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Chen Xing Development Holdings Limited — M&A Activity 2018
Dec 12, 2018
50498_rns_2018-12-12_02ffd35f-746b-4366-ae4f-917b3bd749c1.pdf
M&A Activity
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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.
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Chen Xing Development Holdings Limited 辰興發展控股有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2286)
MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF 49% EQUITY INTEREST IN TARGET COMPANY IN THE PRC
THE ACQUISITION
On 12 December 2018 (after trading hours), the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell 49% equity interest in the Target and the Vendor’s Loan at an aggregate consideration of approximately RMB224,900,000 (equivalent to approximately HK$255,936,200), plus interest on the Vendors’ Loan, subject to the terms and conditions of the Agreement.
Subject to the Purchaser completing the Acquisition and the acquisition of equity interest in the Target from the Targetco Majority Shareholder, the Purchaser shall pay a further consideration of RMB30 million (equivalent to approximately HK$34,140,000) within seven business days of the completion of the registration of transfer of such equity interests. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, each of the Vendor, the Targetco Majority Shareholders and their ultimate beneficial owners are third parties independent of the Company and its connected persons.
The Target is a company established under the laws of the PRC with limited liability on 9 September 2013. The principal assets of the Target are three land parcels located at Phase 2 of Xishuangbanna Travel Resort, Yunan Province, the PRC with an estimated aggregate area of 335.75 mu (equivalent to 223,833.33 sq. m.), comprising 306.12 mu (equivalent to approximately 204,080 sq. m.) for residential purpose and 29.63 mu (equivalent to approximately 19,753.33 sq. m.) for commercial purpose. The Target is currently engaged in the construction and development of the parcel of land which is designated for commercial purpose.
Upon completion of the Acquisition, the Group will be interested in 49% equity interest of the Target and accordingly the Target will become an associated company of the Group. If the Group succeeds in acquiring equity interests in the Target from the Targetco Majority Shareholder such that the Group’s holding of equity interests in the Target exceeds 50%, the Target will become a subsidiary of the Group and the financial results, assets and liabilities of the Target will be consolidated into the accounts of the Group.
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LISTING RULES IMPLICATIONS OF THE ACQUISITION
As one of the applicable percentage ratios in respect of the Acquisition exceeds 25% but is less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders’ approval requirements pursuant to Chapter 14 of the Listing Rules.
The EGM will be convened for the purposes of considering and, if thought fit, passing the necessary resolution(s) to approve, among other matters, the Equity Transfer Agreement and the transactions contemplated thereunder.
A circular containing, among other things, (i) details of the Acquisition; (ii) financial information of the Group; (iii) financial information of the Target; and (iv) a notice of EGM, will be despatched to the Shareholders on or before 28 February 2018 as additional time is required to complete the accountants’ report on the Target and information in accordance with the relevant requirements of the Listing Rules.
As the Equity Transfer Agreement is subject to a number of conditions precedent, in particular, the Targetco Majority Shareholder waiving or not exercising its pre-emption rights to acquire 49% equity interests in the Target held by the Vendor. The Acquisition may or may not become unconditional or be completed. In addition, if the Company enters into agreement with the Majority Shareholder to purchase the remaining equity interests of the Target, the Company will comply with the requirements under the Listing Rules. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.
THE ACQUISITION
On 12 December 2018 (after trading hours), the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendors have conditionally agreed to sell 49% equity interest in the Target and the Vendor’s Loan at an aggregate consideration of approximately RMB224,900,000 (equivalent to approximately HK$255,936,200), plus interest on the Vendors’ Loan, subject to the terms and conditions of the Agreement.
EQUITY TRANSFER AGREEMENT
Date: 12 December 2018
Parties: (i) the Purchaser, an indirectly wholly-owned subsidiary of the Company; and
- (ii) the Vendor.
To the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, each of the Vendor, the Targetco Majority Shareholder and their ultimate beneficial owners are third parties independent of the Company and its connected persons.
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Assets to be acquired
The Target is a company established under the laws of the PRC with limited liability on 9 September 2013. The principal assets of the Target are three land parcels located at Phase 2 of Xishuangbanna Travel Resort, Yunan Province, the PRC with an estimated aggregate area of 335.75 mu (equivalent to 223,833.33 sq. m.), comprising 306.12 mu (equivalent to approximately 204,080 sq. m.) for residential purpose and 29.63 mu (equivalent to approximately 19,753.33 sq. m.) for commercial purpose. The Target is currently engaged in the construction and development of the parcel of land which is designated for commercial purpose.
Upon completion of the Acquisition, the Group will be interested in 49% equity interest of the Target and accordingly the Target will become an associated company of the Group. If the Group succeeds in acquiring equity interests in the Target from the Targetco Majority Shareholder such that the Group’s holding of equity interests in the Target exceeds 50%, the Target will become a subsidiary of the Group and the financial results, assets and liabilities of the Target will be consolidated into the accounts of the Group.
As at the date of this announcement, the Target is owned as to 49% by the Vendor and 51% by the Targetco Majority Shareholder.
Pursuant to the terms of the Equity Transfer Agreement, the Purchaser will acquire 49% equity interest in the Target Company and the Vendor’s Loan from the Vendor.
Consideration
The Consideration was determined with reference to the market value, the future development potential of the Land and the prevailing market price of land in Yunnan Province.
The Consideration shall be paid by the Purchaser in the following manners:
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(i) RMB30 million, being the deposit shall be paid within 5 business days after the date of the Equity Transfer Agreement;
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(ii) RMB80 million, within 5 business days after (a) the date when the Targetco Majority Shareholder decides not to exercise its pre-emption right to acquire the 49% equity interests held by the Vendor; or (b) the deadline as stipulated in the announcement regarding the listing of equity interests of the Target for sale by the Targetco Majority Shareholder;
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(iii) The remaining balance of RMB111.90 million, within 5 business days after completion of the registration with relevant government authority for the transfer of 49% equity interests in the Target Company to the Purchaser.
In addition, after the date of the Equity Transfer Agreement, the Purchaser shall pay Additional Consideration of RMB3 million plus interest calculated at 15% per annum accruing from September 2014 (being the date on which the Vendor’s Loan was provided by the Vendor to the Target) to the Vendor to acquire the Vendor’s Loan .
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Subject to the Purchaser completing the Acquisition and the acquisition of equity interest in the Target from the Targetco Majority Shareholder, the Purchaser shall pay the Further Consideration of RMB30 million (equivalent to approximately HK$34.14 million) within seven business days after the completion of the registration of transfer of such equity interests.
The payment of the Consideration, the Additional Consideration and the Further Consideration (where applicable) will be funded internal resources of the Group.
Conditions Precedent
Completion of the Acquisition is subject to the satisfaction of the following conditions precedent:
-
(a) the Company having obtained shareholders’ approval at the EGM for the Equity Transfer Agreement, and the consummation of the transactions contemplated thereunder; and
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(b) the Targetco Majority Shareholder waiving or not exercising its pre-emption right to acquire 49% equity interests in the Target held by the Vendor.
INFORMATION ON THE PARTIES
The Group and the Purchaser
The Group is principally engaged in property development focusing on development projects of residential and commercial properties. The Purchaser is a company established under the laws of the PRC with limited liability and is an indirectly wholly-owned subsidiary of the Company.
The Vendor and the Targetco Majority Shareholder
The Vendor is a company established under the laws of the PRC with limited liability and is principally engaged in development of tourist attractions, property investment and development.
The Targetco Majority Shareholder is a state-owned enterprise established under the laws of the PRC with limited liability and is principally engaged in property development and investment.
The Target
The Target is a company established under the laws of the PRC with limited liability on 9 September 2013. The principal assets of the Target are the three land parcels located at Phase 2 of Xishuangbanna Travel Resort, Yunan Province, the PRC with an estimated aggregate area of 335.75 mu (equivalent to 223,833.33 sq. m.), comprising 306.12 mu (equivalent to approximately 204,080 sq. m.) for residential purpose and 29.63 mu (equivalent to approximately 19,753.33 sq. m.) for commercial purpose. The Target is currently engaged in the construction and development if the parcel of land which is designated for commercial purpose.
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Financial information on the Target
Set out below is the audited financial information of the Target for the two financial years ended 31 December 2016 and 2017 prepared in accordance with the PRC GAAP:
| Fo the financial | year ended | |
|---|---|---|
| 31 December | ||
| 2016 | 2017 | |
| RMB’000 | RMB’000 | |
| Net loss before taxation and extraordinary items | 5,959 | 4,829 |
| Net loss after taxation and extraordinary items | 6,107 | 4,794 |
The total and net asset values of the Target Company as at 31 December 2017 were approximately RMB420 million and RMB270 million, respectively.
REASONS FOR AND BENEFIT OF THE ACQUISITION
The Group has been looking for opportunities to enter into new and promising cities for business expansion. In view of the location and development of the Land which will mainly feature high end residential buildings on the Land implementing a concept of cultural, tourist and healthy environment and intended for middle-class or upper-class professionals and families. The Board considers that the Equity Transfer Agreement and the transactions contemplated thereunder offers an excellent opportunity for the Group to diversify its investment and property portfolio to the Yunnan market, where the Board sees positive growth prospects, with a view to bringing more investment returns for its Shareholders.
Based on the above factors, the Directors (including the independent non-executive Directors) consider that the terms of the Equity Transfer Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
LISTING RULES IMPLICATIONS OF THE ACQUISITION
As one of the applicable percentage ratios in respect of the Acquisition exceeds 25% but is less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders’ approval requirements pursuant to Chapter 14 of the Listing Rules.
The EGM will be convened for the purposes of considering and, if thought fit, passing the necessary resolution(s) to approve, among other matters, the Equity Transfer Agreement and the transactions contemplated thereunder.
A circular containing, among other things, (i) details of the Acquisition; (ii) financial information of the Group; (iii) financial information of the Target; and (iv) a notice of EGM, will be despatched to the Shareholders on or before 28 February 2018 as additional time is required to complete the accountants’ report on the Target and information in accordance with the relevant requirements of the Listing Rules.
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As the Equity Transfer Agreement is subject to a number of conditions precedent, in particular, the Targetco Majority Shareholder waiving or not exercising its pre-emption rights to acquire 49% equity interests in the Target held by the Vendor. The Acquisition may or may not become unconditional or be completed. In addition, if the Company enters into agreement with the Majority Shareholder to purchase the remaining equity interests of the Target, the Company will comply with the requirements under the Listing Rules. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.
DEFINITIONS
In this Announcement, unless the context requires otherwise, the following terms have the meanings set out below:
| “Acquisition” | the proposed acquisition of 49% equity interest in the Target and the |
|---|---|
| Vendor’s Loan by the Purchaser from the Vendor pursuant to the | |
| terms of the Equity Transfer Agreement | |
| “Additional Consideration” | the additional consideration of RMB3 million plus interest calculated |
| at 15% per annum from September 2014 (being the date on which the | |
| Vendor’s Loan was provided by the Vendor to the Target), payable by | |
| the Purchaser to the Vendor for the Vendor’s Loan | |
| “Board” | the board of Directors |
| “Company” | Chen Xing Development Holdings Limited (辰興發展控股有限公 |
| 司), an exempted company incorporated in the Cayman Islands with | |
| limited liability and the issued Shares are listed on Main Board of | |
| the Stock Exchange | |
| “Consideration” | the consideration of RMB221,900,000 payable by the Purchaser for |
| the Acquisition | |
| “connected person(s)” | shall have the meaning ascribed to it under the Listing Rules |
| “Director(s)” | the director(s) of the Company |
| “EGM” | an extraordinary general meeting of the Company to be convened |
| for the purposes of considering and, if thought fit, passing the | |
| necessary resolution(s) to approve, among other matters, the Equity | |
| Transfer Agreement and the transactions contemplated thereunder | |
| “Equity Transfer | an equity transfer agreement entered into on 12 December 2018 |
| Agreement” | (as supplemented by a supplemental agreement entered into on 12 |
| December 2018) between the Purchaser and the Vendor in relation | |
| to the sale and purchase of 49% equity interest in the Target and the | |
| Vendor’s Loan |
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| “Further Consideration” | the further consideration of RMB30 million to be paid by the Purchaser |
|---|---|
| to the Vendor within seven business days after the completion of the | |
| registration of transfer of the Acquisition and the acquisition of the | |
| equity interest in the Target from the Targetco Majority Shareholder | |
| “Group” | the Company and its subsidiaries |
| “Hong Kong” | the Hong Kong Special Administrative Region of the PRC |
| “Land” | three parcels of land located at Phase 2 of Xishuangbanna Travel |
| Resort, Yunan Province, the PRC with an estimated aggregate area of | |
| 335.75 mu (equivalent to 223,833.33 sq. m.), comprising 306.12 mu | |
| (equivalent to approximately 204,080 sq. m.) for residential purpose | |
| and 29.63 mu (equivalent to approximately 19,753.33 sq. m.) for | |
| commercial purpose | |
| “Listing Rules” | the Rules Governing the Listing of Securities on The Stock |
| Exchange of Hong Kong Limited | |
| “PRC” | the People’s Republic of China (excluding, for the purpose of this |
| announcement, the Hong Kong Special Administrative Region of | |
| the People’s Republic of China, the Macao Special Administrative | |
| Region of the People’s Republic of China and Taiwan) | |
| “PRC GAAP” | the Generally Accepted Accounting Principles in the PRC |
| “Purchaser” | Chenxing Real Estate Development Co., Ltd.* (辰興房地產發展有 |
| 限公司), a company established in the PRC with limited liability, | |
| being an indirect wholly-owned subsidiary of the Company | |
| “RMB” | Renminbi, the lawful currency of the PRC |
| “Stock Exchange” | The Stock Exchange of Hong Kong Limited |
| “subsidiary” | has the meaning attributed to it under the Listing Rules |
| “Target” | Xishuangbanna Jingyuan Investment Development Co., Ltd.* (西 |
| 雙版納景緣投資開發有限公司), a company established under the | |
| laws of the PRC with limited liability | |
| “Targetco Majority | Beijing Sunshine Real Estate Comprehensive Development Co., Ltd. |
| Shareholder” | (北京陽光房地產綜合開發有限公司), a state-owned enterprise |
| established under the laws of the PRC with limited liability |
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“Vendor” Xishuangbanna Haoyuan Tourism Development Co., Ltd.* ( 西雙版 納昊緣旅遊發展有限公司 ) a company established under the laws of the PRC with limited liability
“Vendor’s Loan”
a loan owing to the Vendor by the Target with a principal amount of RMB3 million
“%” per cent.
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“mu” 畝 , a Chinese unit of measurement in terms of area and one mu is equivalent to approximately 666.67 sq.m.
-
“sq.m.” Square metre(s)
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The English translation of Chinese names or words in this announcement is included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words
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For illustration purpose, amounts in RMB in this announcement have been translated in to HK$ at the exchange rate of RMB1=HK$1.138.
By order of the Board Chen Xing Development Holdings Limited Bai Xuankui Chairman
Shaanxi, the PRC, 12 December 2018
As at the date of this announcement, the executive Directors are Mr. Bai Xuankui, Mr. Bai Wukui, Mr. Bai Guohua and Mr. Dong Shiguang and the independent non-executive Directors are Mr. Gu Jiong, Mr. Tian Hua and Mr. Qiu Yongqing.
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