Disposal
May 15 2006 - 10:22AM
UK Regulatory
RNS Number:9817C
Guangdong Development Fund Ld
15 May 2006
Guangdong Development Fund Limited
15 May 2006
GUANGDONG DEVELOPMENT FUND LIMITED ("GDF" or "the Company")
Proposed disposal of interests in GD Decorative, Guangdong MDF, Honour Million
& Guangzhou Malting
1. INTRODUCTION
The Board of GDF is pleased to announce that the Company has conditionally
agreed to dispose of its interests in GD Decorative, Guangdong MDF, Honour
Million and Guangzhou Malting to subsidiaries of GDH for an aggregate
consideration of RMB 55 million (US$6.87 million), payable in cash on completion
which is expected to take place in the second half of 2006 subject to
Shareholders' approval and the Company obtaining all necessary approvals from
regulatory authorities in China.
GDH, through its wholly owned subsidiary, Guangdong Capital Holdings Limited,
owns 10,000,000 Ordinary Shares in GDF, representing approximately 10.3 per
cent. of the issued share capital of GDF. In addition, GDH is ultimately the
majority shareholder in each of the four companies in which GDF has
conditionally agreed to dispose of its interest. Under the Listing Rules, the
proposed Assets Disposal represents both a related party and a Class 1
transaction and therefore requires, and is conditional upon, the prior approval
of Shareholders.
Accordingly, a circular ("the Circular") setting out full details of the
proposal and a notice of an Extraordinary General Meeting ("EGM") at which
shareholder approval shall be sought will be despatched to Shareholders shortly.
As required by the Listing Rules, Guangdong Capital Holdings Limited will
abstain, and will undertake to take all reasonable steps to ensure that their
associates will abstain, from voting on the resolution at the EGM to approve the
Assets Disposal.
2. BACKGROUND TO AND REASONS FOR THE ASSETS DISPOSAL
Shareholders will be aware that on 23 February 2001, a special resolution was
passed at an extraordinary general meeting of the Company authorising the
Company and its directors to arrange for a timely and orderly disposal of all,
or substantially all, of the investment portfolio of the Company and that the
net proceeds arising from these disposals be distributed to Shareholders ("the
2001 Special Resolution").
Up until March 2005, little progress had been made in realising the Company's
long term investments. In March 2005, a shareholder requested an extraordinary
general meeting of the Company and proposed the replacement of the previous
directors with the current Directors, with a view to putting into effect the
outcome of the 2001 Special Resolution. At an extraordinary general meeting held
on 30 May 2005, the resolution to appoint the current Directors was approved.
The Assets Disposal reflects the Directors putting into effect the wishes of
shareholders which brought about the 2001 Special Resolution.
In relation to the Assets Disposal the Board of GDF has been advised by RSM
Robson Rhodes Corporate Finance.
3. INFORMATION ON THE SUBJECTS OF THE ASSETS DISPOSAL
As noted above, GDF is proposing to sell all of its interests in GD Decorative,
Guangdong MDF, Honour Million and Guangzhou Malting. Set out below are the
trading results for each of GD Decorative, Guangdong MDF, Honour Million and
Guangzhou Malting, which represent 100 per cent. of the reported turnover and
profit (or loss) after tax for each of these companies and not GDF's respective
interest in these results, and the investment income received by GDF from each
company for the last three financial years ended 31 December 2005.
GD DECORATIVE
The business of GD Decorative is involved in the manufacture and sales of
interior decorative materials in China, including the "PACO" brand laminate
flooring, melamine faced board and other decorative products. GDF owns 18 per
cent. of the issued share capital of GD Decorative with a carrying value of
GDF's interest (net of any provision) as at 31 December 2005 of US$621,455.
The audited financial results of GD Decorative for the three years ended 31
December 2005 were as follows:
Year Ended 31 December
2005 2004 2003
US$'000 US$'000 US$'000
Turnover 11,870 13,200 12,740
Profit after tax 1,140 1,020 2,150
Investment income received by GDF 70 Nil Nil
GUANGDONG MDF
The business of Guangdong MDF is involved in the manufacture of medium density
fibreboard under the "PACO" brand. GDF owns 11.22 per cent. of the issued share
capital of Guangdong MDF with a carrying value of GDF's interest (net of any
provision) as at 31 December 2005 of US$419,236.
The audited financial results of Guangdong MDF for the three years ended 31
December 2005 were as follows:
Year Ended 31 December
2005 2004 2003
US$'000 US$'000 US$'000
Turnover 16,680 18,840 18,610
Profit/(Loss) after tax (1,500) 330 1,250
Investment income received by GDF Nil Nil Nil
HONOUR MILLION
Honour Million is an investment company which owns a 61 per cent. equity
interest in Prospect Top Developments Limited, a company which owns the entire
issued share capital of Ningbo Malting. Ningbo Malting is involved in the
production and sales of beer malt. GDF has a 16.4 per cent. interest in Honour
Million (representing an effective equity interest of 10 per cent. in Ningbo
Malting) with a carrying value of GDF's interest (net of any provision) as at 31
December 2005 of US$578,406.
The audited financial results of Ningbo Malting for the three years ended 31
December 2005 were as follows:
Year Ended 31 December
2005 2004 2003
US$'000 US$'000 US$'000
Turnover 67,420 49,520 30,730
Profit/(Loss) after tax 3,340 540 (360)
Investment income received by GDF Nil Nil Nil
GUANGZHOU MALTING
Guangzhou Malting is involved in the production and sale of beer malt. GDF has a
29.5 per cent. interest in the issued share capital of Guangzhou Malting with a
carrying value of GDF's interest (net of any provision) as at 31 December 2005
of US$3,699,137.
The audited financial results of Guangzhou Malting for the three years ended 31
December 2005 were as follows:
Year Ended 31 December
2005 2004 2003
US$'000 US$'000 US$'000
Turnover 77,850 61,500 44,520
Profit/(Loss) after tax 4,110 2,340 (790)
Investment income received by GDF 450 Nil 860
Note: All of the above historical financial information has been sourced from
the published audited accounts of the Company for the years ending
31 December 2003, 2004 and 2005.
An independent valuation as at 31 December 2005 of the investments which are
subject to the Assets Disposal has been carried out by Vigers. This valuation
shows an aggregate value of the investments which are subject to the Assets
Disposal of US$5.32 million. The carrying value of the investments which are
subject to the Assets Disposal in the Company's accounts as at 31 December 2005
are stated by reference to the valuation by Vigers. For information, the
aggregate carrying values of the investments which are subject to the Assets
Disposal as at 31 December 2004 in the Company's accounts was US$4.28 million.
4. PRINCIPAL TERMS AND CONDITIONS OF THE ASSETS DISPOSAL
The Company has conditionally agreed to sell its shares in, and assign all of
its shareholder loans to GD Decorative, Guangdong MDF, Honour Million and
Guangzhou Malting to subsidiaries of GDH in four separate agreements which are
inter-conditional ("the Sale and Purchase Agreements") for an aggregate
consideration of RMB55 million (US$6.87 million).
Completion of the Assets Disposal is conditional, inter alia, upon:
(i) Shareholders' approval at the EGM; and
(ii) all of the conditions in each of the four separate agreements being
fulfilled.
If these conditions are not met within the period of 180 days from the date of
Sale and Purchase Agreements, the Assets Disposal will not proceed.
Further details of the principal terms of the Sale and Purchase Agreements are
set out in the Circular.
5. FINANCIAL EFFECTS OF THE ASSETS DISPOSAL
The value of investments subject to the Assets Disposal in the Group's accounts
is US$5.32m million as at 31 December 2005 against proceeds of US$6.87 million
and therefore the net assets of the Continuing Group will increase by US$1.55
million before any costs associated with the Assets Disposal.
Following the Assets Disposal, the investment income received by GDF may decline
as it will no longer be receiving investment income from the investments subject
to the Assets Disposal. GDF's investment income is dependent on the performance
of the underlying businesses in which it holds interests. For the year ended 31
December 2005, the preliminary statement of results shows that GDF received
investment income of US$1.4 million (2004: US$0.8 million) of which US$0.5
million (2004: nil) was received from the interests which are subject to the
Assets Disposal.
It is intended that the proceeds from the Assets Disposal, after deducting all
costs and expenses and taking into consideration the ongoing cash requirements
of the Company, will be distributed to Shareholders in accordance with the 2001
Special Resolution.
Enquiries:
RSM Robson Corporate Finance
Neil Crawford +44 (0)113 225 4100
Samantha Harrison +44 (0)20 7865 2238
DEFINITIONS
The following definitions apply throughout this announcement unless the context
otherwise requires:
"the Assets disposal of the all of the interests (being shareholdings and
Disposal" shareholder loans) of the Company in GD Decorative Material
(Zhongshan) Co., Ltd., Guangdong (Zhanjiang) Medium Density
Fibre Board Co. Ltd., Guangzhou Malting Company Ltd. and Honour
Million Industries Limited.
"Board" the current board of directors of GDF
"China" The People's Republic of China
"Circular" the circular to be posted to shareholders shortly
"Directors" the directors of the Company whose names are set out in the
Circular
"EGM" or the the extraordinary general meeting of GDF, notice of which is
"Extraordinary set out at the end of the Circular, or any adjournment
General thereof
Meeting"
"GDF" and "the Guangdong Development Fund Limited
Company"
"GDH" GDH Limited
"GD Decorative" GD Decorative Material (Zhongshan) Co., Ltd.
and "GDD"
"Guangdong Guangdong (Zhanjiang) Medium Density Fibre Board Co. Ltd.
MDF"
"Guangzhou Guangzhou Malting Company Ltd.
Malting" and
"Guangmai"
"HK$" Hong Kong Dollars, the lawful currency of Hong Kong
"Honour Honour Million Industries Limited
Million"
"Listing the listing rules prepared by the Financial Services Authority
Rules" in its capacity as the competent authority under Part VI of the
Financial Services and Markets Act 2000
"NAV" Net Asset Value
"Ningbo Malting Ningbo Malting Co Ltd
and "Ningmai"
"RMB" Renminbi, the lawful currency of the People's Republic of
China
"Shareholder" or a holder of Shares
"Shareholders"
"Shares" or ordinary shares of US$0.01 nominal value each in the share
"Ordinary capital of GDF
Shares"
"the Subjects" GD Decorative Material (Zhongshan) Co., Ltd., Guangdong
(Zhanjiang) Medium Density Fibre Board Co. Ltd., Ningbo Malting
Co Ltd, and Guangzhou Malting Company Ltd.
"US$" United States Dollars, the lawful currency of the United States
of America
"Vigers" Vigers Appraisal & Consulting Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
DISMGGMKDKNGVZM
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