SOMERLEY LIMITED DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF CERTAIN CONSTRUCTION AND RELATED BUSINESSES OF CHINA RESOURCES ...
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The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes
no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 1109)
DISCLOSEABLE AND CONNECTED TRANSACTION
PROPOSED ACQUISITION OF CERTAIN CONSTRUCTION AND RELATED
BUSINESSES OF CHINA RESOURCES (HOLDINGS) COMPANY LIMITED
Financial adviser to China Resources Land Limited
SOMERLEY LIMITED
The Directors are pleased to announce that, on 22 June, 2007 after trading hours for the Shares on the
Stock Exchange, the Company, the Vendor and CRH have entered into the Sale and Purchase Agreement
in relation to the proposed acquisition of the entire issued share capital of Toprun for the Purchase Price
of HK$170.00 million which will be satisfied in the manner sets out in the paragraph headed “The Sale
and Purchase Agreement” below.
Toprun is an investment holding company and the Sales Group is principally engaged in the construction
and decoration businesses in the PRC.
As at the date of this announcement, the Vendor is a wholly-owned subsidiary of CRH, which in turn is
the controlling shareholder of the Company through its direct and indirect interest in the Company. As
such, the Vendor and CRH are both connected persons of the Company within the meaning of the Listing
Rules and therefore, the entering into of the Sale and Purchase Agreement constitutes a connected
transaction of the Company. Further, based on the percentage ratio calculations under the Listing Rules,
the entering into of the Sale and Purchase Agreement also constitutes a discloseable transaction of the
Company. In light of all of the above, the entering into of the Sale and Purchase Agreement is subject to
the reporting, announcement and Independent Shareholders’ approval requirements, by way of poll at the
EGM, as set out in the relevant provisions of Chapter 14 and 14A of the Listing Rules. The Directors also
consider that the entering into of the Sale and Purchase Agreement is of price-sensitive nature. Accordingly,
this announcement is also made pursuant to Rule 13.09(1) of the Listing Rules.
For the twelve months preceding the date of the Sale and Purchase Agreement, no agreement has been
entered into between the Company and CRH or any of its associates with which the Acquisition should be
aggregated under the Listing Rules.
The Independent Board Committee has been established to advise the Independent Shareholders in respect
of the Acquisition. CIMB-GK Securities (HK) Ltd. has been appointed as the independent financial
advisor to advise the Independent Board Committee and the Independent Shareholders in respect of the
Acquisition. A circular containing, among other things, further information on the Sale and Purchase
Agreement, further information of the Sales Group, the advice of the independent financial adviser to the
Independent Board Committee and the Independent Shareholders in relation to the Sale and Purchase
Agreement, the recommendation of the Independent Board Committee to the Independent Shareholders in
relation to the Sale and Purchase Agreement, the notice convening the EGM and a proxy form will be
despatched to the Shareholders in accordance with the provisions of the Listing Rules.
CRH and their respective associates, being connected persons of the Company interested in the Acquisition,
will abstain from voting at the EGM. No other persons are required to abstain from voting at the EGM.
–1–THE SALE AND PURCHASE AGREEMENT
Date: 22 June, 2007, enter into among the Company, the Vendor and CRH after trading hours for
the Shares on the Stock Exchange. For the twelve months preceding the date of the Sale and
Purchase Agreement, no agreement has been entered into between the Company and CRH or
any of its associates with which the Acquisition should be aggregated under the Listing
Rules.
Parties: (1) Vendor: Emax Capital Limited, a wholly-owned subsidiary of CRH
(2) Purchaser: the Company
(3) Guarantor: CRH, which will guarantee the due and punctual performance and
observance by the Vendor of its obligations under the Sale and Purchase
Agreement and the Deed of Indemnity
The Vendor and CRH are both connected persons of the Company within the meaning of the Listing Rules.
Sale Shares: 2 ordinary shares of US$1 each, representing the entire issued share capital of Toprun as at
the date hereof and on Completion, which are registered in the name of and beneficially
owned by the Vendor. Toprun will become a subsidiary of the Company after Completion
and, accordingly, the financial results of Toprun will be consolidated into the accounts of the
Company.
Purchase Price: HK$170.00 million. The Purchase Price will be satisfied by cash from internal resources of
the Group on the date of Completion.
Pursuant to the Sale and Purchase Agreement, for so long as the Construction Licence is suspended or revoked
or failed to renew upon expiration after Completion (save that such revocation or suspension or failure was
caused by any wrongful act or omission or as a result of the negligence on the part of the Purchaser after
Completion), the Vendor will repurchase the Sale Shares at a price which is equivalent to the total Purchase
Price plus interest calculated at the rate of 50bp above HIBOR from the date of Completion, up to the date of
payment by the Vendor. If only the Electrical and Mechanical Engineering Licence is suspended or revoked or
failed to renew upon expiration after Completion without affecting the validity of the Construction Licence
(save that such revocation or suspension or failure was caused by any wrongful act or omission or as a result of
the negligence on the part of the Purchaser after Completion), HK$13.75 million plus interest calculated at the
rate of 50bp above HIBOR from the date of Completion up to the date of payment by the Vendor shall be paid
by the Vendor to the Group.
The following diagram illustrates the shareholding structure of Toprun as at the date of this announcement:
The Vendor
100%
Toprun
100%
100% 100%
Subsidiaries engaged in construction Subsidiaries engaged in decoration
business in the PRC business in Hong Kong and the PRC
CONSIDERATION
The Purchase Price and the terms of the Sale and Purchase Agreement have been arrived at after arm’s length
negotiations between the Parties.
The Purchase Price will be satisfied in the manner sets out in the paragraph headed “The Sale and Purchase
Agreement”.
–2–The Purchase Price of HK$170.00 million represents a price earnings multiple of approximately 9.83 times the
unaudited combined net profit after taxation of the Sales Group for the year ended 31 December, 2006. The
Purchase Price is equivalent to approximately 1.48 times the unaudited combined net book value of the Sales
Group as at 31 May, 2007 of about HK$115.14 million. The Directors (excluding the independent non-executive
Directors whose opinion will be subject to the advice of the independent financial adviser) consider that the
terms of the Sale and Purchase Agreement, including the Purchase Price, are fair and reasonable. In arriving at
the Purchase Price, the Board has also made reference to the valuation of other companies listed on the Stock
Exchange which engaged in similar businesses as that of the Sales Group and considers that the Purchase Price
is comparable to the valuation of these comparable companies.
PROFIT GUARANTEE
Pursuant to the Sale and Purchase Agreement, CRH has guaranteed to the Company that the net profit after
taxation of the Sales Group for the year ending 31 December, 2007 will not be less than HK$17.30 million. In
the event that such profit cannot achieve the guaranteed level, CRH will compensate the Company the shortfall
between HK$17.30 million and the net profit after taxation of the Sales Group for the year ending 31 December,
2007 on a dollar-to-dollar basis. If the Sales Group is loss making for the year ending 31 December, 2007,
CRH will compensate the Company the aggregate of the HK$17.30 million and the net loss after taxation of the
Sales Group for that period on a dollar-to-dollar basis. In the event that the net profit after taxation of the Sales
Group for the year ending 31 December, 2007 is less than HK$17.30 million and entitling the Company to
claim against CRH, further announcement will be made by the Company.
CONDITION PRECEDENT
Completion is subject to the approval by the Independent Shareholders at the EGM by poll of the acquisition
by the Company of the Sale Shares.
The Condition sets out above shall not be waived in any event.
If the Condition has not been fulfilled by 31 August, 2007 (or such other date as the Parties may agree in
writing), the Sale and Purchase Agreement shall thereupon become invalid and ineffective.
DEED OF INDEMNITY
On Completion, the Company, the Vendor and CRH will enter into the Deed of Indemnity. Subject to certain
limitations as stated in the Deed of Indemnity, the Vendor undertakes to the Company to indemnify and keep
indemnified the Company from and against any tax liabilities in relation to the business activities of the Sales
Group prior to Completion and other as specified in the Deed of Indemnity.
CRH undertakes to guarantee the due performance of the Vendor’s obligation under the Deed of Indemnity.
COMPLETION
Completion will take place on or before the fifth Business Day after the Condition has been fulfilled in
accordance with the Sale and Purchase Agreement or such other date as the Parties may agree.
SIMPLIFIED STRUCTURE OF THE COMPANY
The following diagram sets out the simplified structure of the Company as at the date of this announcement:
The Company
100% 100% 100%
King Role Limited Boom Go
Strong Foundation Developments Limited
Group Limited
100% 100% 100%
Subsidiaries engaged in Subsidiaries engaged in
21.53% 70.4% Cosmart Resources Limited
property development business property investment business
100% 100%
華潤置地（北京）股份有限公司
China Resources Land (Beijing) Charmlink Enterprises Limited Kennex Enterprises Limited
Co., Limited
51% 49%
100%
北京華潤新鎮置業有限責任公司 華潤置地（成都）發展有限公司
Beijing China Resources Xin Zhen China Resources Land (Chengdu)
Property Co., Ltd. Development Company Limited
–3–The following diagram sets out the proposed simplified structure of the Company immediately after Completion:
The Company
100% 100% 100%
King Role Strong Foundation Boom Go
Limited Developments Limited Group Limited 100%
100% 100% 100%
Subsidiaries engaged in property Subsidiaries engaged in
21.53% 70.4% Cosmart Resources Limited Toprun
development business property investment business
100% 100%
100% 100%
華潤置地（北京）股份有限公司
Charmlink Enterprises Kennex Enterprises Subsidiaries engaged in Subsidiaries engaged in decoration
China Resources Land (Beijing)
Limited Limited construction business in the PRC business in Hong Kong and the PRC
Co., Limited
51% 49%
100%
北京華潤新鎮置業有限責任公司 華潤置地（成都）發展有限公司
Beijing China Resources Xin Zhen China Resources Land (Chengdu)
Property Co., Ltd. Develoment Company Limited
INFORMATION OF THE COMPANY, TOPRUN, THE VENDOR AND CRH
The Company is an investment holding company and the activities of its principal subsidiaries are property
investment, development and management in the PRC.
Toprun is an investment holding company. The Sales Group is principally engaged in construction and decoration
business in the PRC. The major licenses for conducting its businesses include:
1. Building Construction Main Contractor Class I (房 屋 建 築 工 程 施 工 總 承 包 壹 級 );
2. Mechanical and Electrical Engineering and Installation Main Contractor Class I (機 電 安 裝 工 程 施 工
總 承 包 壹 級 );
3. Urban Utilities Main Contractor Class I (市 政 公 用 工 程 施 工 總 承 包 壹 級 );
4. Decoration Engineering Specialist Contractor Class I (建 築 裝 修 裝 飾 工 程 專 業 承 包 壹 級 );
5. Mechanical and Electrical Equipment Installation Specialist Contractor Class I (機 電 設 備 安 裝 工 程
專 業 承 包 壹 級 );
6. Curtain Wall Specialist Contractor Class I (建 築 幕 工 程 專 業 承 包 壹 級 ); and
7. Building Intelligent System Specialist Contractor Class I (建 築 智 能 化 工 程 專 業 承 包 壹 級 ).
The Vendor is an investment holding company and it wholly owns Toprun before Completion. The Vendor is a
wholly-owned subsidiary of CRH, which in turn is the controlling shareholder of the Company. The principal
activity of CRH is investment holding.
The aggregate historical investment cost to the Vendor of its 100% interest in the shares of Toprun is
approximately HK$115 million. Based on the Management Accounts, the unaudited combined profit before and
after taxation of the Sales Group for the year ended 31 December, 2005 were approximately HK$22.21 million
and HK$18.03 million, respectively. The unaudited combined profit before and after taxation of the Sales
Group for the year ended 31 December, 2006 were approximately HK$22.06 million and HK$17.30 million,
respectively. The unaudited combined net assets of the Sales Group as at 31 May, 2007 was approximately
HK$115.14 million.
REASONS FOR AND BENEFITS OF THE ACQUISITION
The Company is an investment holding company and the activities of its principal subsidiaries are property
development, investment and management in the PRC. The Sales Group is a leading construction group in the
PRC which also provides design, decoration and furnishing services to its clients.
The Directors (excluding the independent non-executive Directors whose opinion will be subject to the advice
of the independent financial adviser) are of the view that the Acquisition is beneficial to the Group, strategically,
operationally, and financial wise.
–4–In the past two years ended 31 December 2006, the Group had engaged the Sales Group to provide construction
and other services to the Group, amounting to approximately HK$128.8 million and approximately HK$161.5
million, respectively. Those transactions constituted connected transactions pursuant to the Listing Rules and
had been previously announced by the Company on 23 May, 2005, 4 August, 2005 and 29 March, 2006 and
approved by Independent Shareholders in accordance with the Listing Rules. After Completion, such connected
transactions will be eliminated.
The operations of the Sales Group are related to and also complimentary to the Group’s existing core business.
The vertical integration, as a result of the Acquisition, will allow the Group to add greater value to its clients
by providing them with one-stop solution to better meet their demand for products and services required along
the whole value chain of investment and development property business, thus the Acquisition will help enhance
competitiveness of the Group within the market. The Acquisition will also offer the Group with significant
synergy opportunities in areas such as resources sharing (human and physical resources), cost control and
quality assurance of its projects. Moreover, the Acquisition will enhance corporate governance of the Company.
It will also broaden the income base of the Company and be earnings accertive.
As such, the Directors (excluding the independent non-executive Directors whose opinion will be subject to the
advice of the independent financial adviser) are of the view that the Acquisition is on normal commercial terms
which are fair and reasonable and in the best interests of the Company and the Shareholders as a whole.
DISCLOSEABLE AND CONNECTED TRANSACTION
The Vendor is a wholly-owned subsidiary of CRH, which in turn is the controlling shareholder of the Company
through its direct and indirect interest in the Company as at the date of this announcement. As such, the Vendor
and CRH are both connected persons of the Company within the meaning of the Listing Rules and therefore,
the entering into of the Sale and Purchase Agreement constitutes a connected transaction of the Company.
Further, based on the percentage ratio calculations under the Listing Rules, the entering into of the Sale and
Purchase Agreement also constitutes a discloseable transaction of the Company. The Directors also consider
that the entering into of the Sale and Purchase Agreement is of price-sensitive nature. Accordingly, this
announcement is also made pursuant to Rule 13.09(1) of the Listing Rules.
In light of all of the above, the entering into of the Sale and Purchase Agreement is subject to the reporting,
announcement and Independent Shareholders’ approval requirements, by way of poll at the EGM, as set out in
the relevant provisions of Chapter 13, 14 and 14A of the Listing Rules.
GENERAL
The terms of the Sale and Purchase Agreement are made on an arm’s length basis and the Directors (excluding
the independent non-executive Directors whose opinion will be subject to the advice of the independent financial
adviser) are of the view that the terms of the Sale and Purchase Agreement are normal commercial terms, fair
and reasonable and in the interests of the Shareholders as a whole.
The Independent Board Committee has been established to advise the Independent Shareholders in respect of
the Acquisition. CIMB-GK Securities (HK) Ltd. has been appointed as the independent financial advisor to
advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition. A
circular containing, among other things, further information on the Sale and Purchase Agreement, further
information of the Sales Group, the advice of the independent financial adviser to the Independent Board
Committee and the Independent Shareholders in relation to the Sale and Purchase Agreement, the recommendation
of the Independent Board Committee to the Independent Shareholders in relation to the Sale and Purchase
Agreement, the notice convening the EGM and a proxy form will be despatched to the Shareholders in accordance
with the provisions of the Listing Rules.
CRH and their respective associates, being the connected persons of the Company interested in the Acquisition,
will abstain from voting at the EGM. No other persons are required to abstain from voting at the EGM. The
votes of the Independent Shareholders regarding the resolution for approval of the Sale and Purchase Agreement
and the transactions contemplated thereby will be taken by way of a poll at the EGM.
As at the date of this announcement, the executive Directors are Mr. Song Lin (Chairman) and Mr. Wang Yin
(Managing Director); the non-executive Directors are Mr. Jiang Wei, Mr. Yan Biao, Mr. Liu Yan Jie and Mr.
Xie Sheng Xi; and the independent non-executive Directors are Mr. Wang Shi, Mr. Ho Hin Ngai, Bosco, Mr.
Chan Mo Po, Paul and Mr. Andrew Y. Yan.
–5–DEFINITIONS
“Acquisition” the proposed acquisition of certain construction and related businesses
by way of the purchase of the entire issued share capital of Toprun by
the Company pursuant to the Sale and Purchase Agreement
“associate” has the meaning ascribed thereto in the Listing Rules
“Board” the board of Directors
“Business Day” a day on which banks in Hong Kong are generally open for business
(excluding Saturday)
“BVI” British Virgin Islands
“Company” China Resources Land Limited (華 潤 置 地 有 限 公 司 ), a company
incorporated in the Cayman Islands with limited liability and the Shares
are listed on the Stock Exchange
“Completion” completion of the sale and purchase of the Sale Shares in accordance
with the provisions of the Sale and Purchase Agreement
“Condition” the condition sets out in the paragraph headed “Condition Precedent”
of this announcement
“connected person(s)” has the meaning ascribed thereto in the Listing Rules
“Construction Licence” the Licence of Construction Enterprises Qualification (建 築 業 企 業
資 質 証 書 ) issued by Ministry of Construction of the PRC to the
relevant companies within the Sales Group for commercial properties
construction
“controlling shareholder” has the meaning ascribed thereto in the Listing Rules
“CRH” 華 潤（ 集 團 ）有 限 公 司 (China Resources (Holdings) Company
Limited), a company incorporated in Hong Kong with limited liability
and is an investment holding company
“Deed of Indemnity” the deed of indemnity to be entered into between the Vendor, the
Company and CRH on Completion in relation to the tax liabilities of
the Sales Group prior to Completion and other liabilities as specified
in the Deed of Indemnity
“Directors” the directors of the Company
“EGM” the extraordinary general meeting of the Company to be convened
and held for the purpose of considering and, if thought fit, approving
the Acquisition
“Electrical and Mechanical the Licence of Construction Enterprises Qualification (建 築 業 企 業
Engineering Licence” 資 質 証 書 ) issued by Ministry of Construction of the PRC to the
relevant companies within the Sales Group for electrical and
mechanical engineering business
“Encumbrances” rights of pre-emption, options, liens, claims, equities, charges,
mortgages, pledges, third-party rights or interests of any nature
“Group” the Company and its subsidiaries
“HIBOR” Hong Kong Interbank Offered Rate
“HK$” or “Hong Kong dollars” Hong Kong dollars, the lawful currency of Hong Kong from time to
time
–6–“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee” the independent board committee of the Company formed by all the
independent non-executive Directors to advise the Independent
Shareholders on the terms of the Sale and Purchase Agreement
“Independent Shareholders” Shareholders (other than CRH and its respective associates) who are
not required to abstain from voting at the EGM
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Management Accounts” the unaudited combined balance sheet and the unaudited combined
income statement of the Sales Group for the years ended 31 December,
2005 and 31 December, 2006 and for the five months ended 31 May,
2007 prepared in accordance with the Hong Kong Generally Accepted
Accounting Principles
“Parties” the parties to the Sale and Purchase Agreement
“PRC” the People’s Republic of China which, for the purpose of this
announcement, excludes Hong Kong, Taiwan and the Macau Special
Administrative Region of the PRC
“Purchaser” the purchaser pursuant to the Sale and Purchase Agreement, i.e. the
Company
“Purchase Price” the purchase price of HK$170 million payable by the Purchaser for
the Sale Shares pursuant to the Sale and Purchase Agreement
“RMB” Renminbi, the lawful currency of the PRC from time to time
“Sale and Purchase Agreement” the conditional sale and purchase agreement dated 22 June, 2007
entered into between the Company, the Vendor and CRH in respect of
the sale and purchase of the Sale Shares after trading hours for the
Shares on the Stock Exchange
“Sales Group” Toprun and its subsidiaries
“Sale Shares” 2 ordinary shares of US$1 each, representing the entire issued share
capital of Toprun as at the date hereof and on Completion, which are
registered in the name of and beneficially owned by the Vendor
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company
“Shareholder(s)” holders of the Shares
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Toprun” Toprun Investments Limited, a company incorporated in the BVI with
limited liability and is a wholly-owned subsidiary of the Vendor before
Completion
“Vendor” Emax Capital Limited, a company incorporated in the BVI with limited
liability and is a wholly-owned subsidiary of CRH
By order of the Board of
CHINA RESOURCES LAND LIMITED
SONG Lin
Chairman
Hong Kong, 22 June, 2007
–7–For the purposes of this announcement, unless otherwise specified, conversions of RMB into Hong Kong
dollars are based on the approximate exchange rate of RMB0.98 to HK$1.00, for the purposes of illustration
only. No representation is made that any amount in Hong Kong dollars or RMB could have been or could be
converted at the above rate or at any other rates.
“Please also refer to the published version of this announcement in The Standard.”
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