DICKSON TO SPIN OFF CYBER SUBSIDIARY
Byline: Vicki M. Young
NEW YORK — Dickson Concepts Ltd. said Wednesday that it has taken the first steps needed to spin off its e-commerce subsidiary, Dickson Cyber Concepts Ltd., as a listed company on the Growth Enterprise Market of the Hong Kong Stock Exchange, but it appears to have hit a conflict of interest in doing so.
In putting its plan in motion, the Hong Kong-based firm may have inadvertently set itself up for disciplinary action by the stock exchange.
According to the firm’s statement on Wednesday, DicksonCyber.com, a subsidiary of Dickson Cyber Concepts, entered into a consultancy and professional service agreement with Dickson Management Consultancy Ltd., a company owned by Dickson Poon, chairman of the Hong Kong-based firm. The agreement was executed on Dec. 30, 1999, and amended on April 29. Because of exemptions available under the stock exchange’s listing requirements, the board of Dickson Concepts didn’t believe that the agreement was “subject to disclosure.”
But in subsequent discussions with the stock exchange in connection with the spinoff, the exemptions were ruled inapplicable. The stock exchange deemed the agreement a “connected transaction” on the grounds that, under the listing rules, the management firm is an “associate” of a connected person, Dickson Poon. Using boilerplate language in its statement, Dickson Concepts said the “stock exchange has indicated that it reserves the right to take appropriate action against Dickson Concepts.”
Under the terms of the agreement, Poon’s management firm is to provide the e-commerce subsidiary with advice on how to establish and develop its planned Web shopping site and previously announced 70,000-square-foot, Web-enabled shopping venue at Kowloon Station. Poon’s firm will receive a $16.7 million fee on a cost-reimbursement basis. In addition, the Internet operation is obliged to purchase $14.1 million in hardware and software recommended by Poon’s firm. Dollar figures have been converted at current exchange rates. The recommendations are taken from the management firm’s list of suppliers. Dickson Concepts specified that Poon’s firm “will receive no commission” with respect to the recommended purchases.
Services made a part of the agreement include: design and development of the six portals of the Web site; the infrastructure of the physical site at Kowloon Station; advice on warehousing, fulfillment and administrative structure, and preparation of business plans in connection to the two e-commerce operations.
The agreement, which requires shareholder approval, expires on Sept. 30, 2002.
As reported, the shopping site, DicksonCyber.com, uses a category killer concept on the Web and features six lifestyle portals offering consumers merchandise. The physical venue at Kowloon Station utilizes the same six concept portals — Entertainment World, Sports World, E-World, Fashion World, iCosmetic World and Kiddy World. Both the physical and virtual environments are expected to launch by October.
Dickson Concepts provided little information about its planned spinoff, except to say that a special meeting for shareholders will be “convened shortly.” The firm said it has applied for listing on both the stock exchange’s main board and its Growth Enterprise Market board.
Dickson Concepts said the separate listing of Dickson Cyber on the GEM board will provide “more diversified funding sources for it to finance its existing operations and further expansion.”
Dickson Concepts had net income of $19.4 million and operating income of $24.2 million on sales of $391.3 million in 1999. The results include a $30.8 million charge for its investments in e-commerce and other technologies. In the prior year, the company lost $42 million on sales of $648.4 million.
Last year’s results, however, include non-Asian operations that have since been sold to Broad Gain, a private company owned by Poon and members of his family and headed by Poon as chairman.