Re Wheelock Properties Ltd

HCMP 865/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 865 OF 2010

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Before: Hon Harris J in Court

Date of Hearing: 21 July 2010

Date of Decision: 21 July 2010

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D E C I S I O N

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1.The Company seeks the sanction of the Court of its privatisation by scheme of arrangement pursuant to section 166(1) of the Companies Ordinance (“Scheme”) and the confirmation of a technical capital reduction, which forms part of the process by which the privatisation, if sanctioned by the Court, will be implemented.

2.The structure and purpose of the Scheme is straightforward and involves the majority shareholder (Myers Investments Limited, which is a wholly owned subsidiary of Wheelock and Company Limited), who currently owns in excess of 74% of the issued shares of the Company acquiring all the remaining shares for cash at a price of $13 per share.  The majority shareholder takes the view that the Company is not benefiting from its listed status as it does not use opportunities available to listed companies to raise capital and that its long term prospects are greater as a wholly owned and fully integrated part of the majority shareholder.

3.There is only one class of share.  The price of $13 represents a premium of 170.27% over the average closing price of the last 12 months prior to the last trading day, although it is slightly below the net asset value per share as at 31 December 2009 of $13.45.  The scheme shareholders have received advice in respect of the offer from an independent financial adviser, Somerley, which has concluded in its letter of advice that the offer is “fair and reasonable so far as the independent shareholders are concerned” and recommends those shareholders to accept it.

4.The principal features of the Scheme are as follows:

(1)    The reduction of the capital of the Company from HK$600,000,000.00 to HK$493,772,230.40 by the cancellation and extinguishment of all of the 531,138,848 ordinary shares of $0.20 each held by the Scheme shareholders.

(2)    Forthwith upon such reduction of capital taking effect, the restoration of the authorised capital of the Company to its former amount of HK$600,000,000 by the creation of 531,138,848 new ordinary shares of $0.20 each which are equal to the number of the ordinary shares cancelled.

(3)    The application by the Company of the entire credit which will arise in its books of account as a result of such reduction of capital in paying up in full at par the 531,138,848 new ordinary shares so created, which will be allotted and issued, credited as fully paid, to Wheelock and Company Limited.

(4)    The payment by Wheelock and Company Limited to the Scheme shareholders of the total sum of $6,904,805,024 in respect of the ordinary shares of the Company formerly held by them.

5.On 14 May 2010 I ordered that a Scheme meeting be convened.  The meeting took place on 24 June 2010.  The resolution approving the Scheme was carried by in excess of 98.76% in value and in excess of 94% in number of Scheme shareholders present in person or in proxy.  A statutory majority was thus obtained.

6.On 6 July I gave further directions for advertising the hearing of the Petition for sanctioning of the Scheme and made a conventional order dispensing with the need to settle a list of creditors as the reduction of capital involved only a technical reduction for a short period of time.

7.At today’s hearing of the Petition, Ms. Connie Lee appeared on behalf of Wheelock and Company Limited and Myers Investments Limited to give the normal undertaking that they would be bound by the Scheme if sanctioned and do and procure to be done all acts that are necessary for the purpose of giving effect to the Scheme.

8.In deciding whether or not to sanction a scheme of arrangement the Court has regard to the following matters:

(1)    Whether a scheme is for a permissible purpose.  It is generally accepted that privatisation of a public company is a permissible purpose: In re Savoy Hotel Ltd [1981] 1 Ch 351; Shaw Brothers (Hong Kong) Limited HCMP 67/2009 (unreported judgment of Kwan J. 17 March 2009); Re PCCW Ltd [2009] 3 HKC 292, per Rogers V.P. para. 77 and Lam J paras 154-155.

(2)    Whether members who are called on to vote as a single class have sufficiently similar legal rights that they can consult together with a view to their common interest at a single meeting: UDL Argos Engineering & Heavy Industries Co. Ltd. [2001] 3 HKLRD 634.

(3)    Whether the meeting was duly convened in accordance with the Court’s directions: Re China Light & Power Co Ltd [1998] 1 HKLRD 158, per Le Pichon J at page 168E-F.

(4)    Whether members have been given sufficient information about a scheme so as to enable them to make an informed decision whether or not to support it: Id.

(5)    Whether a majority in number representing 75% in value of the members present and voting agree to the arrangement: Id.

(6)    The discretionary element of the sanctioning process and in particular whether the Court is satisfied that a scheme is one that an intelligent and honest man acting in respect of his interests as a member of the class within which he votes, might reasonably approve.  Buckley on the Companies Acts 14^th Ed at page 473; Re PCCW Ltd supra paras 33-38.

9.I am satisfied that the provisions of the Ordinance have been complied with, that a single meeting of members was appropriate, that the Scheme was properly explained and that there is no reason to doubt that it was one that a member could reasonably approve.

10.As I have already mentioned the Scheme involves a reduction of capital, which was approved by the necessary special resolution (section 58 of the Companies Ordinance) on 24 June 2010.  The Court will sanction a reduction of capital pursuant to section 60 of the Companies Ordinance that has been approved by a special resolution of members if the following requirements are satisfied:

(1)    The shareholders are treated equitably;

(2)    The reasons for the reduction is properly explained;

(3)    The interests of creditors are safeguarded;

(4)    The reduction is for a discernible purpose.

See Lippo China Resources Ltd [1998] 1 HKLRD 20, per Le Pichon J. at 23J-24A.

11.It follows from what I have said above that I am satisfied that each of these requirements have been satisfied.  I, therefore, sanction the Scheme including the reduction of capital in the terms of the order before me.

Mr John Scott, SC & Mr Jose Maurellet, instructed by Messrs Deacons, for the Company, Wheelock Properties Limited

Miss Connie Lee, instructed by Messrs Deacons for the Majority Shareholder/Acquirer, Wheelock and Company Limited through its wholly owned subsidiary, Myers Investment Limited