TIDMGMC
RNS Number : 7964W
Global Market Group Ltd
21 August 2015
Global Market Group Limited
(the "Company" or "GMG")
Collaboration to develop land in Pazhou District, Guangzhou
Further to the Company's announcement on 10 August 2015
regarding the payment of a deposit in connection with a potential
land acquisition, the Company would like to announce details of
this potential opportunity.
The Land Project
In early 2015, the municipal government of Guangzhou, the
capital of Guangdong Province, PRC, revealed that it would start
the construction of an e-commerce zone in Pazhou Island (the
"Pazhou e-commerce zone"). Pursuant to the plan, the Pazhou
e-commerce zone would house a central business district centering
on e-commerce. The Pazhou e-commerce zone expects to attract
leading Chinese IT companies and, upon completion, to generate
e-commerce business transactions of over RMB100 billion annually.
Companies which have reportedly acquired land use rights in the
Pazhou e-commerce zone include some of China's largest technology
companies including Tencent, Alibaba, Gome, Fosun and MOBI.
The Company was offered the opportunity to bid for a track of
land of approximately 4,269 sqm (the "Land") in the Pazhou
e-commerce zone at a price of RMB 709.88 million. The Land has the
development potential to yield a gross floor area ("GFA") of
approximately 57,000sqm. Depending on the design and materials
used, the Company believes that approximately RMB490 million will
be required to build, thereby bringing the total gross development
cost of the project (the "Land Project") to an estimated RMB1.2
billion.
The Company believes that the Land, which is being offered only
to eligible IT related companies, was offered by the Guangzhou
government at a very attractive price. In addition, the Company
believes that relocating the Company's group operations to the
Pazhou e-commerce zone once it has been developed would have
enhanced the Company's prestige, reputation and brand image.
However, the Group's requirement is only for approximately
one-fifth of the total GFA from the Land Project. The size of the
Land is therefore larger than the Company's own current
requirements and the total cost of approximately RMB710 million to
acquire the Land and the additional amount require to build exceeds
the Company's financing capabilities. The Company also does not
believe that it should utilise any material part of its financial
resources in a project which is not core to its business needs. In
addition, given the size of the transaction, the acquisition would
have triggered a reverse takeover under AIM Rule 14.
Hence, the Company would like to collaborate with others such
that the Company would be able to utilise the opportunity presented
by the Guangzhou government and secure office space in the Pazhou
e-commerce zone at no financial risks to it.
Proposed Collaboration Arrangements
If the Group had wanted to bid for the Land, it was required to
submit its bid for the Land ("Land Bid") on 10 August 2015 together
with an initial deposit to the Guangzhou municipal government of
RMB 142 million (the "Initial Deposit").
To achieve its objectives and not utilise its financial
resources:
-- The Company established Winning Planet Limited ("WP") a BVI
wholly owned subsidiary of the Company. WP holds 100% of Global
Pearl Limited ("GP") which is another BVI company. GP then
indirectly holds Guangzhou Wang Long ("GWL"), a limited liability
company established in the PRC. GWL would be the bid vehicle for
the Land Bid.
-- The Company wished to collaborate with Luo Xian Hao ("Mr
Luo") whereby Mr. Luo would provide RMB110 million for the Initial
Deposit and agree to provide another RMB40 million if the Land Bid
were successful. Under that arrangement, Mr. Luo would acquire a
9.43% interest in GWL for that RMB150 million and on completion
would be able to exchange that interest for approximately the same
proportion of GFA in the completed development. On 30 July 2015,
GP, GWL and Mr. Luo entered into a collaboration agreement (the
"Onshore Collaboration Agreement") to document their
arrangements.
-- The Company also wished to collaborate with Global Marketing
Group Holding Limited ("GMGH") whereby GMGH would acquire a 75%
economic interest in the remaining Land Project with the remaining
25% being kept by WP. The intention being that GMGH would take all
the risks and obligations of the development (including sourcing
the necessary funding for the Land Project's gross development
cost). On completion, WP would exchange the interests kept by it
for approximately the same proportion of GFA in the completed
development (being approximately 13,000 sqm of projected office
space ("Office Space")) on an unencumbered basis. The collaboration
agreement between WP and GMGH (the "Offshore Collaboration
Agreement") has not been signed pending clarification whether this
agreement would amount to a reverse takeover for the Company under
AIM Rule 14.
GMGH is a British Virgin Islands ("BVI") company wholly owned by
Mr. Weijia Pan ("David Ling") who is the Company's Chairman, Chief
Executive Officer and controlling shareholder. Mr Luo is a PRC
national and is independent of the Company and its related
parties.
All the necessary funding for the Land Project was to be
provided by Mr Luo or sourced by GMGH on a non-recourse basis to
the Company. The collaboration arrangements with GMGH and Mr. Luo
would have allowed the Company to eventually acquire the Office
Space in the resulting development at no upfront cost, ongoing
financial liability to the Company or financial risk to the
Company.
Had the Offshore Collaboration Agreement been entered into, it
would have amounted to a related party transaction under AIM Rule
13. However, the purpose of the Offshore Collaboration Agreement
was intended not to benefit David Ling and its connected persons
but to provide a vehicle for the Company to be ring-fenced from all
financial obligations for the Land Project. GMGH would have to
undertake all the necessary fund-raising and sales to raise money
for the Land cost as well as the building cost. Upon successful
completion of development, the Company would get the unencumbered
Office Space.
The Offshore Collaboration Agreement contains an option for the
Company to acquire the entire Land Project should it choose to do
so within a year. As advised by the Company's then nominated
adviser, the Offshore Collaboration Agreement might amount to a
reverse takeover under AIM Rule 14.
The Bid
As required to keep to the deadline, on 10 August 2015, GWL
submitted the Land Bid and paid the Initial Deposit. Of the RMB 142
million of the Initial Deposit, Mr. Luo extended RMB 110 million
and the Company extended the remaining RMB32 million (the
"Loan").
The results of the Land Bid were to be announced in the late
afternoon (China time) on 20 August 2015. If the GWL were
successful in the bid, it would be obliged to enter into a land
transfer agreement to acquire the Land or lose the Initial
Deposit.
By early morning (China time) 20 August 2015, the Company could
not ascertain if the Offshore Collaboration Agreement would amount
to a reverse takeover under AIM Rule 14. Had the Company entered
into the Offshore Collaboration Agreement and it is subsequently
ruled that it is a reverse takeover under AIM Rule 14, the Company
would be in breach of the AIM Rules which require prior
shareholders' approval to be given.
However, without the Offshore Collaboration Agreement being
entered into, the Company would trigger a reverse takeover in
breach of AIM Rule 14 if GWL were to be successful in the Land
Bid.
The Company has no intention of undertaking any transaction
which breach the AIM Rules. Hence, the Company decided that its
best course of action would be to divest itself of the entire Land
Project immediately.
Sale of the GP Group
To divest itself of the Land Project, in the late morning of 20
August 2015, the Company and WP entered into a sale and purchase
agreement ("SPA") with GMGH and its connected parties, World Target
Limited and Future World International Limited (the "Connected
Purchasers") whereby WP transferred the entire issued share capital
of GP to the Connected Purchasers. The consideration for the
purchase was US$1,000, as GP and its subsidiaries (the "GP Group")
had no assets at the time of the transfer. The Connected Purchasers
collectively own more than 50% shares in the Company.
The SPA confirms that for the purposes of paying the Initial
Deposit, the Company loaned to GWL the Loan. Under the SPA, this
Loan shall be repaid forthwith if the Land Bid were unsuccessful
and the Guangzhou government returns the Initial Deposit to GWL.
The Loan shall be repaid forthwith if the Land Bid were successful
and Mr. Luo pays the outstanding balance of RMB 40 million by 31
August 2015 to the GP Group pursuant to the Onshore Collaboration
Agreement. Failing both, GMGH is required to procure the Loan to be
repaid or to pay the Loan itself no later than six months after the
date of the SPA.
In addition, under the SPA:
-- WP has the right to require the Connected Purchasers to
transfer to it a 25% equity interest in GP ("GP Transfer") for no
consideration if such transfer would not cause the Company to
breach the AIM Rules.
-- WP also has an option ("Option") to acquire the entire
interest in the GP Group from the Connected Purchasers for a total
consideration of the amount invested in the Land Project by the
Connected Purchasers, the total costs incurred by them in the Land
Project and a premium of US$1 million.
The GP Transfer is given to ensure that, if the Company were to
be permitted to hold interests in the Land Project without
breaching the AIM Rules, it would do so. The Company is currently
trying to seek clarification from the Exchange.
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August 21, 2015 10:54 ET (14:54 GMT)
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