CM Energy Tech Co., Ltd. — Capital/Financing Update 2014

Oct 23, 2014

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 securities of the Company.

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TSC Group Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 206)

SHARE TRANSACTION AND CONNECTED TRANSACTION ACQUISITION OF 28% EQUITY INTEREST IN JURUN LIMITED

On 23 October 2014, the Purchaser (a wholly-owned subsidiary of the Company) entered into the Agreement with the Vendor and the Guarantor pursuant to which the Purchaser conditionally agreed to acquire for, and the Vendor has conditionally agreed to dispose of, the Sale Shares at the Consideration of HK$33,613,000 which will be satisfied in full by the allotment and issue of the Consideration Shares to the Vendor at the Issue Price.

The Sale Shares represents approximately 28% of the issued share capital of the Target Company. As at the date of this announcement, the Target Company is owned as to approximately 51% by the Purchaser (and as such is a subsidiary of the Group) and approximately 49% by the Vendor. Immediately after the Completion, the Target Company will be owned as to approximately 79% by the Purchaser and approximately 21% by the Vendor.

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The Consideration Shares, being all new Shares, represent approximately 1.21% of the existing total issued share capital of the Company, and 1.19% of the total issued share capital of the Company as enlarged by the issue of the Consideration Shares upon Completion. The Consideration Shares will be issued under the specific mandate to be sought at the EGM and will rank equally in all respects with the Shares in issue on the date of allotment and issuance. Application will be made to the Stock Exchange for the listing of, and the permission to deal in, the Consideration Shares.

As at the date of this announcement, given that the Target Company is a subsidiary of the Group and the Vendor is a substantial shareholder of the Target Company, the Vendor and the Guarantor (who is an associate of the Vendor) are connected persons of the Company pursuant to Chapter 14A of the Listing Rules.

As the each of the applicable Percentage Ratios is less than 5% and the Transaction involves the allotment and issue of Consideration Shares, the Transaction constitutes a share transaction and connected transaction of the Company and is subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14 and 14A of the Listing Rules.

An Independent Board Committee comprising all the independent non-executive Directors will be established to advise the Independent Shareholders on the Transaction and the allotment and issue of the Consideration Shares. Gram Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Transaction and the allotment and issue of the Consideration Shares in accordance with the Listing Rules.

A circular containing, among other things, particulars of the Agreement, the recommendations of the Independent Board Committee, a letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders and the notice convening the EGM will be sent to the Shareholders as soon as possible in accordance with the requirements of the Listing Rules.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares.

The Board is pleased to announce that on 23 October 2014, the Purchaser (a wholly-owned subsidiary of the Company) entered into the Agreement with the Vendor and the Guarantor pursuant to which the Purchaser conditionally agreed to acquire for, and the Vendor has conditionally agreed to dispose of, the Sale Shares at a consideration of HK$33,613,000 which will be satisfied in full by the allotment and issue of the Consideration Shares to the Vendor at the Issue Price.

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THE AGREEMENT

The material terms of the Agreement are summarised below:

Date

23 October 2014

Parties

1. Purchaser:

2. Petro Equip Leaders Limited, which is a wholly-owned subsidiary of the Company and an investment holding company;

3. Vendor:

4. Xingbo Limited, which is wholly and beneficially owned by the Guarantor and an investment holding company; and

5. Guarantor:

6. Mr. Li Yong Hu, who is the sole beneficial shareholder of the Vendor and who will provide guarantee for the due and punctual performance of the obligations of the Vendor under the Agreement.

The Sale Shares and the Target Company

The Purchaser agreed to purchase from the Vendor the Sale Shares, representing approximately 28% of the issued share capital of the Target Company as at the date of this announcement, at the Consideration.

The Target Group is principally engaged in the provision of petroleum engineering services, equipment rental, repair and maintenance services and trading of spare parts in various locations all over the world.

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The group structure of the Target Company is set out below:

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The Target Company
100%
NN Petroleum
100% 57%
43%
29%
Dongying Shengli Tianjin Shengli
71%
Shandong Cruiser
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The net assets of the Target Group as of 30 June 2014 is HK$66,415,000. The net profit (before taxation) of the Target Group for the two financial years ended 31 December 2013 and 31 December 2012 based on unaudited management accounts were HK$17,256,000 and HK$15,950,000 respectively. The net profits (after taxation) of the Target Group for the two financial years ended 31 December 2013 and 31 December 2012 based on unaudited management accounts were HK$17,105,000 and HK$15,704,000 respectively.

Consideration and the Consideration Shares

The Consideration is HK$33,613,000 which will be satisfied in full by the allotment and issue of the Consideration Shares to the Vendor at the Issue Price.

The Consideration was determined among the Vendor, the Guarantor, the Purchaser after arm’s length negotiation with reference to the Target Group’s future business development prospects and financial performance, and on normal commercial terms.

The Consideration Shares at the Issue Price of HK$4 per Consideration Shares will be issued and allotted by the Company to the Vendor on the Completion Date.

Reference is made to the announcement of the Company dated 1 September 2010 with regards to the original investment cost of the Target Group being HK$46,670,000.

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The Issue Price represents:

• (a) a premium of approximately 27.80% over the closing price of HK$3.13 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (b) a premium of approximately 24.22% over the average of the closing price of HK$3.22 per Share for the last five consecutive trading days up to and including the Last Trading Day;

• (c) a premium of approximately 18.69% over the average of the closing price of HK$3.37 per Share for the last ten consecutive trading days up to and including the Last Trading Day; and

• (d) a premium of approximately 75% to the audited consolidated net asset value of the Company per Share of approximately HK$2.28 as at 31 December 2013 (based on the audited consolidated net asset value of the Company of approximately US$204,244,000 (equivalent to approximately HK$1,584,933,440) as at 31 December 2013 and 696,511,204 issued Shares as at the date of the Agreement).

The Issue Price was determined after arm’s length negotiations among the parties to the Agreement after taken into account (i) the recent trading performance of the Shares; and (ii) current market conditions. In the last two years, the Target Group gradually builds up its international service presence in Latin America and North Africa, such as Columbia, Venezuela and Algeria. Several major contracts are in negotiation stages. With the Company’s foot-print in other regions, controlling more than 75% of the company will enable the Target Group to leverage the Company’s strength. Also, the further integration of the Target Group will give the Company more advantages in competition in the business of offshore drilling rigs services and shale oil/gas rigs services.

The Consideration Shares represent approximately 1.21% of the existing total issued share capital of the Company, and 1.19% of the total issued share capital of the Company as enlarged by the issue of the Consideration Shares upon Completion.

The Consideration Shares will be issued under the specific mandate to be sought at the EGM and will rank equally in all respects with the Shares in issue on the date of allotment and issuance, including all rights to dividends, distributions and other payments made or to be made for which the record date falls on or after the date of such allotment and issuance.

Application will be made to the Stock Exchange for the listing of, and the permission to deal in, the Consideration Shares.

75% of the Consideration Shares shall be subject to a lock-up period of 3 years, commencing from the Completion Date. During the lock-up period, 25% of the Consideration Shares will be released from the lock-up and may be disposed of by the Vendor each year.

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Conditions precedent

The Completion is subject to the satisfactory fulfilment and/or waiver by the Purchaser of the following conditions:

• (a) the shareholder(s) and board of directors of each of the Purchaser and the Vendors having approved the transactions contemplated under the Agreement;

• (b) the Vendor’s warranties being true, accurate and complete in all material respects;

• (c) each of the Vendor and Purchaser having duly complied with its undertakings and obligation and there is no breach of the Agreement;

• (d) the Agreement not having been terminated;

• (e) there being no material adverse effect on the business, assets or financial conditions of the Target Group;

• (f) any and all authorizations, approvals, consents or permits of any competent authority or of any third party that are required to be obtained by the Target Group in connection with the transactions contemplated by the Agreement having been obtained; and

• (g) listing of and permission to deal in all of the Consideration Shares being granted by the Listing Committee of the Stock Exchange having been obtained.

The conditions precedent cannot be waived. If any of the conditions precedent has not been satisfied by 31 December 2014, the Agreement will be terminated automatically and the Purchaser shall not be obligated to purchase the Sale Shares.

Completion

Completion shall take place on the Completion Date, being the 10th Business Day after all conditions precedent have been satisfied (or such other date as the parties may agree).

Completion is expected to take place on or around 31 December 2014.

Other

Upon Completion, the parties will enter into a shareholders agreement to govern the rights and obligations of the Purchaser and Vendor as shareholders of the Target Company.

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EFFECT OF THE TRANSACTION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

For illustrative purpose only, set out below is a summary of the shareholdings in the Company as a result of the issue of the Consideration Shares:

Name of Shareholder Global Energy Investors, LLC. (Note 1) Mr. Zhang Menggui (Note 1) Mr. Jiang Bing Hua (Note 1) Mr. Brian Chang (Note 2) China International Marine Containers (Group) Company Limited (Note 3) Harmony Master Fund (Note 4) The Vendor Other Public Shareholders	As at the date of this announcement No. of Shares % 111,507,200 16.01 4,656,000 0.67 4,656,000 0.67 66,072,800 9.48 92,800,000 13.32 55,767,800 8.01 – – 361,051,404 51.84 696,511,204 100	Immediately after the issue of the Consideration Shares (assuming none of the share options are exercised) No. of Shares % 111,507,200 15.82 4,656,000 0.66 4,656,000 0.66 66,072,800 9.38 92,800,000 13.16 55,767,800 7.91 8,404,000 1.19 361,051,404 51.22 704,915,204 100	Immediately after the issue of the Consideration Shares (assuming none of the share options are exercised) No. of Shares % 111,507,200 15.82 4,656,000 0.66 4,656,000 0.66 66,072,800 9.38 92,800,000 13.16 55,767,800 7.91 8,404,000 1.19 361,051,404 51.22 704,915,204 100
			100

Notes:

1. Global Energy Investors, LLC. is the beneficial owner of 111,507,200 Shares. The entire share capital of Global Energy Investors, LLC. is beneficially owned as to 50% each by Mr. Zhang Menggui and Mr. Jiang Bing Hua, both are the executive Directors of the Company.

2. Mr. Brian Chang indirectly holds 66,072,800 Shares through Windmere International Limited which is his wholly-owned company. Accordingly, he is deemed to be interested in the shares held by Windmere International Limited under Part XV of the SFO. Mr. Brian Chang is the non-executive director of the Company.

3. China International Marine Containers (Hong Kong) Limited (“ CIMC HK ”) is the beneficial owner of 92,800,000 Shares. CIMC HK is a wholly-owned subsidiary of China International Marine Containers (Group) Company Limited (“ CIMC Group ”). Therefore, CIMC Group is deemed to be interested in the 92,800,000 Shares of the Company held by CIMC HK under Part XV of the SFO.

4. Harmony Master Fund (“ Harmony Fund ”) is a long-only equity fund registered in Cayman Island. Harmony Fund is managed by DM Fund Management Limited, a company registered in Cayman Island and a subsidiary of DM Capital Limited, a company incorporated in British Virgin Islands. Harmony Fund primarily holds long equity positions in small capitalization stocks that derive a majority of their revenues within the Greater China region.

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REASONS FOR AND BENEFITS OF THE TRANSACTION

The Target Company mainly engages in the repair and maintenance of Top Drive, the rental of Top Drive and the provision of Top Drive consumables. The Target Company has accumulated experience and practical knowledge in Top Drive technologies for over a decade. It also established comprehensive API Quality Management System and HSE Management System. The services provided by the Target Company basically cover all Top Drive brands, which provide its customers a full range of solutions for the usage and management of the services. The Target Company has established five repair bases worldwide, which are able to provide technical assistance and material support for customers around the world. The brand name Cruiser is one of the largest Top Drive service brands in China. It offers all types of Top Drive services, except Top Drive manufacturing and trading, and is able to provide exceptional quality of management and construction services. The two future business directions of the Target Company are (1) to establish an integrated overseas service network of drilling rigs while working with the Group on the basis of its core Top Drive services; (2) to work with Lanpec Technologies Limited in the research and development of self-proprietary Top Drive products, in order to expand the Top Drive rental business of the Target Company and gradually develop Top Drive manufacturing and trading services.

The Board (excluding the independent non-executive Directors, whose views will be provided after taking into account the opinion and advice from Gram Capital) considers that terms of the Agreement are fair and reasonable and on normal commercial terms and that the Transaction is in the interest of the Company and the Shareholders as a whole.

IMPLICATIONS OF THE TRANSACTION UNDER THE LISTING RULES

As at the date of this announcement, given that the Target Company is a subsidiary of the Group and the Vendor is a substantial shareholder of the Target Company, the Vendor and the Guarantor (who is an associate of the Vendor) are connected persons of the Company pursuant to Chapter 14A of the Listing Rules.

As each of the applicable Percentage Ratios is less than 5% and the Transaction involves the allotment and issue of Consideration Shares, the Transaction constitutes a share transaction and connected transaction of the Company and is subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14 and 14A of the Listing Rules.

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An Independent Board Committee comprising all the independent non-executive Directors will be established to advise the Independent Shareholders on the Transaction and the allotment and issue of the Consideration Shares. Gram Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Transaction and the allotment and issue of the Consideration Shares in accordance with the Listing Rules.

A circular will be despatched to the Shareholders on or before 13 November 2014 setting out, among other things, containing particulars of the Agreement, the recommendations of the Independent Board Committee, a letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders and the notice convening the EGM will be sent to the Shareholders as soon as possible in accordance with the requirements of the Listing Rules.

INFORMATION ON THE GROUP

The Group is principally engaged in development, manufacture, marketing, installation and service of a comprehensive line of products for onshore and offshore drilling industries.

INFORMATION ON THE VENDOR AND THE GUARANTOR

The Vendor is an investment holding company and owns approximately 49% interest in the Target Company as at the date of this announcement. The Vendor is not a Shareholder and does not have any interest in the existing total issued share capital of the Company as at the date of this announcement.

The Guarantor is the sole beneficial owner of the Vendor.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meanings when used herein:

“Agreement”

a share purchase agreement dated 23 October 2014 between the Purchaser, the Vendor and the Guarantor pursuant to which the Purchaser has conditionally agreed to purchase from the Vendor the Sale Shares

“Board”

the board of Directors

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• “Business Day” a day (other than Saturday and Sunday and a day on which a tropical cyclone warning No. 8 or above or a “black rainstorm warning signal” is hoisted in Hong Kong at 10:00 a.m.) on which banks are open in Hong Kong for general banking

• “Company”

• TSC Group Holdings Limited (stock code: 206), a company incorporated in the Cayman Islands with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange

• “Completion” completion of the Transaction pursuant to the terms of the Agreement

• “Completion Date” the 10th Business Day after all conditions precedent have been satisfied (or such other date as the parties may agree), which is expected to be on or around 31 December 2014

• “Consideration”

• HK$33,613,000 payable by the Purchaser for the Sale Shares pursuant to the Agreement

• “Consideration Shares”

• 8,404,000 new Shares to be allotted and issued by the Company to the Vendor at the Issue Price pursuant to the terms of the Agreement

• “Director(s)” director(s) of the Company

• “Dongying Shengli”

• 東營勝利鑽採技術服務有限公司 (Dongying Shengli Drilling Technology services Co., Ltd*), a company established in the PRC and which is wholly owned by NN Petroleum

• “EGM”

• an extraordinary general meeting of the Company to be convened and held for the purposes of consideration and, if thought fit, approving, among other things, the Transaction and the allotment and issuance of the Consideration Shares

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• “Gram Capital” or Gram Capital Limited, a licensed corporation to carry out “Independent Financial Type 6 (Advising on corporate finance) regulated activity Adviser” under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), has been appointed as the independent financial adviser to the Independent Board Committee and Independent Shareholders regarding the Agreement

• “Group” the Company and its subsidiaries

• “Guarantor” Mr. Li Yong Hu, the sole legal and beneficial owner of the Vendor

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Board an independent committee of the Board comprising all Committee” independent non-executive Directors, namely, Mr. Chan Ngai Sang, Kenny, Mr. Bian Junjiang, Mr. Guan Zhichuan and Mr. Robert William Fogal Jr.

• “Independent Shareholders” Shareholders who are not required to abstain from voting on the resolutions to be proposed at the EGM to approve the Transaction, which constitutes a connected transaction of the Company, under the Agreement

• “Issue Price” issue price of HK$4 per Consideration Share

• “Last Trading Day”

• 23 October 2014, being the last full trading day for the Shares before the date of this announcement

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “NN Petroleum” NN Petroleum Engineering (HK) Co., Ltd. (南南石油工程 （香港）有限公司), a company incorporated under the laws of Hong Kong which is wholly-owned by the Target Company

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“Percentage Ratio(s)” the percentage ratio(s) as set out in Rule 14.07 of the Listing Rules to be applied for determining the classification of a transaction

• “PRC”

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

• “Purchaser”

• Petro Equip Leaders Limited, a company incorporated in the British Virgin Islands with limited liability and which is a wholly-owned subsidiary of the Company

• “Sale Shares” 2,562 shares with par value of US$1.00 each of the Target Company, representing approximately 28% of the issued share capital of the Target Company as at the date of this announcement

• “Shandong Cruiser” 山東科魯斯頂驅裝備有限公司 (Cruiser Top Driver Equipment Co., Ltd.*), a company established in the PRC with limited liability and which is owned as to 71% by Dongying Shengli and 29% by NN Petroleum

• “Share(s)”

• ordinary share(s) of HK$0.10 in the share capital of the Company

• “Shareholders” the holders of Shares of the Company

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Target Group”

• the Target Company, NN Petroleum, Dongying Shengli, Shandong Cruiser, Tianjin Shengli and Beijing Cruiser

• “Target Company” Jurun Limited, a company incorporated in the British Virgin Islands with limited liability

• “Tianjin Shengli” 天津勝利石油裝備有限公司 (Tianjin Shengli Petroleum Equipment Co., Ltd.*), a company established in the PRC with limited liability which is held as to 57% by NN Petroleum and 43% by Dongying Shengli

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“Transaction”

the acquisition of an approximately 28% interest in the Target Company by the Purchaser from the Vendor pursuant to the Agreement

“Vendor” Xingbo Limited (星博有限公司), a company incorporated under the laws of BVI and which is wholly owned by the Guarantor

“US$”

United States dollar, the lawful currency of the United States of America

“%”

per cent.

• For identification purpose only

By order of the Board TSC GROUP HOLDINGS LIMITED Jiang Bing Hua Executive Chairman

Hong Kong, 23 October 2014

Unless the context requires otherwise, the translations of US$ into HK$ in this announcement are based on the rate of HK$7.76 = US$1.0.

As of the date of this announcement, the Board comprises 2 executive Directors, namely Mr. Jiang Bing Hua and Mr. Zhang Menggui; 3 non-executive Directors, namely Mr. Jiang Longsheng, Mr. Brian Chang and Mr. Yu Yuqun; and 4 independent non-executive Directors, namely Mr. Chan Ngai Sang, Kenny, Mr. Bian Junjiang, Mr. Guan Zhichuan and Mr. Robert William Fogal Jr.

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