CMON Limited — M&A Activity 2019

Jul 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.

瀋陽公用發展股份有限公司 Shenyang Public Utility Holdings Company Limited

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock code: 747)

MAJOR TRANSACTION DISPOSAL OF 66.67% EQUITY INTERESTS AND SHAREHOLDER’S LOAN IN SHENZHEN HE HUI HUANG DEVELOPMENT COMPANY LIMITED*

THE DISPOSAL

On 4 July 2019 (after trading hours), the Vendor, being a wholly-owned subsidiary of the Company, entered into the Disposal Agreement with the Purchaser, whereby the Purchaser has conditionally agreed to purchase and the Vendor has conditionally agreed to sell 66.67% equity interests and the Shareholder’s Loan of the Disposal Company at the consideration of RMB173,000,000.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the relevant percentage ratios (as defined in the Listing Rules) in respect of the Disposal exceed 25% but are below 75%, the Disposal constitutes a major transaction of the Company and is subject to reporting, announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

GENERAL

An EGM will be convened to consider and, if thought fit, to approve the Disposal Agreement and the Disposal. To the best of the Directors’ knowledge, information and belief, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for approving the Disposal Agreement and the Disposal.

A circular containing, inter alia, further details of the Disposal Agreement, the Disposal and other information as required under the Listing Rules and a notice of the EGM will be despatched to the Shareholders on or before 25 July 2019 so as to allow sufficient time for the preparation of the relevant information for inclusion in the circular.

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Shareholders and investors should note that the Disposal are subject to, inter alia, Shareholders’ approval at the EGM and therefore the Disposal may or may not be effected. As such, Shareholders and investors are urged to exercise caution when dealing in the Shares.

THE DISPOSAL AGREEMENT

Date

4 July 2019 (after trading hours)

Parties

Vendor:

Shenzhen Shenxi Investment & Development Company Limited* 深圳市沈 璽投資發展有限公司, a wholly-owned subsidiary of the Company

Purchaser: Shenzhen Hongxun Investment Development Company Limited* 深圳市鴻 訊投資發展有限公司

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchaser is an Independent Third Party.

Subject of the Disposal

Pursuant to the Disposal Agreement, the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire the sell 66.67% equity interests and the Shareholder’s Loan of the Disposal Company.

Consideration

Pursuant to the Disposal Agreement, the Consideration for the Sale Shares and the Shareholder’s Loan shall be RMB173,000,000, which will be satisfied by the Purchaser in the following manner:

The Consideration shall be satisfied in the following manner:

• (a) the first instalment of RMB20,000,000 shall be payable by the Purchaser to the Vendor within 40 Business Days upon signing of the Disposal Agreement; within 30 Business Days upon the payment of the first instalment, the Vendor shall assist the Purchaser to complete the registration with the Administration for Industry and Commerce in relation to the transfer of the equity interests of the Disposal Company;

• (b) the second instalment of RMB70,000,000 shall be payable by the Purchaser to the Vendor within 30 Business Days upon the Disposal Agreement and the transactions contemplated thereunder having been approved by the Shareholders at a general meeting of the Company;

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• (c) the remaining balance of RMB83,000,000 shall be payable by the Purchaser to the Vendor within 5 Business Days after the expiry date of 4 months from the date on which the Disposal Agreement and the transactions contemplated thereunder having been approved by the Shareholders at a general meeting of the Company.

The Consideration has been determined after arm’s length negotiations among the parties to the Disposal Agreement with reference to (i) the adjusted unaudited net asset value of 66.67% equity interests of the Disposal Company of approximately RMB161,565,345 as at 31 May 2019 and the Shareholder’s Loan of RMB8,000,000 as well as (ii) the unaudited net asset value of 20% equity interests of Zhong De Logistics of approximately RMB165,644,145 as at 31 May 2019.

Conditions precedent

Completion of the Disposal Agreement is conditional upon satisfaction of all of the following conditions:

1. the Purchaser having obtained its shareholders’ approval of the entering into of the Disposal Agreement and the transactions contemplated thereunder;

2. the Company having obtained the approval by its Board and its Shareholders’ approval in a general meeting of the entering into of the Disposal Agreement and the transactions contemplated thereunder;

3. the Disposal Company having completed the industrial and commercial registration with the Administration for Industry and Commerce in relation to the Disposal;

4. the Purchaser having fully settled the Consideration;

5. The Vendor and the Purchaser having been satisfied that, at all time from the date of the Disposal Agreement up to the date of Completion, all warranties given by the Purchaser and the Vendor under the Disposal Agreement remain true, in place, not misleading in all material aspect and not breached, and that there has been no event or situation leading to any material adverse change.

The above conditions shall be fulfilled within 12 months from the date on which the Disposal Agreement was entered or such later date as the parties to the Disposal Agreement may agree in writing.

In the event that the Disposal Agreement and the transactions contemplated thereunder have not been approved by the Shareholders at a general meeting of the Company or the Purchaser fail to settle the Consideration in accordance with the stipulated time as agreed in the Disposal Agreement, the Purchaser shall unconditionally and irrevocably guaranteed that the Vendor shall have the right and the Purchaser shall unconditionally agree to reinstate the industrial and commercial registration of the Disposal Company to its original status. The Vendor also guaranteed that it shall refund all the amount paid by the Purchaser within 10 days upon the organization structure and the industrial and commercial registration of the Disposal Company were reinstated to its original status.

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Completion

Completion shall take place on the date on which the conditions precedent to the Disposal Agreement had been completely fulfilled or such other date as the Vendor and Purchaser may agree in writing.

INFORMATION OF THE DISPOSAL COMPANY

The Disposal Company is a company with limited liability established under the laws of the PRC and is owned as to 66.67% by the Vendor and 33.33% by two individuals who are Independent Third Parties immediately prior to Completion. Its principal business is investment holding. The Disposal Company currently holds 30% equity interests in Zhong De Logistics which is a limited liability company established under the laws of the PRC. Its principal businesses include domestic logistics, freight forwarding, warehousing and distribution services.

Zhong De Logistics is currently engaged in an integrated logistics park development project (the “ Project ”) located on a land parcel with a total site area of approximately 70,793.7 sq.m. in Longgang District, Shenzhen (the “ Property ”). The Property will be developed into an integrated and multifunctional logistics park with an estimated total gross floor area of approximately 236,518.85 square meters, providing comprehensive range of integrated logistics and warehouse storage facilities and service. The market value of the Property as at 31 May 2019 as valued by an independent qualified professional valuer was RMB1,629,600,000.

The construction of Project has been completed and currently in the acceptance stage. Set out below summaries the audited consolidated financial information of the Disposal Company for the two financial years ended 31 December 2017 and 2018:

	For the year ended	For the year ended
	31 December
	2017	2018
	(audited)	(audited)
	RMB	RMB
Turnover	Nil	Nil
Loss before taxation and extraordinary items	412,102	392,355
Loss after taxation and extraordinary items	412,102	392,355

As of 31 May 2019, the adjusted unaudited net asset value of the Disposal Company is RMB242,335,902.

INFORMATION ON THE PURCHASER

The Purchaser is a company incorporated under the laws of the PRC and is principally engaged in investment business.

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FINANCIAL EFFECTS OF THE DISPOSAL AND PROPOSED USE OF PROCEEDS

The Disposal is expected to realize a net gain of approximately RMB7,280,000 for the Group which is derived from the difference between the Consideration of RMB173,000,000 and (i) the cost of 66.67% equity interests of the Disposal Company of RMB155,000,000 (ii) the related profit tax of approximately RMB2,400,000; (iii) the related legal costs and other expenses of the Disposal of approximately RMB320,000; and (iv) the assignment of Shareholder’s Loan.

The actual financial impacts of the Disposal is subject to the review of the Company’s auditors. Save for the net gain on Disposal as mentioned above and tax liabilities of the Group arising from the Disposal, the Disposal does not have any material effect on the earnings, assets and liabilities of the Group. The Group is expected to receive a net proceeds of approximately RMB170,280,000 from the Disposal. The Group currently intends to use the proceeds as general working capital.

Upon Completion, the Group ceased to hold any equity interest in the Disposal Company.

REASONS FOR THE DISPOSAL

As at the date of this announcement, the Group is principally engaged in infrastructure and construction business in the PRC. The Disposal will enable the Group to realise the carrying value of the Sale Shares with net gain. After the Disposal, the Group can streamline its businesses and focus its management efforts on the infrastructure business as well as developing its property management and investment business which are expected to generate higher return to the Group. Therefore, the Directors consider the Disposal is in line with the Group’s overall business strategy.

The Directors also consider that the terms and conditions of the Disposal are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATION OF THE DISPOSAL

As one or more of the relevant percentage ratios (as defined in the Listing Rules) in respect of the Disposal exceed 25% but are below 75%, the Disposal constitutes a major transaction of the Company and is subject to reporting, announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

GENERAL

An EGM will be convened to consider and, if thought fit, to approve the Disposal Agreement and the Disposal. To the best of the Directors’ knowledge, information and belief, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for approving the Disposal Agreement and the Disposal.

A circular containing, inter alia, further details of the Disposal Agreement, the Disposal and other information as required under the Listing Rules and a notice of the EGM will be despatched to the Shareholders on or before 25 July 2019 so as to allow sufficient time for the preparation of the relevant information for inclusion in the circular.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following respective meanings.

“Board”	the board of Directors
“Business Day”	day(s) on which commercial banks are open for business in the
	PRC (excluding Saturdays, Sundays and public holidays)
“Company”	Shenyang Public Utility Holdings Company Limited
“Completion”	the completion of the Disposal
“Consideration”	consideration of the Disposal amounted to RMB173,000,000
“Disposal”	the disposal of 66.67% equity interests and the Shareholder’s Loan
	in the Disposal Company by the Vendor to the Purchaser pursuant
	to the Disposal Agreement
“Disposal Agreement”	the sale and purchase agreement dated 4 July 2019 entered into
	between the Vendor and the Purchaser in relation to the Disposal
“Disposal Company”	Shenzhen He Hui Huang Development Company Limited*深圳市
	合輝煌發展有限公司
“Director(s)”	means the directors of the Company
“Domestic Share(s)”	domestic share(s) with a nominal value of RMB1 each in the share
	capital of the Company which are subscribed for in RMB
“EGM”	an extraordinary general meeting of the Company proposed
	to be convened and held for the Shareholders to consider,
	and if appropriate, approve the Disposal and the transactions
	contemplated thereunder
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“Independent Third	the independent third party(ies) who is/are, to the best of the
Party(ies)”	Directors’ knowledge, information and belief having made all
	reasonable enquiry, independent of the Company and its/their
	connected persons (as defined under the Listing Rules)

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“H-Share(s)”	ordinary share(s) of RMB1 each in the share capital of the
	Company
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China
“Purchaser”	Shenzhen Hongxun Investment Development Company Limited*
	深圳市鴻訊投資發展有限公司
“Sale Shares”	66.67% equity interests of the Disposal Company
“Shareholder(s)”	holder(s) of the H-Shares and the Domestic Shares
“Shareholder’s Loan”	all indebtedness owed by the Disposal Company to the Vendor
	immediately prior to Completion
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“RMB”	Renminbi, the lawful currency of the PRC
“Vendor”	Shenzhen Shenxi Investment & Development Company Limited*
	深圳市沈璽投資發展有限公司, a wholly-owned subsidiary of the
	Company
“Zhong De Logistics”	Shenzhen Zhong De Logistics Company Limited*深圳市眾德物
	流有限公司
“%”	per cent.

By Order of the Board Shenyang Public Utility Holdings Company Limited Zhang Jing Ming Chairman

Shenyang, PRC, 4 July 2019

As at the date of this announcement, the executive Directors are Mr. Zhang Jing Ming, Mr. Leng Xiao Rong and Mr. Chau Ting Yan, the non-executive Directors are Mr. Yin Zong Chen and Mr. Ye Zhi E and the independent non-executive Directors are Mr. Chan Ming Sun Jonathan, Mr. Guo Lu Jin and Ms. Gao Hong Hong.

• For identification purpose only

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