Securities Law & Instruments

Headnote

Take-over bid made in Ontario - bid made in accordance with the laws of Hong Kong - De minimisexemption unavailable because Hong Kong not recognized jurisdiction in Ontario - bid exempted from the requirements of sections 95 through 100, subject to certain conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 93(1)(e), 95 to 100, 104(2)(c).

Recognition Orders Cited

In the Matter of the Recognition of Certain Jurisdictions (Clauses 93(1)(e) and 93(3((h) of Act) (1997) 20 OSCB 1035.

August 21, 2007

IN THE MATTER OF

THE SECURITIES ACT, R.S.O 1990,

c. S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF

YORKWIN INVESTMENTS LIMITED ("YORKWIN")

 

DECISION DOCUMENT

Background

1. The Ontario Securities Commission ("OSC") has received an application from Hong Fok Corporation Limited ("Hong Fok") and Yorkwin (together with Hong Fok, the "Filer"), for a decision under the Act that the formal take-over bid requirements contained in the Act, including provisions relating to delivery of an offer and take-over bid circular and notices of change and variation thereto, minimum deposit periods and withdrawal rights, take-up and payment of securities tendered to a bid, disclosure, financing, identical security and collateral benefits (collectively the "Take-over Bid Requirements") shall not apply to the conditional partial offer by Yorkwin (the "Offer") to the shareholders of Winfoong International Limited (the "Company"), a majority owned (62.8%) subsidiary of Hong Fok, for their shares in Hong Fok Land International Limited ("HF Land"), an affiliated company (40.4% owned) of Hong Fok, for those shares of HF Land (the "HF Land Shares") held by the shareholders of the Company, excluding Hong Fok, its associates, Yorkwin and those acting in concert with Yorkwin (the "Disinterested HF Land Shareholders").

Interpretation

2. Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

3. This decision is based on the following facts represented by the Filer:

(a) Yorkwin is a limited liability company incorporated in the British Virgin Islands on February 27, 2007 and was established solely for the purposes of making the Offer. Yorkwin is a wholly owned subsidiary of Hong Fok.

(b) Hong Fok is a company incorporated in the Republic of Singapore, the shares of which are listed on The Singapore Exchange Securities Trading Limited. Hong Fok is principally engaged in investment holding and its subsidiaries are principally engaged in property investment, property development, property management, investment trading and investment holding and management. Hong Fok and its subsidiaries principally operate in Hong Kong and the Republic of Singapore.

(c) HF Land is a limited liability company incorporated in Bermuda, and was a wholly owned subsidiary of the Company prior to a reorganization involving the Company, Hong Fok, HF Land and their respective subsidiaries (the "Group Reorganization") and subsequently became an affiliated company (not majority owned by) of Hong Fok following the Group Reorganization.

(d) The Company is a company incorporated in Bermuda and its principal place of business is in Hong Kong. The Company is required to, and does in fact, maintain a share register of all of its shareholders from which the Offeror identified the two individual Disinterested HF Land Shareholders resident in the Province of Ontario. The shares of the Company (the "Company Shares") are listed on the main board of The Stock Exchange of Hong Kong Limited (the "HK Exchange").

(e) None of Yorkwin, Hong Fok, HF Land or the Company are, or have any intention of becoming, reporting issuers or the equivalent in any province or territory of Canada and none of their securities are listed for trading on any Canadian stock exchange.

(f) The Offer arose as a result of prior asset acquisition transactions (the "Prior Acquisition") and the Group Reorganization.

(g) The Offer will commence on August 22, 2007, and unless extended or revised will close at 4:00 p.m. (Hong Kong time) on September 12, 2007 (the "First Closing Date"). If the Offer is extended or revised or declared unconditional on the First Closing Date, it will remain open for acceptance for a period of not less than 14 days, and shall be closed on September 27, 2007.

(h) The Offer is a conditional partial offer to the Disinterested HF Land Shareholders, for the aggregate of one third of the HF Land Shares held by the Disinterested HF Land Shareholders, being 294,789,400 HF Land Shares, such that for each HF Land Share held, the Disinterested HF Land Shareholder will receive:

(1) HK$0.16 in cash;

(2) one 3-year bond with a face value of HK$0.24; and

(3) two Company Shares (for every three HF Land Shares held).

(i) Under the Offer, the cash consideration payable by Yorkwin will amount to approximately HK$47.2 million, and the total consideration in the form of Company Shares payable by Yorkwin will amount to 589,578,800 Company Shares.

(j) Upon completion of the Offer, the interests of Hong Fok, its associates, Yorkwin and those acting in concert with Yorkwin in HF Land will increase from 40.7% (as at completion of the Group Reorganization) to 60.5% and their interest in the Company will decrease from 63.0% (as at completion of the Prior Acquisition) to 38.4%.

(k) The Offer will be made in accordance with the Rules Governing the Listing of Securities on the HK Exchange (the "Listing Rules") and The Code of Takeovers and Mergers of Hong Kong (the "Takeovers Code"). The Takeovers Code is regulated by the Hong Kong Securities and Futures Commission ("HKSFC").

(l) Pursuant to Rule 28.1 of the Takeovers Code, any partial offer such as the Offer, is subject to the consent of the Executive Director of the Corporate Finance Division of the HKSFC (the "Executive Director"). Obtaining such consent from the Executive Director is underway.

(m) The information circular of the Company dated June 30, 2007 prepared and delivered to its shareholders in connection with, among other things, the Prior Acquisition and the Group Reorganization (the "Circular") was prepared and delivered in accordance with the Listing Rules and the Takeovers Code. Pursuant to the Listing Rules and the Takeover Code, the Circular was submitted to the HK Exchange and the HKSFC for review and comment, and was approved by the HK Exchange and the HKSFC prior to its delivery.

(n) The offer document of Yorkwin to be delivered to the Disinterested HF Land Shareholders, setting forth the terms and conditions of the Offer (the "Offer Document") is being prepared and will be delivered in accordance with the Listing Rules and Takeovers Code, and pursuant thereto, has been submitted to the HKSFC and the HK Exchange for review, comment and approval. The Offer Document has been approved by the HK Exchange and the HKSFC and is expected to be mailed to the Disinterested HF Land Shareholders on or about August 22, 2007.

(o) The purchase price for the Prior Acquisition was agreed upon on an arm's length basis with reference to the open market value of certain properties located in Singapore (the "Signapore Properties") as at April 30, 2007 as appraised by Savills (Singapore) Pte. Ltd., an independent valuer. A copy of the valuation report was included in the delivered Circular and valuation reports to be prepared in a similar manner by Savills (Singapore) Pte. Ltd. appraising the open market value of the Singapore Properties as at May 31, 2007, will be included in the Offer Document to be delivered to shareholders of the Company in compliance with the Listing Rules and the Takeovers Code.

(p) The Prior Acquisition and the Group Reorganization, among other things, were approved by the requisite majority of the independent shareholders of the Company, excluding Hong Fok, its associates, Yorkwin and those acting in concert with Yorkwin, at a special meeting of the Company held on July 25, 2007.

(q) The Offer Document, which will be prepared in English, will set out details of the Offer, as well as the reasons and background to the Offer, and will contain disclosure information for each of Yorkwin, Hong Fok, the Company and HF Land, as well as financial information for each of the Hong Fok Group (being Hong Fok and its subsidiaries), the Group (being the Company and its subsidiaries) and the HF Land Group (being HF Land and its subsidiaries) including, inter alia, audited financial statements for the three year periods ending December 31, 2006, 2005 and 2004 in the case of the Group and the HF Land Group and audited financial statement for the two year periods ending December 31, 2006 and 2005 in the case of the Hong Fok Group, and will include independent third party valuations of the assets of each of the Hong Fok Group, the Group and the HF Land Group.

(r) The Offer Document will also contain a letter of advice from an independent financial advisor addressed to the Disinterested HF Land Shareholders setting out its recommendation with respect to the fairness of the Offer from a financial point of view.

(s) There are 1,492,410,986 HF Land Shares issued and outstanding.

(t) There are only two individual Disinterested HF Land Shareholders that are resident in the Province of Ontario, which represent the only registered Disinterested HF Land Shareholders resident in Canada. These two individuals hold 500 HF Land Shares and 22 HF Land Shares respectively, totalling 522 HF Land Shares. This represents 0.000035% of the currently issued HF Land Shares.

(u) The Offeror cannot rely on the exemption from the formal take-over bid requirements contained in paragraph 93(1)(e) of the Act because the OSC has not recognized Hong Kong for the purposes of this paragraph of the Act.

(v) The Offer will be made to the two Canadian resident Disinterested HF Land Shareholders on the same terms and conditions as it will be made to Hong Kong resident Disinterested HF Land Shareholders.

(w) The Offer Document and all other material relating to the Offer, including any amendments, that will be sent by or on behalf of the Filer to Disinterested HF Land Shareholders, will be concurrently sent to Canadian resident Disinterested HF Land Shareholders and copies of such material will be filed as nearly as possible with the OSC.

Decision

1. The OSC is satisfied that the test contained in the Act that provides the OSC with the jurisdiction to make the decision has been met.

2. The decision of the OSC under the Act is that the Filer is exempt from the Take-over Bid Requirements in making the Offer to the Canadian resident Disinterested HF Land Shareholders provided that:

(a) the Offer and all amendments to the Offer are made in compliance with the laws of Hong Kong, including the Listing Rules and Takeovers Code; and

(b) the Offer Document and all other material relating to the Offer, including any amendments, that will be sent by or on behalf of the Filer to Disinterested HF Land Shareholders, are concurrently sent to Canadian resident Disinterested HF Land Shareholders and copies of such material are filed as nearly as possible with the OSC.

DATED at Toronto, Ontario on this 21st day of August, 2007.

"Kevin J. Kelly"
Commissioner
Ontario Securities Commission
 
"David L Knight"
Commissioner
Ontario Securities Commission