IMAGI INTERNATIONAL HOLDINGS LIMITED

Transcription

1 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. IMAGI INTERNATIONAL HOLDINGS LIMITED * (incorporated in Bermuda with limited liability) (stock code: 585) BUSINESS OF THE GROUP AFTER COMPLETION OF PROPOSED VERY SUBSTANTIAL DISPOSAL Subject to the passing of the ordinary resolution at the SGM to approve the Sale and Purchase Agreement and the Transactions contemplated under the Transaction Documents, Completion is expected to take place on or around 21 October The Company would like to provide an update on the proposed business of the Group after the Completion. The business plans contemplated as at the date of this announcement represent the current intentions of the Board. If there are changes in circumstances, the Board will re-assess accordingly and make any necessary adjustments. After Completion, the Group will engage in the businesses of the development, production and commercial exploration of intellectual properties, including entertainment and education businesses involving the use of animated content. In particular, the Group will: (a) (b) (c) revitalise the CGI business; enter the Education Business; and consider various options for business development including but not limited to expansion of in-house capabilities, possible acquisitions of new businesses or assets or cooperation with or engagement of other companies including those which relate to the education industry. The Company believes that the crossing over of entertainment and education through animated content presents good business opportunity and market potential in the Greater China region. Given the Group has been engaged in the animated content and consumer products businesses in the PRC market in the past, it is well positioned to tap into this attractive market through the development, production and distribution of animated content as well as education content in the Greater China region. The Company currently intends to focus the target audience of its animated content and education businesses to children and teenagers. * for identification purpose only 1

2 Reference is made to the announcement dated 19 September 2013 and the circular dated 2 October 2013 (the Circular ) of the Company in relation to, among other things, the proposed disposal of the Infoport Group. Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as defined in the Circular. Subject to the passing of the ordinary resolution at the SGM to approve the Sale and Purchase Agreement and the Transactions contemplated under the Transaction Documents, Completion is expected to take place on or around 21 October The Company would like to provide an update on the proposed business of the Group after the Completion. The business plans contemplated as at the date of this announcement represent the current intentions of the Board. If there are changes in circumstances, the Board will re-assess accordingly and make any necessary adjustments. After Completion, the Group will engage in the businesses of the development, production and commercial exploration of intellectual properties, including entertainment and education businesses involving the use of animated content. In particular, the Group will: (a) (b) revitalise the CGI business; enter the Education Business; and (c) consider various options for business development including but not limited to expansion of in-house capabilities, possible acquisitions of new businesses or assets or cooperation with or engagement of other companies including those which relate to the education industry. The Company believes that the crossing over of entertainment and education through animated content presents good business opportunity and market potential in the Greater China region. Given the Group has been engaged in the animated content and consumer products businesses in the PRC market in the past, it is well positioned to tap into this attractive market through the development, production and distribution of animated content as well as education content in the Greater China region. The Company currently intends to focus the target audience of its animated content and education businesses to children and teenagers. CGI Business The Group has been in the business of production, broadcasting and licensing of CGI animation pictures since 2000 and after Completion, the Group will revitalize the CGI business. Although the Group has shifted its management focus away from the CGI business since the acquisition of Infoport Group, the Company still owns the intellectual property rights in relation to the CGI animation products, which include: (a) the copyright of the feature film Astro Boy launched in 2009; (b) the copyright of a work-in-progress film temporarily titled Cat Tale and the copyright of the characters in such film (such as Cat Rover and Cat Sheba); and (c) the copyright of the production titled Zentrix and the copyright of the characters in such production. 2

3 The film Astro Boy is still generating revenues for the Company. The Company entered into a sales agency agreement (through one of its subsidiaries) in 2008 for a period of twenty years, pursuant to which the agent distributes Astro Boy on behalf of the Company. The Company received more than HK$1 million from the distribution of Astro Boy during the financial year ended 31 December 2012 and will continue receiving revenues if the agent is able to continue distributing the film. In addition, the Group will develop and produce the animated movie of Cat Tale (in Putonghua and Cantonese) in the next 18 months with an expected launch of such film in the summer of 2015 in the Greater China region and other Chinese-speaking countries. In general, the development and production of a movie takes about one to two years, and the time from committing to produce a movie to launching it on screen and generating revenue can be as long as two to three years. For more cost-efficient execution, the Group plans to engage external studio(s) in the PRC or Hong Kong for the production of Cat Tale. The estimated production budget for Cat Tale in the next two years is approximately HK$30 million. As a brand owner before, the Company is experienced in developing strategies to capture businesses deriving out of the movie s derivative products including consumer products and related licensing businesses. Besides Cat Tale, the Company is committed to strengthening its production pipeline by engaging a creative team by recruiting relevant professionals. Preliminarily, the Company plans to use approximately HK$20 million for the development of other movies and animated content. Education Business One of the Company s strategies in developing the prospective Education Business is to create popular animation characters suitable for educational use and to develop educational content using such new characters. For the purpose of creating popular animation characters suitable for educational use, the Company entered into the Framework Agreement to secure access to the characters owned by CPE/Infoport and to keep the flexibility of continuing cooperating with CPE after the Completion. However, the Framework Agreement does not include a full set of definitive terms for licensing, production or distribution arrangements and the Company, the Guarantor and CPE/Infoport will continue to discuss the detailed arrangements after the Completion. The plan for the Education Business includes the following steps: Step One: During the first one or two years, the Company plans to develop 180 to 220 episodes of animation programs including both characters licensed from CPE/Infoport and new characters the Company creates. The Company may engage CPE or third parties to produce the animation programs at a reasonable market rate. The detailed terms for the development have not been discussed or concluded. The Company plans to spend approximately HK$7.5 million to HK$15 million in the development of such episodes during the first two years after Completion. 3

4 Step Two: The Company plans to broadcast and distribute the animation programs it develops through CPE and/or other agents. The Company plans to engage CPE for the broadcasting and distribution of the animation programs through TV stations. Under such plan, CPE will (a) distribute the animation programs to selected TV stations within six months; (b) procure the TV stations to begin broadcasting the animation programs within one year; and (c) procure the TV stations to finish broadcasting all the animation programs within two years, from the delivery of master copies of each of the animation programs. The agent fee for the distribution of the animation programs to the TV stations will be equal to 50% of the sales prices of the TV programs. The Company has the flexibility to engage CPE and/or third party agents to distribute the animation programs through other channels by paying an agent fee at market rate. The detailed terms of any distribution agency arrangement have not been discussed or concluded. Step Three: The Company expects that the characters in its animation programs will receive certain popularity after one year from the commencement of the first episode of the animation program (not necessarily after the broadcasting of all animation programs). The Company will, then, use characters which are popular and suitable for education purpose to develop education content and programs (including curricula and other education-aid materials) and distribute and implement the content and programs through online platforms and physical learning centers. The Company expects that this will be the main stream of revenue to be received from the prospective Education Business. The Company has not developed any education content or any platform for distributing the content. Distribution of education content in the Greater China region requires partnership with local distributors with licence to distribute such content to schools, parents through online sales and distribution. The Company is currently discussing and negotiating with businesspartnersinthisregard. Business Development and Acquisitions The Company believes that the success of the development and distribution of education content does not only lie in the delivery of quality learning programs, but also in the entertaining feature of fun learning through animated content. It is, therefore, one of the Company s major objectives in developing its own animated content in order to help develop and distribute education content. The Company expects that newly created animated characters in its animated programs, such as those developed through the Framework Agreement, will receive popularity approximately one year after the commencement of broadcasting the first episode of the animation program. The Company will then use the animated characters which are popular and suitable for education purposes to develop education content and programs (including curriculum-based learning programs and other education-aid materials). 4

5 To develop its own education content, the Company is currently exploring various options including the acquisition of education content development companies or entering into business contracts with prominent market practitioners in the development of education learning programs. The Company s management team has extensive experience in cultural business. Since 2000, the Group has been carrying on the CGI business. While the CGI business and the Education Business belong to different subsectors in the cultural industry, they share some common features. The management of the Company has also gained experience in merchandisation and licensing from running the Infoport business. The experience is relevant to the Education Business which will involve the use of popular characters to develop educational courseware, to motivate students, and to promote the Education Business. If the acquisition of or cooperation with the Hong Kong based company mentioned above is successful, it will supply the Company with an additional experienced management and operation team. The Company currently intends to use approximately HK$100 million to HK$200 million for the acquisition of new businesses and/or assets including those which relate to the education industry. Treasury Management In view of the nature of the business of the Group, the Company considers it appropriate to have treasury management of its excess cash which will not be utilised in the short term. The Company intends to purchase approximately HK$100 million worth of corporate bonds which have a maturity of over two years. Acquisition of Commercial Property in Hong Kong The Company intends to acquire a commercial property in Hong Kong for its office and workshop use and the purchase price will be approximately HK$100 million. A further announcement will be made by the Company on such proposed acquisition after the signing of the provisional sale and purchase agreement in relation to such property purchase. Use of Cash Immediately after Completion, the cash balance of the Company will be approximately HK$851 million. The Company currently intends to apply such cash balance in the following manner: (a) (b) (c) approximately HK$30 million will be used for the production of Cat Tale in the next two years; approximately HK$20 million will be used for the development of other movies and animated content; approximately HK$7.5 million to HK$15 million will be used for the development of animated programs together with its business partners through the Framework Agreement; 5

6 (d) approximately HK$100 million to HK$200 million will be used for the acquisition of new businesses and/or assets including those which relate to the education industry; (e) approximately HK$100 million will be used for treasury management, including purchase of corporate bonds which have a maturity of 2 years or more; (f) (g) (h) approximately HK$100 million will be used for the acquisition of a commercial property in Hong Kong for use as office and workshop; approximately HK$100 million will be used for possible share repurchases by the Company. The Company currently intends to conduct a share repurchase in the short term. The Company considers that a share repurchase may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per share and/or earnings per share of the Company and the repurchase will only be made when and to the extent that the directors of the Company believe that such repurchase will benefit the Company and its shareholders; and the remainder of the cash will be used for the general working capital of the Group. Definitions CGI computer graphic imaging Company Imagi International Holdings Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange Greater China region Group Listing Rules Stock Exchange the PRC, Hong Kong and Taiwan the Company and its subsidiaries The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited The Stock Exchange of Hong Kong Limited By order of the Board Imagi International Holdings Limited Leung Pak To Chairman Hong Kong, 20 October 2013 As at the date of this announcement, the Board comprises Mr. Leung Pak To as the Chairman and non-executive director; Mr. Yung Tse Kwong, Steven as the executive director; Mr. Lian Meng and Ms. Ma Wai Man, Catherine as the non-executive directors; and Mr. Chan Yuk Sang, Mr. Cheng Yuk Wo, Dr. Lam Lee G., Mr. Lim Chin Leong and Ms. Wei Wei as the independent non-executive directors. 6