China Sci-Tech Holdings, run by casino magnate Stanley Ho Hung-sun, 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 on Monday.

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. What is not clear is how a Bermuda-based company can be running a gambling business, since Bermuda specifically excludes gaming activities from those permitted for Bermuda-based companies. The board of directors of China Sci-Tech "confirm the company has no current intention of injecting assets into COL'', a statement 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 the future, although currently no negotiation is carrying on regarding such injection'', the statement continued.

China Sci-Tech in $840 million deal 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 is to 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.

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.