09:57     DENWAY MOTORS<00203> - Announcement (1)                             

    The Stock Exchange of Hong Kong Limited takes no responsibility for       
    the contents of this announcement, makes no representation as to its      
    accuracy or completeness and expressly disclaims any liability            
    whatsoever for any loss howsoever arising from or in reliance upon        
    the whole or any part of the contents of this announcement. This          
    announcement is for information purposes only and does not constitute     
    an invitation or offer to acquire, purchase or subscribe for any          
    securities.                                                               
                                                                              
                                                                              
    DENWAY MOTORS LIMITED                                                     
    (Incorporated in Hong Kong under the Companies Ordinance)                 
    website: http://www.denway-motors.com                                     
    (Stock Code: 203)                                                         
                                                                              
    DISCLOSEABLE AND CONNECTED TRANSACTIONS                                   
    INVOLVING THE ALLOTMENT AND ISSUE OF NEW SHARES                           
                                                                              
                                                                              
    The Directors are pleased to announce that on 3 January 2005,             
    the Company has entered into the Acquisition Agreement with City          
    Achieve, a wholly-owned subsidiary of China Lounge, whereby the           
    Company has conditionally agreed to acquire and take an assignment        
    of, and City Achieve has conditionally agreed to dispose of the Sale      
    Share (i.e. the entire shareholding in Smartstate) and the                
    Shareholder's Loan. The sole asset held by Smartstate is the              
    Guangzhou Denway Interests. Upon Completion, each of Smartstate and       
    Guangzhou Denway will become wholly-owned subsidiary of the Company.      
                                                                              
                                                                              
    The Total Consideration of the Acquisition is HK$996,215,000 and          
    will be satisfied as to HK$789,353,600 in cash, and as to the balance     
    thereof by the allotment and issue of the Consideration Shares of         
    73,800,000 new Shares at the Issue Price of HK$2.803 to City Achieve      
    (or such other person(s) as may be directed by City Achieve in            
    writing). Based on the closing price of the Shares of HK$2.75 per         
    Share as quoted on the Stock Exchange on 3 January 2005, being the        
    date of the Acquisition Agreement, the market value of the                
    Consideration Shares would be equivalent to approximately HK$203.0        
    million. The Cash Portion will be settled as to HK$305,900,000 by the     
    proceeds obtained from the Subscription took place in 2000 and as to      
    HK$483,453,600 by the internal resources of the Group.                    
                                                                              
    Since China Lounge is the immediate controlling shareholder of the        
    Company, City Achieve is a connected person (as defined under the         
    Listing Rules) by virtue of its being a wholly-owned subsidiary of        
    China Lounge. Accordingly, the Acquisition and the issue of the           
    Consideration Shares constitute connected transactions of the Company     
    under Rule 14A.17 of the Listing Rules and are subject to the             
    approval of the Independent Shareholders at the EGM by poll. China        
    Lounge and its associates will abstain from voting in respect of the      
    relevant resolutions at the EGM. Since one of the Relevant Ratios in      
    respect of the Acquisition exceeds 5% but is less than 25%, the           
    Acquisition also constitutes a discloseable transaction for the           
    Company under Rule 14.06(2) of the Listing Rules.                         
                                                                              
    An Independent Board Committee has been formed to advise the Independent  
    Shareholders in relation to the Acquisition and DBS Asia Capital          
    Limited has been appointed as the independent financial adviser to        
    advise the Independent Board Committee and Independent Shareholders       
    in this regard.                                                           
                                                                              
    A circular containing, among other things, further details of the         
    Acquisition and the allotment and issue of the Consideration Shares,      
    the advice from the Independent Board Committee to Independent            
    Shareholders, the recommendation of the independent financial adviser     
    to the Independent Board Committee and Independent Shareholders in        
    respect of the Acquisition, the notice of the EGM and information on      
    the Company will be sent to the Shareholders as soon as possible in       
    compliance with the Listing Rules.                                        
                                                                              
    The Acquisition                                                           
    The Acquisition Agreement                                                 
    Date                                                                      
    3 January 2005                                                            
    Parties                                                                   
    Vendor:                        City Achieve, an investment                
                                   holding company, which is                  
                                   wholly-owned by China Lounge               
    Purchaser:                     the Company                                
                                                                              
    Assets to be acquired                                                     
    (i) the Sale Share, being the entire issued share capital in Smartstate.  
    The sole asset held by Smartstate is the Guangzhou Denway Interests;      
    and                                                                       
                                                                              
    (ii) the Shareholder's Loan.                                              
                                                                              
    Shareholdings                                                             
    Set out below are the shareholdings of the Company before and