CPIL Canton Prop

RNS Number:9028P
Canton Property Investment Limited
12 March 2008


CANTON PROPERTY INVESTMENT LIMITED ("Canton Properties" or the "Company")


ACQUISITION OF $350M CANTON FINANCE CENTRE PROJECT AND ASSOCIATED FUNDRAISING


Acquisition of Canton Finance Centre Project


Further to the announcement dated 13 November 2007, Canton Properties' Board of
Directors is pleased to announce that on 11 March 2008, the Company and Nordsley
Enterprises Limited ("Nordsley"), a wholly owned subsidiary of the Company,
signed a formal sale and purchase agreement (the "Acquisition Agreement") with
Mr Keng Wong ("Mr Wong"), Chairman of CPIL, and Ms. Zhuansong Ye ("Ms. Ye")
(collectively, the "Vendors") to acquire the holding interest of Fortune
Foundation Commercial Estate Investment Group Limited ("Fortune Foundation") and
Rail Commercial International Holdings Limited ("Rail Commercial"), the British
Virgin Islands holding companies that indirectly hold 100 per cent. of the Pearl
River New City B1-1 Project (the "Canton Finance Centre Project" or the
"Project") (the "Acquisition") for an aggregate consideration of RMB
2,499,488,500 (approximately US$352.0 million), to be satisfied partly in cash
and partly by the issuance of new ordinary shares of the Company (the "
Consideration Shares"). The Acquisition is subject to completion of due
diligence and subject to funding; therefore there is no certainty that the
transaction will complete.


Other than their indirect interest in the Canton Finance Centre Project, Fortune
Foundation and Rail Commercial do not have any other business or investment.


The Canton Finance Centre Project


The Project is located at the entrance to the planned Pearl River New City,
Guangzhou, China. The Project is currently under construction and is anticipated
to be developed into a mixed-use commercial development called Canton Finance
Centre comprising retail shops, offices, a hotel and serviced apartments. It is
expected that the retail portion, office portion, serviced apartments and hotel
portion of the Project will be completed in stages during the course of 2010 and
2011.


The total costs of construction incurred to 31 December 2007 are approximately
RMB 24 million (US$3.4 million) and as of that date, the cost of construction
required to complete the Canton Finance Centre Project is estimated to be
approximately RMB 2,946 million (US$414.9 million). Upon completion of the
Acquisition, the ongoing costs of construction will be borne by Canton
Properties. Any construction costs incurred in relation to the Project prior to
the completion of the Acquisition Agreement are borne by the Vendors.


The existing site area and the planned total gross floor area of the Project are
approximately 22,067.192 sq m and 243,894 sq m respectively. Knight Frank Petty
Limited ("Knight Frank") has carried out an independent valuation of the Project
in its existing state and on a completion basis (assuming that the Project was
completed as at the date of valuation). Their valuation states the market value
of the Project in its existing state and the market value on a completion basis
as at 31 December 2007 are RMB 3,029 million (approximately US$426.6 million)
and RMB 8,730 million (approximately US$1,229 million), respectively.


Reasons for the Acquisition


The Acquisition is in line with the Group's objective of creating and
maintaining a diversified portfolio of commercial properties and projects in
Guangzhou. The Canton Finance Centre Project also complements the Group's
existing developments, namely Comic City and the Mall of Canton, both of which
are mixed commercial/retail developments in Guangzhou, and capitalises upon the
Company's expertise and experience in developing those assets.


The independent valuation report by Knight Frank values the Canton Finance
Centre Project in its present form at RMB 3,029 million (US$427 million) which
is 21.2 per cent. above the purchase price of RMB 2,499,488,500 (US$352.0
million). The Acquisition therefore offers an immediate discount to market
value.


The Acquisition is a related party transaction under the AIM Rules for Companies
as Mr Wong, the Chairman of Canton Properties, is the ultimate beneficial owner
of a 50% interest in the Canton Finance Centre Project and the ultimate
beneficial owner of a 42.49% interest in the Company.


The Project is a high quality mixed commercial, retail and residential
development located in a prime position, namely, the entrance to Pearl River New
City. Tianhe, the district in which Pearl River New City is located, is
currently planned to be the new central business district of Guangzhou. The
Acquisition therefore further demonstrates Canton Properties' ability to access
prime real estate opportunities in Guangzhou.


Fundraising


The Company is proposing to effect an equity placing (the "Placing") to complete
the Acquisition and to provide working capital to commence the first stage of
construction of the Canton Finance Centre Project.


The Placing will be undertaken by Libertas Capital who will conduct the equity
fundraising in the UK, Hong Kong, Singapore, the UAE and continental Europe. The
Placing is conditional on the passing of ordinary resolutions (the "Resolutions
") at an extraordinary general meeting of the Company ("EGM") approving the
grant of a specific mandate to the Directors to allot the placing shares and the
Consideration Shares mentioned below. Subject to shareholder approval at the EGM
the Company will grant an over-allotment option to Libertas Capital at the
Placing price which may be exercised during a thirty day period from completion
of the Placing or such other later date as may be agreed between the parties
within the applicable legal and regulatory requirements to cover over-allotments
in the Placing and with a view to supporting the market price of the shares of
the Company at a level higher than that which might otherwise prevail in the
open market.


The Company is proposing to issue a maximum of 408.9 million new ordinary shares
in addition to its existing allotment authorities. Any new ordinary shares
issued will be used to satisfy the share consideration required under the
Acquisition Agreement, will be placed for cash to satisfy the cash consideration
under the Acquisition Agreement and, as required, will be applied towards other
general corporate purposes.


The Directors have recognised that additional equity capital is necessary to
pursue the Company's objectives and to enable full advantages to be taken of the
opportunities afforded by the Acquisition. The Placing will also enhance the
Company's financial strength and is expected to broaden the Company's
institutional shareholder base. The net proceeds of the Placing will provide
investment and working capital for the Company in addition to enabling it to
complete the Acquisition.


Principal Terms of the Acquisition Agreement


The Acquisition Agreement provides for the conditional purchase from the Vendors
of the entire issued share capital of Rail Commercial and Fortune Foundation for
an aggregate consideration of RMB 2,499,488,500 (approximately US$352,040,634)
which, after deducting the deposit mentioned in the later part of this
paragraph, will be satisfied partly in cash by the payment of up to RMB
1,617,494,693 (approximately US$227.7) by Nordsley acting as the buyer to the
Vendors and partly by the issue and allotment by the Company to the Vendors of
the Consideration Shares at the Placing price. A refundable deposit of
approximately US$42.9 million (approximately RMB 319.6 million, calculated as at
the date of payment) has been paid and the deposit will be offset against the
purchase price.


The Consideration Shares will be issued credited as fully paid and will rank
pari passu in all respects with the existing ordinary shares of the Company,
including the right to receive dividends and other distributions declared, made
or paid from the date of admission of the Consideration Shares to trading on AIM
(the "Admission Date"). The Consideration Shares are not being made available in
whole or in part to the public.


On completion of the Acquisition, the Consideration Shares issued to the Vendors
will be subject to lock-in restrictions. The Vendors have agreed to enter into
lock-in agreements with Libertas Capital and the Company pursuant to which the
Vendors will undertake not to sell, transfer or otherwise dispose of any of the
Consideration Shares held by them or their associates (having the same meaning
as related party under the AIM Rules for Companies), other than in certain
limited circumstances, for a period of 12 months following the Admission Date.

Completion of the Acquisition is conditional upon, among other things:


(i)                   the Resolutions having been passed at the EGM;


(ii)                 completion of the Placing and the receipt of the funds by
the Company;


(iii)                the conditions of Rules 12 and 13 of the AIM Rules relating
to substantial transactions and related party transactions respectively having
been met by the Company;


(iv)                the due diligence on Fortune Foundation and Rail Commercial
and all their subsidiaries (the "Target Group") and the Canton Finance Centre
Project Property having been completed to the satisfaction of the Company, at
its sole discretion;


(v)                  there having been no material adverse change to the value
or condition of the Target Group, or the Canton Finance Centre Project before or
as at completion; and


(vi)                the lock-in agreements described above having been executed
by the Vendors with Libertas Capital and the Company.


The Acquisition Agreement contains certain warranties and indemnities given by
the Vendors. The Vendors shall not be liable for any breach of those warranties
if, among other things, such breach arises as a result of legislation which
comes into effect after Completion and which is retrospective in effect.


Financial Effects of the Acquisition


The aggregate consideration of RMB 2,499,488,500 (approximately US$352.0
million), after deducting the deposit, will be partially settled by the payment
of up to approximately RMB 1,617,494,693 (approximately US$227.7 million) in
cash (which will be from funds raised from the Placing) and the balance will be
settled by issue of Consideration Shares.


On the above basis, the total assets of the Company will increase and the
"Capital and reserve" will increase as a result of the issue of the New Ordinary
Shares. There will be no material impact on the total liabilities of the
Company.


Shareholders circular


A circular providing details of the Acquisition, the fund-raising and the
resolutions proposed to be adopted at the EGM together with a notice convening
the EGM will be despatched to Shareholders as soon as possible and made
available on the Company's website in accordance with Rule 26 of the AIM Rules
for Companies.


Recommendation


Mr. Keng Wong and Ms. Mui Kwan Chan have not participated in Board discussions
in relation to this matter and will abstain from voting at the EGM. The Board
considers, having consulted with Libertas Capital Corporate Finance Limited, the
Company's nominated adviser, that the terms of the Acquisition are fair and
reasonable insofar as the shareholders are concerned.


For further information, please contact:

Dennis Yau, Canton Property Investment Limited      Tel: +852 2219 9669
(Chief Financial Officer)

Jakob Kinde, Stephen Pickup, Libertas Capital       Tel: +44 20 7569 9650
Corporate Finance Limited

Allan Piper, Jiang Lei, First City Financial        Tel: +852 2854 2666
Ltd                                                 Tel: +44 20 7242 2666







                      This information is provided by RNS
            The company news service from the London Stock Exchange

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