Air China Regulatory News (AIRC)

4 Jan 2008 07:00

Air China Ld04 January 2008 The Stock Exchange of Hong Kong Limited takes no responsibility for the contentsof this announcement, makes no representation as to its accuracy or completenessand expressly disclaims any liability whatsoever for any loss whatsoever arisingfrom or in reliance upon the whole or any part of the contents of thisannouncement. AIR CHINA LIMITED (Stock Code: 753) CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION: PURCHASE OF EQUITY INTEREST IN AIR CHINA CARGO FROM CITIC PACIFIC LIMITED SUMMARY On 3 January 2008, CNAC, a wholly-owned subsidiary of the Company entered intothe Sale and Purchase Agreement with Gold Leaf and CITIC Pacific, pursuant towhich CNAC has agreed to purchase from Gold Leaf the entire issued share capitalof Fine Star, which in turn holds 25% equity interest in the registered capitalof Air China Cargo. The aggregate consideration payable by CNAC for theTransaction is equal to approximately RMB857 million. The Transaction has beencompleted on 3 January 2008 as well. Air China Cargo operates air cargo services. Immediately prior to the completionof the Transaction, the Company held 51% equity interest of the registeredcapital of Air China Cargo. Upon the completion of the Transaction, the Company's interest in Air China Cargo (including indirect interest through CNAC)increases from 51% to 76%. As Air China Cargo is a subsidiary of the Company within the meaning of theListing Rules, Fine Star, Gold Leaf, and CITIC Pacific are therefore regarded asconnected persons of the Company within the meaning of the Listing Rules. TheTransaction constitutes a connected transaction and discloseable transaction ofthe Company under the Listing Rules. Currently, CNAHC directly ownsapproximately 40.40% of the total issued share capital of the Company and CNAHCthrough its wholly-owned subsidiary CNACG indirectly owns approximately 11.26%of the total issued share capital of the Company. Pursuant to Rule 14A.43 of theListing Rules, the Transaction has been approved by CNAHC and CNACG by way of awritten approval in lieu of a shareholders meeting of the Company. The Company shall, pursuant to the Listing Rules, dispatch a circular containingthe information required under the Listing Rules in relation to the Transactionwithin 21 days after the publication of this announcement. DESCRIPTION OF THE TRANSACTION On 3 January 2008, CNAC, a wholly-owned subsidiary of the Company entered intothe Sale and Purchase Agreement with Gold Leaf and CITIC PACIFIC, pursuant towhich CNAC has agreed to purchase from Gold Leaf the entire issued share capitalof Fine Star, which in turn holds 25% equity interest in the registered capitalof Air China Cargo. The Transaction has been completed on 3 January 2008 aswell. The details of the Transaction are summarized as follows: Parties to the Transaction (i) CNAC, a wholly-owned subsidiary of theCompany, as the purchaser, the principal business activity of which isinvestment holding; (ii) Gold Leaf, a wholly-owned subsidiary ofCITIC Pacific, as the vendor, the principal business activity of which isinvesting holding; and (iii) CITIC PACIFIC, which is engaged in a diversified range of businesses,including manufacturing of special steel, iron ore mining, property developmentand investment, infrastructure, marketing and distribution. Immediately prior to the completion of the Transaction, Gold Leaf wholly ownedFine Star, which in turn owns 25% equity interest in Air China Cargo. As AirChina Cargo is a subsidiary of the Company within the meaning of the ListingRules, Fine Star, Gold Leaf, and CITIC Pacific are therefore regarded asconnected persons of the Company within the meaning of the Listing Rules.Accordingly, the Transaction between CNAC and Gold Leaf and CITIC Pacificconstitutes a connected transaction of the Company within the meaning of theListing Rules. Assets to be acquired by the Company under the Transaction Pursuant to the Sale and Purchase Agreement, one share, being all the issuedshare capital, of Fine Star shall be transferred from Gold Leaf to CNAC. FineStar is an investment holding company, which holds 25% equity interest in AirChina Cargo. Consequently, upon completion of the Transaction the 25% equityinterest of the registered capital of Air China Cargo held by Fine Star isindirectly transferred to CNAC and the Company's interest in Air China Cargo(including indirect interest through CNAC) increases from 51% to 76%. Air China Cargo operates general cargo services, special cargo services forgoods and materials that require special handling, and mail and expressservices, through scheduled and unscheduled cargo flights and rented bellyholdspace of the Company's passenger aircraft. Consideration Upon the incorporation of Air China Cargo, CITIC Pacific made a capitalcontribution in aggregate of RMB550,000,000 equivalent, which represents 25% ofthe total share capital of Air China Cargo. CITIC Pacific subsequentlytransferred its shareholding of the 25% equity interest in Air China Cargo toits wholly-owned subsidiary Fine Star in November 2004. Pursuant to the Sale and Purchase Agreement, the aggregate consideration payableby CNAC for the Transaction is equal to approximately RMB857 million and hasbeen settled by cash upon the completion of the Transaction. The aggregate consideration comprises (i) HK$518,213,209 being the purchaseprice of the Shareholder Loan, and (ii) the purchase price of the one share,being the entire issued share capital, of Fine Star, which is equal to theaggregate consideration less the purchase price of the Shareholder Loan. The consideration for the Transaction is determined through arm's lengthnegotiation and reflects the mutually agreed valuation of Fine Star. Theconsideration for the Transaction also represents a multiple of Air China Cargo's net assets amount and that multiple represents a discount to prevailingmultiples for airline company acquisition deals in developed markets of AsiaPacific region. REASONS FOR AND BENEFITS OF THE TRANSACTION The Directors expect further growth in Chinese air cargo business and plan toincrease the Company's investment in that sector as a strategic move with aview to bringing into Air China Cargo more aviation industry related expertisepossessed by the Company. Upon the completion of the Transaction, the Company's interest in Air China Cargo (including indirect interest through CNAC)increases from 51% to 76% and the Company expects to account Air China Cargo asa consolidated subsidiary of the Company for accounting purpose while Air ChinaCargo was treated as a joint venture of the Company for accounting purpose priorto the completion of the Transaction. The Directors believe that the terms of the Transaction are fair and reasonableand in the interests of the shareholders of the Company as a whole. WRITTEN APPROVAL BY INDEPENDENT SHAREHOLDER As the relevant percentage ratios under Rule 14.07 of the Listing Rules for theTransaction are above 2.5%, the Transaction constitutes a connected transactionof the Company subject to independent shareholders approval. Currently, CNAHCdirectly owns approximately 40.40% of the total issued share capital of theCompany and CNAHC through its wholly-owned subsidiary CNACG indirectly ownsapproximately 11.26% of the total issued share capital of the Company. Each ofCNAHC and its associates (as defined in the Listing Rules, including CNACG) doesnot have any interest in the Transaction other than as a shareholder of theCompany (where applicable). To the best knowledge of the Directors of theCompany, no shareholder of the Company is required to abstain from voting if theCompany were to convene a general meeting for the approval of the Transaction.Pursuant to Rule 14A.43 of the Listing Rules, the Transaction has been approvedby CNAHC and CNACG by way of a written approval in lieu of a shareholdersmeeting of the Company. The Transaction also constitutes a discloseable transaction for the Companyunder the Listing Rules. Pursuant to the Listing Rules requirements in respect of connected transactionsand discloseable transactions, the Company shall dispatch a circular containingthe information required under the Listing Rules, including a letter from theindependent board committee of the Company and a letter from the independentfinancial advisor of the Company, in relation to the Transaction within 21 daysafter the publication of this announcement. DEFINITION In this announcement, unless the context otherwise requires, the following termsshall have the following meanings: "A Shares" ordinary shares in the share capital of the Company with a nominalvalue of RMB1.00 each, which are subscribed for and traded in RMB on theShanghai Stock Exchange "Air China Cargo" Air China Cargo Co., Ltd., a company with limited liabilityincorporated in the PRC, the registered share capital of which was owned by theCompany, CITIC Pacific (through Fine Star) and the Capital Airport HoldingCompany by 51%, 25% and 24%, respectively, immediately prior to the completionof the Transaction and is owned by the Company and the Capital Airport HoldingCompany by 76% and 24% upon completion of the Transaction "CITIC Pacific" CITIC Pacific Limited, a company incorporated in Hong Kong "CNAC" China National Aviation Company Limited, a company incorporated in Hong Kong "CNACG" China National Aviation Corporation (Group) Limited, a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC as at the date of this announcement "CNAHC" China National Aviation Holding Company, a company incorporated under the laws of the People's Republic of China "Company" Air China Limited, a company incorporated in the People's Republic of China, whose H Shares are listed on The Stock Exchange of Hong Kong Limited as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A Shares are listed on the Shanghai Stock Exchange "Director" the director(s) of the Company "Fine Star" Fine Star Enterprises Corp., a company incorporated in the British Virgin Islands, which holds 25% equity interest in the registered capital of Air China Cargo "Gold Leaf" Gold Leaf Enterprises Holdings Ltd., a company incorporated in the British Virgin Islands "H Shares" overseas listed foreign shares of RMB1.00 each in the sharecapital of the Company "Listing Rules" The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited "PRC" the People's Republic of China, excluding, for the purpose of this circular only, Hong Kong, Macau and Taiwan "Sale and Purchase an agreement relating to the sale and purchase of the share Agreement" in and the shareholder's loan to Fine Star dated 3 January 2008 entered into among CNAC, Gold Leaf and CITIC Pacific pursuant to which, among other things, CNAC has agreed to purchase and Gold Leaf has agreed to sell the entire issued share capital of Fine Star "Shareholder Loan" all the loans made by CITIC Pacific Limited to Fine Staras at the close of business on the completion date for the Transaction, of whichthe amount as at 30 September, 2007 was HK$ 518,213,209, and Gold Leafundertakes in the Sale and Purchase Agreement to keep the responsibility of FineStar regarding to the shareholder loan unchanged in any and all aspects untilthat completion date "Transaction" the transactions contemplated under the Sale and Purchase Agreement By order of the BoardAir China LimitedHuang Bin Li Man KitJoint Company SecretariesBeijing, 3 January 2008 As at the date of this announcement, the Directors of the Company are MessrsKong Dong, Wang Shixiang, Yao Weiting, Christopher Dale Pratt, Chen Nan LokPhilip, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu Hung Lick, Henry*, Wu Zhipan*,Zhang Ke* and Jia Kang*. * Independent non-executive Director of the Company This information is provided by RNS The company news service from the London Stock Exchange