CStone Pharmaceuticals — M&A Activity 2015

Jul 27, 2015

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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兗州煤業股份有限公司

YANZHOU COAL MINING COMPANY LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1171)

CONNECTED TRANSACTION – ACQUISITION OF YANKUANG DONGHUA HEAVY INDUSTRY CO., LTD.

ACQUISITION OF DONGHUA HEAVY INDUSTRY

On 27 July 2015, the Company and Yankuang Group entered into the Equity Transfer Agreement. Pursuant to the Equity Transfer Agreement, the Company agreed to acquire from Yankuang Group 100% of the equity interest in Donghua Heavy Industry held by Yankuang Group with a consideration of RMB676,045,800.

Yankuang Group is a controlling shareholder of the Company holding directly or indirectly approximately 56.52% of the issued share capital of the Company as at the date of this announcement and thus a connected person of the Company under the Hong Kong Listing Rules. As Yankuang Group holds 100% equity interest in Donghua Heavy Industry, Donghua Heavy Industry is an associate of Yankuang Group and therefore a connected person of the Company. Accordingly, the Equity Transfer Agreement and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules.

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ACQUISITION OF DONGHUA HEAVY INDUSTRY

1. Introduction

On 27 July 2015, the Company and Yankuang Group entered into the Equity Transfer Agreement. Pursuant to the Equity Transfer Agreement, the Company agreed to acquire from Yankuang Group 100% of the equity interest in Donghua Heavy Industry held by Yankuang Group with a consideration of RMB676,045,800.

2. Equity Transfer Agreement

Date

27 July 2015

Parties

• (1) The Company; and

• (2) Yankuang Group.

Equity Transfer

Pursuant to the Equity Transfer Agreement, the Company agreed to acquire from Yankuang Group 100% of the equity interest in Donghua Heavy Industry held by Yankuang Group with a consideration of RMB676,045,800.

Audited financial information of Donghua Heavy Industry for the year 2013 and 2014 and the unaudited financial information for the first half of 2015 is as follows:

			Unit: RMB ‘0000
	31 December 2013 (audited)	31 December 2014 (audited)	30 June 2015 (unaudited)
Total Assets	145,103.20	236,200.74	206,291.20
Net Assets	41,598.83	43,134.16	45,028.96
	Year 2013 (audited)	Year 2014 (audited)	Year 2015 - January to June (unaudited)
Operating Income	179,402.57	139,085.43	59,722.22
Gross Profit (before tax)	4,982.40	-3,042.93	854.88

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	Net Profit (after tax)	5,001.36	-1,906.26	854.88

Pricing

Consideration for the Acquisition is determined on the basis of the valuation value by a qualified valuation institution required by the State-owned Assets Supervision and Administration Department for confirmation of the transaction. Accordingly, the consideration for the Acquisition is RMB676,045,800. As the Valuation Date was 31 December 2014, taking into account the results of operation of Donghua Heavy Industry for January to June 2015, consideration for the Acquisition is RMB8,548,800 or 1.28% higher than the valuation value of RMB667,497,000. The valuation of Donghua Heavy Industry by the relevant valuation institution was procedurally compliant and with appropriate assumptions and parameters. Consideration for the Acquisition was determined on the basis of the valuation using the asset-base method and taking into account results of operation from the Valuation Date to the Completion Date of Donghua Heavy Industry.

Conditions Precedent

The Equity Transfer Agreement shall be valid upon signing and affixing the official seals of all parties, and shall become effective after (i) obtaining the approval from the regulatory institution on the Equity Transfer Agreement; (ii) the regulatory institution filing the relevant valuation results; (iii) the board of directors of Yankuang Group giving approval and (iv) the Board giving approval.

Payment

The Company should on the Completion Date pay to the designated bank account of Yankuang Group by way of a one-off cash payment an amount which is equal to the consideration of the Acquisition.

3. Reasons and Benefits for Entering into the Equity Transfer Agreement

The Acquisition is beneficial in promoting the transformation and upgrading of the mechanical and electrical equipment manufacturing industry and achieving the integration of operation of the core business of coal operation and mine mechanical and electrical equipment, and could also facilitate the reduction of connected

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transactions between the Company and Yankuang Group.

The Directors (including independent non-executive Directors) consider that the Equity Transfer Agreement is entered into on normal or better commercial terms in the ordinary and usual course of business of the Group, the terms of the Equity Transfer Agreement and the transactions contemplated thereunder are also fair and reasonable and in the interests of the Company and the Shareholders as a whole.

4. Implication under the Hong Kong Listing Rules

Yankuang Group is a controlling shareholder of the Company holding directly or indirectly approximately 56.52% of the issued share capital of the Company as at the date of this announcement and thus a connected person of the Company under the Hong Kong Listing Rules. As Yankuang Group holds 100% equity interest in Donghua Heavy Industry, Donghua Heavy Industry is an associate of Yankuang Group and therefore a connected person of the Company. Accordingly, the Equity Transfer Agreement and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules.

As the relevant percentage ratios in respect of the Equity Transfer Agreement calculated in accordance with the Hong Kong Listing Rules exceed 0.1% but is less than 5%, the Equity Transfer Agreement and the transactions contemplated thereunder are subject to the reporting and announcement requirements under Chapter 14A of the Hong Kong Listing Rules, but are exempted from the independent shareholders’ approval requirements.

General

The Equity Transfer Agreement and the transactions contemplated thereunder were approved at the ninth meeting of the sixth session of the Board held on 27 July 2015. At the aforesaid Board meeting, Mr. Li Xiyong, a director of the Company, being also a director of Yankuang Group, is regarded as having a material interest in the aforesaid connected transaction. Therefore, Mr. Li Xiyong has abstained from voting at the meeting of the Board convened for the purpose of approving such transaction. Save as disclosed above, none of the Directors has a material interest in such transaction.

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Information of the Parties

The Company

The Company is principally engaged in the business of mining, preparation, processing and sales of coal and coal chemicals. The Company’s main products are steam coal for use in large-scale power plants, coking coal for metallurgical production and prime quality low sulphur coal for use in pulverized coal injection.

Yankuang Group

Yankuang Group is a wholly State-owned corporation with a registered capital of RMB3,353,388,000 and is principally engaged in businesses such as production and sales of coal, coal chemicals, coal aluminum, complete sets of electromechanical equipment manufacture and financial investment. As at the date of this announcement, Yankuang Group is the controlling shareholder of the Company, holding directly or indirectly approximately 56.52% of the issued share capital of the Company, and is hence a connected person of the Company.

Information of the Target Company

Donghua Heavy Industry is principally engaged in mining, design, manufacturing, installation, maintenance and sales of mechanical and electrical equipment and accessories, etc.

In January 2013, Yankuang Group through its wholly-owned subsidiary Yankuang Donghua Group Co., Ltd., solely set up Donghua Heavy Industry with a registered capital of RMB50,000,000. In July 2015, 100% of the equity interest of Donghua Heavy Industry was transferred to Yankuang Group. As such, there was no original acquisition cost of the assets to the connected person.

Donghua Heavy Industry has 5 subsidiaries and 3 branches whose details are listed below:

	Name of Company	Registered Capital	Principal Business
Subsidiaries	Yankuang Group Mainland Machinery	RMB50,000,000	Manufacturing and sales of specialist equipment for the

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	Co., Ltd. (兗礦集團大 陸機械有限公司)		mining and coal industry; manufacturing, sales, installation, repair of machinery, electrical equipment and accessories etc.
	Yankuang Group Tang Cun Industrial Co., Ltd. (兗礦集團唐村實業有 限公司)	RMB51,000,000	Manufacturing and sales of rubber conveyor belt and raw materials, rubber and plastic products, cotton fibre products, plastic pipes, cables, chemical products, metal products; processing and sales of mechanical parts and paper products
	Yankuang Group Zoucheng Jinming Mechanical and Electrical Co., Ltd. (兗 礦集團鄒城金明機電有 限公司)	RMB50,000,000	Manufacturing, installation and maintenance of mechanical and electrical equipment, mining accessories, mine supporting materials; manufacturing, installation and maintenance of equipment and accessories of mining, mining wash and transportation; manufacturing of electrical control systems, combination switches, mining man cars, electrical accessories, loaders and mining chains
	Yankuang Group Zoucheng Jintong Rubber Co., Ltd. (兗礦 集團鄒城金通橡膠有限 公司)	RMB6,600,000	Assembling of high, medium and low pressure rubber hoses; manufacturing, sales and export of rubber products; repair of mechanical appliance, etc.
	Yanzhou Eastern Electromechanical Co.,	USD2,400,000	Manufacturing and sales of high and low voltage

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	Ltd. (兗州東方機電有 限公司)		explosion-proof electrical appliances, coal mines specialist products such as mine signal equipment, automated monitoring devices, high and low voltage switchgears, electric drive control devices and uninterruptible power supply systems
Branch companies	Yankuang Donghua Heavy Industry Co., Ltd. Mechanical and Electrical Equipment Manufacturing Branch (兗礦東華重工有限公 司機電裝備製造分公 司)		Manufacturing, installation, maintenance and sales of mining equipment, electrical equipment, hydraulic support, belt conveyor, mining equipment with an inert gas generator, etc.
	Yankuang Donghua Heavy Industry Co., Ltd. Integrated Machinery Manufacturing and Maintenance Branch (兗 礦東華重工有限公司綜 機裝備制修分公司)		Manufacturing, installation, maintenance and sales of mining equipment, electrical equipment, hydraulic support, belt conveyor, mining equipment with an inert gas generator, etc.
	Yankuang Donghua Heavy Industry Co., Ltd. Digging Equipment Manufacturing Branch (兗礦東華重工有限公 司採掘裝備製造分公 司)		Designing, manufacturing, installation, maintenance and sales of mining equipment and mechanical and electrical equipment

DEFINITIONS

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

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• “Acquisition”

• the transfer of the Target Interest by Yankuang Group to the Company pursuant to and under the terms of the Equity Transfer Agreement and the Company accepting such transfer pursuant to and under the terms of the Equity Transfer Agreement;

• “A Shares” domestic shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange;

• “associate” has the meaning ascribed thereto under the Hong Kong Listing Rules;

• “Board” the board of Directors of the Company;

• “Company”

• 兗州煤業股份有限公司, Yanzhou Coal Mining Company Limited, a joint stock limited company established under the laws of the PRC in 1997, and the H Shares, American depositary shares and A Shares of which are listed on the Hong Kong Stock Exchange, New York Stock Exchange and the Shanghai Stock Exchange, respectively;

• “Completion Date” the date on which all the conditions precedent in the Equity Transfer Agreement have been satisfied;

• “connected has the meaning ascribed thereto under the Hong Kong person(s)” Listing Rules;

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

• “Donghua Heavy Yankuang Donghua Heavy Industry Limited, a limited Industry” or “Target liability company incorporated in the PRC, is a wholly-owned Company” subsidiary of Yankuang Group as at the date of this announcement;

• “Equity Transfer the “Equity Transfer Agreement between Yankuang Group Agreement” Corporation Limited and Yancoal Mining Company Limited

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in relation to 100% of the Equity Interest of Yankuang Donghua Heavy Industry Co., Ltd.” entered into between the Company and Yankuang Group on 27 July 2015;

• “Group” the Company and its subsidiaries;

• “Hong Kong Listing the Rules Governing the Listing of Securities on the Hong Rules” Kong Stock Exchange; “Hong Kong Stock The Stock Exchange of Hong Kong Limited; Exchange”

• “H Shares” overseas listed foreign invested shares in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange;

• “PRC” the People’s Republic of China;

• “RMB” Renminbi, the lawful currency of the PRC;

• “Shareholders” the shareholders of the Company;

• “subsidiary(ies)” has the meaning ascribed thereto under the Hong Kong Listing Rules;

• “Target Interest” the 100% equity interest in Donghua Heavy Industry held by Yankuang Group;

• “USD” US dollars, the lawful currency of the United States of America;

• “Valuation Date” the date listed as the date of valuation in the valuation report which serves as the basis for the equity transfer under the Equity Transfer Agreement, i.e. 31 December 2014;

• “Yankuang Group” or Yankuang Group Corporation Limited, a wholly State-owned “Parent Company” corporation and the controlling shareholder of the Company holding directly or indirectly approximately 56.52% of the

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total issued share capital of the Company as at the date of this announcement;

“%”

Percentage

By order of the Board Yanzhou Coal Mining Company Limited Li Xiyong

Chairman of the Board

Zoucheng, Shandong Province, the PRC 27 July 2015

As at the date of this announcement, the directors of the Company are Mr. Li Xiyong, Mr. Yin Mingde, Mr. Wu Yuxiang, Mr. Zhang Baocai, Mr. Wu Xiangqian and Mr. Jiang Qingquan, and the independent non-executive directors of the Company are Mr. Wang Lijie, Mr. Jia Shaohua, Mr. Wang Xiaojun and Mr. Xue Youzhi.

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