Global Brands Group Holding 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. LR14.58(1) Note 5 to LR13.52 Global Brands Group Holding Limited (Incorporated in Bermuda with limited liability) (Stock Code: 787) LR13.51A (1) VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE SALE OF CERTAIN NORTH AMERICAN BUSINESSES (2) INTENDED CONDITIONAL SPECIAL DIVIDEND THE TRANSACTION We refer to the Company s announcement dated 11 May As part of the Company s strategy to improve shareholder value and reduce debt, the Board is pleased to announce that, on 27 June 2018, the Company has agreed to sell a significant part of its North American licensing business, comprising all of its North American kids business, all of its North American accessories business, and a majority of its West Coast and Canadian fashion businesses (together, the Target Business ), to Differential Brands Group Inc. (the Purchaser ) for a purchase price payable in cash of US$1.38 billion (HK$10,764 million), subject to adjustments (the Transaction ). Based on unaudited management accounts for the year ending 31 March 2018, sales from the Target Business comprised approximately US$2.2 billion of the Company s total revenue and sales from the Company s other businesses comprised approximately US$1.8 billion of the Company s total revenue. Following completion of the Transaction ( Closing ), the Company s remaining businesses will comprise all of its footwear business, all of its New York fashion business, all of its European and Asian businesses and all of its Global Brand Management business. The Purchaser is a company listed on the NASDAQ Capital Market under the ticker symbol DFBG and has a business that owns, manages and operates brands in the premium apparel, footwear and accessories sectors. The Purchaser has entered into binding debt commitment letters to support its obligations to pay the purchase price. These letters are subject to conditions, some of which are outside the control of the Company. 1

2 Closing is subject to the fulfilment or waiver of certain customary conditions, including in particular the approval of the shareholders of the Company ( Shareholders ) which will be sought at a Special General Meeting to be convened in due course. The current target date for Closing is 31 August In addition to customary purchase price adjustments, the Company and the Purchaser have agreed to contractual provisions which enable certain parts of the Target Business to be carved out from the Transaction if the relevant consents for their transfer to the Purchaser are not obtained (the Carve-Out Arrangements ). If the Carve-Out Arrangements are utilised, there will be a corresponding reduction in the purchase price to reflect the extent of the carve-out that is required. REASONS FOR, AND BENEFITS OF, THE TRANSACTION The Board are of the view that the Transaction is in the interests of the Company and the Shareholders as a whole. The reasons for, and benefits of, the disposal of the Target Business are: (i) to right size the Company s widespread product and brand portfolio, resulting in a more focused operation; (iii) to improve operational efficiency as a result of paragraph (i) and to reduce the Company s working capital needs; (iv) to allow the Company to repay some existing financial debt from Transaction proceeds, leading to a stronger balance sheet and credit profile for the Company; and (v) to allow Shareholders to realise, by way of the payment of a proposed special dividend from the proceeds of the Transaction, substantial value from their shareholdings in the Company while continuing to be invested in the Company s remaining businesses. INTENDED CONDITIONAL SPECIAL DIVIDEND The Board intends that, subject to Closing and approval by Shareholders, a special cash dividend in an amount of up to approximately US$356 million (HK$2,780 million) (the Special Dividend ) be distributed to Shareholders as soon as practicable after Closing. For illustrative purposes, based on the 8,552,922,729 shares of the Company in issue as at the date of this announcement, the Special Dividend would be in an amount of up to HK$0.325 per share. 2

3 The Special Dividend will be paid out of the proceeds from the Transaction and the final amount of the Special Dividend will be determined by the Board taking into account any adjustments to the purchase price and any utilisation of the Carve-Out Arrangements. After Closing and subject to approval by Shareholders of the Special Dividend, the Company will announce further details of the Special Dividend including the final amount of the Special Dividend, the closure date of the register of members of the Company, the record date for determining entitlements to receive the Special Dividend and the pay-out date for the Special Dividend. All Shareholders whose name appear on the share register on the record date for the special dividend will receive the Special Dividend in accordance with his/her shareholding as at the record date. USE OF PROCEEDS FROM THE TRANSACTION The Company intends to use the proceeds from the Transaction to fund the Special Dividend, to repay existing financial debt and for general working capital purposes. LISTING RULES IMPLICATIONS As one or more of the applicable percentage ratios (as set out and calculated under Rule of the Listing Rules) in respect of the Transaction is more than 75%, the Transaction constitutes a very substantial disposal for the Company and is subject to reporting, announcement, circular and shareholders approval requirements under Chapter 14 of the Listing Rules. SPECIAL GENERAL MEETING A Special General Meeting will be convened for Shareholders to consider and, if thought fit, approve the Transaction and the Special Dividend. A circular containing, among other things, the information required under the Listing Rules in relation to the Transaction ( Circular ) and a notice of Special General Meeting is expected to be despatched to Shareholders on or around 19 July IRREVOCABLE UNDERTAKING TO VOTE Fung Holdings (1937) Limited, which has direct interests in approximately 26% of the issued shares in the Company as at the date of this announcement, has irrevocably undertaken to the Company to procure that the voting rights attaching to such shares be voted in favour of the resolution to approve the Transaction at the Special General Meeting. FINANCIAL ADVISOR Goldman Sachs (Asia) L.L.C. have been appointed as the financial adviser to advise the Company on the Transaction. 3

4 WARNING Shareholders and potential investors in the Company should note that: (1) the Transaction and the Special Dividend may or may not proceed as: (i) they are subject to a number of conditions which may or may not be fulfilled (or waived) and; (ii) the Sale and Purchase Agreement may be terminated in certain circumstances; and (2) the final amount of the Special Dividend may be subject to adjustments to the purchase price. Accordingly, there is no assurance that the Transaction will be completed and the Special Dividend paid, nor any assurance as to the amount of the Special Dividend. There is also no assurance that the conditions to the Purchaser s debt financing for the Transaction will be satisfied, or that the Purchaser will have the financial resource to consummate the Transaction. The Company will have limited recourse, if any, against the Purchaser if the Transaction is not consummated, including as a result of the conditions to the debt financing not being satisfied. Shareholders and potential investors in the Company should exercise caution when dealing in the shares of the Company. 1. INTRODUCTION The Board is pleased to announce that, on 27 June 2018, the Company has agreed to sell the Target Business to the Purchaser pursuant to the terms of a sale and purchase agreement between the Company, the Seller (a wholly owned subsidiary of the Company) and the Purchaser (the Sale and Purchase Agreement ). LR14.58(3) LR SALE AND PURCHASE AGREEMENT The principal terms of the Sale and Purchase Agreement are set out below. (a) Structure of Transaction As the Target Business is comprised of certain Target Assets and certain Target Companies, the Transaction will be structured as follows: LR14.60(2) (i) prior to Closing, the Company will (at its own cost) implement a pre-sale reorganisation of the Target Business (the Reorganisation ), pursuant to which, among other things: (A) the Seller shall form a new Delaware limited liability company as its wholly owned subsidiary ( NewCo ); and (B) each Target Company shall become a wholly-owned direct or indirect subsidiary of NewCo; and 4

5 (ii) on Closing: (A) the Company will sell (or procure the sale of), and the Purchaser will purchase, the Target Assets; and (B) the Seller will sell, and the Purchaser will purchase, all of the issued share capital in NewCo. (b) Consideration The purchase price for the Transaction will be an amount equal to US$1.38 billion (HK$10,764 million). LR14.58(4) The purchase price will be paid to the Company in cash on Closing and will be adjusted following Closing based on the financial debt, cash, transaction expense and working capital position of the Target Business on the Closing Date (the Adjustments ). In addition, the Company, the Seller and the Purchaser have agreed to provisions which enable certain parts of the Target Business to be carved out from the Transaction if the relevant consents for their transfer to the Purchaser are not obtained (the Carve-Out Arrangements ). Further details of the Adjustments and the Carve-out Arrangements will be set out in the Circular. If the Carve-Out Arrangements are utilised, there will be a corresponding reduction in the purchase price to reflect the extent of the carve-out required. The Company will make an announcement when the final purchase price has been determined. The purchase price was arrived at following a strategic review and was determined based on arm s length negotiations with the Purchaser, with reference to the business prospects and financial performance of the Target Business. LR14.58(5) The purchase price of US$1.38 billion represents the value which the Purchaser is willing to attribute to the Target Business as a going concern, taking into account the Target Business market share, competitive positioning, growth prospects, cash flow generation ability, among other considerations. 5

6 (c) Conditions to Closing (i) Conditions to obligations of Company, Seller and Purchaser to Close The obligations of the Company, the Seller and the Purchaser to proceed to Closing of the Transaction are conditional on the following conditions being satisfied or waived (to the extent permitted by law) by the Company and the Purchaser: (A) the waiting period applicable to the consummation of the Hart- Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder having expired or having been terminated and all filings, authorisations, consents and approvals of or expirations of waiting periods imposed pursuant to certain antitrust or competition laws and/or foreign investment control laws having been obtained or filed or having occurred; (B) no action commenced by a governmental entity which seeks, directly or indirectly, to challenge or make illegal or otherwise enjoin, prohibit, prevent or restrain the consummation of the Transaction having commenced or being continuing; (C) no order, legal restraint or prohibition having been entered, enacted, promulgated, enforced or issued by any governmental entity, or otherwise being in effect, that would or could reasonably be expected to challenge or make illegal or otherwise enjoin, prohibit, prevent or restraint the consummation of the Transaction; (D) Shareholder approval for the Transaction having been obtained; and (E) the affirmative vote of the holders of a majority of the issued and outstanding shares of the Purchaser s capital stock entitled to vote thereon to approve certain proposed equity arrangements to support the Purchaser s obligations to pay the purchase price. 6

7 (ii) Conditions to obligations of the Purchaser to Close The obligations of the Purchaser to proceed to Closing of the Transaction are conditional on the following conditions being satisfied or waived by the Purchaser: (A) certain fundamental representations and warranties given by the Company and Seller being true and correct in all respects as of the date of the Sale and Purchase Agreement and the Closing Date and certain other business representations and warranties given by the Company and Seller being true and correct as of the date of the Sale and Purchase Agreements and the Closing Date without regard to the terns material, materiality, Material Adverse Effect and other similar or correlative qualifications, except for breaches and inaccuracies that would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect ( Company Representations and Warranties Condition ); (B) each of the Company and the Seller having performed in all material respects certain of its obligations under the Sale and Purchase Agreement to be performed at or prior to the Closing and having complied in all material respects with the terms of the Sale and Purchase Agreement and the other Transaction Documents to be complied with and performed by the Company and the Seller at or before Closing, in each case without regard to the terms material, materiality, Material Adverse Effect and other similar qualifications ( Company Obligations Condition ); (C) no Material Adverse Effect having occurred or be occurring; (D) the Purchaser having received certain customary officer s and secretary s certificates; (E) (F) the Company and the Seller having delivered all required Closing deliverables; and the Reorganisation having been consummated. 7

8 (iii) Conditions to obligations of the Company and the Seller to Close The obligations of the Company and the Seller to proceed to Closing of the Transaction are conditional on the following conditions being satisfied or waived by the Company: (A) certain representations and warranties given by the Purchaser being true and correct in all material respects as of the Closing Date, except for breaches and inaccuracies that would not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the Purchaser s ability to timely execute, deliver or perform the Sale and Purchase Agreement or any related Agreement (or consummate the transactions contemplated by those agreements) ( Purchaser Representations and Warranties Condition ); (B) the Purchaser having performed in all material respects its obligations under the Sale and Purchase Agreement or in the Transaction Documents to be performed at or prior to the Closing and having complied in all material respects with the terms of the Sale and Purchase Agreement and the other Transaction Documents to be complied with and performed by the Purchaser at or before Closing, in each case without regard to the terms material, materiality, Material Adverse Effect and other similar qualifications ( Purchaser Obligations Condition ); (C) the Company having received certain customary officer s and secretary s certificates; and (D) the Purchaser having delivered all required Closing deliverables. (d) Closing Closing of the Transaction will take place on the third Business Day following the date on which the above conditions (other than those conditions that by their nature are not to be satisfied at the Closing but subject to the satisfaction or waiver of such conditions) are satisfied or waived. The current target date for Closing is 31 August

9 (e) Termination The Sale and Purchase Agreement may be terminated prior to Closing as follows: (i) (ii) by mutual written agreement of the Company and the Purchaser; by either the Company or the Purchaser if the above conditions are not fulfilled on or before 5:00 pm New York time on 31 October 2018 (provided such party must not be in material breach of its obligations under the Sale and Purchase Agreement); (iii) by either the Company or the Purchaser if consummation of the transactions contemplated by the Sale and Purchase Agreement would violate, or otherwise be illegal under, any non-appealable final order of any governmental entity; (iv) by the Purchaser if a certain third party consent cannot be obtained or on terms agreed with the Company or if consent fees exceed a certain threshold; (v) by the Purchaser if any representation or warranty of the Company or the Seller shall have become untrue in any material respect or if there is any material breach of any of their respective obligations such that, if occurring on the Closing Date, the Company Representations and Warranties Condition or the Company Obligations Compliance Condition would not be satisfied at Closing (subject to a 30 day cure period and further provided that the Purchaser is not then in material breach under the Sale and Purchase Agreement such that either of those conditions are unable to be satisfied); (vi) by either the Company or the Purchaser if the Special General Meeting has concluded without Shareholder approval for the Transaction having been obtained; (vii) by the Company if any representation or warranty of the Purchaser shall have become untrue in any material respect or if there is any material breach of its obligations such that, if occurring on the Closing Date, the Purchaser Obligations Condition would not be satisfied at Closing (subject to a 30 day cure period and further provided that the Purchaser is not then in material breach under the Sale and Purchase Agreement such that either that Condition is unable to be satisfied) ( Purchaser Representation and Warranties Failure Termination Right ); or (viii) by the Company if: (i) all of the conditions which apply to it and the Seller have been satisfied or waived in writing by the Purchaser (other than those conditions which would be satisfied at the Closing if there was a Closing); and (ii) if the Company has given written notice to the Purchaser no earlier than the date on which the Closing should have occurred in accordance with the Sale and Purchase Agreement that it is ready, willing and able to consummate the Closing; and (iii) the Purchaser has failed to consummate the Closing within 1 Business Day of receipt of such notice ( Purchaser Closing Failure Termination Right ). 9

10 3. CERTAIN OTHER TERMS In connection with the Transaction, the Company and the Purchaser have agreed to the following arrangements: (a) Employees It is intended that the existing management team of the Company who are currently engaged in the management of the Target Business, including Mr. Jason Rabin (President, North America), will be offered employment by the Purchaser (or its designated company) with effect from the Closing Date. (b) Transition Services The parties have agreed to enter into a transition services agreement to cover a number of areas including IT, finance, HR, legal, communications and premises on terms customary for transactions of this size and nature. (c) Reciprocal non-solicit covenant Until the eighteenth-month anniversary of the Closing Date, each of the Company, the Seller (on the one hand) and the Purchaser (on the other hand) will not, nor will it permit any of their respective affiliates to, directly or indirectly, solicit for employment or hire certain agreed classes of employees or any officers or independent contractors of the other parties or their affiliates, in each case subject to customary carve-outs. (d) Reciprocal non-interference covenant In respect of any intellectual property license to which the Company, the Seller or the Purchaser (or any of their respective affiliates) is a licensee as at the Closing Date ( Existing License ), from the Closing Date until such Existing License expires or is terminated in accordance with its terms, each other party will not, nor will it permit any of its affiliates to, directly or indirectly through any other person: (i) (ii) solicit, induce or entice, or attempt to induce or entice, a breach, or the termination of, or seek to solicit or entice the termination of, such Existing License; or obtain, or seek to obtain, an intellectual property license from the licensor of such Existing License or any successor or permitted assignee thereof with respect to the same, or similar, subject matter or content of such Existing License. 10

11 (e) Security arrangements The Company has agreed that, in respect of certain guarantees, indemnities, surety bonds, letters of credit and letters of comfort obtained (as at the date of this announcement and in the ordinary course prior to Closing) by the Company or its affiliates for the benefit of the Target Companies, the Company and its affiliates shall not be removed or released from its obligations under those arrangements until the date falling up to 36 months following the Closing Date. Further details of these arrangements will be set out in the Circular, including (if applicable) any implications under the Listing Rules. LR14.58(9) 4. INTENDED CONDITIONAL SPECIAL DIVIDEND The Board intends that, subject to Closing of the Transaction and approval by Shareholders, a special cash dividend in an amount of up to approximately US$356 million (HK$2,780 million) (the Special Dividend ) be distributed to Shareholders as soon as practicable after Closing. For illustrative purposes, based on the 8,552,922,729 shares of the Company in issue as at the date of this announcement, the Special Dividend would be in an amount of up to HK$0.325 per Share. The Special Dividend will be paid out of the proceeds from the Transaction and the final amount of the Special Dividend will be determined by the Board taking into account any Adjustments and any utilisation of the Carve-Out Arrangements. The Special Dividend will allow Shareholders to immediately realise substantial value from their shareholdings in the Company while continuing to be invested in the Company s remaining businesses. As the Special Dividend provides the opportunity for a substantial and immediate cash realization to the Shareholders from the outcome of the Transaction, the Board considers that the proposed distribution of the Special Dividend would, if approved and materialized, be in the interests of the Company and the Shareholders as a whole. If the Transaction is not approved by the Shareholders, or does not complete, then the Special Dividend will not be paid. After Closing and subject to approval by Shareholders of the Special Dividend, the Company will announce further details of the Special Dividend including the final amount of the Special Dividend, the closure date of the register of members of the Company, the record date for determining entitlements to receive the Special Dividend and the pay-out date for the Special Dividend. All Shareholders whose name appear on the share register on the record date for the special dividend will receive the Special Dividend in accordance with his/her shareholding as at the record date. 11

12 5. REASONS FOR, AND BENEFITS OF, THE TRANSACTION The Board are of the view that the Transaction is in the interests of the Company and the Shareholders as a whole. The reasons for, and benefits of, the disposal of the Target Business are: LR14.58(8) (i) (ii) to right size the Company s widespread product and brand portfolio resulting in a more focused operation; to improve operational efficiency as a result of paragraph (i) and to reduce the Company s working capital needs; (iii) to allow the Company to repay some existing financial debt from Transaction proceeds, leading to a stronger balance sheet and credit profile for the Company; and (iv) to allow Shareholders to realise, by way of the payment of the proposed Special Dividend, substantial value from their shareholdings in the Company while continuing to be invested in the Company s remaining businesses. The Directors believe that the terms of the Transaction are fair and reasonable and in the interests of the Company and the Shareholders as a whole. 6. RECOMMENDATION OF THE BOARD Having taken into account the reasons for, and benefits of, the Transaction as set out above, the Directors have unanimously approved the Transaction and recommend the Shareholders to vote in favour of the resolution to be proposed at the Special General Meeting to approve the Transaction and the transactions contemplated under the Transaction Documents. 7. FINANCIAL EFFECTS OF THE TRANSACTION As a result of the Transaction, the Company does not expect to realise any gain or loss (subject to any Adjustments and any utilisation of the Carve-Out Arrangements). LR14.60 (3)(a) The basis for calculating the expected nil gain or loss from the Transaction is the purchase price of the Target Business less the carrying value for the Target Business (as derived from the unaudited management accounts of the Target Business for 31 March 2018). The carrying value of the Target Business includes goodwill, tangible fixed assets (for example, furnishing, computers) and intangible assets (for example, customer lists). Based on the unaudited management accounts of the Target Business for 31 March 2018, the purchase price and the carrying value of the Target Business were broadly inline. Therefore, the Company is not expected to realise any gain or loss as a result of the Transaction. 12

13 Shareholders should note that the above paragraph is for illustrative purposes only. The actual gain or loss from the Transaction may be different and will be determined based on the financial position of the Company on the Closing Date and the review of the Company s auditors upon finalisation of the consolidated financial statements of the Company. Upon Closing, the Company will be able to maintain sufficient operations under Rule of the Listing Rules based on its remaining business. On Closing, NewCo and each of the Target Companies will cease to be subsidiaries of the Company and the profit and loss and the assets and liabilities of the Target Business will no longer be consolidated into the Company s consolidated financial statements. LR14.60(6) On Closing, the Purchaser will assume all obligations and liabilities of NewCo and the Target Companies of any kind, character or description solely to the extent primarily related to the Target Business or the Target Assets, except for the liabilities expressly excluded under the Sale and Purchase Agreement. 8. USE OF PROCEEDS FROM THE TRANSACTION The Company intends to use the net proceeds from the Transaction to pay down existing financial debt, to fund the Special Dividend, and for general working capital purposes. LR14.60 (3)(b) Assuming no adjustments to the purchase price, the Company currently intends to use about half of the net proceeds to repay existing financial debt with about a quarter to fund the Special Dividend, and the remaining net proceeds for working capital purposes. Further details of the intended use of net proceeds will be set out in the Circular. 9. INFORMATION ABOUT THE TARGET BUSINESS The Target Business comprises the following businesses of the Company s North American licensing business: (i) (ii) all of the kids business; all of the accessories business; and (iii) a majority of the West Coast and Canadian fashion businesses. The net asset value of the Target Business (including goodwill and intangible assets) at 31 March 2018, as derived from the unaudited management accounts of the Target Business, was approximately US$1,277 million (HK$9,961 million). LR14.60(2) 13

14 The consolidated profit before tax and after tax of the Target Business, as derived from the unaudited management accounts of the Target Business, is as follows: LR14.58(7) Year ended 31 March HK$ millions Profit before tax Profit after tax INFORMATION ABOUT THE COMPANY AND THE SELLER The Company LR14.58(2) The Company and its subsidiaries are principally engaged in the design, development, marketing and sale of branded kids, men s and women s apparel, footwear, fashion accessories and related lifestyle products, primarily for sales to retailers in the Americas, Europe, Middle East and Asia. The Company and its subsidiaries are also engaged in the brand management business offering expertise in expanding its clients brand assets into new product categories, new geographies and retail collaborations, as well as assisting in distribution of licensed products on a global basis. The Seller The Seller is a wholly owned subsidiary of the Company and will, following completion of the Reorganisation, hold 100% of the issued share capital in NewCo. 11. INFORMATION ABOUT THE PURCHASER The Purchaser is a company listed on the NASDAQ Capital Market under the ticker symbol DFBG and has a business that owns, manages and operates brands in the premium apparel, footwear and accessories sectors. The Purchaser s focuses on organically growing its brands through a global, omni-channel distribution strategy while continuing to seek opportunities to acquire accretive, complementary brands. The Purchaser has entered into binding debt commitment letters to support its obligations to pay the purchase price. These letters are subject to conditions, some of which are outside the control of the Company. The Directors confirm that, to the best of their knowledge, information and belief, having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company (as defined in the Listing Rules). LR14.58(2) LR14.58(3) 12. LISTING RULES IMPLICATIONS As one or more of the applicable percentage ratios (as set out and calculated under Rule of the Listing Rules) in respect of the Transaction is more than 75%, the Transaction constitutes a very substantial disposal for the Company and is subject to reporting, announcement, circular and shareholders approval requirements under Chapter 14 of the Listing Rules. 14

15 13. GENERAL INFORMATION (a) Special General Meeting A Special General Meeting will be convened for Shareholders to consider and, if thought fit, approve the Transaction, the Special Dividend and the transactions contemplated under the Transaction Documents. Fung Holdings (1937) Limited, which has direct interests in approximately 26% of the issued Shares as at the date of this announcement, has irrevocably undertaken to the Company to procure that the voting rights attaching to such Shares be voted in favour of the resolution to approve the Transaction at the Special General Meeting. (b) Circular A circular containing, among other things, the information required under the Listing Rules in relation to the Transaction and a notice of Special General Meeting is expected to be despatched to Shareholders on or around 19 July LR14.60(7) (c) Financial Advisers Goldman Sachs (Asia) L.L.C. has been appointed as the financial advisers to advise the Company on the Transaction. (d) Warning Shareholders and potential investors in the Company should note that: (1) the Transaction and the Special Dividend may or may not proceed as: (i) they are subject to a number of conditions which may or may not be fulfilled (or waived) and; (ii) the Sale and Purchase Agreement may be terminated in certain circumstances; and (2) the final amount of the Special Dividend may be subject to adjustments to the purchase price. Accordingly, there is no assurance that the Transaction will be completed and the Special Dividend paid, nor any assurance as to the amount of the Special Dividend (if paid). There is also no assurance that the conditions to the Purchaser s debt financing for the Transaction will be satisfied, or that the Purchaser will have the financial resource to consummate the Transaction. The Company will have limited recourse, if any, against the Purchaser if the Transaction is not consummated, including as a result of the conditions to the debt financing not being satisfied. Shareholders and potential investors in the Company should exercise caution when dealing in the shares of the Company. 15

16 14. DEFINITIONS Unless the context otherwise requires, the following expressions have the following meanings: Adjustments affiliate Board business day Carve-Out Arrangements Circular Closing Closing Date Company Company Obligations Condition Company Representations and Warranty Condition Directors has the meaning given in section 2(b) of this announcement shall mean, with respect to any person, any other person that directly, or through one or more intermediaries, controls, is controlled by or is under common control with such person (subject to the provisos set out in the Sale and Purchase Agreement) the board of directors of the Company a day other than a Saturday, a Sunday or a day on which (a) commercial banks in New York City or Hong Kong are or (b) the Hong Kong Stock Exchange is, authorised or obligated by law or executive order or the Listing Rules to remain closed has the meaning given in section 2(b) of this announcement the circular relating to the Transaction to be despatched to the Shareholders in accordance with the Listing Rules completion of the Transaction in accordance with the provisions of the Sale and Purchase Agreement the date on which Closing occurs Global Brands Group Holding Limited, a company incorporated in Bermuda with limited liability, whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 787) has the meaning given in section 2(c)(ii)(B) of this announcement has the meaning given in section 2(c)(ii)(A) of this announcement the directors of the Company 16

17 Existing License HK$ Listing Rules Material Adverse Effect has the meaning given in section 3(d) of this announcement Hong Kong dollars, the lawful currency of Hong Kong the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time any change, event, development, circumstance, state of facts or effect that, individually or in the aggregate: (a) has been, is, or would reasonably be expected to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Target Business or NewCo or the Target Companies, taken as a whole, excluding for these purposes any such change, event, development, circumstance, state of facts or effect caused by, or resulting or arising from: (i) (ii) the execution, delivery, announcement or pendency of the Sale and Purchase Agreement and the transactions contemplated hereby; changes in the economic, regulatory or political conditions generally in the United States or any other jurisdiction in which the Target Business operates; (iii) changes after the date hereof in global or national political conditions, including the outbreak or escalation of war or acts of terrorism; (iv) changes in IFRS (or local equivalents in the applicable jurisdiction); (v) changes in law; (vi) any hurricane, tornado, flood, earthquake or other natural disaster; 17

18 (vii) any action required or permitted by the Sale and Purchase Agreement or any Transaction Document or any action taken (or omitted to be taken) with the written consent of, or at the express written direction of, Purchaser; or (viii) the failure to meet any revenue, earnings or other projections, forecasts or predictions (subject to certain provisos), and provided that, for certain of the above items, they shall be taken into account in determining whether a Material Adverse Effect has occurred to the extent they have had, do have or would reasonably be expected to have, individually or in the aggregate, a disproportionate effect on the assets, liabilities, condition (financial or otherwise) or results of operations of the Target Business or NewCo or the Target Companies relative to other similarly situated businesses and persons operating in the same industry and in the same jurisdictions as the Target Business; or (b) has prevented or materially impaired or delayed, or would reasonably be expected to prevent or materially delay, the ability of Company or the Seller to carry out their respective obligations under, or to consummate the transactions contemplated by, the Sale and Purchase Agreement or the Transaction Documents NewCo Purchaser Purchaser Closing Failure Termination Right Purchaser Obligations Condition a Delaware limited liability company and wholly owned subsidiary of the Seller to be formed by the Seller as part of the Reorganisation Differential Brands Group Inc., a company listed on the listed on the NASDAQ Capital Market under the ticker symbol DFBG has the meaning given in section 2(e)(viii) of this announcement has the meaning given in section 2(c)(iii)(B) of this announcement 18

19 Purchaser Representation and Warranties Condition Purchaser Representation and Warranties Failure Termination Right Reorganisation Sale and Purchase Agreement Seller Shareholders Shares Special Dividend Special General Meeting Stock Exchange Target Assets Target Business Target Companies has the meaning given in section 2(c)(iii)(A) of this announcement has the meaning given in section 2(e)(vii) of this announcement has the meaning given in section 2(a)(i) of this announcement the agreement dated 27 June 2018 entered into between the Company, the Seller and the Purchaser relating to the sale and purchase of the Target Business, the principal terms of which are set out in section 2 of this announcement GBG USA Inc., a wholly owned subsidiary of the Company the holders of Shares ordinary shares of HK$ each in the share capital of the Company has the meaning given in section 4 of this announcement the special general meeting of the Company to be convened for Shareholders to consider and, if thought fit, approve the Transaction and the Special Dividend The Stock Exchange of Hong Kong Limited the assets of the Company and its subsidiaries relating to the Target Business agreed to be sold to the Purchaser pursuant to the Sale and Purchase Agreement all of the Company s North American kids business, all of the Company s North American accessories business, and a majority of the Company s West Coast and Canadian fashion businesses certain subsidiaries of the Company which conduct the Target Business 19

20 Transaction Transaction Documents US$ the proposed disposal by the Company of the Target Business in accordance with the provisions of the Sale and Purchase Agreement, as further described in this announcement the Sale and Purchase Agreement and the agreements to be entered into pursuant thereto United States dollars, the lawful currency of the United States of America By Order of the Board Global Brands Group Holding Limited William FUNG Kwok Lun Chairman In this announcement, United States dollars are converted into Hong Kong dollars at the rate of US$1 = HK$7.8. Hong Kong, 27 June 2018 As at the date of this announcement, the Board comprises two Non-executive Directors, namely William Fung Kwok Lun (Chairman) and Hau Leung Lee, one Executive Director, namely Bruce Philip Rockowitz (Chief Executive Officer & Vice Chairman) and five Independent Non-executive Directors, namely Paul Edward Selway Swift, Stephen Harry Long, Allan Zeman, Audrey Wang Lo and Ann Marie Scichili. LR