GREAT WALL TECHNOLOGY COMPANY LTD. 
By 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.
GWT長城科技股份有限公司
Great Wall Technology Company Limited(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 0074)
TERM SHEET RELATING TO PROPOSED ACQUISITION OF REMAINING 30% INTEREST IN THE JOINT VENTURE WITH PHILIPS AND PROPOSED AMENDMENTS TO CERTAIN AGREEMENTS IN CONNECTION WITH THE PHILIPS TV BUSINESS IN EUROPE AND CERTAIN SOUTH AMERICAN COUNTRIES AND LICENSING OF PHILIPS TRADEMARKS
This announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong).
The Board is pleased to announce that on 20 January 2014, TPV and MMD entered into a Term Sheet with Philips, pursuant to which TPV, MMD and Philips have agreed on the following key terms that will be contained in the definitive agreements:
(a) MMD will acquire the remaining 30% shareholding of Philips in JVCo for a deferred purchase price, which will be combined with the deferred purchase price for the 70% stake acquired by MMD on 1 April 2012;
(b) subject to a cap of US$375 million, the combined deferred purchase price for 100% of the shares in JVCo will be based on four (4) times the Average Proportional EBIT;
(c) the guaranteed minimum annual royalty payable by JVCo to Philips under the trademark license agreement will be reduced from EUR 50 million to EUR 40 million from 1 April 2014; and
(d) (i) the shareholders agreement dated 1 April 2012 between TPV, MMD, Philips and JVCo will be terminated; (ii) Philips will provide a support of EUR 50 million to JVCo; and (iii) all outstanding loans and stand-by facilities between Philips and JVCo will be assigned by JVCo to TPV and TPV shall assume all JVCo's rights and obligations under these loan agreements with Philips.
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This announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong).
Reference is made to the announcements of the Company dated 18 April 2011, 9
November 2011 and 2 April 2012, and the circular dated 23 December 2011 relating to the acquisition by MMD of a 70% shareholding in JVCo, the joint venture with Philips relating to the Philips TV business in Europe and certain South American countries and licensing of Philips trademarks.
The Board is pleased to announce that on 20 January 2014, TPV, MMD and Philips entered into the Term Sheet, pursuant to which TPV, MMD and Philips have agreed on the following key terms that will be contained in the definitive agreements:
(a) MMD will acquire from Philips the remaining 30% shareholding in JVCo for a deferred purchase price, which will be combined with the deferred purchase price for the 70% stake acquired by MMD on 1 April 2012;
(b) subject to a cap of US$375 million (equivalent to approximately RMB2,270 million), the combined deferred purchase price for 100% of the shares in JVCo will be calculated based on four (4) times the Average Proportional EBIT. If the calculation results in a negative number, the combined deferred purchase price will be zero;
(c) the trademark license agreement between Philips (as the licensor) and JVCo (as the licensee) will remain in place, with an annual royalty of 2.2% of sales payable by JVCo to Philips, but the guaranteed minimum annual royalty will be reduced from EUR 50 million (equivalent to approximately RMB412 million) to EUR 40 million (equivalent to approximately RMB329.6 million) from 1 April 2014; and
(d) (i) the shareholders agreement dated 1 April 2012 between TPV, MMD, Philips and JVCo will be terminated; (ii) Philips will provide a support of EUR 50 million (equivalent to approximately RMB412 million) to JVCo; and (iii) all outstanding loans and stand-by facilities between Philips and JVCo will be assigned by JVCo to TPV and TPV shall assume all JVCo's rights and obligations under these loan agreements with Philips.
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Following completion of the transactions contemplated in the Term Sheet, JVCo will become a wholly-owned subsidiary of TPV, which will enable it to further integrate into TPV's TV operation and advance the realization of potential operational synergies and thus reduce costs and improve efficiency.
The parties have agreed to negotiate the definitive agreements in good faith and aim to sign the definitive agreements on or before 28 February 2014. If the definitive agreements are not entered into on or before 30 April 2014 (or such other date as the parties may agree), either TPV or Philips may terminate the Term Sheet.
The proposed acquisition of the remaining 30% interest in JVCo and the proposed amendments to the agreements in connection with the joint venture with Philips may constitute a notifiable transaction under Chapter 14 of the Listing Rules and will be a connected transaction under Chapter 14A of the Listing Rules.
At the time TPV and MMD enter into the definitive agreements in relation to the proposed acquisition and amendments, a further announcement will be issued and a circular will be sent to Shareholders as soon as practicable thereafter and the approval of independent Shareholders will be sought in compliance with the Listing Rules.
In this announcement, the following expressions shall have the following meanings, unless the context otherwise requires:
"Average Proportional : The total amount of (i) plus (ii) to be divided by the EBIT" number of years as of the financial year ended 2012 to (and including) the year on which Philips exercises its right
to receive the deferred purchase price:
(i) 50% of the annual consolidated EBIT of JVCo for financial years ended 2012 and 2013, each as reported in the audited consolidated annual accounts of JVCo for these financial years;
plus
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(ii) the total Proportional EBIT for the period from (and including) the financial year ending 2014 to (and including) the year on which Philips exercises its right to receive the deferred purchase price. Philips may exercise its right to receive the deferred consideration at any time after 31 March 2018;
"Board" : the board of directors of the Company;
"Company" : Great Wall Technology Company Limited (長城科 技股份有限公司 ), a joint stock limited company
incorporated in the PRC with limited liability, whose H shares are listed on The Stock Exchange of Hong Kong Limited;
"EBIT" : e a r n i n g s b e f o r e i n t e r e s t a n d t a x e s a n d a d j u s t e d pursuant to the terms of the definitive agreements;
"JVCo" : TP Vision Holding B.V., a company incorporated in the Netherlands with limited liability which is currently
70% owned by MMD and 30% owned by Philips;
"Listing Rules" : the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited;
"MMD" : Coöperatie MMD Meridian U.A., a cooperative established in the Netherlands with limited liability, being a wholly-owned subsidiary of TPV;
"Philips" : Koninklijke Philips N.V. (formerly Koninklijke Philips
Electronics N.V.);
"Proportional EBIT" : (i) ( t h e t o t a l r e v e n u e o f P h i l i p s - b r a n d e d T V s man ufa ctu red and sol d by JVC o un der the TMLAs divided by the total revenue of TVs manufactured and sold by the TPV Group) multiply by the adjusted operating profit or loss for the TVs segment (or TVs segments if there are more segments in which sales of TVs are reported), each as reported in the audited consolidated annual accounts of TPV
plus
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(ii) ( t h e t o t a l r e v e n u e o f P h i l i p s - b r a n d e d T V s man ufa ctu red and sol d by JVC o un der the TMLAs divided by the total consolidated revenue of the TPV Group) multiply by (the unallocated income plus unallocated expenses), each as reported in the audited consolidated annual accounts of TPV;
"Shareholders" : shareholders of the Company;
"Term Sheet" : the term sheet dated 20 January 2014 relating to the proposed acquisition of the remaining 30% in JVCo by MMD and the proposed amendments to certain agreements in connection with the joint venture with Philips relating to the Philips TV business in Europe and certain South American countries and licensing of Philips trademark;
"TMLAs" : the trademark licence agreements between Philips and JVCo entered into on 1 April 2012 in respect of the grant by Philips to JVCo and certain of its affiliates an exclusive trademark licenses in respect of the Philips trademark and certain Philips secondary trademarks;
"TPV" : TPV Technology Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are primarily listed on the main board of The Stock Exchange of Hong Kong Limited and secondarily listed on the Singapore Exchange Securities Trading Limited, a non wholly-owned subsidiary of the Company;
"TPV Group" : TPV and its subsidiaries; and
"TVs" : televisions.
By Order of the Board
Chairman
Shenzhen, PRC, 20 January 2014
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As at the date of this announcement, the Board comprises six executive directors, namely Liu Liehong, Tam Man Chi, Yang Jun, Du Heping, Fu Qiang and Xu Haihe; and three independent non-executive directors, namely Yao Xiaocong, James Kong Tin Wong and Zeng Zhijie.
Unless otherwise specified in this announcement, amounts denominated in € have been converted, for illustrative purpose only, into Renminbi at a rate of €1.00 = RMB8.241 and amounts denominated in US$ have been converted, for illustrative purpose only, into Renminbi at a rate of US$1.00 = RMB6.0526. These exchange rates are for the purpose of illustration only and do not constitute a representation that any amount has been, could have been or may be converted at any of the above rates and any other rates.
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