Wheelock / Wharf Joint Announcement – Discloseable Transaction: Disposal of Wharf T&T

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.

The respective Boards of Wheelock and Wharf announce that on 4 October 2016, Wharf Communications (a wholly-owned subsidiary of Wharf) entered into the Agreement with the Buyer to dispose of the entire equity interests in Wharf T&T to the Buyer at a total consideration of HK$9,500 million in cash subject to the terms and conditions of the Agreement.

For both Wheelock and Wharf, the entering into of the Agreement constitutes a discloseable transaction under Chapter 14 of the Listing Rules and is subject to reporting and announcement requirements but exempt from the shareholders' approval requirement under Chapter 14 of the Listing Rules.

Reference is made to the 2015 Final Results Announcement of Wharf dated 9 March 2016. It was mentioned that Wharf started the Communications, Media & Entertainment ("CME") business over 20 years ago. The market has since changed drastically and the pace of change has accelerated. In 2015, Wharf's CME segment under Wharf Communications represented 9% of Wharf Group's revenue and 1% of Wharf Group's operating profit. Wharf has been conducting a strategic review to evaluate different options to enhance these businesses. As a result and as part of the strategic review, the Agreement was entered into with an aim that the Disposal would maximize the value to the shareholders of Wheelock and Wharf. The proceeds from the Disposal will provide additional cashflow to Wharf Group for its future business development and investment opportunities.

The strategic review of Wharf has not yet been completed. Upon completion of the Disposal, Wharf's CME business will comprise mainly the business of i-CABLE Communications Limited.

The respective Boards of Wheelock and Wharf announce that on 4 October 2016, Wharf Communications (a wholly-owned subsidiary of Wharf) entered into the Agreement with the Buyer to dispose of the entire equity interests in Wharf T&T to the Buyer at a total consideration of HK$9,500 million in cash subject to the terms and conditions of the Agreement.

The principal terms of the Agreement are as follows:

Such undertakings does not preclude or prohibit Wharf Communications from making an investment in listed securities of any person (provided that such investment is not a Restricted Investment), engage in the existing or future business of i- CABLE Communications Limited or its subsidiaries, or any existing business and activities of Wharf Communications Group as at the date of Completion.

The consideration for the Sale Shares was determined after due negotiation on an arm's length basis among Wharf Communications and the Buyer with reference to the business prospects and financial results of Wharf T&T Group and the net asset value of Wharf T&T of approximately HK$2.1 billion as at 30 June 2016.

Wharf T&T was incorporated in Hong Kong in 1992 and is wholly-owned by Telecom Network Communications Limited, which is in turn indirectly beneficially wholly-owned by Wharf. Wharf T&T is Hong Kong's largest purely enterprise-focused telecom service provider, with an extensive fibre optic network covering about 90% of the commercial market. Wharf T&T offers a strong portfolio of local data connectivity and a full suite of information and communications services complemented by leading system integration capabilities.

The profit (before and after taxation) of Wharf T&T based on the audited financial statements of Wharf T&T for each of the two years ended 31 December 2014 and 2015 is set out below:

Reference is made to the 2015 Final Results Announcement of Wharf dated 9 March 2016. It was mentioned that Wharf started the CME business over 20 years ago. The market has since changed drastically and the pace of change has accelerated. In 2015, Wharf's CME segment under Wharf Communications represented 9% of Wharf Group's revenue and 1% of Wharf Group's operating profit. Wharf has been conducting a strategic review to evaluate different options to enhance these businesses. As a result and as part of the strategic review, the Agreement was entered into with an aim that the Disposal will maximize the value to the shareholders of Wheelock and Wharf. The proceeds from the Disposal will provide additional cashflow to Wharf Group for its future business development and investment opportunities.

The strategic review of Wharf has not yet been completed. Upon completion of the Disposal, Wharf's CME business will comprise mainly the business of i-CABLE Communications Limited.

The attributable gain arising from the Disposal accrued to Wheelock and Wharf is estimated to be HK$4.5 billion and HK$7.4 billion respectively. Upon Completion, Wharf T&T will cease to be a subsidiary of Wheelock and Wharf. Accordingly, the profits or losses and the assets and liabilities of Wharf T&T will no longer be consolidated into the respective consolidated financial statements of Wheelock or Wharf.

The respective directors of Wheelock and Wharf are of the view that the terms of the Agreement and the transactions contemplated thereunder are on normal commercial terms and in the ordinary and usual course of business of Wheelock Group and Wharf Group, and that the terms of the Agreement are fair and reasonable, and in the interests of Wheelock and Wharf and their respective shareholders as a whole.

Goldman Sachs (Asia) L.L.C acted as the exclusive financial advisor to Wharf Communications in connection with this transaction.

For both Wheelock and Wharf, the entering into of the Agreement constitutes a discloseable transaction under Chapter 14 of the Listing Rules, as one or more of the applicable percentage ratios is/are greater than the 5% threshold while all such ratios are below the 25% threshold, and is therefore subject to the requirements in respect of reporting and announcement but exempt from the shareholders' approval requirements under Chapter 14 of the Listing Rules.

The principal business activities of Wheelock Group and Wharf Group are ownership of properties for development and letting, investment holding, container terminals as well as communications, media and entertainment.

Wharf Communications is a company incorporated in Hong Kong and a direct wholly-owned subsidiary of Wharf. It is principally engaged in the business of provision of communications and telecommunication services to Hong Kong's business and residential sector.

The Buyer is an exempt company incorporated in the Cayman Islands and is a special purpose vehicle established for the purpose of the Disposal and beneficially owned by MBK Partners Fund III, L.P. and TPG equally. MBK Partners Fund III, L.P. is one of the leading private equity funds which focuses on investments in the North Asia market. TPG is a leading global private investment firm founded in 1992 with over USD70 billion of assets under management.

To the best of the knowledge, information and belief of the Board of Wheelock having made all reasonable enquiries, the Buyer and its ultimate beneficial owners are third parties independent of Wheelock and connected persons of Wheelock.

To the best of the knowledge, information and belief of the Board of Wharf having made all reasonable enquiries, the Buyer and its ultimate beneficial owners are third parties independent of Wharf and connected persons of Wharf.