Casino magnate Stanley Ho Hung-sun's China Sci-Tech Holdings is buying control of technology firm China Online (Bermuda) for $840 million in cash. China Sci-Tech, in which Mr Ho is the largest single shareholder, would buy 32.82 per cent of China Online (COL) from its controlling shareholder China Strategic Holdings, the companies said last night. Market rumours about the deal have been rife for days, with speculation focusing on the possibility that Mr Ho would use COL as a vehicle to launch an on-line gambling venture. China Sci-Tech called the reports 'speculative' and said directors were unaware of the source of such information. However, it did not explicitly rule out a move into the Internet gambling business. The directors 'confirm the company has no current intention of injecting assets [which the stock exchange considers as a business not suitable for listing] into COL', it said. 'However, subject to full compliance with laws and regulatory requirements, the directors would not rule out the possibility of injection of suitable assets into COL in future, although currently no negotiation is carrying on regarding such injection.' A stock exchange source last week warned that an on-line gambling business was unlikely to gain regulatory approval, as casino gambling was illegal in Hong Kong. China Sci-Tech will buy three billion COL shares at 28 cents a share, a premium of about 9.8 per cent to the closing price on October 20, its last day of trading before the stock was suspended. The price is a 344 per cent premium to COL's unaudited consolidated net tangible asset value of 6.3 cents per share. China Strategic, which has a 47.07 per cent stake in COL, has agreed to sell the rest of its stake to persons not connected with it or China Sci-Tech immediately following completion of the deal. China Strategic chairman Oei Hong Leong has also agreed to dispose of his 3.57 per cent shareholding on the same terms. This would leave China Sci-Tech as possibly the single largest shareholder of COL, China Strategic said. China Sci-Tech said: 'The directors consider that the transaction poses a valuable opportunity to acquire a major stake in COL, which has a strategic investment in high-technology businesses and thus the premium is reasonable.' Cash-rich COL, formerly known as Star Telecom, reaped a $440 million exceptional gain from the sale in May of 400 million shares in Pacific Century CyberWorks, its former subsidiary Tricom Holdings. COL still holds 200 million shares in CyberWorks and China Strategic has given a warranty that these will still be included in the assets of COL at completion of the deal. The deal is subject to various conditions, including confirmation from the Securities and Futures Commission that China Sci-Tech will not be required to make a general offer for COL shares. The deal, which is expected to be completed by the end of the year, will be subject to the approval of China Strategic and COL shareholders. Mr Ho bought a 16.7 per cent interest in China Sci-Tech in August, thus becoming the company's biggest single shareholder. The shares of all three companies have been suspended from trading since October 21. They have applied for trading to resume this morning.
