Purchase of Equity Interest i

RNS Number : 0392Q

Air China Ld

02 April 2009

 



Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 753)

CONNECTED TRANSACTION: 

PURCHASE OF EQUITY INTEREST IN AIR CHINA CARGO 

FROM CAPITAL AIRPORTS HOLDING COMPANY

SUMMARY

On 2 April 2009, the Company entered into the Sale and Purchase Agreement with Capital Airports, pursuant to which the Company has agreed to purchase from Capital Airports its 24% equity interest in the registered capital of Air China Cargo. The aggregate consideration payable by the Company for the Transaction is equal to RMB718,004,045.

Air China Cargo operates air cargo services. Immediately prior to the completion of the Transaction, the Company held (including indirect interest through CNAC) 76% equity interest of the registered capital of Air China Cargo. Upon the completion of the Transaction, the Company's interest in Air China Cargo (including indirect interest through CNAC) will increase from 76% to 100%.

As Air China Cargo is a subsidiary of the Company and Capital Airports is a substantial shareholder of Air China Cargo within the meaning of the Listing Rules, Capital Airports is therefore regarded as a connected person of the Company within the meaning of the Listing Rules. The Transaction constitutes a connected transaction of the Company under the Listing Rules. As at the date of this announcement, CNAHC directly owns 4,949,066,567 shares (accounting for approximately 40.40% of the total issued share capital of the Company) and CNAHC through its wholly-owned subsidiary CNACG indirectly owns 1,447,334,920 shares (accounting for approximately 11.81% of the total issued share capital of the Company). Pursuant to Rule 14A.43 of the Listing Rules, the Transaction has been approved by CNAHC and CNACG by way of a written approval in lieu of a shareholders meeting of the Company.

The Company shall, pursuant to the Listing Rules, dispatch a circular containing the information required under the Listing Rules in relation to the Transaction within 21 days after the publication of this announcement.

DESCRIPTION OF THE TRANSACTION 

On 2 April 2009, the Company entered into the Sale and Purchase Agreement with Capital Airports, pursuant to which the Company has agreed to purchase from Capital Airports its 24% equity interest in the registered capital of Air China Cargo.

The details of the Transaction are summarised as follows:

Parties to the Transaction

(i)    The Company, as the purchaser, the principal business activity of which is carrying air passenger, carrying air cargo and providing airline-related services; 

(ii)    Capital Airports, as the vendor, the principal business activity of which is providing ground handling services to domestic and international airlines, providing the operating and management services to member airports and other member entities, counters and premises rental, management of car parking, housing rental and properties management.

Immediately prior to the completion of the Transaction, Capital Airports owns 24% equity interest in Air China Cargo. As Air China Cargo is a subsidiary of the Company and Capital Airports is a substantial shareholder of Air China Cargo within the meaning of the Listing Rules, Capital Airports is therefore regarded as a connected person of the Company within the meaning of the Listing Rules. Accordingly, the Transaction between the Company and Capital Airports constitutes a connected transaction of the Company within the meaning of the Listing Rules.

Assets to be acquired by the Company under the Transaction 

Pursuant to the Sale and Purchase Agreement, 24% of the equity interest in Air China Cargo shall be transferred from Capital Airports to the Company. Consequently, upon completion of the Transaction, the Company's interest in Air China Cargo (including indirect interest through CNAC) will increase from 76% to 100%.

Air China Cargo operates general cargo services, special cargo services for goods and materials that require special handling, and mail and express services, through scheduled and unscheduled cargo flights and rented bellyhold space of the Company's passenger aircraft. The net profits of Air China Cargo for the financial years ended 31 December 2006 and 2007 were RMB10.15 million (adjusted according to the PRC Accounting Standards for Business effective as of 1 January 2007) and RMB-537.9 million respectively. As at 31 December 2008, Air China Cargo's total assets was RMB5,143 million (unaudited), total liabilities was RMB3,191 million (unaudited), shareholders' equity was RMB1,952 million (unaudited). The revenue of Air China Cargo for the year 2008 is RMB7,067million (unaudited) and net profits is RMB41 million (unaudited). The book value of the 24% equity interest held by Capital Airports in Air China Cargo is RMB468 million (unaudited).

Consideration

Upon the incorporation of Air China Cargo, Capital Airports made a capital contribution in aggregate of RMB582 million, which represents 24% equity interest in the registered capital of Air China Cargo.

Pursuant to the Sale and Purchase Agreement, the aggregate consideration payable by the Company for the Transaction is equal to RMB718,004,045 and will be settled by cash upon the completion of the Transaction.

The consideration for the Transaction was determined through arm's length negotiation and was mutually agreed between the parties. The consideration for the Transaction was determined with reference to the net asset value of Air China Cargo as at 30 September 2008 and the consideration for the acquisition of 25% equity interest of the share capital of Air China Cargo on 3 January 2008 by the Company as set out in the circular of the Company dated 24 January 2008.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Directors expect further growth in Chinese air cargo business and plan to increase the Company's investment in that sector as a strategic move with a view to bringing into Air China Cargo more aviation industry related experience and resources possessed by the Company and so that the Company may plan, as a whole, matters relating to transportation capabilities and maintenance. Upon the completion of the Transaction, the Company's interest in Air China Cargo (including indirect interest through CNAC) will increase from 76% to 100%.

The Directors believe that the terms of the Transaction are fair and reasonable and 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 the Transaction are above 2.5%, the Transaction constitutes a connected transaction of the Company subject to independent shareholders approval. As at the date of this announcement, CNAHC directly owns 4,949,066,567 shares (accounting for approximately 40.40% of the total issued share capital of the Company) and CNAHC through its wholly-owned subsidiary CNACG indirectly owns 1,447,334,920 shares (accounting for approximately 11.81% of the total issued share capital of the Company). Each of CNAHC and its associates (as defined in the Listing Rules, including CNACG) does not have any interest in the Transaction other than as a shareholder of the Company (where applicable). To the best knowledge of the Directors of the Company, having made all reasonable enquiries, no shareholder of the Company is required to abstain from voting if the Company 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 approved by CNAHC and CNACG by way of a written approval in lieu of a shareholders meeting of the Company. 

Pursuant to the Listing Rules requirements in respect of connected transactions, the Company shall dispatch a circular containing the information required under the Listing Rules, including a letter from the independent board committee of the Company and a letter from the independent financial advisor of the Company, in relation to the Transaction within 21 days after the publication of this announcement.

DEFINITION

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:

'A Shares'	ordinary shares in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and traded in RMB on the Shanghai Stock Exchange
'Air China Cargo'	Air China Cargo Co., Ltd., a company with limited liability incorporated in the PRC, the registered share capital of which was owned by the Company (including indirect interest through CNAC) and Capital Airports by 76% and 24%, respectively, immediately prior to the completion of the Transaction and will be wholly owned by the Company (including indirect interest through CNAC) upon completion of the Transaction
'Capital Airports'	Capital Airports Holding Company, an enterprise established in the PRC
'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 PRC
'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(s)'	the director(s) of the Company
'H Shares'	overseas listed foreign shares of RMB1.00 each in the share capital 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 announcement only, Hong Kong, Macau and Taiwan
'Sale and Purchase  Agreement'	an agreement relating to the sale and purchase of 24% of the issued share capital of Air China Cargo dated 2 April 2009 entered into among the Company and Capital Airports pursuant to which, among other things, the Company has agreed to purchase and Capital Airports has agreed to sell 24% of the issued share capital of Air China Cargo
'Transaction'	the transactions contemplated under the Sale and Purchase Agreement

By order of the Board

Air China Limited

Huang Bin  Tam Shuit Mui

Joint Company Secretaries

PRC, Beijing, 2 April 2009

As at the date of this announcement, the Directors of the Company are Mr. Kong Dong, Ms. Wang Yinxiang, Mr. Wang Shixiang, Mr. Christopher Dale Pratt, Mr. Chen Nan Lok, Philip, Mr. Cai Jianjiang, Mr. Fan Cheng, Mr. Hu Hung Lick, Henry*, Mr. Wu Zhipan*, Mr. Zhang Ke* and Mr. Jia Kang*.

* Independent non-executive Director of the Company

 

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