Chiho Environmental Group Limited — M&A Activity 2016

Aug 30, 2016

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 liabilities whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [122 x 52] intentionally omitted <==

CHIHO-TIANDE GROUP LIMITED 齊合天地集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 976)

VERY SUBSTANTIAL ACQUISITION: ACQUISITION OF THE ENTIRE SHARE CAPITAL OF SCHOLZ HOLDING GMBH

THE PROPOSED ACQUISITION

On 29 August 2016 (after trading hours), CRDL (as purchaser), Mr. O. Scholz, Mr. B-U. Scholz, Scholz Beteiligungsgesellschaft (as sellers) and TBD entered into the Share Purchase Agreement, pursuant to which, among other things, CRDL has conditionally agreed to purchase, and Mr. O. Scholz, Mr. B-U. Scholz and Scholz Beteiligungsgesellschaft have conditionally agreed to sell, the entire share capital in Scholz Holding for a cash consideration of EUR1.00 (equivalent to approximately HK$8.90).

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under Chapter 14 of the Listing Rules) exceed 100%, the Proposed Acquisition (both on a standalone basis and on an aggregated basis with the German Debt Acquisition, the US Assignment and the Relevant Restructuring Steps) constitutes a very substantial acquisition of the Company and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

GENERAL

The EGM will be held for the purpose of considering and, if thought fit, approving the relevant resolution(s) in respect of the Share Purchase Agreement and the Proposed Acquisition. To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, no Shareholder has a material interest in the Share Purchase Agreement and the Proposed Acquisition and therefore no Shareholder is required to abstain from voting at the EGM.

1

A circular containing, among other things, (i) further details of the Proposed Acquisition; (ii) financial information of Scholz Holding; (iii) other information as required under the Listing Rules; and (iv) a notice to convene the EGM, is expected to be despatched to the Shareholders on or before 25 November 2016, which is more than 15 business days after the publication of this announcement, as the Company requires more time to prepare the information to be included in the circular.

As completion of the Proposed Acquisition is subject to satisfaction of certain Closing Conditions under the Share Purchase Agreement, the Proposed Acquisition may or may not proceed. Accordingly, Shareholders and potential investors should exercise caution when dealing in the Shares.

INTRODUCTION

The Company refers to its circular (the “ Circular ”) published on 22 August 2016 in relation to, among other things, the German Debt Acquisition, the provision of the Bridging Loan, the US Assignment and the Restructuring Steps.

Scholz Group is currently significantly over-leveraged and therefore its equity value is currently negative. In order to (a) restructure Scholz Group’s financial situation and balance sheet; (b) facilitate the significant deleveraging of Scholz Group; (c) revitalize the sustainable going concern of Scholz Holding’s business; and (d) enable the Group, due to its position as the largest creditor of Scholz Group (and therefore being able to provide for an overall financial restructuring solution for Scholz Group), to be provided with the opportunity to acquire the Target Shares with a nominal purchase price of EUR1.00 (equivalent to approximately HK$8.90), the Company has carried out the aforementioned transactions, which are summarised as follows:

• (i) on 29 April 2016, the Company entered into the German Debt Purchase Agreement with certain lenders of Scholz Holding, which was subsequently executed by all parties and became effective on 28 June 2016, under which, among other things, the Company:

• a. purchased the German Debt in the nominal value of approximately EUR524 million (equivalent to approximately HK$4.7 billion) at the initial purchase price of approximately EUR236 million (equivalent to approximately HK$2.1 billion), which is subject to a maximum adjustment of an additional EUR20.4 million (equivalent to approximately HK$181.6 million); and

• b. set aside EUR20 million (equivalent to approximately HK$178 million), representing approximately 7.8% of the aggregate purchase price of EUR256.4 million (equivalent to approximately HK$2.3 billion), for the settlement of the 8.5% EUR150 million (equivalent to approximately HK$1.3 billion) Austrian law governed bond originally issued by Scholz Holding on 8 March 2012 and subsequently increased to EUR182.5 million (equivalent to approximately HK$1.6 billion) on 13 February 2013, as well as the settlement of certain other closing conditions.

Formal closing of the German Debt Acquisition took place on 22 July 2016;

2

• (ii) on 1 June 2016, the Company entered into the Assignment and Assumption Agreement with certain lenders of the US Borrowers and the US Borrowers, pursuant to which the Company acquired the rights and obligations of the lenders under a credit agreement for a purchase price of US$16.76 million (equivalent to approximately HK$130.23 million). Closing of the US Assignment took place on 2 June 2016; and

• (iii) on 20 July 2016, the Company entered into the Restructuring Agreement with CRDL, CTRL, Scholz Holding, Scholz Recycling, Scholz Beteiligungsgesellschaft and TBD, pursuant to which, among other things, (a) the terms of an up to EUR80 million (equivalent to approximately HK$712 million) Bridging Loan are finalized; (b) the maturity dates of the German Debt are amended together with a partial release of approximately EUR224 million (equivalent to approximately HK$2.0 billion) of the German Debt plus accrued interest; and the acquisition and waiver of the TTC Loan. Due to the Restructuring Steps outlined in the Restructuring Agreement, the financial over-leverage of Scholz Group is expected to be overcome by the end of August 2016, once the Restructuring Agreement has been closed.

As stated in the Circular, the aforementioned transactions form part of a series of steps taken by the Company to prepare for the Proposed Acquisition. The Board is pleased to announce that on 29 August 2016 (after trading hours), CRDL (as purchaser), Mr. O. Scholz, Mr. B-U. Scholz, Scholz Beteiligungsgesellschaft (as sellers) and TBD entered into the Share Purchase Agreement, pursuant to which, among other things, CRDL has conditionally agreed to purchase, and Mr. O. Scholz, Mr. B-U. Scholz and Scholz Beteiligungsgesellschaft have conditionally agreed to sell, the Target Shares for a cash consideration of EUR1.00 (equivalent to approximately HK$8.90).

PRINCIPAL TERMS OF THE SHARE PURCHASE AGREEMENT

Date

• 29 August 2016

Parties

• (i) CRDL

• (ii) Mr. O. Scholz

• (iii) Mr. B-U. Scholz

• (iv) Scholz Beteiligungsgesellschaft

• (v) TBD

3

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, each of Mr. O. Scholz, Mr. B-U. Scholz, Scholz Beteiligungsgesellschaft, TBD and their respective ultimate beneficial owner(s) are independent of the Company and its connected persons.

Shares to be acquired

Pursuant to the Share Purchase Agreement, CRDL will acquire the Target Shares, i.e. 50,000,000 shares in Scholz Holding, representing the entire share capital of Scholz Holding. Upon closing of the Proposed Acquisition, Scholz Holding will become a direct wholly-owned subsidiary of CRDL and an indirect wholly-owned subsidiary of the Company.

Consideration

The aggregate purchase price for the Target Shares payable by CRDL to the Sellers is EUR1.00 (equivalent to approximately HK$8.90) and shall be allocated among the Sellers in the following manner:

	No. of
	Target Shares
	to be sold by the
Seller	respective Seller	Allocated purchase price
		(EUR)	(HK$ equivalent)
Mr. O. Scholz	29,950,000	EUR0.60	HK$5.34
Scholz Beteiligungsgesellschaft	12,000,000	EUR0.24	HK$2.14
Mr. B-U. Scholz	8,050,000	EUR0.16	HK$1.42
Total:	50,000,000	EUR1.00	HK$8.90

CRDL shall pay the aggregate purchase price in cash upon closing of the Proposed Acquisition.

The aggregate nominal purchase price was determined after arm’s length negotiations between CRDL and the Sellers and was based on the fact that Scholz Holding is currently significantly over-leveraged, having regard to, among other things, (i) the Company and CRDL’s view of the value of the assets, business, and financial results of Scholz Holding; (ii) the consideration paid by the Group in respect of the German Debt Acquisition, the US Assignment and the Bridging Loan; and (iii) the factors set out in the section headed “Reasons for and Benefits of the Proposed Acquisition” below.

4

Closing

Closing shall take place at 0:00 hours CET on the calendar day following the calendar day on which all of the following conditions (the “ Closing Conditions ”) are fulfilled, or, respectively, their fulfillment is waived (the “ Closing Date ”):

• (i) the legal title in the shares in Scholz Hong Kong Ltd. (including its Chinese and Singapore subsidiaries) has been transferred out of Scholz Group;

Note:

The financial information of Scholz Holding as disclosed in the section headed “INFORMATION ABOUT SCHOLZ HOLDING – Key Financial Data of Scholz Holding under German GAAP” below includes the financial information of the aforementioned entities which are expected to be transferred out of Scholz Group prior to the Closing Date and the Company is of the view that such entities are not material to Scholz Group's operations as a whole.

• (ii) the applicable merger control clearances for the Proposed Acquisition under the merger control laws of Austria, Bosnia-Herzegovina, Germany, Poland, Serbia, Slovenia and Turkey (collectively, the “ Merger Clearances ”) have been obtained or deemed to be obtained (e.g. due to lapse of applicable waiting periods or due to jurisdiction having been declined by any relevant governmental authority) or it turns out that the closing of the Proposed Acquisition is otherwise permissible pursuant to such merger control laws;

• (iii) CRDL has confirmed to Scholz Beteiligungsgesellschaft in writing the passing by the Shareholders in the Company’s general meeting of the requisite resolution(s) approving the Share Purchase Agreement and the transactions contemplated thereunder in accordance with the requirements of the Listing Rules; and

• (iv) CRDL has confirmed to Scholz Beteiligungsgesellschaft in writing that the Restructuring Closing Date has occurred.

CRDL shall be entitled at any time to waive (in whole or in part) any of the Closing Conditions set forth in paragraphs (i), (iii) and (iv) above by written notification to the other parties. As at the date of this announcement, CRDL has no intention to waive (in whole or in part) any of the Closing Conditions.

Closing Conditions regarding Merger Clearances

CRDL and the Sellers agree to make any filings necessary in connection with the Merger Clearances and any other filings with, or notifications to, any governmental authority required in connection with the Share Purchase Agreement. Any such filings or notifications shall be made by CRDL on behalf of all parties involved (except to the extent not permitted under applicable law). The Sellers undertake to fully cooperate with CRDL in providing all information concerning Scholz Group and the Sellers reasonably required by CRDL for such purposes.

5

In order to obtain the Merger Clearances, CRDL and the Sellers shall:

• (i) use all reasonable efforts to cooperate in all respects in the preparation of any filing or notification and in connection with any submission, investigation or inquiry; and

• (ii) supply to any competent authority without undue delay any additional information requested pursuant to applicable law and take all other procedural actions required to obtain the Merger Clearances or to cause any applicable waiting period to commence and expire, subject, in all cases, to appropriate measures being taken to safeguard (including the Sellers, Scholz Holding and Scholz Recycling) the confidentiality of commercially sensitive information of CRDL.

As at the date of this announcement, all relevant applications for merger control clearances have been made and merger control clearances for the Proposed Acquisition have been obtained from the relevant regulatory authorities in Austria, Germany, Poland, Turkey and Slovenia. The remaining clearances from the relevant regulatory authorities in Serbia and Bosnia-Herzegovina are expected to be received by early September 2016.

Rights of Withdrawal

In the event that the Closing Conditions have not been fulfilled by 31 December 2016 (unless Scholz Beteiligungsgesellschaft and CRDL agree in writing on an extension of this period), Scholz Beteiligungsgesellschaft and CRDL shall be entitled in each case – until the occurrence of all Closing Conditions (by fulfilment or waiver) – to withdraw from the Share Purchase Agreement by written declaration vis-a-vis the respective other parties to the Share Purchase Agreement. The right of withdrawal shall not exist if the party declaring the withdrawal prevents the fulfillment of the Closing Conditions contrary to good faith or causes obstacles to closing of the Proposed Acquisition contrary to good faith.

CRDL shall further be entitled to withdraw from the Share Purchase Agreement by written declaration vis-a-vis the other parties, if one of the following circumstances occurs:

• (i) the Restructuring Closing Date has not occurred by (and including) 30 September 2016; or

• (ii) filing of an application for the opening of insolvency proceedings in respect of one of the companies of Scholz Group, with the proviso that CRDL shall not be entitled to withdraw if the application is made by CRDL or an enterprise affiliated with CRDL as defined in §§ 15 et seqq. AktG or in case of a Chapter 7 or a Chapter 11 filing for one or several of Scholz Group’s subsidiaries in the United States of America.

A right of withdrawal may be exercised by the parties entitled to a withdrawal before the occurrence of all Closing Conditions (by satisfaction or waiver). In the event that a right of withdrawal under the Share Purchase Agreement is not exercised, it shall not be deemed a waiver in respect of any other rights of the respective parties under the Share Purchase Agreement.

6

INFORMATION ABOUT SCHOLZ HOLDING

Business Overview

Scholz Holding is the holding company of a global network of companies and affiliates in the business of treating and processing scrap and metal, and is one of the largest European-based global network of companies and affiliates active in this industry. Founded in 1872, Scholz Group provides all steps in recycling metal and scrap metal and is a one-stop shop, from collecting, gathering, sorting and processing the material to its sale, utilization, and recirculation. In 2014, Scholz Group treated and processed approximately 9.8 million tons of metal and scrap metal through its business activities in Europe, North-and Central-America.

Key Financial Data of Scholz Holding under German GAAP

According to the audited consolidated financial statements of Scholz Holding prepared in accordance with German GAAP, the total assets value and the net liabilities value of Scholz Holding as at 31 December 2015 were approximately EUR809.8 million (equivalent to approximately HK$7.2 billion) and EUR455.4 million (equivalent to approximately HK$4.1 billion), respectively. The net liabilities of Scholz Holding was primarily attributable to the previous business strategy of Scholz Holding which focused on expansion by acquiring new businesses that were funded by external borrowings. As at 31 December 2015, the net liabilities of Scholz Holding mainly comprised bank borrowings (including the German Debt), the Austrian Bond and the TTC Loan which amounted to approximately EUR712.4 million (equivalent to approximately HK$6.3 billion), EUR182.5 million (equivalent to approximately HK$1,624.25 million) and EUR60 million (equivalent to approximately HK$534 million), respectively. According to the audited consolidated financial statements of Scholz Holding prepared in accordance with German GAAP, the total revenue, gross profit, loss from ordinary activities and net loss of Scholz Holding for each of the financial years ended 31 December 2014 and 31 December 2015 are as follows:

	For the	financial year	ended 31 December	ended 31 December
	2014		2015
		HK$		HK$
	EUR	equivalent	EUR	equivalent
Revenue	3.1 billion	27.6 billion	2.3 billion	20.5 billion
Gross profit	485 million	4.3 billion	427 million	3.8 billion
Loss from ordinary activities	112.9 million	1.0 billion	194.9 million	1.7 billion
Net loss for the year	123.0 million	1.1 billion	232.0 million	2.1 billion

The above financial information of Scholz Holding is extracted from the audited consolidated financial statements of Scholz Holding prepared in accordance with German GAAP which is different from HKFRS, the accounting standards adopted by the Company. The principal differences between German GAAP and HKFRS include (i) the criteria for the inclusion of entities in the consolidated group under

7

HKFRS differs from the criteria under German GAAP. Certain entities may no longer be included in full in the consolidated group due to the lack of sufficient control over the entity under HKFRS 10 Consolidated Financial Statements; (ii) depreciation methods, useful life assumptions and residual value assessment of property, plant and equipment of Scholz Group will be reconsidered under HKAS 16 Property, Plant and Equipment; and (iii) under German GAAP, the criteria for classifying lease contracts as finance or operating leases is different from HKAS 17 Leases. Operating lease under German GAAP might be classified as finance lease under HKAS 17.

Financial Overview

Scholz Group has been operating in an over-leveraged capital structure for a prolonged period during the commodities boom of the last decade, given that their business strategy in the past was mainly focused on expansion by acquiring new businesses. As Scholz Holding has been family owned, those investments have been financed largely by bank loans and the Austrian Bond.

Several of those investments had failed during the financial crisis, causing the banks to initiate the first restructuring in 2010. However, business recovered strongly and restructuring attempts were postponed.

In 2013, with the collapse of commodities prices, the banks pushed for a restructuring which resulted in a new investor TTC, which provided new equity for 39.9% shareholding interest in Scholz Holding. Since TTC invested in Scholz Holding, various measures were undertaken by the shareholders and the management to restructure Scholz Group, including certain divestment, resulting in significant extraordinary expenses such as impairments, write-offs and restructuring costs, and hence Scholz Group had recorded net losses despite significant gross profit over the last three years. However, the restructuring efforts did not include a haircut by the banks or holders of the Austrian Bond and therefore the leverage was not significantly decreased in the course of the restructuring and interest expenses remained high. According to the audited consolidated financial statements of Scholz Holding prepared in accordance with German GAAP, the interest expenses incurred by Scholz Group for each of the financial years ended 31 December 2014 and 2015 amounted to approximately EUR86.6 million (equivalent to approximately HK$770.7 million) and EUR79.5 million (equivalent to approximately HK$707.6 million), respectively.

In addition, there has been tremendous excess capacities in the steel sector (mainly in the People’s Republic of China) which has led to a decline in steel (scrap) prices since 2010. As a metal and scrap metal processor, the downward trend in steel prices have put much pressure on margins industry-wide. Moreover, scrap demand of EAF (electric arc furnace) and BOF (basic oxygen furnace) steel mills in Scholz Group’s core markets in Europe has also reduced due to declining iron ore prices.

As a result of the over-leveraged capital structure and adverse market conditions during the past few years, Scholz Group has continued to remain in financial distress for a significant period and has faced a severe liquidity crisis in December 2015, such crisis had a negative impact on the scale of operations of Scholz Group. TTC finally decided to exit the investment in March 2016. The over-leverage issue and liquidity issue will be addressed by the Company through the German Debt Acquisition and the provision of the Bridging Loan, respectively. The current over-leverage of Scholz Group will be overcome upon closing of the Restructuring Agreement.

8

Upon the closing of the Restructuring Agreement, approximately EUR224 million (equivalent to approximately HK$2.0 billion) of the German Debt and the TTC Loan plus relevant accrued interest will be released and together with the settlement of Austrian Bond (which was one of the closing conditions of the German Debt Purchase Agreement), the gearing of Scholz Group will significantly improve, resulting in a material saving on the finance cost.

Moreover, it is envisaged that saving on extraordinary expenses can be achieved with Scholz Group stepping out from the restructuring. In addition, the Bridging Loan is provided to Scholz Group with a view to revitalize its working capital and reinstate its scale of operation.

INFORMATION ABOUT THE PARTIES

The Company and CRDL

The Company is principally engaged in the business of mixed metal scrap recycling, reuse and processing, which involves the breaking down, demolition and separation of mixed metal scrap. CRDL is an indirect wholly-owned subsidiary of the Company.

Mr. O. Scholz

As at the date of this announcement, Mr. O. Scholz is the owner of 29,950,000 Target Shares. He is a director of Scholz Holding and one of the directors of Scholz Recycling. Mr. O. Scholz’s ancestors founded Scholz Group in 1872. Mr. O. Scholz has been the chief executive officer of Scholz Holding since 1999 and is the fifth generation leading Scholz Group since 2014.

Mr. B-U. Scholz

As at the date of this announcement, Mr. B-U. Scholz is the owner of 8,050,000 Target Shares. He was one of the directors of Scholz Holding until July 2014. Mr. B-U. Scholz is the father of Mr. O. Scholz and was the fourth generation leading Scholz Group until 2014 when he resigned as a managing director of Scholz Holding.

Scholz Beteiligungsgesellschaft and TBD

Each of Scholz Beteiligungsgesellschaft and TBD is a limited liability company organized under the laws of the Federal Republic of Germany. As at the date of this announcement, Scholz Beteiligungsgesellschaft holds 12,000,000 Target Shares. Scholz Beteiligungsgesellschaft and TBD are the trustees of a double-sided trust arrangement in respect of the shares in Scholz Holding, the beneficiaries of which are the lenders of Scholz Group which include the Group and certain financial institutions.

9

REASONS FOR AND BENEFITS OF THE PROPOSED ACQUISITION

The Group is a mixed metal scrap recycler in China and has been principally engaged in the business of mixed metal scrap recycling, reuse and processing even before its listing on the main board of the Stock Exchange in 2010.

The Company has been actively looking for suitable acquisition opportunities within the scrap metal recycling sector in mature overseas markets, and has been targeting at global recyclers with the necessary technology, management techniques and know-how. The Company aims to, through such acquisition opportunities, take a leadership role to consolidate the fragmented recycling businesses and upskill the recycling market in China, as well as further strengthen its operations.

Scholz Group, the target group, is also a mixed metal scrap recycler. It is one of the largest Europeanbased global network of companies and affiliates active in the field of treating and processing scrap metal. Founded in 1872, Scholz Group provides all steps in recycling metal and scrap metal and is a one-stop shop, from collecting, gathering, sorting, and processing the material to its sale, utilization, and recirculation. It has a global procurement network for recycling materials including end-of-life automobiles in over 30 countries, mainly located in Europe, another forefront region in the recycling business. It also carries out demolitions and gutting projects and takes apart railway vehicles and recovers resources from these materials which it then supplies to steel mills, foundries, and smelters worldwide. Scholz Group also developed a number of pioneering processing methods and is one of the few service providers in recycling that handles all steps in the resource cycle with its own companies.

The Company anticipates that its envisaged equity investment in Scholz Group would give the Group direct and immediate access to stable upstream material supplies from the European and U.S. markets, and to one of the best end-of-life vehicle dismantling and processing technology globally which, in turn, will create synergistic effects between the Group and Scholz Group and revitalize the Group’s existing operations. With Scholz Group’s vast procurement networks mainly located in Europe and the U.S., the Proposed Acquisition can provide the Group a valuable opportunity to have stable and economical access to supplies of upstream material; thereby driving down the cost of the Group’s business. Separately, the Group will be able to leverage on Scholz Group’s technological capabilities and know-how to enhance its recycling operations thereby optimizing its profits. In addition, as a further business synergy, the Group may be able to access Scholz Group’s extensive clientele and expand the geographical scope of its own clientele, which are principally located in China.

Scholz Group is currently significantly over-leveraged and therefore its equity value is currently negative. In order to (a) restructure Scholz Group’s financial situation and balance sheet; (b) facilitate the significant deleveraging of Scholz Group; (c) revitalize the sustainable going concern of Scholz Holding’s business; and (d) enable the Group, due to its position as the largest creditor of Scholz Group (and therefore being able to provide for an overall financial restructuring solution for Scholz Group), to be provided with the opportunity to acquire the Target Shares with a nominal purchase price of EUR1.00 (equivalent to approximately HK$8.90), the Company has taken a series of steps as set out in the section headed “Introduction” above.

10

In light of the above, the Directors consider that the terms of the Share Purchase Agreement are fair and reasonable and the entering into of the Share Purchase Agreement and the transactions contemplated thereunder are in the interests of the Company and Shareholders as a whole.

THE GROUP’S INTENTION IN RELATION TO SCHOLZ GROUP AND THE GROUP UPON COMPLETION OF THE PROPOSED ACQUISITION

The board of Scholz Holding currently comprises Mr. O. Scholz and two other managing directors who are professionals from a firm which provides professional management services in restructuring situations, and have been appointed to the board in connection with the execution of the double-sided trust arrangement in respect of the shares in Scholz Holding. Two directors acting jointly are generally required to represent Scholz Holding. In connection with the Proposed Acquisition and only after obtaining all Merger Clearances, it is intended to restructure the board of directors of Scholz Holding by having a representative from the Company appointed to replace Mr. O. Scholz as a managing director of Scholz Holding. In addition, it is envisaged that two new managing directors who are professionals from another managing director services provider will also be appointed to replace the current other two managing directors.

Being an industrial player for over 20 years, the Company possesses in-depth knowledge of the metal recycling industry. Given the fact that Scholz Group has always been managed by a professional manager team, it is the Company’s intention to maintain the existing management team to the largest extent with appropriate adjustments to cater for the enlarged geographical footprint after the Proposed Acquisition. The Company will also consider to bring in new additions with extensive industrial experience as well as representatives from the Company to the current management team in Scholz Group when it sees fit.

As at the date of this announcement, USUMHK directly holds 1,008,885,181 Shares, representing approximately 62.29% of the voting rights of the Company. It is anticipated that USUMHK will continue to remain as the Company’s single largest Shareholder upon completion of the Proposed Acquisition and the Company has no intention to change the composition of the Board upon completion of the Proposed Acquisition.

The Company is currently exploring the possibility of streamlining its operations with a view to optimizing the business portfolios of the Group. Apart from the possible streamlining of operations and the Proposed Acquisition, the Company currently is not involved in any agreement, arrangement and understanding (concluded or otherwise) in relation to acquisitions or injection of any new businesses to the Group or disposals, scaling-down and/or termination of any of its existing businesses and/or major operating assets. However, the Company will continue to seek development of its business when there are suitable opportunities.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under Chapter 14 of the Listing Rules) exceed 100%, the Proposed Acquisition (both on a standalone basis and on an aggregated basis with the German Debt Acquisition, the US Assignment and the Relevant Restructuring Steps) constitutes a very substantial acquisition of the Company and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

11

GENERAL

The EGM will be held for the purpose of considering and, if thought fit, approving the relevant resolution(s) in respect of the Share Purchase Agreement and the Proposed Acquisition. To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, no Shareholder has a material interest in the Share Purchase Agreement and the Proposed Acquisition and therefore no Shareholder is required to abstain from voting at the EGM.

A circular containing, among other things, (i) further details of the Proposed Acquisition; (ii) financial information of Scholz Holding; (iii) other information as required under the Listing Rules; and (iv) a notice to convene the EGM, is expected to be despatched to the Shareholders on or before 25 November 2016, which is more than 15 business days after the publication of this announcement, as the Company requires more time to prepare the information to be included in the circular.

As completion of the Proposed Acquisition is subject to satisfaction of certain Closing Conditions under the Share Purchase Agreement, the Proposed Acquisition may or may not proceed. Accordingly, Shareholders and potential investors should exercise caution when dealing in the Shares.

DEFINITIONS

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

“Assignment and the assignment and assumption agreement entered into on 1 June 2016 Assumption Agreement” by the Company in relation to the US Assignment together with other ancillary documents to give effect to the US Assignment

“Austrian Bond” the 8.5 per cent. EUR150 million (equivalent to approximately HK$1,335 million) Austrian law governed bond originally issued by Scholz Holding on 8 March 2012 and subsequently increased to EUR182.5 million (equivalent to approximately HK$1,624.25 million) on 13 February 2013

“Board” the board of directors of the Company “Bridging Loan” an up to EUR80 million (equivalent to approximately HK$712 million) bridging loan to be provided by CRDL (as lender) to Scholz Recycling (as borrower) pursuant to the terms of the bridging loan agreement entered into between CRDL and Scholz Recycling on 20 July 2016

“CET” Central European Time

“Circular” has the meaning given to it in the section headed “Introduction” in this announcement

12

“Closing Conditions”

has the meaning given to it under the section headed “Principal Terms of the Share Purchase Agreement – Closing” in this announcement

“Closing Date”

has the meaning given to it under the section headed “Principal Terms of the Share Purchase Agreement – Closing” in this announcement

“Company” Chiho-Tiande Group Limited ( 齊合天地集團有限公司 ), a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 976)

“connected person(s)” has the meaning ascribed to it under the Listing Rules “CRDL” Chiho Renewable Development Limited, a company incorporated in Hong Kong with limited liability, and an indirect wholly-owned subsidiary of the Company

“CTRL” Chiho-Tiande Resources Limited, a company incorporated under the laws of the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company

“Directors” the directors of the Company “EGM” the extraordinary general meeting of the Company to be convened to approve, among other things, the Share Purchase Agreement and the Proposed Acquisition “EUR” Euro, the lawful currency of the European Union

“German Debt” the debt owing by Scholz Group to CTRL under certain loan agreements and promissory notes which CTRL has assumed the lenders’ rights thereunder pursuant to the German Debt Purchase Agreement and the transfer agreement entered into between the Company and CTRL on 19 May 2016. The German Debt represents syndicated senior credit facility in an aggregate principal amount of EUR471 million (equivalent to approximately HK$4.19 billion), promissory notes in the aggregate amount of EUR43.3 million (equivalent to approximately HK$385.4 million) and a standalone credit facility in the amount of EUR10 million (equivalent to approximately HK$89 million)

“German Debt Acquisition” the acquisition of the German Debt under the terms and conditions of the German Debt Purchase Agreement

13

“German Debt Purchase	the debt purchase agreement entered into on 29 April 2016 by the
Agreement”	Company in connection with the German Debt Acquisition, which was
	executed by the sellers and became effective on 28 June 2016
“German GAAP”	HGB (Handelsgesetzbuch), German generally accepted accounting
	principles
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong Special
	Administrative Region
“HKAS”	the Hong Kong Accounting Standards
“HKFRS”	the Hong Kong Financial Reporting Standards
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Merger Clearances”	has the meaning given to it under the section headed “Principal Terms
	of the Share Purchase Agreement – Closing” in this announcement
“Mr. B-U. Scholz”	Mr. Berndt-Ulrich Scholz
“Mr. O. Scholz”	Mr. Oliver Scholz
“PRC”	the People’s Republic of China which, for the purposes of this
	announcement, excludes Hong Kong, the Macau Special Administrative
	Region and Taiwan
“Proposed Acquisition”	the proposed acquisition of the Target Shares from the Sellers pursuant
	to the Share Purchase Agreement
“Relevant Restructuring	has the meaning given to it in the section headed “Definitions –
Steps”	Restructuring Agreement” in this announcement
“Restructuring Agreement”	the restructuring agreement dated 20 July 2016 and entered into
	by, among others, the Company and Scholz Holding, in relation to,
	among other things, (i) finalization of terms of the Bridging Loan; (ii)
	amendment to the maturity dates, and partial release, of the German
	Debt; and (iii) the acquisition and release of the TTC Loan (together,
	the “Restructuring Steps”, and in relation to (i) and (iii) only, the
	“Relevant Restructuring Steps”)

14

“Restructuring Closing is the later of: (i) 31 August 2016; or (ii) the calendar day following Date” the calendar day on which the last closing conditions under the Restructuring Agreement is fulfilled or waived “Restructuring Steps” has the meaning given to it in the section headed “Definitions – Restructuring Agreement” in this announcement “Scholz Scholz Beteiligungsgesellschaft mbH, a limited liability company Beteiligungsgesellschaft” ( Gesellschaft mit beschränkter Haftung ) organized under the laws of the Federal Republic of Germany and registered with the commercial register at the local court of Charlottenburg under registration no. HRB 171406B “Scholz Group” Scholz Holding and its subsidiaries “Scholz Holding” Scholz Holding GmbH, a limited liability company ( Gesellschaft mit beschränkter Haftung ) organized under the laws of the Federal Republic of Germany, which is registered at the Commercial Register ( Handelsregister ) of the Local Court ( Amtsgericht ) of Ulm, under registration number HRB 730756 “Scholz Recycling” Scholz Recycling GmbH & Co. KG, a partnership with a limited liability company as general partner, organized under the laws of the Federal Republic of Germany, and registered with the commercial register of the local court of Ulm under registration number HRA 721190. It is a direct wholly-owned subsidiary of Scholz Holding “Sellers” Mr. O. Scholz, Mr. B-U. Scholz and Scholz Beteiligungsgesellschaft “Share Purchase the share purchase agreement entered into on 29 August 2016 among Agreement” CRDL, Mr. O. Scholz, Mr. B-U. Scholz, Scholz Beteiligungsgesellschaft and TBD in relation to the Proposed Acquisition “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company “Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Shares” 50,000,000 shares in Scholz Holding, being the entire share capital of Scholz Holding

15

“TBD” TBD Vermögensverwaltungs GmbH, a limited liability company ( Gesellschaft mit beschränkter Haftung ) under the laws of the Federal Republic of Germany and registered with the commercial register at the local court of Hamburg under registration no. HRB 105876

“TTC” Toyota Tsusho Corporation, a stock corporation ( Kabushikigaisha ) incorporated under the Laws of Japan, registered with the Nagoya Legal Affairs Bureau

“TTC Loan”

the EUR60 million (equivalent to approximately HK$534 million) loan owed by Scholz Holding to Scholz Beteiligungsgesellschaft. The TTC Loan was initially advanced by TTC to Scholz Holding in June 2014 and subsequently transferred by TTC to Scholz Beteiligungsgesellschaft

“US Assignment” the assignment of rights and obligations under the credit agreement from certain lenders of the US Borrowers to the Company under the terms of the Assignment and Assumption Agreement

“US Borrowers”

the borrowers to a credit agreement entered into on 8 August 2013 (as amended, restated, amended and restated, extended, renewed, supplemented or otherwise modified), all of which are indirect nonwholly owned subsidiaries of Scholz Holding

“USUMHK” USUM Investment Group Hong Kong Limited, a company incorporated in Hong Kong with limited liability

“US$”

the lawful currency of the United States of America

By Order of the Board Chiho-Tiande Group Limited Tu Jianhua Chairman

Hong Kong, 30 August 2016

In this announcement and for illustration purposes only, amounts denominated in:

• (a) EUR has been converted into HK$ at the rate of EUR1 = HK$8.90; and

• (b) US$ has been converted into HK$ at the rate of US$1= HK$7.77.

As at the date of this announcement, the Board of Directors of the Company comprises:

Executive Directors: Tu Jianhua, Zhang Jun, Qin Yongming Independent Non-executive Directors: Loke Yu, Zhang Jingdong, Zhu Dajian

16