance of the said waiver to the Acquisition
while the said undertakings given by Guangdong Holdings is a condition to the grant of
the said waiver by SFC, the Board considers that the said undertakings are in line with the
strategy of the Company and the interest of the Company and its Shareholders as a whole.
E. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL
ADVISER
An Independent Board Committee comprising all the independent non-executive
Directors (namely, Dr. CHAN Cho Chak, John, Dr. the Honourable LI Kwok Po, David,
Mr. FUNG Daniel Richard, Dr. the Honourable CHENG Mo Chi, Moses and Mr. WU Ting
Yuk, Anthony) has been formed to consider the Acquisition and the Specific Mandate.
Somerley Capital Limited has been appointed by the Company as the Independent
Financial Adviser to advise the Independent Board Committee and the Independent
Shareholders on the same matters.
F. DIRECTOR PROPOSED TO BE RE-ELECTED AT THE EGM
Pursuant to Article 73 of the Articles of Association of the Company, the Board shall
have power at any time and from time to time to appoint any person to be a Director,
either to fill a casual vacancy or as an addition to the existing Board. Any Director so
appointed by the Board shall hold office only until the first general meeting after his
appointment and shall then be eligible for re-election at that meeting.
Mr. CAI Yong, who was appointed as a Non-Executive Director of the Company on
25 August 2016, will retire at the EGM in accordance with Article 73 of the Articles of
Association of the Company. Being eligible, he will offer himself for re-election.
Particulars of Mr. Cai who will retire at the EGM and being eligible, offer himself for
re-election are set out in Appendix III to this circular.
A separate resolution will be put forward at the EGM for the re-election of Mr. Cai.
LETTER FROM THE BOARD
– 25 –
G. EGM
A notice of the EGM is set out on pages 91 and 92 of this circular. The EGM will be
convened at Concord Room, 8th Floor, Renaissance Harbour View Hotel Hong Kong, One
Harbour Road, Wanchai, Hong Kong on Monday, 20 March 2017 at 10:00 a.m., at which,
the resolutions in respect of the Acquisition, the Specific Mandate and the re-election of
Mr. Cai will be proposed to the Shareholders to consider and, if thought fit, approve.
Pursuant to Rule 13.39(4) of the Listing Rules, all votes to be taken at the EGM will be
taken by way of poll.
A form of proxy for use at the EGM is accompanied with this circular. Whether or
not you intend to attend the EGM in person, please complete and return the enclosed form
of proxy in accordance with the instructions printed thereon to the Company’s share
registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East,
Hong Kong as soon as possible but in any event not later than 48 hours before the time of
the EGM or any adjournment thereof. Completion and return of the form of proxy will not
preclude you from attending and voting in person at the EGM or any adjourned meeting
should you so wish.
The register of members will be closed and no transfer of shares will be effected for
one day on Monday, 20 March 2017 for determining the Shareholders’ eligibility to attend
and vote at the EGM.
H. RECOMMENDATION
Your attention is drawn to:
(i) the letter from the Independent Board Committee comprising all of the
independent non-executive Directors, namely Dr. CHAN Cho Chak, John,
Dr. the Honourable LI Kwok Po, David, Mr. FUNG Daniel Richard, Dr. the
Honourable CHENG Mo Chi, Moses and Mr. WU Ting Yuk, Anthony set out
on pages 28 and 29 of this circular which contains the recommendation of the
Independent Board Committee to the Independent Shareholders concerning
the fairness and reasonableness of the Acquisition and the Specific Mandate;
and
(ii) the letter from the Independent Financial Adviser set out on pages 30 to 66 of
this circular which contains its recommendations to the Independent Board
Committee and the Independent Shareholders on whether the terms of the
Acquisition and the Specific Mandate are fair and reasonable, on normal
commercial terms and are in the interests of the Company and the
Shareholders as a whole, and the principal factors and reasons taken into
account by the Independent Financial Adviser in arriving at its
recommendations.
LETTER FROM THE BOARD
– 26 –
Based on the reasons set out hereinabove, the Board recommends the Independent
Shareholders to vote in favour of the proposed ordinary resolution no.1 set out in the
notice convening the EGM.
The Board believes that the re-election of Mr. Cai is in the best interests of the
Company as well as the Shareholders. Accordingly, the Board also recommends that
Shareholders vote in favour of the proposed ordinary resolution no. 2 set out in the notice
convening the EGM.
I. ADDITIONAL INFORMATION
Your attention is drawn to the additional information set out in the appendices to
this circular.
Yours faithfully,
By Order of the Board
Guangdong Investment LimitedHUANG Xiaofeng
Chairman
LETTER FROM THE BOARD
– 27 –
(Incorporated in Hong Kong with limited liability)
(Stock Code: 0270)
24 February 2017
To the Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTION
THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES
UNDER THE SPECIFIC MANDATE
We refer to the circular of the Company to the Shareholders dated 24 February 2017
(the “Circular”), of which this letter forms part. Unless the context otherwise requires,
capitalised terms used in this letter will have the same meanings as defined in the
Circular.
We, CHAN Cho Chak, John, LI Kwok Po, David, FUNG Daniel Richard, CHENG Mo
Chi, Moses and WU Ting Yuk, Anthony, being Independent Non-Executive Directors of
the Company, have been appointed by the Board as the Independent Board Committee to
consider the Acquisition, being a connected transaction, pursuant to the terms and
conditions of the Sale and Purchase Agreement, and to advise the Independent
Shareholders as to whether, in our opinion, the Acquisition and the Specific Mandate are
fair and reasonable so far as the Independent Shareholders are concerned.
Somerly Capital Limited has been appointed as the Independent Financial Adviser
to advise the Independent Board Committee and the Independent Shareholders in respect
of the Acquisition and the Specific Mandate.
We wish to draw your attention to the letter from the Board set out on pages 7 to 27
of the Circular which contains, among others, information on the Acquisition and the
Specific Mandate and the letter from the Independent Financial Adviser set out on pages
30 to 66 of the Circular which contains its advice in respect of the Acquisition and the
Specific Mandate.
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
– 28 –
Having taken into account the principal factors and reasons underlying the
Acquisition and the Specific Mandate as well as the advice of the Independent Financial
Adviser as set out in the Circular, we consider the terms and conditions of the Acquisition
and the Specific Mandate to be fair and reasonable, on normal commercial terms, and in
the interests of the Company and the Shareholders as a whole.
Accordingly, we recommend the Independent Shareholders to vote in favour of the
ordinary resolution no. 1 in respect of the Acquisition and the Specific Mandate to be
proposed at the EGM.
Yours faithfully,
For and on behalf of
the Independent Board Committee
Dr. Chan Cho Chak, JohnIndependent Non-Executive Director
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
– 29 –
Set out below is the text of the letter of advice from Somerley to the Independent BoardCommittee and the Independent Shareholders in respect of the Acquisition and the SpecificMandate, which has been prepared for the purpose of inclusion in this circular.
SOMERLEY CAPITAL LIMITED20th Floor
China Building
29 Queen’s Road Central
Hong Kong
24 February 2017
To: The Independent Board Committee and the Independent Shareholders of GuangdongInvestment Limited
Dear Sirs,
DISCLOSEABLE AND CONNECTED TRANSACTION
THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER
THE SPECIFIC MANDATE
INTRODUCTION
We refer to our appointment as the independent financial adviser to advise the
Independent Board Committee and the Independent Shareholders in relation to the
Acquisition and the Specific Mandate. Details of the Acquisition are contained in the
circular issued by the Company to the Shareholders dated 24 February 2017 (the
“Circular”), of which this letter forms part. Unless the context otherwise requires,
capitalised terms used in this letter shall have the same meanings as those defined in the
Circular.
On 19 January 2017, the Company entered into the Sale and Purchase Agreement
with GDH, pursuant to which the Company conditionally agreed to acquire the Sale
Shares from GDH for the Consideration of RMB3,358 million.
Since certain of the applicable percentage ratios in respect of the Acquisition exceed
5% but all of them are less than 25% as determined in accordance with Rule 14.07 of the
Listing Rule, the Acquisition constitutes a discloseable transaction of the Company for the
purpose of Chapter 14 of the Listing Rules. Further, since GDH is the controlling
shareholder of the Company holding approximately 54.6% of the issued share capital of
the Company as at the Latest Practicable Date and hence is a connected person of the
Company, the Acquisition also constitutes a connected transaction of the Company, which
is subject to the reporting, announcement and Independent Shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
LETTER FROM SOMERLEY
– 30 –
The Independent Board Committee comprising all of the independent
non-executive Directors, namely Dr. Chan Cho Chak, John, Dr. the Honourable Li Kwok
Po, David, Mr. Fung Daniel Richard, Dr. the Honourable Cheng Mo Chi, Moses and Mr.
Wu Ting Yuk, Anthony, has been established to give advice and recommendation to the
Independent Shareholders in respect of the Acquisition and the Specific Mandate. We,
Somerley Capital Limited, have been appointed as the Independent Financial Adviser to
advise the Independent Board Committee and the Independent Shareholders in the same
regard.
We are not associated with the Company, GDL, GDH, Guangdong Holdings or their
respective core connected persons, close associates or associates and accordingly are
considered eligible to give independent advice on the terms of the Acquisition and the
Specific Mandate. Apart from normal professional fees payable to us in connection with
this appointment, no arrangement exists whereby we will receive any fees or benefits from
the Company, GDL, GDH, Guangdong Holdings or their respective core connected
persons, close associates or associates.
In formulating our opinion and recommendation, we have reviewed, among other
things, the Sale and Purchase Agreement, the announcement of the unaudited financial
information of the Company for the nine months ended 30 September 2016 (the “GDI 20163Q Announcement”), the interim report of the Company for the six months ended 30 June
2016 (the “GDI 2016 Interim Report”), the annual report of the Company for the year
ended 31 December 2015 (the “GDI 2015 Annual Report”), the announcement of the
unaudited financial information of GDL for the nine months ended 30 September 2016 (the
“GDL 2016 3Q Announcement”), the interim report of GDL for the six months ended 30
June 2016 (the “GDL 2016 Interim Report”), the annual report of GDL for the year ended
31 December 2015 (the “GDL 2015 Annual Report”), the valuation report on the
properties held by the GDL Group as at 30 November 2016 prepared by Vigers Appraisal &
Consulting Limited (“Vigers”), the independent professional valuer appointed by the
Company, and the information as set out in the Circular.
In addition, we have relied on the information and facts supplied, and the
statements, representations and opinions made, by the Directors and the management of
the Group and have assumed that they are true, accurate and complete in all material
respects at the time they were made. We have no reason to believe that any of such
information, facts, statements, representations or opinions relied on by us in forming our
opinion is untrue, inaccurate or misleading, nor are we aware of any material omissions
which would render the information, facts, statements, representations or opinions
supplied or expressed to us untrue, inaccurate or misleading. We have assumed that all
such information, facts, statements, representations or opinions for matters relating to the
Group supplied or expressed to us by the Directors and the management of the Group
have been reasonably made after due and careful enquiry. We have relied on such
information, facts, statements, representations and opinions and consider these sufficient
for us to reach our advice and recommendation as set out in this letter. However, we have
not conducted any independent investigation into the business, financial conditions,
affairs and future prospects of any member of the Group or the GDL Group.
LETTER FROM SOMERLEY
– 31 –
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our opinion and recommendation, we have considered the principal
factors and reasons set out below.
1. Principal business activities and financials of the Group
The Group is principally engaged in investment holding, water resources, property
holding and investment, hotel ownership and operation, hotel management, department
store operation and investments in other infrastructure projects.
The water resources segment is the largest segment of the Group and contributed
the majority of the revenue and the profit to the Group in recent years. This segment
mainly comprises the Dongshen water supply project, which provides water supply to
Hong Kong, Shenzhen and Dongguan. The water resources segment will remain the key
operating segment and the strategic focus of the Group upon completion of the
Acquisition.
The property investment and development segment is the Company’s second
largest segment. The Group has a long history of developing and holding
mall/commercial/office properties. The property holding and investment segment
currently has four property projects in the PRC and Hong Kong, namely Teem Plaza,
Tianjin Teem Shopping Mall, Panyu Wanbo Central Business District (“CBD”) Project and
Guangdong Investment Tower. Teem Plaza comprises a shopping mall, an office building
and a hotel located in Guangzhou and the shopping mall and the office building are held
for investment purposes by the Group. Tianjin Teem Shopping Mall and Panyu Wanbo
CBD Project, located in Tianjin and Panyu respectively, are being developed into a modern
shopping mall and an integrated commercial project respectively. Guangdong Investment
Tower is a commercial property located in Hong Kong held by the Group for investment
purposes.
In the hotel ownership and operation and hotel management segment, as at 30
September 2016, the Group’s hotel team managed a total of 39 hotels, of which a
significant majority were located in the PRC. On the same date, the Group also owned or
lease-owned seven hotels, five of which are situated in the PRC and the remaining two are
located in Hong Kong. The department store operation owned majority stakes in eight
department stores and a minority interest in one department store in the PRC as at 30
September 2016. The investments in other infrastructure projects consist of certain
interests in power plants and an expressway in the PRC.
LETTER FROM SOMERLEY
– 32 –
Se
to
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7.1
LETTER FROM SOMERLEY
– 33 –
The revenue increase in 2015 was mainly attributable to a better performance in
water resources and department store operation as well as returns from the toll road
acquired during 2015. The consolidated profit before tax and consolidated net profit
attributable to the Shareholders, however, decreased by approximately 14.0% and 11.2% to
HK$5,246.2 million and HK$3,905.3 million for 2015 respectively, mainly attributable to a
number of one-off charges for 2015.
For the six months ended 30 June 2016 and nine months ended 30 September 2016,
there was growth in revenue, profit before tax and profit attributable to the Shareholders,
mainly attributable to a better performance in both water resources and electric power
generation businesses, and additional returns from the toll road business and certain
water resources projects acquired during the last quarter of 2015. The increase was
partially offset by, among other things, and the unsatisfactory performance in department
store operation and hotel operation and management businesses.
The financial performance of the property holding and investment segment was
satisfactory. Rental income from Teem Plaza and Guangdong Investment Tower improved
by approximately 3% and 5% respectively during the nine months ended 30 September
2016 before currency translation and these properties had very high occupancy rates in
such period.
While the majority of revenue and profit contributions came from the water
resources segment, the property investment and development segment also provides
considerable amount of revenue and profit to the Group. For the year ended 31 December
2015, the property investment and development segment contributed approximately
12.8% of total revenue and approximately 22.1% of total profit to the Group. For the six
months ended 30 June 2016, this segment contributed approximately 10.6% of total
revenue and 18.2% of total profit to the Group. Furthermore, as set out in the table below,
the investment properties had a total balance of approximately HK$12,528 million, which
was over 25% of total assets less cash and cash equivalents of the Group as at 30 June 2016.
On this basis, the property investment and development segment, though not the largest
segment of the Group, is nevertheless a significant part of the business.
LETTER FROM SOMERLEY
– 34 –
Set out below is a summary of the financial position of the Group as at 30 June 2016,
31 December 2015 and 31 December 2014 as extracted from the GDI 2016 Interim Report
and the GDI 2015 Annual Report.
As at30 June
As At31 December
As at31 December
2016 2015 2014HK$ million HK$ million HK$ million
NON-CURRENT ASSETS
Property, plant and equipment 6,918.2 7,083.4 3,649.6
Investment properties 12,527.7 12,326.8 12,113.8
Operating concession rights 14,685.9 15,218.7 12,858.0
Others 2,820.9 2,989.4 2,985.6
Total non-current assets 36,952.7 37,618.3 31,607.0
CURRENT ASSETS
Available-for-sale financial assets 4,899.1 6,228.8 8,207.9
Cash and cash equivalents 10,122.8 9,295.2 7,001.9
Others 1,514.2 967.7 798.6
Total current assets 16,536.1 16,491.7 16,008.4
CURRENT LIABILITIES
Payables and accruals (4,011.4) (4,385.3) (3,163.8)
Others (1,154.1) (1,393.1) (2,969.8)
Total current liabilities (5,165.5) (5,778.4) (6,133.6)
NET CURRENT ASSETS 11,370.6 10,713.3 9,874.8
NON-CURRENT LIABILITIES
Bank and other borrowings (6,559.0) (7,016.0) (1,975.2)
Others (3,928.9) (4,048.2) (3,842.4)
Total non-current liabilities (10,487.9) (11,064.2) (5,817.6)
Net assets 37,835.4 37,267.4 35,664.2
EQUITY
Equity attributable to owners of
the Company 31,968.2 31,472.1 30,266.8
Non-controlling interests 5,867.2 5,795.3 5,397.4
Total equity 37,835.4 37,267.4 35,664.2
LETTER FROM SOMERLEY
– 35 –
The majority of assets of the Group relate to the water resources segment, such as
the water distribution operating concession rights, and the investment properties held for
rental purposes under the property holding and investment segment.
The Group maintained a healthy working capital (i.e. net current assets) of
approximately HK$11,370.6 million as at 30 June 2016. The Group’s net cash position as at
30 June 2016 was approximately HK$1,434.2 million, representing cash and cash
equivalents of approximately HK$10,122.8 million after netting off (i) short-term and
long-term bank and other borrowings of approximately HK$6,938.3 million; and (ii)
receipt in advance from Hong Kong Government of approximately HK$827.4 million and
amounts due to related companies of approximately HK$922.9 million. The Group’s net
cash position as at 30 June 2016 represents an increase from HK$710.3 million as at 31
December 2015. The increase in net cash position is attributable to the strong net cash
inflows from operating activities during the period of approximately HK$2,718.3 million.
The Group’s liquidity position is also backed by its available-for-sale financial
assets. As at 30 June 2016, the available-for-sale financial assets of the Group was
HK$4,899.1 million, placed by the Group with a number of licensed banks in the PRC for
terms not exceeding one year. The principal sums of these financial assets were
denominated in RMB and were principal protected upon the maturity date.
Based on the GDI 2016 3Q Announcement, the Company had unaudited
consolidated net asset value (the “NAV”) attributable to the Shareholders of
approximately HK$32,233.6 million as at 30 September 2016, equivalent to approximately
HK$5.15 per Share.
2. Information on the GDL Group
(i) Business of the GDL Group
Formerly known as Kingway Brewery Holdings Limited (金威啤酒集團有限公司), GDL was mainly engaged in the brewery business until September 2013, when it
disposed of its brewery business and related assets to China Resources Snow
Breweries Limited (華潤雪花啤酒有限公司) and pivoted its principal businesses
toward property development and investment. It currently has two main property
portfolios located in the PRC.
GDL is a subsidiary of GDH held as to approximately 73.82% as at the Latest
Practicable Date. The Vendor acquired the Sale Shares from 2003 to 2011 at the
aggregate cost of approximately HK$2,284.2 million.
(ii) Properties of the GDL Group
The main properties held by the GDL Group are (i) the Buxin Project, being the
development of a multi-module commercial complex in Luohu District, Shenzhen,
the PRC with the jewellery products industry as the project’s main theme; (ii)
certain unsold apartment units and car-parking spaces of the Ruyingju Project,
being a residential property project in Panyu District, Guangzhou, the PRC; and (iii)
certain residential units of the Buxin Garden in Luohu District, Shenzhen, the PRC
used as staff quarters by the GDL Group. Details of these properties held by the GDL
Group as at 30 November 2016 are set out in the table below. We have also provide
detailed overviews of the Buxin Project and the Ruyingju Project below.
LETTER FROM SOMERLEY
– 36 –
Prop
erty
Distr
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LETTER FROM SOMERLEY
– 37 –
(a) Buxin Project
After the disposal of the brewery and related assets in 2013, the GDL
Group retained the Buxin Land, being three land parcels located at the Buxin
Area, Luohu District, Shenzhen, the PRC. In mid-2016, the GDL Group
acquired the land use rights of the Buxin Land from the Shenzhen Luohu
Renewal Authority (深圳市羅湖區城市更新局) by paying an aggregate land
premium of approximately RMB2,267.0 million pursuant to the land use
rights transfer agreements (the “Land Use Rights Transfer Agreements”)
with an intention to redevelop the Buxin land into the Buxin Project for
commercial use and new industry related use (新型產業用地) pursuant to the
urban renewal unit planning proposal (城市更新單元規劃方案) for the Buxin
Project approved (the “Buxin Project Approval”) by the Shenzhen Urban
Planning Committee (深圳市城市規劃委員會) in November 2015. The Buxin
Land, being one of the largest plots of industrial land in the Buxin area of
Shenzhen, is expected to be developed into an industrial and commercial
complex with jewelry as the main theme. It has a planned total development
site area for the Buxin Project of approximately 66,526 sq. m. with a planned
GFA of approximately 462,051 sq. m. (inclusive of underground area with a
GFA of 30,000 sq.m. for commercial use). Phase I of the Buxin Project is
expected to be completed by September 2021 with pre-sale commencing in
April 2018, and Phase II of the Buxin Project is expected to be completed by
July 2023.
The Buxin Project is surrounded by a well-established road network and
is near several trunk roads, which provides easy access to other districts in
Shenzhen. It takes around 15 minutes to reach the Luohu control point from
the Buxin Project by car under normal traffic conditions. The Buxin Project is
also within walking distance to the Buxin station (布心站) of the Shenzhen
metro Line 5 (a circle metro line connecting major areas in the eastern, central
and western parts of Shenzhen) and the Shuibei station (水貝站) of the
Shenzhen metro Line 3 (a line which connects the outer eastern area with the
central business district of Shenzhen). In recent years, businesses engaging in
the design, manufacture and sale of jewellery and costume jewellery products
in the PRC have congregated mainly in this area. We conducted a site visit to
the Buxin Project on 25 January 2017.
LETTER FROM SOMERLEY
– 38 –
Set out below is the site-map of the Buxin Project for illustration
purpose.
★ The Buxin Project
Conversion of the uses of the land under the Buxin Project has been
substantially completed and the development of a multi-module commercial
complex with the jewellery products industry as its main theme is underway.
As disclosed in the circular of GDL dated 22 June 2016, the Buxin Project was
expected to (i) commence pre-sale of the properties in the Northwestern Land
(as defined in the said circular) in 2018; (ii) commence pre-sale of the
commercial office premises in Phase I of the Buxin Project in 2019 and
introduce leasing of the commercial properties with jewellery as the main
theme in Phase I of the Buxin Project in 2021; and (iii) introduce leasing of the
properties in the Phase II of the Buxin Project in 2023. Whilst the pre-sale of
properties of the Buxin Project will help finance part of its ongoing capital
expenditure, the Company believes that, upon completion of construction, the
Buxin Project will generate stable and continuing revenue and cash flow to the
Group in the long run.
As at 30 June 2016, the Buxin Project incurred preliminary development
costs in the amount of approximately HK$2,762 million in aggregate (31
December 2015: HK$97 million), representing a net increase of HK$2,665
million in the period under review, and such net increase was substantially
due to the addition of the costs of land premium for the Buxin land acquired
during the year. Approximately HK$1,694 million and HK$1,068 million were
classified as “properties under development” under current assets and
“investment properties” under non-current assets of GDL, respectively as at
30 June 2016.
The total site area of the Buxin Land for development pursuant to the
Buxin Project Approval is approximately 67,903 sq. m. Pursuant to the Land
Use Rights Transfer Agreements, the Company shall acquire the land use
rights as to an aggregate site area of approximately 66,526 sq. m., with
LETTER FROM SOMERLEY
– 39 –
approximately 1,377 sq. m. shortfall when compared to the total site area
approved under the Buxin Project Approval. Ongoing negotiations between
the GDL Group and the municipal government of Shenzhen are underway in
respect of the acquisition of (including the land premium payable for) the land
use rights to such remaining area.
It is worthwhile noting that certain portion of the Buxin Project with an
aggregate GFA of approximately 192,108 sq. m. (i.e. note 1 in the property
table above) has been designated for investment purpose as stipulated under
the Land Use Rights Transfer Agreements. After including such portion,
equivalent to an investment value of approximately RMB2,228.4 million, the
aggregate value of the Buxin Project is approximately RMB6,496.4 million.
The Buxin Project’s aggregate value accounted for more than 90% of both the
total GFA and the total market value of the property portfolio held by the GDL
Group. As such, GDL is essentially a one-property company.
(b) Ruyingju Project
The Ruyingju Project is a residential property project situated in the
south of Sanzhi Xiangshui Road, Dashi Town, Panyu District, Guangzhou, the
PRC. The total site area of the Ruyingju Project is approximately 38,771 sq. m.
and the total aggregate GFA is approximately 128,947 sq. m. with 917
residential units and 651 car-parking spaces for sale. In April 2015, the GDL
Group acquired from GDH an 80% interest in the Ruyingju Project. The
Ruyingju Project was completed in November 2015. As at 30 September 2016,
the accumulated sale contracts signed under the Ruyingju Project represented
an aggregate GFA of approximately 84,900 sq. m., representing approximately
90.2% of the total saleable area of the residential units of the Ruyingju Project.
As at 30 November 2016, there remained 80 unsold apartment units and 651
car-parking spaces.
(iii) Listed status of GDL
GDL was listed on the Stock Exchange in 1997. Following the disposal of the
brewery business in 2013, the share price has traded in the range HK$1.68 to
HK$3.48 during 2013. In 2016, the high/low closing prices were HK$2.42 and
HK$1.55 respectively. The shares are not actively traded, averaging 648,450 shares
per day in 2016, and only rarely exceeding 2,000,000 shares (worth about HK$4
million). No dividend has been paid since 2013. Like most small/medium-size Hong
Kong listed property companies, the shares of GDL have been traded at a discount
to net asset value, even before taking into account property revaluation. The reasons
for such discount may be due to external factors which are not in the control of GDL,
and it does not reflect the intrinsic value of the underlying assets of GDL.
LETTER FROM SOMERLEY
– 40 –
The Acquisition essentially involves the transfer of controlling stake of GDL’s
business comprising principally property assets instead of the transfer of a small
volume of shares. As noted in section headed “7.(ii) Comparable transactions –
Listed Property Company Takeovers Comparable Transactions” in this letter below,
a premium over revalued net assets is normally required to purchase control of a
Hong Kong listed property company. The Consideration, which is largely based on
the Reassessed NAV (as defined below) and the application of the Discount (as
defined below), on a per Sale Share basis, is approximately HK$2.99, which
represents premiums of approximately 47.3% and 59.9% over the last trading prices
of GDL prior to the date of the Sale and Purchase Agreement of HK$2.03 and as at
the Latest Practicable Date of HK$1.87 respectively. As the share price of GDL
relates to low trading volume without any element of control, we do not consider
the market share prices of GDL relevant to the appropriate price payable for a
controlling block of over 70% of GDL. What matters more should be a measure more
reflective of the intrinsic value of GDL, in our opinion, is the Reassessed NAV.
(iv) Financial information of the GDL Group
Set out below are the consolidated revenue, consolidated profit before
taxation and consolidated profit after taxation attributable to the shareholders of
GDL for the nine months ended 30 September 2015 and 2016 and the two years
ended 31 December 2014 and 2015.
For the nine months ended30 September
For the year ended31 December
2016 2015 2015 2014(HK$ million) (HK$ million) (HK$ million) (HK$ million)
Consolidated revenue 1,064.2 0.2 857.9 3.4
Consolidated profit before taxation 112.5 206.2 176.4 90.9
Consolidated profit after taxation
attributable to the shareholders of
GDL 12.1 207.6 174.8 81.8
The sale of properties under the Ruyingju Project is currently the main source
of revenue to the GDL Group for 2015 and the nine months ended 30 September
2016. As the sale of properties of the Ruyingju Project did not commence until the
fourth quarter of 2015, the GDL Group did not record any revenue or profit in
relation to the Ruyingju Project for the year ended 31 December 2014.
Apart from the sale of properties under the Ruyingju Project since the fourth
quarter of 2015, the profit in 2015 was mainly attributable to a one-off non-operating
gain items amount to approximately HK$319 million (which included a gain on
bargain purchase of 80% of the Ruyingju Project of approximately HK$234 million)
(the “2015 Non-Operating Gain Items”).
LETTER FROM SOMERLEY
– 41 –
For the nine months ended 30 September 2016, owing to the continuing sale of
properties under the Ruyingju Project and average selling price of the units being
higher than that of 2015, the unaudited consolidated revenue of the GDL Group was
approximately HK$1,064.2 million, representing a significant increase compared to
the corresponding period in 2015 as there had been no residential units delivered
under the Ruyingju Project for the first nine months of 2015. However, the
unaudited profit attributable to the shareholders of GDL was approximately
HK$12.1 million, which represented a decrease of approximately 94.2% from the
same period last year of approximately HK$207.6 million. The reason for such
decrease in profit was mainly due to, among others, (i) an aggregate income tax
expense of approximately HK$91.9 million recorded during the nine months ended
30 September 2016 comprising corporate income tax, land appreciation tax and
reversal of deferred tax liabilities; and (ii) the absence of the 2015 Non-Operating
Gain Items. If the combined effect of the 2015 Non-Operating Gain Items was
excluded, the GDL Group would have recorded an unaudited loss attributable to
shareholders of GDL for the nine months ended 30 September 2015.
As at 30 September 2016, the unaudited consolidated NAV attributable to the
shareholders of GDL was approximately HK$4,326.8 million. The GDL Group was
cash rich and it had cash and cash equivalents of approximately HK$2,561.6 million
as at 30 June 2016. The operation of GDL was largely funded by equity with no
long-term borrowings.
3. Reasons for and benefits of the Acquisition
As set out in the Letter from the Board, the Acquisition is expected to have the
benefits to the Group as set out below.
(i) Given the prime location of the Buxin Project, the Acquisition is in line with
the Group’s ongoing strategy of its property investment and development
segment where properties in the Group’s existing property portfolios are all
strategically located in local core central business districts. Upon completion
of construction, the Buxin Project will also generate stable and continuing
revenue and cash flow to the Group in the long run.
(ii) Undertaking the Buxin Project in downtown Shenzhen will broaden the
geographic exposure of the Group’s property business to Shenzhen, a Tier 1
city with scarcity of land in prime locations, population net inflow and a
strong urbanisation rate and social net worth accumulation.
(iii) The Buxin Project is located in a prime location in the Buxin area in Shenzhen
with well-established transportation network and the development of that
area is currently supported by government initiatives. The development of the
Buxin Project is already underway and the Company believes the Acquisition
would enable the Group to tap into the development opportunity of the Buxin
area and enhance the Group’s future strategic growth.
(iv) The Acquisition will bring into the Group a well-established listed platform,
with a valuable asset in a prime location of the PRC and with a strong
LETTER FROM SOMERLEY
– 42 –
financing capability to finance the development of the Buxin Project by its
internal resources and/or bank borrowing, without relying on financial
support by the Company.
(v) The Group has extensive experience in property investment and development
in the PRC. Upon Completion, the Company is able to enjoy the benefits from
the growth potential of the Buxin Project whereas GDL may leverage on the
Company’s management expertise in property investment and development
as well as enhancing its brand name within the region to facilitate its
development of the Buxin Project.
Facing with the decision to expand the Company’s property investment and
development segment by way of the Acquisition and a long development window of the
Buxin Project, we understand in order to formulate such strategic business and
investment decision, the Company has taken into account a number of factors including,
among others, the uncertainty in the PRC property market and the associated potential
increase in business risk as a result of the Acquisition. However, after conducting a
comprehensive risk and benefit assessment, in particular the positive factors and potential
benefits outlined above, the Company considers that the Acquisition is complementary to
its existing business and in line with the interests of the Company and the Shareholders as
a whole.
In addition, taking into account the timelines of development plan and income
streams of the Buxin Project, the Company is of the view that it is in the interests of the
Company and the Shareholders as a whole to proceed with the Acquisition at this
moment, as the Acquisition would enable the Company to capture the opportunity in
securing a scarce land resource in the prime location in Shenzhen with a consideration at
a reasonable discount to market valuation and allow the Company the ability to
contribute positively to the development theme and schedule as well as the marketing
strategies at the appropriate stage of the development of this project.
Based on the reasons and benefits as set out above, we concur with the Company’s
strategic business and investment decision. We also consider the Acquisition, given its
positive prospects and risk differentials, is likely to provide diversification benefits to the
Group’s business.
For a more detailed version of the reasons for and benefits of the Acquisition, the
Independent Shareholders’ attention is drawn to the section headed “A.4. Reasons for and
benefits of the Acquisition” in the Letter from the Board.
4. Industry overview
According to the National Bureau of Statistics, China recorded a 6.7% year-on-year
gross domestic product (“GDP”) growth in the third quarter of 2016 which is on par with
first two quarters of 2016 and on target to achieve the PRC Government’s full-year target
of 6.5% to 7%. Structural reform introduced by the PRC Government continued to
progress which resulted in a growing service sector accounting for approximately 52.8%
of the GDP growth. Retail sales growth have been strong, with year-on-year growth of
approximately 9.8% in real terms for the first nine months of 2016.
LETTER FROM SOMERLEY
– 43 –
Our review has concentrated on the economic development and the property market
in Shenzhen, where the Buxin Project is located. Being a Tier 1 city and the first Special
Economic Zone of China in 1980, Shenzhen has enjoyed special economic policies and
flexible government measures. Since the beginning of the economic reform in 1980,
Shenzhen’s annual GDP growth has averaged over 20% per year, making it one of the
world’s fastest developing cities during this period. Apart from being the financial center
of Southern China where the Shenzhen Stock Exchange is located, science and technology
are the main engines behind Shenzhen’s rapid development. Shenzhen has over 30,000
science/technology enterprises and is earning a reputation as “China’s Silicon Valley”.
According the preliminary statistics of the Guangdong Bureau of Statistics, Shenzhen’s
GDP for 2016 exceeded approximately RMB1.9 trillion, representing a year-on-year
growth of approximately 9.0%. Such growth rate surpassed the national average and
topped all other cities of the Guangdong Province. Notably, the service sector of Shenzhen
has been strong, growing at the rate of approximately 10.4% in 2016.
According to the Guangdong Bureau of Statistics, the total investment in fixed
assets in Shenzhen in 2016 increased to approximately RMB407.8 billion, representing a
growth rate of approximately 24.2% as compared to the previous year, which was the
highest level since 1994. Total investment in fixed assets of the tertiary sector was the main
growth engine, with approximately RMB338.3 billion and a year-on-year growth of
approximately 24.6%.
For further details of Shenzhen’s economic fundamentals, please refer to the section
headed “A.4. Reasons for and benefits of the Acquisition” in the Letter from the Board.
Taking into account the above, we concur with the view of the management of the
Group that the growth prospect of the property market of Shenzhen is positive.
5. Principal terms of the Sale and Purchase Agreement
Set out below is the summary of the salient terms of the Sale and Purchase
Agreement:
(i) Subject matter
On 19 January 2017, the Company and GDH entered into the Sale and
Purchase Agreement, pursuant to which the Company conditionally agreed to
acquire the Sale Shares, representing approximately 73.82% of the issued share
capital of GDL, from GDH. Details of the GDL Group is set out in the section headed
“2. Information on the GDL Group” in this letter above.
(ii) Consideration
The Consideration for the Sale Shares amounted to RMB3,358 million
(equivalent to approximately HK$3,780.4 million), to be settled by the Company in
the following manner:
a) as to RMB2,518.5 million (equivalent to approximately HK$2,835.3
million) (being 75% of the Consideration) by the allotment and issue of
LETTER FROM SOMERLEY
– 44 –
the Consideration Shares by the Company to GDH on the Completion
Date and the difference between such amount and the value of such
Consideration Shares (based on our understanding, being the amount of
a fractional Share, which will not be issued as part of the Consideration
Shares, in the amount of approximately RMB2.30) will be settled in cash;
and
b) as to RMB839.5 million (equivalent to approximately HK$945.1 million)
(i.e. the Cash Consideration, being 25% of the Consideration) in cash on
the Completion Date.
Given the properties of GDL constitute the majority of its assets, the
Consideration was arrived at after arm’s length negotiations based on the NAV as
adjusted with reference to the property valuation with a certain discount and it
represents a discount of approximately 28.2% to the unaudited consolidated NAV of
GDL as at 30 September 2016 as adjusted by the said valuation (the “Discount”).
With respect to the Discount, the Board has taken into account, among others, (i) the
development plan, quality and size of properties held by GDL; (ii) the future
prospects of real estate business in Shenzhen, the PRC; and (iii) the relevant market
transactions concerning the property companies listed on the Stock Exchange. For
details of the determination of the Consideration, please refer to the sections headed
“A.2. The Sale and Purchase Agreement” in the Letter from the Board and “6.(i) The
Reassessed NAV” in this letter below.
The Company has considered the market capitalisation of the GDL Group and
the prevailing trading prices of shares of GDL. The Consideration translates into
approximately HK$2.99 per Sale Share and represents a premium of approximately
47.3% over the per share closing trading price of GDL of HK$2.03 as of 18 January
2017 (the day before the date of the announcement of the Company in respect of the
Acquisition dated 19 January 2017). However, given the low trading volume of GDL
and the substantial discount of market capitalisation of the GDL Group to its net
asset value as adjusted with reference to the property valuation, the Company
believes that the market capitalisation does not reflect the intrinsic value of the
underlying assets of GDL Group and therefore prevailing trading prices of shares of
GDL was, in the Board’s opinion, not an appropriate benchmark in determining the
Consideration. The Board’s opinion is not dissimilar to our view as set out in the
section headed “2.(iii) Listed status of GDL” in this letter above.
(iii) Consideration Shares
The Consideration Shares will be allotted and issued at the Issue Price of
HK$10.39 per Consideration Share, credited as fully paid. The Consideration
Shares, when allotted and issued, shall rank pari passu in all respects with the
Shares in issue on the date of allotment and issue of the Consideration Shares.
The Consideration Shares comprise 272,890,019 Shares, which represent: (i)
approximately 4.36% of the existing issued share capital of the Company as at the
Latest Practicable Date; and (ii) approximately 4.17% of the issued share capital of
LETTER FROM SOMERLEY
– 45 –
the Company as enlarged by the allotment and issue of the Consideration Shares
(assuming there is no other change in the share capital of the Company from the
Latest Practicable Date to Completion).
The Consideration Shares will be issued pursuant to the Specific Mandate to
be obtained from the Independent Shareholders at the EGM. An application will be
made by the Company to the Listing Committee of the Stock Exchange for the listing
of and permission to deal in the Consideration Shares.
(iv) Conditions Precedent
Completion is conditional upon the fulfillment or, where applicable, waiver of
the following Conditions Precedent:
(a) the Circular having been approved by the Stock Exchange (or the Stock
Exchange having confirmed that it has no comment on the Circular) and
despatched to the Shareholders, and there having been no requirement
by the Stock Exchange in respect of the Acquisition that is not
acceptable to the Company;
(b) the relevant transactions under the Sale and Purchase Agreement,
including but not limited to the issue of the Consideration Shares,
having been approved by the Independent Shareholders of the
Company at the EGM in accordance with the requirements of the Listing
Rules;
(c) the approval for the listing of and permission to deal in the
Consideration Shares by the Stock Exchange having been obtained by
the Company, and such approval not having been revoked or
withdrawn prior to the Completion Date;
(d) the waiver having been obtained from the SFC by the Company from the
mandatory offer obligation of the Company under Rule 26.1 of the
Takeovers Code in respect of the relevant transactions under the Sale
and Purchase Agreement, and such waiver not having been revoked
prior to the Completion Date;
(e) the trading in the Shares not having been suspended for more than 20
consecutive days and on the Completion Date, except for the reason of
review of the announcement in relation to the Acquisition or the
Circular by the relevant regulatory body;
(f) the listing of the Shares on the Stock Exchange not having been
cancelled or withdrawn, and the SFC not having initiated any material
investigations that would lead to any suspension or cancellation or
withdrawal of the listing of the Shares on the Stock Exchange;
(g) the Company having performed all relevant obligations, duties,
undertakings and warranties in accordance with the Sale and Purchase
Agreement on or before the Completion Date;
LETTER FROM SOMERLEY
– 46 –
(h) the representations and warranties by the Company being true, accurate
and not misleading in all material respects on or before the Completion
Date;
(i) the Company having obtained all necessary approvals and
authorisations from any governmental or regulatory authorities for the
enforcement and completion of the transactions under the Sale and
Purchase Agreement, and the same remaining in full effect under the
applicable jurisdiction and the relevant laws and regulations;
(j) the trading in the shares of GDL not having been suspended for more
than 20 consecutive days and on the Completion Date, except for the
reason of the review of the announcement in relation to the Acquisition
or the Circular by the relevant regulatory body;
(k) the listing of the shares of GDL on the Stock Exchange not having been
cancelled or withdrawn, and the SFC not having initiated any material
investigations that would lead to any suspension or cancellation or
withdrawal of the listing of the shares of GDL on the Stock Exchange;
(l) GDH having performed all relevant obligations, duties, undertakings
and warranties in accordance with the Sale and Purchase Agreement on
or before the Completion Date;
(m) the representations and warranties by GDH being true, accurate and not
misleading in all material respects on or before the Completion Date;
and
(n) GDH having made the relevant application to the relevant state-owned
assets administration authority and obtained all necessary approvals
and authorisations from any governmental or regulatory authorities (if
necessary) for the enforcement and completion of the transactions
under the Sale and Purchase Agreement, and the same remaining in full
effect under the applicable jurisdiction and the relevant laws and
regulations.
The Conditions Precedent under sub-paragraph (e) to (i) above may be
waived by GDH at its discretion and those sub-paragraph (j) to (n) above may be
waived by the Company at its discretion.
As at the Latest Practicable Date, in respect of the Condition Precedent under
sub-paragraph (a) above, the Stock Exchange had confirmed that it had no comment
on the Circular; and in respect of the Condition Precedent under sub-paragraph (d)
above, the waiver had been obtained from the SFC by the Company (for details,
please refer to the section headed “D. Listing Rules and Takeovers Code
Implications” in the Letter from the Board). None of the other Conditions Precedent
has been satisfied (or waived) as at the Latest Practicable Date.
LETTER FROM SOMERLEY
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If the Conditions Precedent cannot be satisfied (or waived) before 30 June
2017 (or such other date as agreed by the Parties in writing), the Sale and Purchase
Agreement shall terminate unless the Parties otherwise agree.
(v) Completion
Completion shall take place on the 15th Business Day after the date on which
the last Condition Precedent is satisfied (or waived) and the issue of the
announcement by GDL of its preliminary results for the year ended 31 December
2016 (whichever is later), or at such other time as GDH and the Company shall agree
in writing.
(vi) Minimum Year-end NAV of GDL
GDH undertakes to the Company that the RMB equivalent of the audited
consolidated NAV of GDL as at 31 December 2016 to be disclosed in the
announcement of GDL on its preliminary results for the year of 2016 (i.e. the
Year-end NAV) shall not be less than RMB3,704,835,000 (i.e. the Minimum Year-end
NAV) and in the event that the RMB equivalent of the Year-end NAV falls below
such amount (i.e. the Deficient Amount), GDH shall pay to the Company the portion
of the Deficient Amount attributable to the Sale Shares Percentage after applying the
Discount to the same, and in such event, the Company will comply with the
disclosure requirements under the Listing Rules. The Minimum Year-end NAV was
determined after arm’s length negotiation between the Company and the Vendor.
The Parties have agreed that with the amount of the Consideration being RMB3,358
million, the Consideration should represent a discount of at least 28.00% to the
reassessed NAV of GDL attributable to the Vendor as at 31 December 2016. This
translates into a required minimum NAV of GDL attributable to the shareholders of
GDL of approximately RMB3,704,835,000 of consolidated NAV of GDL as at 31
December 2016.
Having considered (i) the Year-end NAV is not available as at the Latest
Practicable Date; and (ii) setting the Minimum Year-end NAV will effectively ensure
that the Consideration represents a discount of at least 28.00% to the Reassessed
NAV and any Deficient Amount attributable to the Sale Shares Percentage after
applying the Discount to the same shall be refunded by GDH to the Company, we
consider the undertaking by GDH is a reasonable measure to safeguard the
Shareholders’ interest by making a guarantee on the minimum net asset value to be
consolidated to the financial statements of the Company upon Completion.
(vii) Undertakings by Guangdong Holdings
Guangdong Holdings has given several undertakings to the SFC, details of
which are set out in the paragraph headed “D. Listing rules and Takeovers Code
Implication” in the Letter from the Board. In particular, Guangdong Holding has
undertaken, among others, that it will procure the Company not to transfer or
dispose of any shares of GDL or issue new shares or convertible securities to any
parties not acting in concert with Guangdong Holdings, GDH and/or the Company,
LETTER FROM SOMERLEY
– 48 –
which will lead to any person obtaining statutory control of the Company within
three years from Completion. As set out in the Letter from the Board, having taken
into account the development plan and income streams of the Buxin Project, the
Company views the Acquisition as a medium to long-term strategic investment and
therefore has planned to maintain statutory control over GDL during the term of
such undertakings. Also, in view of the strong financial position of the Company
and the long-standing support from GDH, the Company considers that, among the
various possible options of financing alternatives, issuing new shares or convertible
shares to the extent where GDH will lose statutory control over the Company, is not
likely to happen during the term of such undertakings.
Having taken into account the above, we concur with the Board’s view that
such undertakings would not have any material impact on the future corporate
decision making process of the Company and/or any negative impact on the
Company’s future business plan on GDL. Moreover, the said undertakings
committed by Guangdong Holdings represents a long-term commitment in
maintaining its corporate strategy of developing the property investment and
development segment and at the same time, protects the Shareholders’ interest from
potential dilution of shareholdings. Also, the said undertakings are pre-requisite of
the grant of the waiver application pursuant to Note 6(a) to Rule 26.1 of the
Takeovers Code and one of the conditions precedent to Completion, without which
will lead to a mandatory offer obligation of the Company that would result in a
higher acquisition cost as a result of a mandatory offer obligation and a potential
material change in public float of GDL. Notwithstanding the abovementioned
restrictions, we concur with the Company’s view that the Acquisition represents a
strategic and positive step of the Company’s long-term business development and it
is in the interests of the Company and its Shareholders that GDL maintains its well
established listed platform after Completion.
LETTER FROM SOMERLEY
– 49 –
6. The valuation of the properties held by the GDL Group
(i) Reassessed NAV
We note that the total consideration of RMB3,358 million was determined after
arm’s length negotiation based on, among other things, the Reassessed NAV and the
Discount, which are set out in more detail in the table below.
RMB (million)Approximate
The unaudited consolidated NAV of GDL attributable to
the shareholders of GDL as at 30 September 2016 (Note 1)3,725.2
(Note 2)
Add: Revaluation surplus in the unaudited consolidated
NAV of GDL attributable to the shareholders of
GDL (based on the market valuation of the
properties owned by the GDL Group as appraised
by Vigers as at 30 November 2016 minus the
related book value of the properties as at 30
November 2016), net of potential tax liabilities and
non-controlling interests of the Ruyingju Project
(Notes 3, 4, 5 and 6) 2,613.1
Reassessed NAV of GDL attributable to the
shareholders of GDL 6,338.3
Less: Reassessed NAV of GDL attributable to
non-controlling interests of GDL (Note 7) (1,659.4)
Reassessed NAV of GDL attributable to GDH(i.e. the Reassessed NAV) 4,678.9
Consideration 3,358.0
Discount of the Consideration to theReassessed NAV (Note 8) 28.2%
LETTER FROM SOMERLEY
– 50 –
Notes:
1. The unaudited consolidated NAV of GDL attributable to the shareholders of GDL as at 30
September 2016 of approximately HK$4,326.8 million is extracted from the GDL 2016 3Q
Announcement.
2. This is translated from approximately HK$4,326.8 million at the exchange rate of RMB1.00
= HK$1.1615 as quoted by the People’s Bank of China on 30 September 2016.
3. Revaluation surplus in the unaudited consolidated NAV of GDL attributable to the
shareholders of GDL is calculated based on the market valuation of the properties owned
the GDL Group as appraised by Vigers as at 30 November 2016 of approximately
RMB7,031.0 million (comprising (a) the total market value of the three properties of the
GDL Group of approximately RMB4,778.8 million; (b) the investment value of the
self-owned portion of the Buxin Project of approximately RMB2,228.4 million, both of
which are shown in the Valuation Report (as defined below); and (c) the total market value
of other miscellaneous properties of the GDL Group of approximately RMB23.8 million
not shown in the Valuation Report (as defined below).) minus (i) the related book value of
the properties as at 30 November 2016 of approximately RMB2,672.2 million; (ii) the
relevant potential tax liabilities to be borne by the GDL Group upon disposal of the
properties owned by the GDL Group of approximately RMB1,742.1 million; and (iii)
non-controlling interests of the Ruyingju Project of approximately RMB3.6 million.
4. As there may be potential tax liabilities to be borne by the GDL Group upon disposal of the
properties owned by the GDL Group, in arriving at the Reassessed NAV, the unaudited
consolidated NAV of GDL attributable to the shareholders of GDL as at 30 November 2016
has been adjusted downwards by the estimated potential tax liabilities, which comprise
the estimated deferred taxation in respect of (i) land appreciation tax; and (ii) corporate
income tax.
5. As advised by the management of the Group, the deferred land appreciation tax is
calculated at applicable tax rates in the range of 30% and 60% on the “land value
appreciation amount”, being the excess of the estimated proceeds to be received from the
disposal of the properties over the deductible expenditures, which include borrowing
costs and property development expenditures, pursuant to the relevant PRC regulations
on land appreciation tax. The deferred corporate income tax is calculated at 25% (being the
applicable tax rate) on the estimated assessable profit generated from the disposal of the
properties, which in turn is based on the estimated proceeds to be received from the
disposal of the properties less, among others, the property development expenditures and
the land appreciation tax.
6. The non-controlling interests of the Ruyingju Project refer to the 20% equity interest in
Guangzhou Panyu Yuehai Real Estate Company Limited (廣州市番禺粵海房地產有限公司),
the project company of the Ruyingju Project, held by Guangzhou Panyu District
Properties Lianhe Kaifa Company (廣州市番禺區房地產聯合開發總公司), an independent
third party.
7. The non-controlling interests of GDL refer to the approximately 26.18% equity interest in
GDL held by shareholders of GDL other than GDH.
8. With respect to the Discount, the Board has taken into account, among others, (i) the
development plan, quality and size of properties held by GDL; (ii) the future prospects of
real estate business in Shenzhen, the PRC; and (iii) the relevant market transactions
concerning the property companies listed on the Stock Exchange.
As illustrated above, the Consideration represents the Discount of
approximately 28.2% to the Reassessed NAV.
LETTER FROM SOMERLEY
– 51 –
Revaluation surplus of the GDL Group’s properties is essentially the excess of
the value of those properties owned by the GDL Group based on the valuation by
Vigers as at 30 November 2016 over their book values as at 30 September 2016, after
netting off principally the relevant potential tax liabilities. We concur with the
management of the Group that the above adjustments were the relevant adjustments
in arriving at the Reassessed NAV, as the unaudited consolidated NAV of GDL
attributable to the shareholders of GDL as at 30 September 2016 did not take into
account the latest market valuation of property projects held by the GDL Group and
the relevant potential tax liabilities.
We also consider the basis of the Consideration, which is based on, among
others, the Discount to the Reassessed NAV, is a commonly adopted approach in
assessing the fairness of the consideration for transactions of this type.
(ii) Valuation methodologies
GDL’s properties were valued by Vigers, an independent property valuer
appointed by the Company. We have interviewed Vigers regarding its expertise and
noted that Vigers is an established independent property valuer with a large
number of completed assignments acting for listed companies with property
interests in the PRC. We understand that the person-in-charge of the Vigers’
valuation team has over 22 years and 29 years of experience in the valuation of
properties in the PRC and Hong Kong respectively. We have also reviewed the terms
of Vigers’ engagement letter and noted that the scope of their work is to prepare a
property valuation report and provide the Company with the opinion of value on
the property interests held by GDL.
The full text of the valuation report and certificate of the property interests
attributable to GDL as at 30 November 2016 (the “Valuation Report”) is set out in
Appendix I to the Circular. In particular, we note that in performing the valuation
for the property interests attributable to GDL, Vigers has categorised the various
groups of properties held by GDL and adopted the following valuation
methodologies for each of the groups (details of the properties under each group of
properties held by GDL can be found in Appendix I to the Circular):
(a) For the Buxin Project other than the Restricted GFA (as defined below)
held for future development, Vigers has valued such property interests
on the basis that it will be developed and completed in accordance with
the permitted use and plot ratio stipulated by the relevant government
authorities. Vigers has adopted the direct comparison approach by
making reference to comparable sales evidences as available in the
relevant market (the “Direct Comparison Approach”) and has taken
into account the costs that will be expended to complete the
redevelopment to reflect the quality of the completed redevelopment.
LETTER FROM SOMERLEY
– 52 –
(b) For the Restricted GFA (as defined below), Vigers has adopted the
income approach by taking into account the reversionary potential of
the property interest (the “Income Approach”) and has also taken into
account the costs that will be expended to complete the redevelopment
to reflect the quality of the completed redevelopment.
(c) For the residential units of the Buxin Garden and the unsold portion of
the Ruyingju Project, which are completed properties, Vigers has also
adopted the Direct Comparison Approach by assuming sale of the
properties in their existing states with the benefit of vacant possession
and by making reference to comparable sales transactions as available
in the relevant market.
We have discussed with Vigers the rationale of adopting the abovementioned
valuation methodologies for valuing the properties held by GDL. According to
Vigers, the Direct Comparison Approach is the most appropriate valuation method
for assessing the market value of the Buxin Project, the residential properties of the
Buxin Garden and the unsold portion of the Ruyingju Project as the majority of these
properties are residential and commercial properties with transparent and readily
available market price information. The Restricted GFA, due to the legal
requirement of the relevant government authorities, is restricted to leasing or
self-use only. In this regard, Vigers considered the Income Approach which takes
into account the rental transactions of the market comparables to be more
appropriate to reflect the actual usage complying with the legal requirements.
After considering the reasons for Vigers’ choice of adopting the valuation
methodologies for valuing the abovementioned properties held by GDL, we are of
the opinion that the valuation methodologies used are reasonable and acceptable in
establishing the market values of the properties attributable to GDL as at 30
November 2016.
(iii) Valuation bases and assumptions
In arriving at the appraised value for the Buxin Project using the Direct
Comparison Approach, we note that the Buxin Project was primarily valued on the
basis that the Buxin Project will be developed and completed in accordance with
GDL’s latest development proposals and development programme provided to
Vigers assuming all consents, approvals and licences from relevant government
authorities for the development proposals have been obtained without onerous
conditions or delays. In arriving at its opinion of value, Vigers generally starts the
process by collecting and analysing the recent transactions of the market
comparables located in the vicinity of the Buxin Project. The collected comparables
were then adjusted to reflect the difference between the comparables and the Buxin
Project in terms of, among others, location, age, size and building quality. We have
reviewed and discussed about Vigers’ workings on the selection of the market
comparables and the relevant adjustments made. We are of the view that the basis of
selection of market comparables and the adjustments, including various factors (i.e.
LETTER FROM SOMERLEY
– 53 –
date of transaction, location, nature and quality of properties) taken into account,
made for reflecting the difference between the selected comparables and the Buxin
Project are reasonable and relevant for the purpose of establishing the market value
of the Buxin Project. The appraised value of the Buxin Project after applying the
Direct Comparison Approach was then derived from the estimated average unit
price and GFA of the Buxin Project after deduction of estimated outstanding
construction cost and the profit margin. We have also reviewed the research report
published by an independent quantitative surveyor (the “QS Report”) adopted by
Vigers regarding the approximate building costs of different types of building for
major cities in China and noted that the parameters in relation to the estimated
outstanding construction cost is within the range stipulated in the QS Report.
As disclosed in note 4 to valuation of the Buxin Project in the Valuation
Report, due to the legal requirement of the relevant government authorities, a GFA
of approximately 75,583 sq.m. for industry related office use, approximately 36,803
sq.m. portion of land for commercial use, approximately 12,050 sq.m. for innovative
industry related office use and approximately 20,632 sq.m. for underground
commercial use of Southern Land (as defined in the Valuation Report) and a GFA of
approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for
underground commercial use of the Northern Land (as defined in the Valuation
Report), totaling approximately 192,108 sq.m. was restricted for self-use or leasing
only (the “Restricted GFA”). In this regard, the Restricted GFA are not freely
transferable and therefore Vigers has assigned no market value to the Restricted
GFA. However, given that the Restricted GFA are still able to be leased for rental
income and for self-use by the Group, Vigers has assigned an investment value as at
30 November 2016 of approximately RMB2,228.4 million for the Restricted GFA.
In arriving the investment value of the Restricted GFA, as with to the rest of
the Buxin Project, Vigers has also adopted the Income Approach by collecting and
analysing the recent rental transactions of the market comparables located in the
vicinity of the Restricted GFA. Vigers then estimated the average price per sq. m. of
the Restricted GFA by adjusting the rental income of the market comparables with
other factors including location, nature and quality of properties to arrive at the net
rental income (i.e. gross rental income after deducting the estimated maintenance
expense, management fee and insurance expense). The net rental income was then
divided by the capitalisation rate to arrive the investment value, from which is
deducted the estimated outstanding construction cost and the developer ’s profit
margin. We have reviewed and discussed with Vigers their workings on the
selection of the market comparables and the relevant adjustments made. On the
basis that (i) GDL has possessed the legal title of the Buxin Project (including the
Restricted GFA); and (ii) it is the Company’s plan to lease out the properties situated
in the Restricted GFA, we are of the view that the basis of selection of market
comparables and the adjustments, including various factors (i.e. date of transaction,
location, nature, quality of properties, the capitalisation rate and the total tenure)
taken into account, is reasonable and relevant for the purpose of determining the
investment value of the Restricted GFA. We have also reviewed the parameters in
estimated outstanding construction cost adopted by Vigers and noted that the
parameters are within the range stipulated in the QS Report.
LETTER FROM SOMERLEY
– 54 –
For the avoidance of doubt, in measuring the revaluation surplus of the Buxin
Project, both the market value of the Buxin Project, which refers to the portion of
land other than the Restricted GFA (i.e. approximately RMB4,268.0 million) and the
investment value of the Restricted GFA (i.e. approximately RMB2,228.4 million)
have been taken into account. In this regard, the total appraised value of the Buxin
Project is approximately RMB6,496.4 million.
For the residential properties of the Buxin Garden and the unsold portion of
the Ruyingju Project, as with the Buxin Project, Vigers has collected and analysed
the recent transactions of the market comparables located in the vicinity of the
subject properties. We have also reviewed and discussed about Vigers’ workings on
the selection of the market comparables. We are of the view that the basis of
selection of market comparables is reasonable and relevant for the purpose of
determining the market value of the residential properties of the Buxin Garden and
the unsold portion of the Ruyingju Project.
Taking into account the above, we consider that the bases and assumptions
adopted by Vigers for the valuation methodologies discussed above are reasonable
and in line with market practice.
7. Analysis of the Consideration
(i) Comparable transactions – Asset Injection Comparable Transactions
GDL is principally engaged in property development and investment. Other
than certain restricted bank balances and cash and cash equivalents, majority of
GDL’s assets are investment properties, completed properties held for sale and
properties under development. Moreover, the Buxin Project accounted for more
than 90% of both the total GFA and the total market value of GDL’s property
portfolio. In other words, GDL is essentially a one-property company. The essence of
the Acquisition is the purchase of the Buxin Project.
Based on our experience, when Hong Kong-listed companies conduct asset
injections of property assets, normally the consideration would represent a discount
to the reassessed NAV of the property holding company. We understand, in
determining the Discount, the Board has taken into account, among others, (i) the
development plan, quality and size of properties held by GDL; (ii) the future
prospects of real estate business in Shenzhen, the PRC; and (iii) the relevant market
transactions concerning the property companies listed on the Stock Exchange. In
order to assess the fairness and reasonableness of the Discount of approximately
28.2% (i.e. the discount of the Consideration to the Reassessed NAV), we have
carried out a review of the acquisitions of property assets (the “Asset InjectionComparable Transactions”) by State-owned Hong Kong listed companies with
principal activities of property development and/or investment in the PRC and the
following criteria: (i) reassessed NAV of the Asset Injection Comparable
Transactions were not less than RMB2.3 billion (representing approximately half of
the Reassessed NAV); (ii) the Asset Injection Comparable Transactions excluded
acquisition through public auction or involving substantially completed property
assets; (iii) the announcement of the Asset Injection Comparable Transactions were
published in the period from 1 January 2015 up to the date of the announcement of
the Acquisition. Set out in the table below is a summary of the Asset Injection
Comparable Transactions.
LETTER FROM SOMERLEY
– 55 –
Date
ofan
noun
cem
ent
Date
ofcir
cular
Nam
eofc
ompa
ny(st
ock
code
)Na
ture
oftar
geta
ssets
Cons
ider
ation
Disc
ount
tore
asse
ssed
NAV
6D
ecem
ber2
016
29D
ecem
ber2
016
Min
met
als
Land
Lim
ited
(230
)A
resi
dent
iald
evel
opm
entp
roje
ctlo
cate
din
Nan
jing,
Jiang
suPr
ovin
ce,t
hePR
C
RMB2
,238
mill
ion
25.2
%
12O
ctob
er20
164
Nov
embe
r201
6Ch
ina
Ove
rsea
sG
rand
Oce
ans
Gro
up
Lim
ited
(81)
Resi
dent
ialp
rope
rty
deve
lopm
entp
roje
cts
loca
ted
in
third
tierc
ities
inCh
ina
RMB3
,516
mill
ion
0.0%
19Se
ptem
ber2
016
25N
ovem
ber2
016
Shan
ghai
Indu
stri
alU
rban
Dev
elop
men
tGro
upLi
mite
d(5
63)
Two
resi
dent
ialv
illa
proj
ects
loca
ted
inSh
angh
ai,
Chin
a
RMB2
,350
mill
ion
18.7
%
26A
ugus
t201
615
Sept
embe
r201
6Ch
ina
Reso
urce
sLa
ndLi
mite
d(1
109)
Am
ixed
-use
inte
grat
edde
velo
pmen
tpro
ject
,
incl
udin
gre
side
ntia
lbui
ldin
gs,h
otel
,ser
vice
d
apar
tmen
tsan
dsh
oppi
ngm
alll
ocat
edin
Shen
zhen
and
carp
arks
inth
ePR
C
RMB6
,236
mill
ion
30.3
%
14M
arch
2016
30Ju
ne20
16Ch
ina
Ove
rsea
sLa
ndan
dIn
vest
men
t
Lim
ited
(688
)
Apo
rtfo
lioof
com
mer
cial
prop
ertie
san
dof
fices
mai
nly
loca
ted
inm
ajor
citie
sin
the
PRC
such
as
Shan
ghai
and
Nan
jing
HK
$37,
080
mill
ion
29.7
%
Aver
age
20.8%
Med
ian25
.2%M
axim
um30
.3%M
inim
um0.0
%
19Ja
nuar
y201
7Th
eAcq
uisit
ion
RMB3
,358m
illio
n28
.2%
LETTER FROM SOMERLEY
– 56 –
As set out in the table above, the Discount of approximately 28.2% is within
the range of 0.0% and 30.3% of the discounts of the Asset Injection Comparable
Transactions and is higher the average and the median of the discounts of the Asset
Injection Comparable Transactions of approximately 20.8% and 25.2% respectively.
(ii) Comparable transactions – Listed Property Company Takeovers ComparableTransactions
Pursuant to the Sale and Purchase Agreement, the Company has conditionally
agreed to purchase the Sale Shares, which represent approximately 73.82% of the
issued shares of GDL. In this connection, the Executive has granted a waiver from
the Company’s obligation to make a mandatory general offer for all shares of GDL
pursuant to Rule 26.1 of the Takeovers Code. Nevertheless, in our view, the
Acquisition can be compared to the acquisition of a controlling stake in a listed
company. In this regard, as a secondary research, we have carried out an analysis of
completed takeovers of Hong Kong-listed companies with principal activities of
property development and/or investment set out in documents dated from 1
January 2015 to the date of the announcement of the Acquisition. Set out in the table
below is a list of takeover transactions (the “Listed Property Company TakeoversComparable Transactions”) involving the acquisition of controlling stakes of Hong
Kong-listed property companies (the “Takeover Property Companies”) with
reassessed NAV disclosed in the relevant composite documents.
LETTER FROM SOMERLEY
– 57 –
As
inth
eca
seo
fth
eA
sse
tIn
ject
ion
Co
mp
ara
ble
Tra
nsa
ctio
ns,
we
com
pa
red
the
dis
cou
nt
of
the
off
er
pri
ceto
the
rea
sse
sse
d
NA
Vo
fth
eL
iste
dP
rop
ert
yC
om
pa
ny
Ta
ke
ov
ers
Co
mp
ara
ble
Tra
nsa
ctio
ns,
aft
er
tak
ing
into
acc
ou
nt
the
va
lue
of
the
pro
pe
rty
ass
ets
be
ing
acq
uir
ed
,a
ssu
mm
ari
sed
inth
efo
llo
win
gta
ble
:
Dat
eof
thec
ompo
site
docu
men
tTa
keov
erPr
oper
tyCo
mpa
nyna
me
Stoc
kco
dePr
inci
palb
usin
essa
ctiv
ities
Offe
rpric
eper
shar
e
Prem
ium
over
/(D
isco
untt
o)re
asse
ssed
NAV
20Ja
nuar
y20
15C
&D
Inte
rnat
iona
lInv
estm
entG
roup
Lim
ited
(for
mer
lykn
own
asSo
uth
Wes
tEco
Dev
elop
men
tLim
ited
)
1908
Sout
hW
estE
coD
evel
opm
entL
imit
edis
prin
cipa
llyen
gage
din
the
busi
ness
ofpr
oper
tyle
asin
g,pr
oper
tyde
velo
pmen
t,bu
ildin
gm
anag
emen
tser
vice
san
dpr
ovis
ion
ofad
viso
ryan
dco
nsul
tanc
yse
rvic
es.
HK
$3.2
668
per
shar
e15
.4%
16A
pril
2015
HK
C(H
oldi
ngs)
Lim
ited
(“H
KC”)
190
HK
C(H
oldi
ngs)
Lim
ited
ispr
inci
pally
enga
ged
inth
epr
oper
tyde
velo
pmen
t,pr
oper
tyin
vest
men
tand
leas
ing
and
infr
astr
uctu
rem
ainl
yin
the
PRC
.
HK
$0.2
5pe
rsh
are
(75.
3)%
(Not
e1)
6N
ovem
ber
2015
Win
foon
gIn
tern
atio
nalL
imit
ed63
Win
foon
gIn
tern
atio
nalL
imit
edis
prin
cipa
llyen
gage
din
prop
erty
rela
ted
busi
ness
es,t
hepr
ovis
ion
ofho
rtic
ultu
rals
ervi
ces
and
secu
riti
estr
adin
gbu
sine
ss.
HK
$0.3
619
per
shar
e12
0.4%
4N
ovem
ber
2016
Arm
ada
Hol
ding
sLi
mit
ed58
3A
rmad
aH
oldi
ngs
Lim
ited
ispr
inci
pally
enga
ged
inth
epr
oper
tyin
vest
men
tbus
ines
sH
K$1
.345
9pe
rsh
are
39.7
%
18N
ovem
ber
2016
Dan
Form
Hol
ding
sC
ompa
nyLi
mit
ed(“
Dan
Form
”)27
1D
anFo
rmH
oldi
ngs
Com
pany
Lim
ited
ispr
inci
pally
enga
ged
inpr
oper
tyin
vest
men
t,pr
oper
tyre
ntal
and
esta
tem
anag
emen
t.
HK
$2.7
5pe
rsh
are
(34.
0)%
(Not
e2)
Aver
age
13.2%
Med
ian
15.4%
Max
imum
120.4
%M
inim
um(7
5.3)%
TheA
cqui
sitio
n12
4Th
eGD
LG
roup
ispr
inci
pally
enga
ged
inpr
oper
tyde
velo
pmen
tand
inve
stm
ent.
(28.2
)%
Sour
ce:
Blo
om
be
rga
nd
the
Sto
ckE
xch
an
ge
’sw
eb
site
LETTER FROM SOMERLEY
– 58 –
Notes:
1. The subject transaction involved the relevant offeror acquiring only a non-controlling stake of the
relevant offeree’s issued share capital (i.e. 13.7%) but doing so had triggered a mandatory
unconditional offer obligation on the part of the relevant offeror, which is arguably different from
those of the other Listed Property Company Takeovers Comparable Transactions and the
Acquisition where control stake is acquired.
2. The subject transaction involved the relevant offeror acquiring the relevant offeree with inherent
risk whereby a substantial portion (i.e. over 50%) of the relevant offeree’s NAV was attributable to
an associate. The relevant offeree did not have control over the operations and business of
associate nor was it able to dictate major business transactions (including material purchases,
sales or dividend payouts) of the associate historically.
As shown in the table above, the offer price compared to the reassessed NAV
of the Takeover Property Companies ranged from an approximately 75.3% discount
to an approximately 120.4% premium, with an average and a median of
approximately 13.2% premium and approximately 15.4% premium respectively.
Unlike these average premiums, the Acquisition reflects the Discount to the
Reassessed NAV of approximately 28.2%.
We consider that the Listed Property Company Takeovers Comparable
Transactions as represented by HKC and Dan Form may be outliers for reasons
stated in the notes in the table above. If we were to exclude HKC and Dan Form from
our analysis above, the premium of the offer price to the appraised value of the
property of the Takeover Property Companies would range from approximately
15.4% to 120.4% with an average and a median of approximately 58.5% and 15.4%
respectively.
Combining the Asset Injection Comparable Transactions and the Listed
Property Company Takeovers Comparable Transactions, it is worthwhile to note
that the Consideration represents a significant discount to the Reassessed NAV
compared to the market transaction precedents.
8. Financing/payment alternatives available to the Group
We have reviewed with the management of the Group the form of payment of the
Consideration and whether there were other financing/payment alternatives available to
the Group other than the issue of the Consideration Shares under the Specific Mandate
and the payment of the Cash Consideration.
As advised by the management of the Group, while it was possible to satisfy the
entire Consideration in cash, after considering the funding requirements for further
investments in and development of the Group’s principal business segments (namely,
water resources, property and infrastructure businesses), the Group’s dividend policy and
general working capital requirements, the management of the Group was of the view that
the Consideration should only be satisfied as to one-fourth in cash and the remaining
portion in other means. Having considered (i) the disadvantages of other financing
alternatives as discussed below; and (ii) the willingness of the Vendor to accept the
Consideration Shares (as opposed to pure cash or other form of consideration)
LETTER FROM SOMERLEY
– 59 –
demonstrates the confidence of the Vendor and Guangdong Holdings in the prospects of
both the Group and the GDL Group and the Vendor ’s support to the Group in respect of
the Acquisition, the final form of payment of the Consideration comprising the
Consideration Shares and Cash Consideration was agreed amongst the parties to the Sale
and Purchase Agreement.
As advised by the management of the Group, the Company considered other
methods of equity financing. Currently, the Issue Price of HK$10.39 per Consideration
Share, represents slight discounts ranging from approximately 1.7% to 4.3% to the closing
prices of the Shares during the 10 consecutive trading days prior to the date of the Sale and
Purchase Agreement. In contrast, fund raising exercise by way of issue of new Shares to
independent third parties (e.g. new share placement) or to existing Shareholders on a pro
rata basis (e.g. rights issue or open offer) usually require a deeper discount to the
prevailing market price of the Shares. Furthermore, fund raising through rights issue or
open offer would attract higher transaction costs (such as underwriting and other fees)
and the dilution effect on those non-participating Shareholders would usually be greater
as compared to the issue of the Consideration Shares.
Debt financing would increase overall financing costs of the Group.
We understand that the current proposed financing structure proposal was arrived
at after due and careful consideration of various alternatives by the management of the
Group. We concur with the view of the management of the Group that the proposed issue
of the Consideration Shares under the Specific Mandate and the payment of the Cash
Consideration are suitable financing/payment mechanisms for the Acquisition. While the
issue of the Consideration Shares will result in a minor dilution in the shareholdings in
percentage terms of the existing public Shareholders, having taken into account various
factors (details of which are set out in section 11 headed “Shareholding structure of the
Company before and after Completion” in this letter below), we are of the view that the
dilution effect on the shareholding of the existing public Shareholders are acceptable.
9. Analysis of the Issue Price
The Issue Price was determined by the Board after arm’s length negotiations with
GDH with reference to, among others, the prevailing market prices of the Shares and the
current market conditions. The Issue Price represents:
(i) a premium of approximately 0.7% over the closing price of HK$10.32 per
Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 4.3% to the closing price of HK$10.86 per Share as
quoted on the Stock Exchange on the date of the Sale and Purchase
Agreement;
(iii) a discount of approximately 1.7% to the average closing price of HK$10.57 per
Share as quoted on the Stock Exchange for the last ten consecutive trading
days immediately prior to the date of the Sale and Purchase Agreement;
LETTER FROM SOMERLEY
– 60 –
(iv) a premium of approximately 0.2% over the average closing price of HK$10.37
per Share as quoted on the Stock Exchange for the last 20 consecutive trading
days immediately prior to the date of the Sale and Purchase Agreement;
(v) the average closing price of HK$10.39 per Share as quoted on the Stock
Exchange for the last 30 consecutive trading days immediately prior to the
date of the Sale and Purchase Agreement; and
(vi) a premium of approximately 101.7% over the NAV per Share of approximately
HK$5.15 based on the NAV attributable to the Shareholders of approximately
HK$32,233.6 million as at 30 September 2016 divided by 6,264,931,421 Shares
in issue as at the Latest Practicable Date.
Set out below is the Share price performance since the publication of the GDI 2016
3Q Announcement.
0
1
2
3
4
5
6
7
8
9
10
11
12
13
Issue Price at HK$10.39 Publication of the GDI 20163Q Announcement
26/10
/2016
26/11
/2016
26/1/
2017
26/12
/2016
The Late
st
Practi
cable
Date
Publication of theannouncement of the
Acquisition
Share price performance
Source: Website of the Stock Exchange
Since the publication of the GDI 2016 3Q Announcement in late October 2016, the
Share price has trended downwards. The Share price stablised in December 2016 in the
approximate range of HK$10.0 to HK$10.6 and increased slightly in early January 2017
before the publication of the announcement of the Acquisition.
In general, the Issue Price is in line with recent Share prices before the publication of
the announcement of the Acquisition.
LETTER FROM SOMERLEY
– 61 –
10. Financial effects of the Acquisition on the Group
(i) NAV attributable to the Shareholders
Upon Completion, GDL will become a 73.82%-owned subsidiary of the
Company and, accordingly, all assets and liabilities of the GDL Group will be
consolidated into those of the Group.
As advised by the management of the Group and as set out in the GDI 2015
Annual Report, it is the Group’s accounting policy to account for business
combinations using the acquisition method and accounting for the Acquisition will
follow this policy. Though currently standing at RMB3,358.0 million (equivalent to
approximately HK$3,780.4 million), the fair value of the Consideration will be
finally detemined at the Completion Date. Likewise, the fair value of the Group’s
interests in the identifiable assets and liabilities of the GDL Group will also be
measured at Completion Date. Such fair value represents the Reassessed NAV,
which currently stands at approximately RMB4,678.9 million (equivalent to
approximately HK$5,267.5 million). Based on current circumstances, the
management of the Group considers that instead of recognising goodwill, the Group
is more likely to recognise a bargain gain on purchase in respect of the Acquisition,
which will be determined by, among other things, the difference between the fair
values of the Consideration and attributable proportion of reassessed NAV of the
GDL Group at the Completion Date.
For illustrative purpose only, assuming completion of the Acquisition took
place on 30 September 2016, the changes in the NAV attributable to the Shareholders
of the Group will be as follows:
The Group Per ShareHK$ (million) HK$
The NAV attributable to the Shareholders as
at 30 September 2016 32,233.6 5.15
Add: the Reassessed NAV 5,267.5
Less: Cash Consideration (945.1)
The NAV attributable to the Shareholders
of the enlarged Group as at
30 September 2016 36,556.0 5.59
The increase in the NAV attributable to theShareholders– in amount 4,322.4 0.44– in percentage 13.4% 8.5%
LETTER FROM SOMERLEY
– 62 –
Independent Shareholders should note that the actual impact on the NAV
attributable to the Shareholders of the enlarged Group will be subject to relevant
calculations based on (i) fair value of the Consideration, which arguably can be
quite volatile depending on changes in Share prices; and (ii) the fair value of the
identifiable assets and liabilities of the GDL Group as at the Completion Date.
(ii) Earnings attributable to the Shareholders
Upon Completion, the consolidated financial results of the GDL Group will be
consolidated into the consolidated financial statements of the Group. As the
financial performance of the GDL Group has yet to reflect revenue to be recognized
when development properties are delivered and rental to be earned from the leasing
of investment properties until 2021 where it completes Phase I of the Buxin Project,
the GDL Group is not expected to make an immediate contribution to the earnings of
the Group.
A gain on purchase in respect of the Acquisition may be recognised when
Completion takes place. This gain on purchase in respect of the Acquisition would
be of a non-cash nature and not recurrent. The current estimate of the bargain gain is
based on the Discount of approximately 28.2% to the Reassessed NAV. In the event
that the fair value of the Consideration and the identifiable assets and liabilities of
the GDL Group vary at the Completion Date, the amount of the gain (if any) would
also vary.
(iii) Working capital and net cash position
The Group maintained a healthy working capital (i.e. net current assets) of
approximately HK$11,370.6 million as at 30 June 2016. The Group’s net cash position
as at 30 June 2016 was approximately HK$1,434.2 million, representing cash and
cash equivalents of approximately HK$10,122.8 million after netting off (i)
short-term and long-term bank and other borrowings of approximately HK$6,938.3
million; and (ii) receipt in advance from Hong Kong Government of approximately
HK$827.4 million and amounts due to related companies of approximately
HK$922.9 million.
For illustrative purpose only, assuming Completion took place on 30 June
2016 and after taking into account (i) the Group’s net cash position and working
capital as at 30 June 2016 of approximately HK$1,434.2 million and HK$11,370.6
million respectively; (ii) the GDL Group’s net cash position and working capital as
at 30 June 2016 of approximately HK$3,557.6 million and HK$3,539.0 million
respectively; and (iii) the Cash Consideration of approximately RMB839.5 million
(equivalent to approximately HK$945.1 million), both the enlarged Group’s net cash
position and working capital are expected to be enhanced. As advised by
management of the Group, there is an outstanding land premium payable of
approximately RMB1,350 million related to the Buxin Project which is expected to be
settled on or before 8 June 2017. Despite this significant cash payment, the
Acquisition is expected to have a positive effect on the net cash position and the
working capital of the enlarged Group.
LETTER FROM SOMERLEY
– 63 –
11. Shareholding structure of the Company before and after Completion
The shareholding structure of the Company (i) as at the Latest Practicable Date; and
(ii) immediately upon Completion (assuming that there is no change in the issued share
capital of the Company from the Latest Practicable Date and up to Completion other than
the Acquisition), is summarised as follows:
Name of Shareholder As at the Latest Practicable Date Immediately after Completion
Number ofShares held
Approximatepercentage of
total issued sharecapital
Number ofShares held
Approximatepercentage of
total issued sharecapital
GDH 3,420,563,527 54.60% 3,693,453,546 56.49%
Public Shareholders 2,844,367,894 45.40% 2,844,367,894 43.51%
Total 6,264,931,421 100.00% 6,537,821,440 100.00%
As shown in the table above, the shareholding of the existing public Shareholders in
the Company will decrease from approximately 45.40% to approximately 43.51%
immediately after Completion (representing a dilution by approximately 4.16%).
Although the shareholding interest of the existing public Shareholders will be diluted,
having taken into account (i) the benefits of the Acquisition; (ii) the valuation of GDL
which we consider fair; (iii) the Issue Price being in line with recent Share prices before the
publication of the announcement of the Acquisition; and (iv) the positive financial effects
on the enlarged Group as a result of the Acquisition as summarised in section headed “10.
Financial effects of the Acquisition on the Group” above, we are of the opinion that the
dilution effects on shareholding of the existing public Shareholders are acceptable.
DISCUSSION AND ANALYSIS
The Group is principally engaged in investment holding, water resources, property
holding and investment, hotel ownership and operation, hotel management, department
store operation and investments in other infrastructure projects. The Group has a long
history of developing and holding mall/commercial/office properties and existing
property projects are located in prime locations of Guangzhou, Tianjin and Hong Kong.
The Acquisition is in line with the stated development strategy of the Group and is
expected to deliver growth potential to one of its existing core businesses. The
Acquisition, which is in essence the acquisition of the Buxin Project, will deliver a
multi-module property portfolio with a GFA of approximately 462,051 sq. m. located in a
prime location of Shenzhen, a Tier 1 Chinese city with growth potential. The Buxin Project
is expected to be financed from GDL’s own financial resources and will consolidate
property sector management expertise and resources for both the Group and the GDL
Group.
LETTER FROM SOMERLEY
– 64 –
The Consideration is RMB3,358.0 million, representing a discount of approximately
28.2% to the Reassessed NAV, which took into account the appreciation of the GDL
Group’s properties as valued by Vigers as at 30 November 2016 and the relevant potential
tax liabilities. We consider the basis of the Consideration, which is based on, among
others, the Discount to the Reassessed NAV, is a commonly adopted measure in assessing
the fairness of the consideration for transactions of this type. The Discount compares well
with the comparable transactions, being higher than the average and the median of the
discounts of the Asset Injection Comparable Transactions of approximately 20.8% and
25.2% respectively. Also, unlike the premiums seen in the Listed Property Company
Takeovers Comparable Transactions, the Acquisition, on the other hand, reflects the
Discount.
The Consideration, on a per Sale Share basis, represents a premium of 59.9% over
the closing price of GDL on the Latest Practicable Date. However, as explained in section
headed “2.(iii) Listed status of GDL” above, the market price of GDL reflects illiquid
trades with no control element, consequently, we do not consider the market price of GDL
to be of material relevance in our assessment of the Consideration.
The Consideration will be settled by the Company as to three-fourths by way of
proposed issue of the Consideration Shares under the Specific Mandate and one-fourth by
way of the payment of the Cash Consideration. The Issue Price of HK$10.39 per
Consideration Share is at slight discounts ranging from approximately 1.7% to 4.3% to the
closing prices of the Shares during the 10 consecutive trading days prior to the date of the
Sale and Purchase Agreement. In addition, the issue of the Consideration Shares may
serve to demonstrate the Vendor and Guangdong Holdings’ confidence in the prospects of
the enlarged Group.
Other financing/payment alternatives for the Acquisition, including placing of new
Shares, rights issue, open offer and debt financing, have been considered by the
management of the Group. However, each of these alternatives has disadvantages in
terms of discount on issue, costs and timing compared with the terms of the proposed
issue of the Consideration Shares and the payment of the Cash Consideration. We
therefore concur with the management of the Group that the proposed issue of the
Consideration Shares under the Specific Mandate and the payment of the Cash
Consideration are suitable financing/payment mechanisms for the Acquisition.
The shareholding of the existing public Shareholders in the Company will be
diluted by approximately 4.16% as a result of Completion. We consider such dilution
relatively modest and justified by the factors set out in section 11 above.
We consider the financial effects of the Acquisition on the Group are positive. The
Acquisition is expected to deliver earnings as Phases I and II of the Buxin Project complete
in 2021 and following years. NAV attributable to the Shareholders of the enlarged Group
as at 30 September 2016 will increase by approximately HK$4,322.4 million or 13.4% to
approximately HK$36,556.0 million. On a per Share basis, the NAV per Share attributable
to the Shareholders of the enlarged Group as at 30 September 2016 will increase from
approximately HK$5.15 by approximately HK$0.44 or 8.5% to approximately HK$5.59.
The enlarged Group’s working capital and net cash position are also expected to be further
enhanced as a result of the Acquisition.
LETTER FROM SOMERLEY
– 65 –
OPINION AND RECOMMENDATION
Having taken into account the above principal factors and reasons, we consider that
the terms of the Acquisition (including the issue of the Consideration Shares under the
Specific Mandate) are on normal commercial terms and are fair and reasonable and that
the Acquisition is in the ordinary and usual course of business of the Group and in the
interests of the Company and the Shareholders as a whole.
We therefore advise the Independent Board Committee to recommend, and we
ourselves recommend, the Independent Shareholders to vote in favour of the resolutions
to be proposed at the EGM to approve the Acquisition and the Specific Mandate.
Yours faithfully,
for and on behalf of
SOMERLEY CAPITAL LIMITEDM.N. Sabine
Chairman
LETTER FROM SOMERLEY
– 66 –
Vigers Appraisal & Consulting LimitedInternational Assets Appraisal Consultants
10th Floor, The Grande Building
398 Kwun Tong Road
Kowloon
Hong Kong
24 February 2017
The Directors
Guangdong Investment Limited
28th and 29th Floors,
Guangdong Investment Tower,
148 Connaught Road Central,
Hong Kong
Dear Sirs,
In accordance with your instructions of Guangdong Investment Limited (the
“Company”) and its subsidiaries (hereinafter referred to as the “Group”) to value the
property interests in the People’s Republic of China (the “PRC”), we confirm that we have
carried out inspections, made relevant enquiries and obtained such further information as
we consider necessary for the purpose of providing you with our opinion of the market
value of such property interests as at 30 November 2016 (“valuation date”) for the purpose
of incorporation in the circular.
Our valuation is our opinion of the market value of the property interest which we
would define market value as intended to mean “the estimated amount for which an asset
or liability should exchange on the valuation date between a willing buyer and a willing
seller in an arm’s-length transaction after proper marketing and where the parties had
each acted knowledgeably, prudently and without compulsion”.
In valuing the property No. 1, we have valued such property interest on
redevelopment basis that it will be developed and completed in accordance with the
permitted use and plot ratio in accordance with the three Land Use Rights Transfer
Agreements entered into between the Shenzhen City Luohu District Urban Renewal
Authority (“Shenzhen Luohu Renewal Authority”) and Guangdong Land (Shenzhen)
Limited (“Guangdong Land Shenzhen”). We have assumed that all consents, approvals
and licences from relevant government authorities for the redevelopment have been
obtained or will be obtained without onerous conditions or undue time delays. We have
also assumed that the design and construction of the redevelopment are in compliance
with the local planning regulations and have been approved by the relevant authorities. In
arriving at our opinion of value of freely transferred portion, we have adopted the direct
comparison approach by making reference to comparable sales evidences as available in
the relevant market and have also taken into account the costs that will be expended to
complete the redevelopment to reflect the quality of the completed redevelopment. In
arriving at our opinion of value of self-owned portion, we have adopted the income
APPENDIX I VALUATION REPORT
– 67 –
approach by taking into account the reversionary potential of the property interest and
have also taken into account the costs that will be expended to complete the
redevelopment to reflect the quality of the completed redevelopment.
In valuing the property Nos. 2 to 3, we have also valued the properties by the direct
comparison approach assuming sale of the properties in their existing states with the
benefit of vacant possession and by making reference to comparable sales transactions as
available in the relevant market.
Our valuation has been made on the assumption that the owner sells the property
interests on the open market in its existing state without the benefit of a deferred term
contract, leaseback, joint venture, management agreement or any similar arrangement
which would serve to increase the value of the property interests. In addition, no forced
sale situation in any manner is assumed in our valuation.
We have not caused title searches to be made for the property interests at the
relevant government bureau in the PRC. We have been provided with certain extracts of
title documents relating to the property interests. However, we have not inspected the
original documents to verify the ownership, encumbrances or the existence of any
subsequent amendments which may not appear on the copies handed to us. In
undertaking our valuation for the property interests, we have relied on the legal opinion
(the “PRC legal opinion”) provided by the Company’s PRC legal adviser, Zhong Lun Law
Firm.
We have relied to a considerable extent on information provided by the Group and
have accepted advice given to us by the Group on such matters as planning approvals or
statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the
identification of the properties and other relevant matter. We have also been advised by
the Group that no material facts had been concealed or omitted in the information
provided to us. All documents have been used for reference only.
All dimensions, measurements and areas included in the valuation certificates are
based on information contained in the documents provided to us by the Group and are
approximations only. No on-site measurement has been taken.
We have inspected the exterior and, where possible, the interior of the properties.
However, we have not carried out a structural survey nor have we inspected woodwork or
other parts of the structures which are covered, unexposed or inaccessible and we are
therefore unable to report that any such parts of the properties are free from defect. No
tests were carried out on any of the services.
The site inspection of the property was carried out by Mr. Wilson Wu and Mr. Vinco
Huang in December 2016 and January 2017.
No allowance has been made in our valuation for any charges, mortgages or
amounts owing on the property interests nor for any expenses or taxation which may be
incurred in effecting a sale. Unless otherwise stated, it is assumed that the property
interests are free from encumbrances, restrictions and outgoings of an onerous nature
which could affect their values.
APPENDIX I VALUATION REPORT
– 68 –
In valuing the property interests, we have complied with the requirements set out in
Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by
The Stock Exchange of Hong Kong Limited, Rule 11 of the Code on Takeovers and mergers
issued by the Securities and Futures Commission and the HKIS Valuation Standards (2012
Edition) published by the Hong Kong Institute of Surveyors (“HKIS”).
As advised by the Company, the potential tax liabilities which may arise from the
sale of the properties in the PRC mainly include corporation income tax (25%, business tax
(5%), stamp duty (0.005%, deed tax 3% to 5% and land appreciation tax (30% to 60)% on
the appreciation in property value.
As advided by the Company, there will be no likelihood of such liabilities being
crystallized as it is understood that the Group has no intention to dispose the properties as
at the Latest Practicable Date.
Unless otherwise stated, all money amounts stated are in Renminbi (RMB). The
exchange rate used in valuing the property interests in the PRC as at 30 November 2016
was RMB1.00 = HK$1.1258. There has been no significant fluctuation in the exchange rate
for Renminbi against Hong Kong Dollars (HK$) between that date and the date of this
letter.
We enclose herewith a summary of valuation and the valuation certificates for the
material properties as per your instructions.
Yours faithfully,
For and on behalf of
Vigers Appraisal & Consulting LimitedRaymond Ho Kai Kwong
Registered Professional Surveyor (GP)MRICS MHKIS MSc(e-com)
China Real Estate Appraiser
Managing Director
Note: Mr. Raymond Ho Kai Kwong, Chartered Surveyor, MRICS MHKIS MSc(e-com), has over twenty nine
years’ experiences in undertaking valuations of properties in Hong Kong and has over twenty two years’
experiences in valuations of properties in the PRC.
APPENDIX I VALUATION REPORT
– 69 –
SUMMARY OF VALUATION
Property interests to be acquired by the Group in the PRC
Property
Market Valuein existing state as at
30 November 2016
1. Three land parcels (known as the Buxin Land),
No.1 Dongchang Road,
Buxin Area, Luohu District,
Shenzhen City,
Guangdong Province, the PRC
RMB4,267,990,000
(equivalent to
approximately
HK$4,804,900,000)
(Refer to Note 1 below)
2. 59 residential units,
BuXin Garden,
Buxin Road, Luohu District,
Shenzhen City,
Guangdong Province, the PRC
RMB183,800,000
(equivalent to
approximately
HK$206,920,000)
3. The unsold portion of Ruyingju Project,
the south of Sanzhi Xiangshui Road,
Dashi Town,
Panyu District,
Guangzhou City,
Guangdong Province,
the PRC
RMB326,970,000
(equivalent to
approximately
HK$368,100,000)
Total: RMB4,778,760,000
(equivalent toapproximately
HK$5,379,920,000)
Notes:
1. For reference purpose, according to the self-owned portion stated in 3 Land Use Rights Transfer
Agreements mentioned from Note (1) to Note (3) of Property No. 1, it stated a gross floor area
approximately 75,583 sq.m. for industry related office use, approximately 36,803 sq.m. for a portion of
commercial use, approximately 12,050 sq.m. for innovative industry related office use and approximately
20,632 sq.m. for underground commercial use of Southern Land and the self-owned portion of a gross
floor area of approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for
underground commercial use of Northern Land. In this regard, the self-owned portion could not be freely
transferred. However, as advised by the Company’s PRC legal advisers – Zhong Lun Law Firm,
Guangdong Land (Shenzhen) Limited cannot freely transfer non-commodity houses, self-owned portion
of land and buildings but they can be used for leasing. Therefore, we have attributed no market value to
the self-owned portion of the property. Given that the self-owned portion can be leased or self-used by
the Group, we have attributed an investment value to the self-owned portion, comprising a total gross
floor area of approximately 192,108 sq.m., as at the valuation date RMB2,228,430,000.
APPENDIX I VALUATION REPORT
– 70 –
VALUATION CERTIFICATES
Property Description and TenureParticulars ofoccupancy
Market Value inexisting state as at 30
November 2016
1. Three land
parcels (known
as the Buxin
Land),
No.1 Dongchang
Road,
Buxin Area,
Luohu District,
Shenzhen City,
Guangdong
Province,
the PRC
The Buxin Land comprises three
parcels of land with a total site area
of approximately 66,525.90 sq.m.
(716,085 sq.ft.).
The Buxin Land is proposed to be
developed into a composite
development. The details of site
area and proposed gross floor area
are as follows:
As at the valuation
date, the
Northwestern Land
and the Northern
Land are bare sites,
whilst the Southern
Land with an
industrial building
erected thereon is
owner-occupied for
office use and the
whole Buxin Land is
pending for future
development.
RMB4,267,990,000
(equivalent to
approximately
HK$4,804,900,000)
(Refer to
Note 4 below)
Land Lot Site Area(sq.m.)
Northwestern Land 16,680.23
Southern Land 16,043.57
Northern Land 33,802.10
Total: 66,525.90
Northwestern Land:
Building Usage
ApproximateGross
Floor Area(sq.m.)
Commercial 8,018
Office 49,450
Commercial apartment 57,600
Property Service Room 232
Public Facilities 700
Total: 116,000
APPENDIX I VALUATION REPORT
– 71 –
Property Description and TenureParticulars ofoccupancy
Market Value inexisting state as at 30
November 2016
Southern Land:
Building Usage
ApproximateGross
Floor Area(sq.m.)
Industry Related
Office 137,367
Commercial 37,460
Innovative Industry
Related Office 12,050
Public Facilities 423
Public Terminus 3,200
Underground
Commercial 21,000
Total: 211,500
Northern Land:
Building Usage
ApproximateGross
Floor Area(sq.m.)
Industry Related
Office 86,402
Property Service Room 269
Commercial 38,880
Underground
Commercial 9,000
Total: 134,551
100 car parking spaces is permitted
to be provided.
Notes:
1. According to a Land Use Rights Transfer Agreement (Document No.: Shen De He Zi (2016) No. H001 “深地合字(2016) H001號”) entered into between the Shenzhen City Luohu District Urban Renewal Authority
(“Shenzhen Luohu Renewal Authority”) (Party A) and Guangdong Land (Shenzhen) Limited
(“Guangdong Land Shenzhen”) (Party B) dated 13 June 2016, the northwestern part of the Buxin Land
(designated as land number H409-0078(1)) (the “Northwestern Land”), with a total site area of a total
approximately 16,680.23 sq.m. and a gross floor area of approximately 116,000 sq.m. of the property was
granted for a term expiring on 12 June 2056 for commercial uses from Party A to Party B.
APPENDIX I VALUATION REPORT
– 72 –
2. According to a Land Use Rights Transfer Agreement (Document No.: Shen De He Zi (2016) No. H002 “深地合字(2016) H002號”) entered into between the Shenzhen City Luohu District Urban Renewal Authority
(“Shenzhen Luohu Renewal Authority”) (Party A) and Guangdong Land (Shenzhen) Limited
(“Guangdong Land Shenzhen”) (Party B) dated 15 June 2016, the southern part of the Buxin Land
(designated as land number H409-0011) (the “Southern Land”), with a total site area of a total
approximately 16,043.57 sq.m. and a gross floor area of approximately 211,500 sq.m. of the property was
granted for a term expiring on 14 June 2066 for new industry related uses from Party A to Party B.
3. According to a Land Use Rights Transfer Agreement (Document No.: Shen De He Zi (2016) No. H003 “深地合字(2016) H003號”) entered into between the Shenzhen City Luohu District Urban Renewal Authority
(“Shenzhen Luohu Renewal Authority”) (Party A) and Guangdong Land (Shenzhen) Limited
(“Guangdong Land Shenzhen”) (Party B) dated 13 June 2016, the northern part of the Buxin Land
(designated as land number H409-0092) (the “Northern Land”), with a total site area of a total
approximately 33,802.10 sq.m. and a gross floor area of approximately 134,551 sq.m. of the property was
granted for a term expiring on 12 June 2066 for new industry related uses from Party A to Party B.
4. For reference purpose, according to the self-owned portion stated in 3 Land Use Rights Transfer
Agreements mentioned from Note (1) to Note (3), it stated a gross floor area approximately 75,583 sq.m.
for industry related office use, approximately 36,803 sq.m. for a portion of commercial use,
approximately 12,050 sq.m. for innovative industry related office use and approximately 20,632 sq.m. for
underground commercial use of Southern Land and the self-owned portion of a gross floor area of
approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for underground
commercial use of Northern Land. In this regard, the self-owned portion could not be freely transferred.
However, as advised by the Company’s PRC legal advisers – Zhong Lun Law Firm, Guangdong Land
(Shenzhen) Limited cannot freely transfer non-commodity houses, self-owned portion of land and
buildings but they can be used for leasing. Therefore, we have attributed no market value to the
self-owned portion of the property. Given that the self-owned portion can be leased or self-used by the
Group, we have attributed an investment value to the self-owned portion, comprising a total gross floor
area of approximately 192,108 sq.m., as at the valuation date RMB2,228,430,000.
5. Guangdong Land (Shenzhen) Limited is a wholly-owned subsidiary of Guangdong Land Holdings
Limited.
6. The PRC legal opinion states, inter alia, the following:
(i) The practicing entity of GDL Kingway Brewery Urban Renewal Authority is entitled to enter into
the land grant contract as grantee;
(ii) Shenzhen Luohu Renewal Authority is entitled to enter into the land contract as grantor;
(iii) GDL legally owns the land use rights of three land parcels H409-0078(1), H409-0092 and
H409-0011 and shall apply for the land use right certificate with the real estate registration
authority upon payment of all land use right grant fee, land development fee and municipal
ancillary facilities fee; and
(iv) GDL shall settle the second instalment of the remaining land use right grant fee, land
development fee and municipal ancillary facilities fee before 8 June 2017 and commence
construction and complete construction within the stipulated time pursuant to the provisions of
the grant contract of land use rights. Prior to registering the land use rights and obtaining the real
estate ownership certificate, no disposal of land nor transfer of land and the structures thereon in
any manner for the purpose of non-commodity housing and own use is allowed.
7. The status of title and grant of major approvals and permits in accordance with the PRC legal opinion and
information provided by the Company are as follows:
(i) Land Use Rights Transfer Agreement Yes
APPENDIX I VALUATION REPORT
– 73 –
Property Description and Tenure Particulars of occupancy
Market Value inexisting state asat 30 November
2016
2. 59 residential units,
BuXin Garden,
Buxin Road,
Luohu District,
Shenzhen City,
Guangdong Province,
the PRC
The property comprises
59 residential units of Bu
Xin Garden located at
various levels of a
8-storey building
completed in about 1988.
The property has a total
gross floor area of
approximately 4,634.33
sq.m.
The property is currently
occupied by the Group
for residential uses.
RMB183,800,000
(equivalent to
approximately
HK$206,920,000)
Notes:
1. According to 59 Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi Nos., 2000132341,
2000132342, 2000132343, 2000132345, 2000132346, 2000132348, 2000132349, 2000132350, 2000132352,
2000132353, 2000132355, 2000132356, 2000132358, 2000132359, 2000132360, 2000132362, 2000132363,
2000132364, 2000132366, 2000132367, 2000132368, 2000132369, 2000132370, 2000132371, 2000132373,
2000132374, 2000132375, 2000132376, 2000132377, 2000132378, 2000132379, 2000132380, 2000132381,
2000132382, 2000132383, 2000132384, 2000132385, 2000132386, 2000132387, 2000132388, 2000132389,
2000132390, 2000132391, 2000132392, 2000132393, 2000132394, 2000132395, 2000132396, 2000132397,
2000132398, 2000132405, 2000132406, 2000132407, 2000132408, 2000132410, 2000132411, 2000132413,
2000132415 and 2000132497), the land use rights of the property have been granted to Shenzhen Brewery
Co., Ltd “深圳金威啤酒有限公司”for residential use for a term expiring on 28 October 2035 and the
building ownership rights of the property with a total gross floor area of approximately 4,634.33 sq.m. are
owned by Shenzhen Brewery Co., Ltd.
2. Shenzhen Brewery Co., Ltd. is now known as Yuehai Technology (Shenzhen) Co. Ltd. “粵海科技(深圳)有限公司”.
3. The PRC legal opinion states, inter alia, the following:
(i) The 59 units of BuXin Garden is not subject to seizure and mortgage; and
(ii) Yuehai Technology (Shenzhen) Co. Ltd. is entitled to transfer, lease, pledge or otherwise dispose
of the 59 units of BuXin Garden in accordance with the law.
4. The status of title and grant of major approvals and permits in accordance with the PRC legal opinion and
information provided by the Company are as follows:
(i) Real Estate Ownership Certificate Yes
APPENDIX I VALUATION REPORT
– 74 –
Property Description and Tenure Particulars of occupancy
Market Value inexisting state asat 30 November
2016
3. The unsold portion of
Ruyingju Project,
the south of Sanzhi
Xiangshui Road,
Dashi Town,
Panyu District,
Guangzhou City,
Guangdong Province,
the PRC
The development
comprises a parcel of
land having a total site
area of approximately
38,771 sq.m. and a total
gross floor area of
approximately 128,947
sq.m. completed in about
2015.
According to the
information provided by
the Company, 80
apartment units with a
total gross floor area of
approximately 8,159.32
sq.m. of the unsold
portion and 651
carparking spaces of the
development will be
acquired.
The property is held with
the land use rights for
terms expiring on 24 May
2032 and 24 May 2062 for
commercial and
residential uses
respectively.
The unsold units of the
development was vacant
as at the valuation date.
RMB326,970,000
(equivalent to
approximately
HK$368,100,000)
Notes:
1. Pursuant to a State-owned Land Use Rights Certificate (Document No.: G04-002585) (the “State-owned
Land Use Certificate”), the land use rights of the property were granted to Guangzhou Panyu Yuehai Real
Estate Company Ltd. “廣州市番禺粵海房地產有限公司” (“Panyu Yuehai”) for terms expiring on 24 May
2032 and 24 May 2062 for commercial and residential uses respectively.
2. According to an Agreement To Modify State-owned Construction Land Use Rights Grant Contract
(Document No.: Sui Fan Guo Di Chu He (2012) No. 025-1 Agreement To Modify) (the “Land Modification
Agreement”) entered into between the State-owned Land Resources and Housing Management Bureau of
Guangzhou (Party A) and Panyu Yuehai (Party B) dated 21 February 2013, the land use rights of the
property with a site area of approximately 38,771 sq.m. were granted from Party A to Party B.
3. According to a Construction Work Planning Acceptance Certificate (Document No.: Sui Gui Yan Zheng
(2015) No. 572) issued on 14 October 2015, the development comprising a total gross floor area of
approximately 128,947 sq.m. was completed.
4. According to the information provided by the Group, 80 apartment units with a total gross floor area of
approximately 8,159.32 sq.m. of the unsold portion and 651 carparking spaces of the development will be
acquired.
5. Panyu Yuehai is a 80% owned subsidiary of Guangdong Land Holdings Limited.
APPENDIX I VALUATION REPORT
– 75 –
6. The PRC legal opinion states, inter alia, the following:
(i) The unit situated at Room 3502, Block 4 (A2), No. 63 Yan Sha Road East, Luopu Street, Panyu
District has completed the preliminary registration. Accordingly, it is excluded from the list of
unsold units of Ruyingju Project;
(ii) Ruyingju Project shall make up the outstanding payment to the relevant authority pursuant to the
provisions in the Planning Acceptance Certificate prior to the initial registration of the Building
Ownership Certificate, and adjust the land use area based on the land area stated in the
Construction Land Use Planning Permit (Sui Gui Di Zheng (2006) No.1551) upon applying for the
Real Estate Ownership Certificate;
(iii) Upon obtaining the Building Ownership Certificate, with respect to the 79 unsold units (other
than Room 3502) that remain unsold to third party or are in the process of preliminary
registration, Panyu Yuehai is entitled to transfer, lease, pledge or otherwise dispose of these 79
units in accordance with the law. Prior to 25 December 2016, Panyu Yuehai is the creditor of Room
3502 and may dispose of Room 3502 in accordance with the law; and
(iv) With respect to parking spaces in the civil defense area, as Ruyingju Project’s parking spaces in
the civil defense area are within the scope of car parking under planning, their ownership may be
agreed by Guangzhou Panyu Yuehai Real Estate Company Ltd. through disposal, gift or lease.
Where the construction planning application and completion acceptance documents and the
attachments are all ready, the parking spaces in the civil defense area may be registered initially
under the name of Panyu Yuehai and disposed of by Panyu Yuehai. Pre-sales are not allowed.
Upon disposal, the needs of the landlord must be satisfied.
7. The status of title and grant of major approvals and permits in accordance with the PRC legal opinion and
information provided by the Company are as follows:
(i) State-owned Land Use Rights Certificate Yes
(ii) Planning Permit for Construction Land Yes
(iii) Planning Permit for Construction Works Yes
(iv) Permit for Commencement of Construction Works Yes
APPENDIX I VALUATION REPORT
– 76 –
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Listing Rules for the
purpose of giving information with regard to the Group. The Directors, having made all
reasonable enquiries, confirm that to the best of their knowledge and belief, the
information contained in this circular is accurate and complete in all material respects and
not misleading or deceptive, and there are no other matters the omission of which would
make any statement herein or this circular misleading.
2. INTERESTS AND SHORT POSITIONS OF DIRECTORS AND CHIEFEXECUTIVE
As at the Latest Practicable Date, the interests and short positions of the Directors
and chief executive of the Company in the shares, underlying shares and debentures of the
Company and its associated corporations (within the meaning of Part XV of the SFO)
which were required to be (i) notified to the Company and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the
Directors or chief executive were taken or deemed to have under such provisions of the
SFO); (ii) entered in the register kept by the Company pursuant to Section 352 of the SFO;
or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code, were
as follows:
I. Interests and short positions in securities of the Company
(a) Shares
Name of Director
Capacity/Nature ofinterests
Number ofShares
heldLong/Shortposition
Approximate% of
interestsheld
(Note)
Huang Xiaofeng Personal 2,595,580 Long position 0.041%
Wu Jianguo Personal 333,370 Long position 0.005%
Zhang Hui Personal 2,106,130 Long position 0.034%
Zhao Chunxiao Personal 582,170 Long position 0.009%
Li Wai Keung Personal 1,927,160 Long position 0.031%
Ho Lam Lai Ping,
Theresa
Personal 879,200 Long position 0.014%
Tsang Hon Nam Personal 879,200 Long position 0.014%
Chan Cho Chak, John Personal 5,450,000 Long position 0.087%
Li Kwok Po, David Personal 12,000,000 Long position 0.192%
Cheng Mo Chi, Moses Personal 3,000,000 Long position 0.048%
Note: The approximate percentage of interests held was calculated on the basis of
6,264,931,421 Shares in issue as at the Latest Practicable Date.
APPENDIX II GENERAL INFORMATION
– 77 –
(b) Share options
Name of Director
Date ofgrant of
shareoptions
Number ofshare
optionsgranted on
date ofgrant
Number ofshare
optionsheld as atthe Latest
PracticableDate
Totalconsideration
paid forshare
optionsgranted
Price to bepaid on
exercise ofshare
optionsLong/Shortposition
(dd.mm.yyyy) HK$ HK$(per Share)
Huang Xiaofeng 22.01.2013 2,693,000 877,420 – 6.20 Long position
Wen Yinheng 22.01.2013 1,395,000 454,330 – 6.20 Long position
Wu Jianguo 22.01.2013 2,268,000 778,630 – 6.20 Long position
Zhang Hui 22.01.2013 2,268,000 770,870 – 6.20 Long position
Zhao Chunxiao 22.01.2013 2,268,000 778,630 – 6.20 Long position
Li Wai Keung 22.01.2013 2,243,000 815,840 – 6.20 Long position
Ho Lam Lai Ping,
Theresa
22.01.2013 1,256,000 376,800 – 6.20 Long position
Tsang Hon Nam 22.01.2013 1,256,000 376,800 – 6.20 Long position
Notes to the above share options granted pursuant to the share option scheme adopted by
the Company on 24 October 2008:
(1) The option period of all the share options is five years and six months from the
date of grant.
(2) Any share option is only exercisable during the option period after it has become
vested.
(3) The normal vesting scale of the share options is as follows:
Date Percentage Vesting
The date two years after the date of grant 40%
The date three years after the date of grant 30%
The date four years after the date of grant 10%
The date five years after the date of grant 20%
(4) The vesting of the share options is further subject to the achievement of such
performance targets as determined by the Board upon grant and stated in the offer
of grant.
APPENDIX II GENERAL INFORMATION
– 78 –
(5) The leaver vesting scale of the share options that would apply in the event of the
grantee ceasing to be an eligible person under certain special circumstances (less
the percentage which has already vested under the normal vesting scale or lapsed)
is as follows:
Date on which event occurs Percentage Vesting
Before the date which is four months after the date
of grant
0%
On or after the date which is four months after but
before the date which is one year after the date of
grant
10%
On or after the date which is one year after but
before the date which is two years after the date
of grant
25%
On or after the date which is two years after but
before the date which is three years after the date
of grant
40%
On or after the date which is three years after but
before the date which is four years after the date
of grant
70%
On or after the date which is four years after the
date of grant
80%
The remaining 20% also
vests upon passing the
overall performance
appraisal for those four
years
II. Interests and short positions in shares of associated corporations
(a) GDL
Name of Director
Capacity/Nature ofinterests
Numberof shares
heldLong/Shortposition
Approximate% of
interestsheld
(Note)
Huang Xiaofeng Personal 3,880,000 Long position 0.227%
Ho Lam Lai Ping,
Theresa
Personal 398,000 Long position 0.023%
Cheng Mo Chi, Moses Personal 600,000 Long position 0.035%
Note: The approximate percentage of interests held was calculated on the basis of
1,711,536,850 ordinary shares of GDL in issue as at the Latest Practicable Date.
APPENDIX II GENERAL INFORMATION
– 79 –
(b) Guangnan (Holdings) Limited (“Guangnan Holdings”)
Name of Director
Capacity/Nature ofinterests
Numberof shares
heldLong/Shortposition
Approximate% of
interestsheld
(Note)
Tsang Hon Nam Personal 300,000 Long position 0.033%
Li Kwok Po, David Personal 15,000 Long position 0.002%
Note: The approximate percentage of interests held was calculated on the basis of
907,593,285 ordinary shares of Guangnan Holdings in issue as at the Latest
Practicable Date.
(c) Guangdong Tannery Limited
Name of Director
Capacity/Nature ofinterests
Numberof shares
heldLong/Shortposition
Approximate% of
interestsheld
(Note)
Ho Lam Lai Ping,
Theresa
Personal 200,000 Long position 0.037%
Note: The approximate percentage of interests held was calculated on the basis of
538,019,000 ordinary shares of Guangdong Tannery Limited in issue as at the
Latest Practicable Date.
Save as disclosed above, as at the Latest Practicable Date, to the knowledge of
the Company, none of the Directors or chief executive of the Company had any
interests or short positions in the shares, underlying shares and debentures of the
Company or any of its associated corporations (within the meaning of Part XV of the
SFO) which were required to be: (i) notified to the Company and the Stock Exchange
pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short
positions which the Directors and chief executive were taken or deemed to have
under such provisions of the SFO); (ii) entered in the register kept by the Company
pursuant to Section 352 of the SFO; or (iii) notified to the Company and the Stock
Exchange pursuant to the Model Code.
APPENDIX II GENERAL INFORMATION
– 80 –
3. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS
As at the Latest Practicable Date, so far as is known to any Director or chief
executive of the Company, the following persons (other than a Director or chief executive
of the Company) had, or were taken or deemed to have interests or short positions in the
Shares or underlying Shares of the Company which would fall to be disclosed to the
Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of
the SFO, or which were recorded in the register kept by the Company pursuant to Section
336 of the SFO:
Name of shareholderCapacity/Nature of interests
Numberof Shares
heldLong/Shortposition
Approximate% of
interestsheld
(Note 2)
Guangdong Holdings
(Note 3)Interest in controlled
corporation
3,693,453,546 Long position 56.49%
GDH (Note 4) Beneficial owner/
Interest in controlled
corporation
3,693,453,546 Long position 56.49%
Guangdong Trust Ltd.
(粵海信托有限公司)
Beneficial owner/
Interest in controlled
corporation
576,404,918 Long position 8.82%
Notes:
1. The above interests include the allotment and issue of the Consideration Shares upon and subject
to completion of the Sale and Purchase Agreement.
2. The approximate percentage of interests held was calculated on the basis of 6,537,821,440 Shares
of the Company in issue after completion of the Sale and Purchase Agreement.
3. The attributable interest which Guangdong Holdings has in the Company is held through its
100% direct interest in GDH.
4. The interests of GDH set out above include attributable interest held through its wholly-owned
subsidiary, Guangdong Trust Ltd. (粵海信托有限公司).
APPENDIX II GENERAL INFORMATION
– 81 –
5. As at the Latest Practicable Date, the following Directors were a director or an employee of
Guangdong Holdings and/or GDH:
Name of DirectorPosition(s) held inGuangdong Holdings Position(s) held in GDH
Huang Xiaofeng chairman and director chairman and director
Cai Yong director and general manager executive director and
general manager
Wu Jianguo director executive director
Zhang Hui deputy general manager executive director
Zhao Chunxiao deputy general manager and
chief administration officer
executive director, chief
administration officer and
company secretary
Lan Runing deputy general manager executive director
Li Wai Keung chief financial officer executive director and chief
financial officer
Save as disclosed above, as at the Latest Practicable Date, no other person (other
than a Director or chief executive of the Company) had, or were taken or deemed to have
interests or short positions in the Shares or underlying Shares of the Company which
would fall to be disclosed to the Company and the Stock Exchange under the provisions of
Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register kept by the
Company pursuant to Section 336 of the SFO.
Save as disclosed below, as at the Latest Practicable Date, so far as is known to the
Directors or chief executive of the Company, no other person (other than a Director or
chief executive of the Company) was directly or indirectly interested in 10% or more of the
issued shares carrying rights to vote in all circumstances at general meetings of other
members of the Group or had any option in respect of such issued shares:
Name of shareholder interested in 10%or more of the subsidiaries of the Company1
Name of subsidiary ofthe Company
Long/Shortposition
Percentage ofinterests held
by thatshareholder
寶應縣自來水公司(Baoying Tap Water Company Limited*)
寶應悅寶工程有限公司(Baoying Yuebao
Engineering Company
Limited*)
Long position 30.00%
寶應縣自來水公司(Baoying Tap Water Company Limited*)
寶應粵海水務有限公司(Baoyjng Yuehai Water
Company Limited*)
Long position 30.00%
APPENDIX II GENERAL INFORMATION
– 82 –
Name of shareholder interested in 10%or more of the subsidiaries of the Company1
Name of subsidiary ofthe Company
Long/Shortposition
Percentage ofinterests held
by thatshareholder
Billion City Investments Limited Super Sino Investment
Limited
Long position 30.00%
Billion City Investments Limited 儋州聯順通自來水管網有限公司(Danzhou Lian Shun Tong
Water Pipe Company
Limited*)
Long position 30.00%
Billion City Investments Limited 儋州清泉水質檢測有限公司(Danzhou Qing Quan
Water Testing Company
Limited*)
Long position 30.00%
Billion City Investments Limited 海南儋州自來水有限公司(Hainan Danzhou Tap
Water Company Limited*)
Long position 30.00%
儋州市農林水利開發有限公司(Danzhou Nonglin Shuili Development
Company Limited*)
海南儋州粵海水務有限公司(Hainan Danzhou
Guangdong Water
Company Limited*)
Long position 23.80%
東莞發展控股股份有限公司(Dongguan Development Holding Company
Limited*)
東莞市清溪粵海水務有限公司(Dongguan Qingxi
Guangdong Water Co.,
Ltd.*)
Long position 10.00%
東莞市東江原水有限公司(Dongguan Dongjiang Raw Water Company
Limited*)
東莞市清溪粵海水務有限公司(Dongguan Qingxi
Guangdong Water Co.,
Ltd.*)
Long position 44.00%
東莞市東江原水有限公司(Dongguan Dongjiang Raw Water Company
Limited*)
東莞市粵海東原水務有限公司(Dongguan Yuehai
Dongyuan Water Co.,
Ltd.*)
Long position 49.00%
高郵市自來水公司(Gaoyoushi Tap Water Company Limited*)
高郵港郵供水有限公司(Gaoyou Gangyou Water
Supply Company Limited*)
Long position 40.00%
APPENDIX II GENERAL INFORMATION
– 83 –
Name of shareholder interested in 10%or more of the subsidiaries of the Company1
Name of subsidiary ofthe Company
Long/Shortposition
Percentage ofinterests held
by thatshareholder
高郵市自來水公司(Gaoyoushi Tap Water Company Limited*)
高郵市港郵工程有限公司(Gaoyoushi Gangyou
Engineering Company
Limited*)
Long position 40.00%
高州市城鄉基礎設施建設投資有限公司(Gaozhou Chengxiang Foundation Facilities
Construction Investment Company Limited*)
高州粵海水務有限公司(Gaozhou Guangdong
Water Company Limited*)
Long position 49.00%
廣東粵海投資開發有限公司(Guangdong Yuehai Investment
Development Co., Ltd.*)
廣州天河城投資有限公司(Guangzhou Tianhecheng
Investment Co., Ltd.*)
Long position 40.00%
廣州市城市建設開發集團有限公司(Guangzhou City Construction &
Development Holdings Ltd.*)
Teem Holdings Limited Long position 12.98%
廣州市番禺信息技術投資發展有限公司(Guangzhou City Panyu Information
Technology Investment Development
Company Limited*)
廣州市萬亞投資管理有限公司(Guangzhou City Wanye
Investment Management
Company Limited*)
Long position 32.00%
廣州市市政園林工程管理中心(Guangzhou City Shizheng Yuanlin
Engineering Management Centre*)
開平粵海水務有限公司(Kaiping Guangdong
Water Co., Ltd.*)
Long position 45.71%
國開發展基金有限公司(Guokai Development Fund Company
Limited*)
梅州梅穗投資有限責任公司(Meizhou Meisui
Investment Co., Limited*)
Long position 49.00%
廣州市市政園林工程管理中心(Guangzhou Shizheng Yuanlin Engineering
Management Centre*)
開平粵海污水處理有限公司(Kaiping Yuehai Sewage
Treatment Co., Ltd.*)
Long position 45.71%
江河水務有限公司(Jianghe Water Company Limited*)
廣西梧州自來水工程有限公司(Guangxi Wuzhou Tap
Water Engineering
Company Limited*)
Long position 49.00%
江河水務有限公司(Jianghe Water Company Limited*)
梧州粵海江河水務有限公司(Wuzhou Yuehai Jianghe
Water Company Limited*)
Long position 49.00%
APPENDIX II GENERAL INFORMATION
– 84 –
Name of shareholder interested in 10%or more of the subsidiaries of the Company1
Name of subsidiary ofthe Company
Long/Shortposition
Percentage ofinterests held
by thatshareholder
江河水務有限公司(Jianghe Water Company Limited*)
梧州市建標水表檢定有限公司(Wuzhoushi Jianbiao
Shuibiao Jianding
Company Limited*)
Long position 49.00%
梅州市自來水總公司(Meizhou Water Supply Co., Ltd.*)
梅州粵海水務有限公司(Meizhou Guangdong
Water Co., Ltd.*)
Long position 30.00%
梅州市自來水總公司(Meizhou Water Supply Co., Ltd.*)
梅州市自來水安裝公司(Meizhou Water Supply
Installation Co., Ltd*)
Long position 30.00%
梅州市自來水總公司(Meizhou Water Supply Co., Ltd.*)
梅州梅穗投資有限責任公司(Meizhou Meisui
Investment Co., Limited*)
Long position 15.30%
汕尾市紅草產業園投資開發有限公司(Shanwei Hongcao Chanyeyuan Investment
Development Company Limited*)
汕尾粵海環保有限公司(Shanwei Yuehai Huanbao
Co., Ltd.*)
Long position 20.00%
梧州市國資委(State-owned Assets Supervision and
Administration Commission of Wuzhou*)
梧州粵海環保發展有限公司(Wuzhou Yuehai Huanbao
Fazhan Company
Limited*)
Long position 13.04%
遂溪縣自來水公司(Suixi Tap Water Company Limited*)
遂溪粵海水務有限公司(Suixi Guangdong Water
Company Limited*)
Long position 30.00%
Upper Horn Investments Limited Guangdong Power
(International) Limited
Long position 49.00%
儀征城鄉水務有限公司(Yizheng Chengxiang Water Company
Limited*)
揚州粵港市政工程有限公司(Yanzhou Yuegang
Shizheng Engineering Co. ,
Ltd.*)
Long position 40.00%
儀征城鄉水務有限公司(Yizheng Chengxiang Water Company
Limited*)
儀征港儀供水有限公司(Yizheng Gangyi Water
Supply Company Limited*)
Long position 40.00%
APPENDIX II GENERAL INFORMATION
– 85 –
Name of shareholder interested in 10%or more of the subsidiaries of the Company1
Name of subsidiary ofthe Company
Long/Shortposition
Percentage ofinterests held
by thatshareholder
肇慶大旺城市發展有限公司(Zhaoqing Dawang City Development
Company Limited*)
肇慶高新區粵旺工程有限公司(Zhaoqing Gaoxinqu
Yuewang Engineering
Company Limited*)
Long position 30.00%
肇慶大旺城市發展有限公司(Zhaoqing Dawang City Development
Company Limited*)
肇慶高新區粵海水務有限公司(Zhaoqing HZ GDH Water
Co., Ltd.*)
Long position 30.00%
中山興中集團有限公司(Zhongshan Xingzhong Group Co., Ltd.*)
中山火力發電有限公司(Zhongshan Thermal
Power Co., Ltd.*)
Long position 25.00%
1 These interests include interests in the issued share capital of subsidiaries of the Company, equity
interests in subsidiaries of the Company which are established in the form of an equity joint
venture in the PRC, and interests in subsidiaries of the Company which are established in the
form of a cooperative joint venture in the PRC.
4. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had entered or was
proposing to enter into a service contract with any member of the Group (excluding
contracts expiring or determinable by the employer within one year without payment of
compensation (other than statutory compensation)).
5. DIRECTORS’ INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT
As at the Latest Practicable Date, none of the Directors had any direct or indirect
interests in any assets which had been, since 31 December 2015, the date to which the
latest published audited consolidated financial statements of the Group were made up,
acquired or disposed of by or leased to any member of the Group, or were proposed to be
acquired or disposed of by or leased to any member of the Group.
Except for the share options held by the Directors as mentioned above, as at the
Latest Practicable Date, none of the Directors was materially interested, directly or
indirectly, in any contract or arrangement subsisting at the Latest Practicable Date which
is significant in relation to the business of the Group.
APPENDIX II GENERAL INFORMATION
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6. COMPETING INTERESTS OF DIRECTORS AND CLOSE ASSOCIATES
As at the Latest Practicable Date, so far as is known to any Director or chief
executive of the Company, the interests of Directors or their respective close associates in
the businesses which competed or were likely to compete, either directly or indirectly,
with the businesses of the Group as required to be disclosed were as follows:
I. Core business activities of the Group
(1) Water resources
(2) Property holding and investment
(3) Hotel ownership and operation
(4) Hotel management
(5) Department store operation
(6) Investments in other infrastructure projects
II. Interests in Competing Business
Name of Director Name of company Nature of interestsCompetingBusiness
Huang Xiaofeng Guangdong Holdings Chairman (1), (2) & (3)
GDH Chairman (1), (2) & (3)
GDL Chairman &
Non-Executive
Director
(2)
Cai Yong Guangdong Holdings Director & General
Manager
(1), (2) & (3)
GDH Executive Director &
General Manager
(1), (2) & (3)
Wu Jianguo Guangdong Holdings Director (1), (2) & (3)
GDH Executive Director (1), (2) & (3)
Zhang Hui GDH Executive Director (1), (2) & (3)
Zhao Chunxiao GDH Executive Director (1), (2) & (3)
GDL Executive Director &
Chief Executive
Officer
(2)
Lan Runing GDH Executive Director (1), (2) & (3)
Li Wai Keung GDH Executive Director (1), (2) & (3)
GDL Executive Director (2)
APPENDIX II GENERAL INFORMATION
– 87 –
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or
their respective close associates had an interest in any business that competes with or is
likely to compete with the business of the Group.
7. EXPERTS AND CONSENTS OF EXPERTS
The following are the qualifications of the experts who had given opinion or advice
which is contained herein:
Name Qualification
Somerley Capital Limited a corporation licensed to carry out Type 1 (dealing in
securities) and Type 6 (advising on corporate finance)
regulated activities under the SFO
Vigers Appraisal &
Consulting Limited
Professional surveyor and valuer
As at the Latest Practicable Date, each of the above expert had given and had not
withdrawn its written consent to the issue of this circular with the inclusion herein of its
letter dated the date of this circular and references to its names in the form and context in
which it appears.
As at the Latest Practicable Date, none of the above experts had any shareholding,
directly or indirectly, in any member of the Group or any right (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for securities in
any member of the Group.
As at the Latest Practicable Date, none of the above experts had any direct or
indirect interests in any assets which had been, since 31 December 2015, the date to which
the latest published audited consolidated financial statements of the Group were made
up, acquired or disposed of by or leased to any member of the Group, or were proposed to
be acquired or disposed of by or leased to any member of the Group.
8. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors were not aware of any material
adverse change in the financial or trading position of the Group since 31 December 2015,
the date to which the latest published audited consolidated financial statements of the
Group were made up.
9. GENERAL
In the event of any inconsistency, the English texts of this circular and the
accompanying form of proxy shall prevail over their respective Chinese texts.
APPENDIX II GENERAL INFORMATION
– 88 –
10. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be made available for inspection at the
office of Reed Smith Richards Butler, legal advisers to the Company as to Hong Kong laws,
at 20th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong, during normal
business hours on any Business Day from the date of this circular up to 20 March 2017
(both days inclusive):
(a) the Sale and Purchase Agreement;
(b) the letter from the Independent Board Committee, the text of which is set out
on pages 28 and 29 of this circular;
(c) the letter from Somerley to the Independent Board Committee and the
Independent Shareholders, the text of which is set out on pages 30 to 66 of this
circular;
(d) the valuation report, the text of which is set out on pages 67 to 76 in Appendix
I to this circular;
(e) the written consents as referred to in the paragraph headed “7. EXPERTS AND
CONSENTS OF EXPERTS” in this appendix; and
(f) this circular.
APPENDIX II GENERAL INFORMATION
– 89 –
Set out below are the personal particulars of Mr. CAI Yong, who has offered himself
for re-election at the EGM:
Mr. CAI Yong, aged 51, was appointed a Non-Executive Director of the Company on
25 August 2016. Mr. Cai holds a Master ’s degree in Business Administration from the
South China University of Technology. Between 1991 and 2016, Mr. Cai worked for a
number of departments of the People’s Government of Guangdong Province in various
positions including Deputy Director of the Economic and Trade Commission, Deputy
Director of the Economic and Information Commission and Deputy Director of
Department of Commerce. Mr. Cai was appointed a Director and the General Manager of
Guangdong Holdings in January 2016 and an Executive Director and the General Manager
of GDH in May 2016.
Other than as stated above, Mr. Cai is not related to any Director, senior
management or substantial shareholder or controlling shareholder of the Company and
has not held any directorship in any other listed company in the last three years.
As at the Latest Practicable Date, Mr. Cai did not have any interests in shares and/or
underlying shares of the Company or its associated corporations within the meaning of
Part XV of the SFO.
There is a letter of appointment entered into between the Company and Mr. Cai.
Mr. Cai, if re-elected, will hold office for a term of not more than approximately three
years effective from the conclusion of the EGM to the earlier of (i) the conclusion of the
Company’s annual general meeting to be held in 2019 and (ii) 30 June 2019, subject to
earlier determination in accordance with the Articles of Association of the Company
and/or any applicable laws and regulations.
Pursuant to the Articles of Association of the Company, Mr. Cai is entitled to such
director ’s fee as may be approved by the Board. Remuneration (if any) for Mr. Cai will be
determined in accordance with the Company’s policy on Directors’ remuneration by
reference to the responsibilities involved and the remuneration offered for similar
positions in comparable companies. At present, Mr. Cai is not receiving any remuneration
from the Company.
Save as disclosed above, the Board is not aware of any other matters that need to be
brought to the attention of the Shareholders in relation to the re-election of Mr. Cai as a
Director of the Company and there is no information which is discloseable nor is/was Mr.
Cai involved in any matters required to be disclosed pursuant to any of the requirements
of the provisions under paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules.
APPENDIX III DETAILS OF THE DIRECTOR TO BE RE-ELECTED
– 90 –
(Incorporated in Hong Kong with limited liability)
(Stock Code: 0270)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “EGM”) of
Guangdong Investment Limited (the “Company”) will be held at Concord Room, 8th
Floor, Renaissance Harbour View Hotel Hong Kong, One Harbour Road, Wanchai, Hong
Kong on Monday, 20 March 2017 at 10:00 a.m. for the purpose of considering and, if
thought fit, passing with or without amendments, the following resolutions of the
Company:
ORDINARY RESOLUTIONS
1. “THAT:
(a) the Sale and Purchase Agreement dated 19 January 2017 entered into between
GDH Limited and the Company in relation to the Acquisition (as defined and
the particulars of which are set out in the circular of the Company dated 24
February 2017 to its shareholders), all transactions contemplated under the
Sale and Purchase Agreement and the Acquisition, be and are hereby
approved and confirmed;
(b) the allotment and issue to the Vendor of 272,890,019 shares of the Company
credited as fully paid-up at the issue price of HK$10.39 per share (the
“Consideration Shares”), as part of the consideration for the Acquisition, be
and is hereby approved; and
(c) the authorisation of any one or more directors of the Company to sign, execute
and deliver all such documents and take all such actions and steps and do
such acts, matters and things as any one or more of them may consider
necessary, appropriate, desirable or expedient to give full effect to this
resolution, and for the purposes of or in connection with the Acquisition, the
Sale and Purchase Agreement and the allotment and issue of the
Consideration Shares, be and are hereby approved and confirmed.”
NOTICE OF EXTRAORDINARY GENERAL MEETING
– 91 –
2. “THAT Mr. CAI Yong be and is hereby re-elected as a Director of the Company.”
By Order of the Board
Guangdong Investment LimitedHUANG Xiaofeng
Chairman
Hong Kong, 24 February 2017
Registered office:
28th and 29th Floors
Guangdong Investment Tower
148 Connaught Road Central
Hong Kong
Notes:
(i) A shareholder entitled to attend and vote at the EGM may appoint one or more proxies to attend and, on
a poll, vote in his place and such proxy need not be a shareholder of the Company.
(ii) A form of proxy is enclosed. To be valid, the form of proxy together with the power of attorney (if any) or
other authority (if any) or the authority under which it is signed (or a notarially certified copy of such
power or authority) must be delivered to the Company’s share registrar, Tricor Tengis Limited, at Level
22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time fixed for
holding the EGM or adjourned meeting. The appointment of a proxy will not prevent a shareholder from
subsequently attending and voting at the EGM or any adjourned meeting if he so wishes. If a shareholder
who has lodged a form of proxy attends the EGM, his form of proxy will be deemed to have been revoked.
(iii) In the case of joint shareholders, the vote of the senior who tenders a vote, whether in person, or by proxy,
shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority
will be determined by the order in which the names stand in the Company’s register of members in
respect of the joint holding.
(iv) The register of members will be closed and no transfer of shares will be effected for one day on Monday,
20 March 2017 for determining the shareholders’ eligibility to attend and vote at the EGM.
(v) In order to qualify for attending and voting at the EGM, unregistered holders of shares of the Company
should ensure that all transfer documents accompanied by the relevant share certificates must be lodged
with the Company’s share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s
Road East, Hong Kong, for registration not later than 4:30 p.m. on Friday, 17 March 2017.
NOTICE OF EXTRAORDINARY GENERAL MEETING
– 92 –