Baoye Group Company Limited — M&A Activity 2017

Oct 26, 2017

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.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

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* 偉 俊 集 團 控 股 有 限 公 司 WAI CHUN GROUP HOLDINGS LIMITED (incorporated in Bermuda with limited liability) (Stock code: 1013)

DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO THE ACQUISITION OF ENTIRE SHARE CAPITAL IN THE TARGET GROUP

THE EQUITY TRANSFER AGREEMENT

The Board is pleased to announce that on 25 October 2017 (after trading hours), the Company, Holy Profit Limited (a direct wholly owned subsidiary of the Company) (as purchaser) and the Vendors entered into the Equity Transfer Agreement pursuant to which Holy Profit Limited has conditionally agreed to acquire and the Vendors has conditionally agreed to sell an aggregate of 100% of equity interest in the Target Company, for the Consideration of HK$100 million, and shall be paid by the Company to the Vendors by way of the issue and allotment of 1,000 million Consideration Shares at the Issue Price of approximately HK$0.10 per Consideration Shares to the Vendors.

Upon Completion, the Target Company will become an indirect wholly owned subsidiary of the Company, and the financial results of the Target Company will be consolidated into the financial results of the Company.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Acquisition calculated exceeds 5% but is less than 25%, the Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. As such, the Acquisition is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

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As at the date of this announcement, Ka Chun Holdings Limited holds 15,000,000,000 Shares (representing approximately 70.1% of the issued share capital of the Company) and Mr. Lam Ching Kui, who is the chairman of the board of directors and an executive director of the Company, is the ultimate beneficial owner of entire share capital of Ka Chun Holdings Limited. One of the Vendors, Mr. Lam Ka Chun, is the son of Mr. Lam Ching Kui. Accordingly, the Vendors is regarded as a connected person of the Company, and the Acquisition constitutes a connected transaction of the Company under Chapter 14A Connected Transactions of the Listing Rules.

The Company will appoint an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders regarding the propose Acquisition.

A circular containing, among other things, (i) details of the Acquisition, (ii) the letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iii) the leter of advice form the independent financial adviser to the Independent Board Committee and the Independent Shareholders; (iv) other information required to be disclosed under the Listing Rules; and (v) the notice of the Special General Meeting (“SGM”) of the shareholders is expected to be despatched to the shareholders on or before 15 November 2017. Mr. Lam Ching Kui and the connected persons will be required to abstain from voting on the resolutions approving the Acquisition at the SGM.

INTRODUCTION

The Board is pleased to announce that on 25 October 2017 (after trading hours), the Company, Holy Profit Limited (a direct wholly owned subsidiary of the Company) (as purchaser) and the Vendors entered into the Equity Transfer Agreement pursuant to which Holy Profit Limited has conditionally agreed to acquire and the Vendors has conditionally agreed to sell an aggregate of 100% of equity interest in the Target Company, for the Consideration of HK$100 million, and shall be paid by the Company to the Vendors by way of the issue and allotment of 1,000 million Consideration Shares at the Issue Price of approximately HK$0.10 per Consideration Shares to the Vendors.

PRINCIPAL TERMS OF THE EQUITY TRANSFER AGREEMENT

Date: 25 October 2017

Parties: (i) The Company (ii) Holy Profit Limited (a direct wholly owned subsidiary of the Company) (as purchaser)

(iii) The Vendors

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As at the date of this announcement, Ka Chun Holdings Limited holds 15,000,000,000 Shares (representing approximately 70.1% of the issued share capital of the Company) and Mr. Lam Ching Kui, who is the chairman of the board of directors and an executive director of the Company, is the ultimate beneficial owner of entire share capital of Ka Chun Holdings Limited. One of the Vendors, Mr. Lam Ka Chun, is the son of Mr. Lam Ching Kui. Accordingly, the Vendors is regarded as a connected person of the Company, and the Acquisition constitutes a connected transaction of the Company under Chapter 14A Connected Transactions of the Listing Rules. Moreover, one of the Vendors, Mr. Chuk Yan Fuk (祝恩福先生), is the controlling shareholder of the vendor in the Company’s announcement dated 9 June 2017 regarding the propose acquisition of 岳陽凱達科旺汽車零部件製造有限公司(Yueyang Kaida Kewang Motor Vehicle Parts Manufacturing Limited*).

Saved as disclosed above, to the best knowledge, information and belief of the Board and after making all reasonable enquiries, each of the Vendors, the Target Company and its ultimate beneficial owner(s) are Independent Third Parties.

Assets to be acquired:

Pursuant to the Equity Transfer Agreement, Holy Profit Limited has conditionally agreed to acquire and the Vendors has conditionally agreed to sell an aggregate of 100% of equity interest in the Target Company which is a company established in the British Virgin Islands with limited liability. The Target Group consists of four companies. Upon Completion, the Target Company will become an indirect wholly owned subsidiary of the Company and will be beneficially owned as to 100% by Holy Profit Limited.

Consideration and payment terms

The aggregate Consideration of HK$100 million shall be paid by the Company to the Vendors by way of the issue and allotment of 1,000 million Consideration Shares at the Issue Price of approximately HK$0.10 per Consideration Shares to the Vendor. The terms of the Equity Transfer Agreement were determined based on arm’s length negotiations among the parties thereto. The Consideration of HK$100 million was determined with reference to the profit forecasts of the Target Group. The profit forecasts are the net profit after tax will be not less than RMB60 million in the year 2018 and the net profit after tax will be not less than RMB120 million in the year 2019.

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The Issue Price represents:

• (i) a premium of approximately 78.6% over the closing price of HK$0.056 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a premium of approximately 76.7% over the average closing price of approximately HK$0.057 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day (the “ 5-day Average Price ”);

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• (iii) a premium of approximately 78.3% over the average closing price of HK$0.056 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day (the “ 10-day Average Price ”);

Although the issue of the Consideration Shares will have a dilution effect to the existing Shareholders upon the Completion, having considered (i) the current volatile market sentiment of the stock market in Hong Kong; (ii) the shareholding interests in the Company held by the public shareholders will only be diluted from 29.9% to 25.24%; and (iii) the Issue Price was determined with reference to the profit forecasts of the Target Group. The Issue Price represents a premium of approximately 78.6%, 76.7% and 78.3% over the share price of the Company as at the Last Trading Day, the 5-day Average Price and the 10-day Average Price respectively, the Directors consider that the issue of the Consideration Shares is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions Precedent

Completion of the Equity Transfer Agreement shall be conditional upon the fulfillment of the Conditions including:

• (i) Holy Profit Limited being reasonably satisfied with the results of the financial and legal due diligence conducted on the Target Group;

• (ii) regarding to the arrangement of change of the shareholding in the Target Group including but not limited to change of article of incorporation, change of representative(s), director(s), supervisor(s) and general manager (if required), the Vendor and the Target Company having submitted all the relevant applications and the related documents to the respective industry and commerce bureau which has formally accepted the respective applications;

• (iii) regarding to the relevant matters of the change of the shareholding in the Target Group including but not limited to change of shareholder and controlling shareholder, change of article of incorporation, change of representative(s) and corporation contract, the Vendor and the Target Company having submitted all the relevant applications and the related documents in the foreign investment management information system;

• (iv) the Vendors having obtained all necessary internal consents and approvals in the Target Group in respect of the Equity Transfer Agreement;

• (v) Holy Profit Limited having obtained all its necessary internal consents and approvals in respect of the Equity Transfer Agreement; and

• (vi) the Company and Holy Profit Limited having completed all the relevant disclosure and obtained the approvals (if applicable) from the Stock Exchange under the Listing Rules in respect of the transactions contemplated under the Equity Transfer Agreement.

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The Company, Holy Profit Limited, Vendors and the Target Group shall use all reasonable endeavours to procure satisfaction of the above conditions on or before the Long Stop Date. If the aforesaid conditions (ii), (iii), and (iv) are not fulfilled by the Vendor or are not waived by the Company and Trend Access on or before the Long Stop Date, the Equity Transfer Agreement shall be of no effect since the Long Stop Date and the Vendor shall have the obligations and liabilities of the relevant losses caused towards Holy Profit Limited. If the aforesaid condition (v) is not fulfilled by the Holy Profit Limited or are not waived by the Vendors on or before the Long Stop Date, the Equity Transfer Agreement shall be of no effect since the Long Stop Date and the Company and Holy Profit Limited shall have the obligations and liabilities of the relevant losses caused towards the Vendors.

Application for listing

An application will be made by the Company to the Stock Exchange for the listing of, and the permission to deal in, the Consideration Shares.

Completion

Completion shall take place when all of the above Conditions have been fulfilled or waived on or before the Long Stop Date (or such other date as the Company, Holy Profit Limited and the Vendors may agree in writing).

INFORMATION ABOUT THE VENDORS

The Target Company is a limited liability company incorporated in British Virgin Islands and is principally engaged in investment holding as to 50% held by Mr. Lam Ka Chun, 26 % held by Mr. Chuk Yan Fuk and 24% held by Mr. Yan Kai Feng.

INFORMATION ABOUT THE TARGET GROUP

The Target Company (“Insight Technology”) is a company established in the British Virgin Islands with limited liability on 21 April 2017. Insight Technology is an enterprise focus on artificial intelligence and safety of the brain research and development of high-tech. Insight Technology integrates of artificial intelligence, large information technology, to create a wide range of services in public safety, industry safety, business safety products. Insight Technology itself developed the artificial intelligence engine can immediately analyze the massive data from all corners of the world, including text, video, voice. Through the natural language understanding, car identification, behavior analysis, voice recognition and other technologies, these materials are structured, and then use data mining technology for hundreds of millions of dimensions of data analysis, to find potential threats, so that alert in advance, alarm in process and post hoc analysis. So as to provide a full range of security services for the public, corporations and organisations for all rounded safety services.

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Set out below is certain unaudited financial information of the Target Group for the period ended 30 September 2017:

	For the period ended
	30 Sep 2017
	unaudited
	RMB’000
Revenue	0
Profit/(loss) before taxation	(859)
Profit/(loss) after taxation	(859)
	As at 30 Sep 2017
	Unaudited
	RMB’000
Total assets	760
Net assets	141

The Target Company will become an indirect wholly owned subsidiary of the Company, and its assets and liabilities and its profits and losses will be consolidated into the consolidated financial statements of the Company after Completion.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Company was incorporated in Bermuda with limited liability and its shares are listed on the Main Board of the Stock Exchange. The Company is an investment holding company and has been, via its major operating subsidiaries, principally engaged in (i) network and system integration by production of software and provision of solutions and related services; (ii) trading of communication products; (iii) investment holdings; and (iv) provision of telecommunications infrastructure solution services.

As disclosed in the annual report of the Company for the year ended 31 March 2017, the Group has been actively identifying projects with growth potential for acquisition.

Given that Insight Technology is an enterprise focus on artificial intelligence and safety of the brain research and development of high-tech. Insight Technology integrates of artificial intelligence, large information technology, to create a wide range of services in public safety, industry safety, business safety products. The products of Insight Technology will be widely used. The Board is optimistic about its prospect and would like to identify investment opportunities in the China high-tech market.

The Board is of the opinion that the Acquisition will bring a new revenue stream and satisfactory investment returns to the Company considering the Insight Technology’s integration of artificial intelligence, large information technology, to create a wide range of services in public safety, industry safety, business safety products that as disclosed in

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the section headed “Information about the Target Group”. The Board is also of the view that the terms and conditions of the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Acquisition calculated exceeds 5% but is less than 25%, the Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. As such, the Acquisition is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, Ka Chun Holdings Limited holds 15,000,000,000 Shares (representing approximately 70.1% of the issued share capital of the Company) and Mr. Lam Ching Kui, who is the chairman of the board of directors and an executive director of the Company, is the ultimate beneficial owner of entire share capital of Ka Chun Holdings Limited. One of the Vendors, Mr. Lam Ka Chun, is the son of Mr. Lam Ching Kui. Accordingly, the Vendors is regarded as a connected person of the Company, and the Acquisition constitutes a connected transaction of the Company under Chapter 14A Connected Transactions of the Listing Rules.

The Company will appoint an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders regarding the propose Acquisition.

A circular containing, among other things, (i) details of the Acquisition, (ii) the letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iii) the leter of advice form the independent financial adviser to the Independent Board Committee and the Independent Shareholders; (iv) other information required to be disclosed under the Listing Rules; and (v) the notice of the Special General Meeting (“SGM”) of the shareholders is expected to be despatched to the shareholders on or before 15 November 2017. Mr. Lam Ching Kui and the connected persons will be required to abstain from voting on the resolutions approving the Acquisition at the SGM.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

“Acquisition” the acquisition of the an aggregate of 100% of the equity interest in the Target Company pursuant to the terms and conditions of the Equity Transfer Agreement

“Board” the board of Directors

“Company” Wai Chun Group Holdings Limited, an

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exempted company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange

• “Completion”

• “Condition(s)”

• “Consideration”

• “Consideration Shares”

• “Director(s)”

• “Equity Transfer Agreement”

• “Group”

• “Holy Profit Limited”

• “Hong Kong”

• “HK$”

• “Independent Third Party(ies)”

• “Issue Price”

• completion of the transactions contemplated under the Equity Transfer Agreement

• the condition(s) precedent set out in the Equity Transfer Agreement

• the consideration of HK$100 million payable by the Company to the Vendors by way of the issue and allotment of 1,000 million Consideration Shares at the Issue Price of approximately HK$0.10 per Consideration Shares to the Vendor

• 1,000 million new Shares to be issued to the Vendor at an issue price of HK$0.10 per new Shares for the full settlement of the Consideration

the director(s) of the Company

• the equity transfer agreement dated 25 October 2017 entered into among the Company, Holy Profit Limited and the Vendors relating to the Acquisition

the Company and its subsidiary

• Holy Profit Limited, a company incorporated in British Virgin Islands with limited liability

Hong Kong Special Administrative Region of the PRC

Hong Kong dollars, the lawful currency of Hong Kong from time to time

third party(ies) independent of the Company and are not connected persons (as defined under the Listing Rules) of the Company

HK$0.10 per Consideration Share

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• “Last Trading Day”

• “Listing Rules”

• “Long Stop Date”

• “PRC”

• “RMB”

• “Share(s)”

• “Shareholder(s)”

• “Stock Exchange”

• “Target Company”

• “Target Group”

• “Vendors”

• 25 October 2017, being the last trading day immediately prior to the entering into of the Equity Transfer Agreement

the Rules Governing the Listing of Securities on the Stock Exchange as amended from time to time

being 31 January 2018 or such other date as all parties to the Equity Transfer Agreement may agree in writing

the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan

Renminbi, the lawful currency in the PRC

• ordinary share(s) in the share capital of the Company

holder(s) of the Share(s)

The Stock Exchange of Hong Kong Limited

Insight Technology International Investment Group Limited, a company incorporated in British Virgin Islands with limited liability

(i) Insight Technology International Investment Group Limited, a company incorporated in British Virgin Islands with limited liability; (ii) Insight Technology Innovation Limited, a company incorporated in Hong Kong with limited liability; (iii) 深圳前海洞悉科技有限公司(Shenzhen Qian Hai Insight Technology Company Limited) a company incorporated in PRC with limited liability; and (v) 全悉科技（北 京）有限公司 (Quan Xi Technology (Beijing) Company Limited )

(i) Mr. Lam Ka Chun, a Hong Kong resident holding 50% equity interest in the Target Company, he is the son of Mr. Lam Ching

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Kui (ii) Mr. Chuk Yan Fuk, a Hong Kong resident holding 26% equity interest in the Target Company; and (iii) Mr. Yan Kai Feng, a PRC resident holdingd 24% equity interest in the Target Company

“%”

Percent

By order of the Board Wai Chun Group Holdings Limited Lam Ching Kui Chairman & Chief Executive Officer

Hong Kong, 25 October 2017

As at the date of this announcement, the Board consists of one executive Director, namely Mr. Lam Ching Kui (Chairman & Chief Executive Officer), and three independent non-executive Directors, namely Mr. Ko Ming Tung, Edward, Mr. Shaw Lut, Leonardo and Mr. To Yan Ming, Edmond.

For the purpose of this announcement, the translation of RMB into HK$ is based on the approximately exchange rate of RMB1.00 = HK$1.18. Such translation should not be construed as a representation that the amount in question has been, could have been or could be converted at any particular rate or at all.

• for identification purpose only

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