News for the Hospitality Executive
Millennium & Copthorne Hotels New Zealand Alleging
and the Breaking of Company Seals by a Partner in a Business Venture
that has Gone Sour in China
Millennium & Copthorne Hotels plc (“M&C”) Statement concerning Chinese Joint Venture
April 12, 2010
The following announcement was released earlier today by M&C’s subsidiary, Millennium & Copthorne Hotels New Zealand Limited (“MCHNZ”), which is listed on the New Zealand Stock Exchange. M&C has a 70.2% interest in MCHNZ. M&C’s effective interest in First Sponsor Capital Limited (“FSCL”) is 39.8%.
Based on the unaudited management accounts of the FSCL Group as at 28 February 2010, FSCL’s carrying value of the net assets of and a loan to the Hainan Hotel Owning Company and the Dongguan Owning Company (both of which are defined in the MCHNZ announcement) is US$47.8 million. M & C’s effective interest is US$ 19.0 million or £12.7 million.
M&C’s management is taking all possible action to protect the group’s interests in those assets.
Millennium & Copthorne Hotels New Zealand Limited (NZX:MCK) issues the following statement with regard to its interest in its Chinese Joint Venture:
MCK wishes to report that its Chinese joint venture, held through its 34% interest in First Sponsor Capital Limited (“FSCL”) (which in turn owns a 75% interest in Idea Valley Investment Holdings Ltd (“IVIHL”)), has encountered certain difficulties arising from the actions initiated by one of FSCL’s Chinese joint venture partners (a company controlled by Mr Cheung Ping Kwong (“Cheung”) which owns a 20% interest in IVIHL).
IVIHL in turn owns 100% interest in Idea Valley Group Limited (“IVGL”) which is involved with property related businesses in Guangdong and Hainan, China. Cheung was the founder of IVGL.
Under a joint venture agreement dated 27 September 2007 (“JVA”), Cheung was granted management rights over IVGL and its subsidiaries (“IVGL Group”). Owing to Cheung’s failure to meet the conditions in the JVA, Cheung ceased to be entitled to exercise such management rights over IVGL Group. Principally for this reason and Cheung’s management conduct, the IVGL board resolved on 20 November 2009 that (a) Cheung cease to be the Chief Executive Officer (“CEO”) of IVGL; and (b) the company seals of IVGL Group and two of its related companies (collectively, the “i-vale Entities”) be placed under the control of IVGL’s Chief Financial Officer (“CFO”) (an appointee of FSCL).
Cheung refused to comply with the 20 November 2009 IVGL board resolutions, and accordingly, the IVGL directors and management (at a meeting on 26 November 2009) confirmed the appointment of IVGL’s new interim CEO who, together with his management team, would take over IVGL’s daily operations.
In March 2010, Cheung:-
In China, the affixing of the company seal, together with the legal representative’s signature, represents the full authority of the company. Accordingly, as an added precaution, the i-vale Entities issued press notices in a major newspaper in China, on 30 March 2010 to notify that Cheung had been removed from his various appointments and that the company seals under Cheung’s control were void. By 12 April 2010, the relevant Chinese authorities had registered the new seals for five i-vale Entities (including IVGL) and the change in IVGL’s legal representative to an appointee of FSCL was completed.
Notwithstanding these steps to protect IVIHL’s interests in the joint venture, on 8 and 9 April 2010, IVIHL learned that Cheung (without any authority from the board of IVGL or the relevant i-vale Entity) procured:-
IVIHL is dependent on the assistance and cooperation from the various PRC governmental authorities and bodies to prevent loss and damage to IVIHL’s interests in the i-vale Entities.
The remaining operations of the IVIHL Group, principally in Sichuan, China and which constituted approximately 38% of FSCL Group’s net assets remain under the control of FSCL.
Based on the unaudited management accounts of the FSCL Group as at 28 February 2010, FSCL’s carrying value of the net assets of and a loan to the Hainan Hotel Owning Company and the Dongguan Owning Company is US$47.8 million. MCK’s effective interest is approximately US$ 16.3 million or NZ$22.7 million (based on a US$1/ NZ$1.39 exchange rate as at 12 April 2010).
Issued by Millennium & Copthorne Hotels New Zealand Limited
Millennium & Copthorne Hotels plc
|Also See:||Millennium Hotels and Resorts Adds a Kingsgate Branded Property, the Former Best Western Portland Hotel of Thorndon, Located in Wellington, New Zealand / February 2007|