HONG KONG, CHINA - Media OutReach - 20 August 2019 - Orange Sky Golden Harvest Entertainment (Holdings) Limited ("Orange Sky Golden Harvest" or the ''Company'', together with the subsidiaries collectively as the "Group", SEHK stock code: 1132) today issued a circular about the major transaction, connected transaction and continuing connected transaction in relation to the Cinema Lease Agreement and the Hotel Lease agreement.
On 28 June 2019, Jiangyin Orange Sky Golden Harvest Liuliu Enterprise Management Co., Ltd* (江陰橙天嘉禾六六企業管理有限公司), an indirect wholly-owned subsidiary of the Company (the "Tenant") entered into the Cinema Lease Agreement and the Hotel Lease Agreement with Jiangyin Orange Land Cinema Development Management Co., Ltd.* (江陰橙地影院開發管理有限公司), a connected person of the Company, (the "Landlord") in respect of leasing the Cinema Premises and the Hotel Premises with a term of 15 years commencing from the date following the Cinema Delivery Date and the Hotel Delivery Date for cinema and hotel operations.
The two Premises are situated in a complex located at Wuxing Road, Xiagang Street, Jiangyin, the PRC (中國江陰市夏港街道五星路). The complex is a mixed-use development including a 13-storey hotel building and a 9-storey commercial arcade with a cinema, erected on a parcel of land with a site area of 23,334 square meters. The Cinema Premises are on the 5th, 6th and 7th Floors of the commercial arcade with a total gross floor area of approximately 17,124.49 square meters. The Hotel Premises are located at a hotel building (Orange Sky Land Square One) (L1--L11 & Roof) with a total gross floor area of 14,188.57 square meters in the complex.
The Group is principally engaged in theatrical exhibition, cinema operation, film, video and television production, distribution and entertainment businesses in Hong Kong, the PRC, Taiwan and Singapore. As a non-compete undertaking about not to engage in the investment in and the operation of the cinema business in the PRC of the Group has expired, the Group intends to develop a new form of multifunctional cinema business in the PRC to operate cinemas which enable customers to not only watch movies shown at the cinemas, but also to enjoy other facilities at the cinema, including entertainment rooms, game centres and virtual reality (VR) and augmented reality (AR) experience facilities. As such, the operation of a cinema at the Cinema Premises and the entering into of the Cinema Lease Agreement facilitates the Group's development of cinema business with a new direction.
In order to capitalise the goodwill and brand equity of the Group, to leverage its resources, innovation and experience of its management team in the entertainment industry, and to commercialise its intellectual properties, the Company intends to operate a movie-themed hotel and to attract local residents and tourists with multifunctional movie theatres, virtual reality (VR) and augmented reality (AR) experiencing facilities, game centres and themed restaurants. It is also anticipated that the operation of the movie-themed hotel at the Hotel Premises will help to widen the customer base and provide a steady customer flow to the cinema at the Cinema Premises. The operation of the multifunctional cinema and movie-themed hotel is expected to commence in the second half of 2020, which coincides with the opening of the rest of the entertainment complex.
The Company is of the view that Jiangyin, being one of the top-ranked city amongst the top 100 economically developed cities in the PRC, is a rapidly developing city with high consumption power and is a popular place for domestic tourists to visit. The complex benefits from its excellent location as there are several high-end residential estates nearby and local residents around the area are generally well-off with sufficient leisure time to visit the cinema and the movie-themed hotel to be operated by the Group. The Company is of the view that there is strong market potential to operate a cinema and the movie-themed hotel at the complex.
The terms of the above two lease agreements were determined after arm's length negotiations between the parties having taken into consideration of the historical property market trend, the current property environment and future prospects of cinema and hotel market.
According to the circular, the Group's independent directors and independent financial advisor both consider that the above two Lease Agreements and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. They further consider that the entering into of the above two Lease Agreements is in the ordinary and usual course of the business of the Group, interests of the Company and the Shareholders as a whole. The transactions are pending for independent shareholders' approval in the coming special general meeting to be held on 5 September 2019.