Swire Pacific Limited
(incorporated in Hong Kong with limited liability)
(Stock Codes: 19 and 87)
LISTING RULE 13.09 ANNOUNCEMENT
On 8 June 2006, Air China, Cathay, CNAC Limited, CITIC Pacific and SPAC
entered into a conditional agreement in relation to (i) the restructuring
of the parties' shareholdings in Cathay and Dragonair and (ii) the
acquisition by Cathay of additional shares in Air China. If the agreement
becomes unconditional, (1) Dragonair will become a wholly-owned subsidiary
of Cathay, (2) Air China will become a substantial shareholder of Cathay
and (3) Cathay will increase its shareholding in Air China.
Cathay has offered to acquire all the Dragonair Shares which it does not
already own for a total consideration of HK$8.22 billion (based on a
valuation of Dragonair of HK$10.00 billion or HK$20.00 per Dragonair
Share) to be satisfied by a combination of the issue of 548,045,724 new
Cathay Shares at an issue price of HK$13.50 per share and HK$0.82 billion
in cash.
Each of SPAC, CNAC Limited and CITIC Pacific has agreed to accept the
offer from Cathay to acquire their Dragonair Shares. To the extent that
any Dragonair Minority Shareholders do not accept the offer from Cathay to
acquire their Dragonair Shares, Cathay intends to exercise its powers
under section 168 of the Companies Ordinance (Cap.32 of the Laws of Hong
Kong) following completion of the Transaction to acquire compulsorily the
remaining Dragonair Shares from the relevant Dragonair Minority
Shareholders.
SPAC and CITIC Pacific have agreed to sell to Air China 40,128,292 and
359,170,636 Cathay Shares respectively. The consideration payable by Air
China for such Cathay Shares is HK$13.50 per share.
Cathay has agreed to subscribe in cash for 1,179,151,364 Air China H
Shares at an aggregate subscription price of HK$4.07 billion, representing
HK$3.45 per Air China H Share.
SPAC and CITIC Pacific have agreed to sell on or before Completion, such
number of Cathay Shares as will result in the percentage of Cathay Shares
held by them on Completion being 40% and 17.50% respectively and the percentage of Cathay Shares in public hands being not less than 25%.
Under the Restructuring Agreement, SPAC and CITIC Pacific have agreed to
recommend to the Cathay Board that as soon as practicable following
Completion and in any event, no later than 60 days following Completion,
Cathay will pay a special interim dividend of HK$0.32 per Cathay Share.
SPAC, CNAC Limited, CITIC Pacific and Air China have entered into a
shareholders agreement for the purpose of regulating their relationship
with each other as shareholders of Cathay and certain aspects of the
affairs of, and their shareholdings in, Cathay, following completion of
the Transaction.
Under the Shareholders Agreement:
(i) the parties have agreed that the Cathay Board will, subject to
adjustment in certain circumstances, consist of four non-executive
directors nominated by SPAC, two non-executive directors nominated by each
of CITIC Pacific and Air China, five executive directors nominated by SPAC
and four independent non-executive directors;
(ii) the parties have agreed to support, including by exercise (to the
extent permitted by law and the rules of the Exchange) of their respective
voting rights as shareholders of Cathay, the continuation and periodic
renewal of the existing management arrangements for Cathay and its
subsidiaries, including the services agreement between John Swire & Sons
(H.K.) Limited and Cathay, and their extension to Dragonair and its
subsidiaries substantially on their current terms; and
(iii) to support the implementation of the Operating Agreement and by
exercise (to the extent permitted by law and the rules of the Exchange) of
their respective voting rights as shareholders of Cathay, its continuation
and any periodic renewal of it.
In addition, the parties have agreed to the following in relation to their
shareholdings in Cathay:
(i) SPAC has agreed that the beneficial interest of SPAC and its group
in the Cathay Share Capital will not exceed 44.90% (49.90% if (i) CITIC
Pacific and its group or (ii) Air China and its group increase their
respective combined aggregate beneficial interest in the Cathay Share
Capital to above 22.45%), except with the prior written consent of the
other parties;
(ii) Each of (i) CITIC Pacific and (ii) Air China and CNAC Limited have
agreed that the combined aggregate beneficial interest of respectively
CITIC Pacific and its group and Air China and its group in the Cathay
Share Capital will not exceed 29.99%, except with the prior written
consent of the other parties; and
(iii) CITIC Pacific, Air China and CNAC Limited have agreed that, except
with the prior written consent of SPAC, their combined beneficial interest
in the Cathay Share Capital (including those of their groups ) will not
exceed 40% or the percentage beneficial interest of SPAC and its group in
the Cathay Share Capital (whichever is the lower).
(The undertakings by CITIC Pacific, Air China and CNAC Limited described
in paragraphs (ii) and (iii) above will cease to apply if SPAC (and/or its
group companies) disposes of Cathay Shares and as a result SPAC (together
with its group) is beneficially interested in less than 30% of the Cathay
Share Capital and Air China (together with its group) or CITIC Pacific (
together with its group) is beneficially interested (whether or not as a
result of such disposal by SPAC and/or its group companies) in more Cathay
Shares than SPAC (together with its group). The undertaking by CITIC
Pacific, Air China and CNAC Limited in paragraph (iii) above will also
cease to apply if SPAC (together with its group) is beneficially
interested in 44.50% or more of the Cathay Share Capital. The
undertakings by SPAC, CITIC Pacific, Air China and CNAC Limited described
above will cease to apply in favour of any shareholder which is a party to
the Shareholders Agreement whose beneficial interest in the Cathay Share
Capital (including that of its group) is less than 15%.)
The parties to the Shareholders Agreement have also agreed that so long as
a Shareholder is beneficially interested (together with its group) (
directly or indirectly) in 15% or more of the Cathay Share Capital, it
will not make a takeover offer for Cathay or accept a takeover offer from
a third party, unless that offer has been recommended by the Cathay Board.
Air China and Cathay have today also jointly announced that they have
entered into the Operating Agreement.
Based on the assumptions and reasoning set out below under the heading "
Regulatory and Listing Rule Implications":
Air China
* the acquisition by Air China of Cathay Shares from CITIC Pacific
constitutes a connected transaction for Air China and is subject to the
approval of the independent shareholders of Air China;
* the issue of Air China H Shares to Cathay constitutes a connected
transaction for Air China and is subject to the approval of the
independent shareholders of Air China;
* the sale of Dragonair Shares by CNAC Limited (as a subsidiary of Air
China) to Cathay and the acquisition of Cathay Shares by CNAC Limited (as
a subsidiary of Air China) from Cathay each constitutes a connected
transaction for Air China and is subject to the approval of the
independent shareholders of Air China;
* the acquisition of Cathay Shares by CNAC Limited (as a subsidiary of Air
China) from Cathay, when aggregated with the acquisition by Air China of
Cathay Shares from CITIC Pacific and SPAC, constitutes a major transaction
for Air China and is subject to the approval of the shareholders of Air
China;
* the issue of additional Air China H Shares to Cathay is subject to
approval by a special resolution of shareholders in general meeting of Air
China and approvals by special resolutions of shareholders at separate
class meetings of Air China in accordance with Air China's articles of
association and Rule 19A.38 of the Listing Rules;
Cathay
* the acquisition of Dragonair Shares by Cathay from SPAC and CITIC
Pacific constitutes a connected transaction and is subject to the approval
of the independent shareholders of Cathay;
* the allotment and issue of new Cathay Shares by Cathay to SPAC and CITIC
Pacific constitutes a connected transaction for Cathay and is subject to
the approval of the independent shareholders of Cathay;
* the acquisition of Dragonair Shares by Cathay from each of SPAC, CITIC
Pacific, CNAC Limited and the Dragonair Minority Shareholders, when
aggregated, constitutes a discloseable transaction for Cathay;
* the acquisition by Cathay of additional Air China H Shares constitutes a
discloseable transaction for Cathay;
* the proposed increase of the authorised share capital of Cathay from 3,
900,000,000 Cathay Shares to 5,000,000,000 Cathay Shares to facilitate the
Transaction is subject to the approval of the shareholders of Cathay;
* the allotment and issue by Cathay of new Cathay Shares to SPAC and CITIC
Pacific is subject to the approval of the shareholders of Cathay pursuant
to Rule 13.36(1)(a) of the Listing Rules;
CNAC Limited
* the sale by CNAC Limited of Dragonair Shares to Cathay in consideration
of Cathay issuing new Cathay Shares and paying HK$0.43 billion in cash to
CNAC Limited constitutes a very substantial disposal and a very
substantial acquisition for CNAC Limited and is therefore subject to the
approval of the shareholders of CNAC Limited;
CITIC Pacific
* the sale by CITIC Pacific of Dragonair Shares to Cathay constitutes a
connected transaction for CITIC Pacific and is subject to the approval of
the independent shareholders of CITIC Pacific;
* the sale by CITIC Pacific of Dragonair Shares to Cathay constitutes a
discloseable transaction for CITIC Pacific;
* the acquisition of new Cathay Shares by CITIC Pacific as consideration
for the Dragonair Shares constitutes a connected transaction for CITIC
Pacific and is subject to the approval of the independent shareholders of
CITIC Pacific;
* the acquisition by CITIC Pacific of new Cathay Shares as consideration
for the Dragonair Shares constitutes a discloseable transaction for CITIC
Pacific; and
* the sale by CITIC Pacific of Cathay Shares to Air China constitutes a
discloseable transaction for CITIC Pacific.
SPAC
* This joint announcement is made, in the case of SPAC, under Rule 13.09
of the Listing Rules.
A circular giving further details of the Transaction, the views of the
independent non-executive directors of Air China and independent financial
adviser to Air China, together with a notice of the Air China EGM will be
dispatched to shareholders of Air China as soon as practicable.
Details of the Transaction, to the extent they constitute connected
transactions for Air China, will also be included in Air China's next
annual report and accounts in accordance with Rule 14A.45 of the Listing
Rules.
A circular giving further details of the Transaction, the views of the
independent non-executive directors of Cathay and independent financial
adviser to Cathay, together with notice of the Cathay EGM will be
dispatched to shareholders of Cathay as soon as practicable.
Details of the Transaction, to the extent they constitute connected
transactions for Cathay, will also be included in Cathay's next annual
report and accounts in accordance with Rule 14A.45 of the Listing Rules.
A circular giving further details of the Transaction, the views of the
independent non-executive directors of CNAC Limited and independent
financial adviser to CNAC Limited, together with a notice of the CNAC
Limited EGM will be dispatched to shareholders of CNAC Limited as soon as
practicable.
A circular giving further details of the Transaction, the views of the
independent non-executive directors of CITIC Pacific and independent
financial adviser to CITIC Pacific, together with a notice of the CITIC
Pacific EGM will be dispatched to shareholders of CITIC Pacific as soon as
practicable.
Details of the Transaction, to the extent they constitute connected
transactions for CITIC Pacific, will also be included in CITIC Pacific's
next annual report and accounts in accordance with Rule 14A.45 of the
Listing Rules.
Conditional Undertaking and Request for Privatization of CNAC Limited
On Ling Investments Limited, which beneficially owns approximately 9.75%
of the issued share capital of CNAC Limited, has given a conditional
irrevocable undertaking to Air China and CNAC Limited to vote in favour of
the shareholders' resolutions to be proposed at CNAC Limited's
shareholders' meeting to approve the sale by CNAC Limited of Dragonair
Shares to Cathay and the acquisition of Cathay Shares by CNAC Limited as
described in this announcement. The conditions precedent to On Ling's
undertaking are:
(a) the publication of an announcement by or on behalf of Air China of
a privatization offer in cash for all the issued shares of CNAC Limited,
other than those already owned by Air China and parties acting in concert
with it, on terms no less favourable than HK$2.80 per CNAC Limited Share;
and
(b) the independent financial adviser to CNAC Limited's independent
board of directors committee is of the opinion that the terms of the sale
of the Dragonair Shares and the privatization referred to in paragraph (a)
above from a financial perspective are fair and reasonable.
Following receipt of the conditional undertaking from On Ling Investments
Limited, CNAC Limited Directors have requested Air China to privatize CNAC
Limited by way of a scheme of arrangement, on the basis that the offer
price will be HK$2.80 per CNAC Limited share. Air China is currently
considering the request by CNAC Limited Directors and is seeking the
appropriate PRC regulatory approvals and financing to proceed with the
privatization offer. Air China is currently also in the process of
formulating the proposals for the privatization offer and will issue an
announcement if and as soon as the proposals are finalized. As certain
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