Chen Xing Development Holdings Limited — M&A Activity 2019

Jan 4, 2019

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 100% EQUITY INTERESTS IN TARGET COMPANY IN THE PRC

THE 49% ACQUISITION

Reference is made to the announcement of the Company dated 12 December 2018 regarding the 49% Acquisition. On 12 December 2018 (after trading hours), the Purchaser, an indirect whollyowned subsidiary of the Company, entered into the 49% Equity Transfer Agreement with the 49% Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the 49% Vendor has conditionally agreed to sell 49% equity interest in the Target and the 49% Vendor’s Loan at an aggregate consideration of approximately RMB224.90 million (equivalent to approximately HK$256.16 million), plus interest on the 49% Vendor’s Loan, subject to the terms and conditions of the 49% Equity Transfer Agreement.

Subject to the Purchaser completing the 49% Acquisition and the acquisition of equity interest in the Target from the 51% Vendor, the Purchaser shall pay a further consideration of RMB30.0 million (equivalent to approximately HK$34.17 million) within seven business days of the completion of the registration of transfer of such equity interests.

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THE 51% ACQUISITION

On 4 January 2019 (after trading hours), the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the 51% Equity Transfer Agreement with the 51% Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the 51% Vendor has conditionally agreed to sell 51% equity interest in the Target and the 51% Vendor’s Loan at an aggregate consideration of approximately RMB393.56 million (equivalent to approximately HK$448.26 million), plus interest on the 51% Vendor’s Loan subject to the terms and conditions of the 51% Equity Transfer Agreement.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, each of the 49% Vendor and the 51% Vendor and their ultimate beneficial owners are third parties independent of the Company and its connected persons.

Upon completion of the 100% Acquisition, the Group will be interested in 100% equity interests of the Target and accordingly the Target will become a subsidiary of the Company and the financial results, assets and liabilities of the Target will be consolidated into the accounts of the Group.

LISTING RULES IMPLICATIONS OF THE 100% ACQUISITION

As one or more of the applicable percentage ratios in respect of the 100% Acquisition exceeds 25% but is less than 100%, the 100% 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 100% Acquisition, the Equity Transfer Agreements and the transactions contemplated thereunder.

A circular containing, among other things, (i) details of the 100% 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 31 March 2019 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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THE 49% ACQUISITION

Reference is made to the announcement of the Company dated 12 December 2018 regarding the 49% Acquisition. On 12 December 2018 (after trading hours), the Purchaser, an indirect whollyowned subsidiary of the Company, entered into the 49% Equity Transfer Agreement with the 49% Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the 49% Vendor have conditionally agreed to sell 49% equity interest in the Target and the 49% Vendor’s Loan at an aggregate consideration of approximately RMB224.90 million (equivalent to approximately HK$256.16 million), plus interest on the 49% Vendor’s Loan, subject to the terms and conditions of the 49% Equity Transfer Agreement.

Subject to the Purchaser completing the 49% Acquisition and the acquisition of equity interest in the Target from the 51% Vendor, the Purchaser shall pay a further consideration of RMB30.0 million (equivalent to approximately HK$34.17 million) within seven business days of the completion of the registration of transfer of such equity interests.

THE 51% ACQUISITION

On 4 January 2019 (after trading hours), the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the 51% Equity Transfer Agreement with the 51% Vendor, pursuant to which the Purchaser has conditionally agreed to acquire and the 51% Vendor has conditionally agreed to sell 51% equity interest in the Target and the 51% Vendor’s Loan at an aggregate consideration of approximately RMB393.56 million (equivalent to approximately HK$448.26 million), plus interest on the 51% Vendor’s Loan, subject to the terms and conditions of the 51% Equity Transfer Agreement.

THE 51% EQUITY TRANSFER AGREEMENT

Date: 4 January 2019

Parties: (i) the Purchaser, an indirectly wholly-owned subsidiary of the Company; and (ii) the 51% Vendor.

To the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, each of the 49% Vendor and the 51% Vendor 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 100% Acquisition, the Group will be interested in 100% equity interests of the Target and accordingly the Target will become a subsidiary of the Company 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 49% Vendor and 51% by the 51% Vendor.

Pursuant to the terms of the 49% Equity Transfer Agreement, the Purchaser will acquire 49% equity interest in the Target and the 49% Vendor’s Loan from the 49% Vendor. Pursuant to the terms of the 51% Equity Transfer Agreement, the Purchaser will acquire 51% equity interest in the Target and the 51% Vendor’s Loan from the 51% Vendor.

51% Acquisition Consideration

The 51% Acquisition Consideration was arrived at after the open bidding process at the public auction conducted online by the Beijing Equity Exchange ( 北京產權交易所 ) on 4 December 2018.

The 51% Acquisition Consideration shall be paid by the Purchaser in the following manners:

• (i) RMB100 million, being the refundable deposit for participating in the bidding process, has been paid to the Beijing Equity Exchange on 3 January 2019 and will be applied towards part payment of the 51% Acquisition Consideration; and

• (ii) RMB293.56 million (equivalent to approximately HK$334.36 million), within five business days to an account designated by the China Beijing Equity Exchange.

In addition, after the date of the 51% Equity Transfer Agreement, the Purchaser shall pay interest calculated at 15% per annum on the amount of RMB124.30 million, being the principal of the 51% Vendor’s Loan, accruing from 1 April 2018.

The payment of the 51% Acquisition Consideration will be funded internal resources of the Group.

Conditions Precedent

Completion of the 51% Acquisition and the 49% Acquisition are subject to the Company having obtained shareholders’ approval at the EGM for the 51% Equity Transfer Agreement and the 49% Equity Transfer Agreement, and the consummation of the transactions contemplated thereunder.

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Since the 51% Vendor has agreed to sell its 51% equity interest in the Target to the Purchaser, the 51% Vendor is also deemed to have waived its pre-emption right to acquire 49% equity interests in the Target held by the 49% 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 49% Vendor and the 51% Vendor

The 49% 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 51% Vendor 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.

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.

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REASONS FOR AND BENEFIT OF THE ACQUISITION

The 100% Acquisition will enable the Group to acquire the entire equity interest in the Target, which holds the land use rights of the Land. 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 100% Equity Transfer Agreements 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 100% Equity Transfer Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS OF THE 100% ACQUISITION

As one or more of the applicable percentage ratios in respect of the 100% Acquisition exceeds 25% but is less than 100%, the 100% 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 100% Acquisition, the 100% Equity Transfer Agreements and the transactions contemplated thereunder.

A circular containing, among other things, (i) details of the 100% 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 31 March 2019 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.

DEFINITIONS

In this Announcement, unless the context requires otherwise, the following terms have the meanings set out below:

• “49% Acquisition”

the proposed acquisition of 49% equity interest in the Target and the 49% Vendor’s Loan by the Purchaser from the 49% Vendor pursuant to the terms of the 49% Equity Transfer Agreement

• “49% Acquisition

• Additional Consideration”

• the additional consideration of RMB3 million plus interest calculated at 15% per annum from September 2014 (being the date on which the 49% Vendor’s Loan was provided by the 49% Vendor to the Target), payable by the Purchaser to the 49% Vendor for the 49% Vendor’s Loan

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“49% Acquisition Consideration”

• the consideration of RMB221,900,000 payable by the Purchaser for the 49% Acquisition

• “49% Acquisition the further consideration of RMB30 million to be paid by the Further Consideration” Purchaser to the 49% Vendor within seven business days after the completion of the registration of transfer of the 49% Acquisition and the acquisition of the equity interest in the Target from the 51% Vendor

• “49% 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 49% Vendor in relation to the sale and purchase of 49% equity interest in the Target and the 49% Vendor’s Loan

• “49% 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

• “49% Vendor’s Loan” a loan owing to the 49% Vendor by the Target with a principal amount of RMB3 million

• “51% Acquisition” the proposed acquisition of 51% equity interest in the Target and the 51% Vendor’s Loan by the Purchaser from the 51% Vendor pursuant to the terms of the 51% Equity Transfer Agreement

• “51% Acquisition the consideration of approximately RMB393.56 million (equivalent Consideration” to approximately HK$448.26 million) payable by the Purchaser for the Acquisition

• “51% Equity Transfer an equity transfer agreement entered into on 4 January 2019 Agreement” between the Purchaser and the 51% Vendor in relation to the sale and purchase of 51% equity interest in the Target and the 51% Vendor’s Loan

• “51% Vendor” Beijing Sunshine Real Estate Comprehensive Development Co., Ltd. ( 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

• “51% Vendor’s Loan” loans owing to the 51% Vendor by the Target in the sum of RMB150.84 million (inclusive of interest up to 31 March 2018) (equivalent to approximately HK$171.81 million)

• “100% Acquisition” the 49% Acquisition and the 51% Acquisition

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“100% Equity Transfer	the 49% Equity Transfer Agreement and the 51% Equity Transfer
Agreements”	Agreement
“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
“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 100%
	Equity Transfer Agreements and the transactions contemplated
	thereunder
“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

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“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

“%”

per cent.

“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)

• 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

• For illustration purpose, amounts in RMB in this announcement have been translated in to HK$ at the exchange rate of RMB1=HK$1.139.

By order of the Board Chen Xing Development Holdings Limited Bai Xuankui Chairman

Shanxi, the PRC, 4 January 2019

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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