CWT International Limited - M&A Activity 2014

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**SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 297)

MAJOR AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF 15.01% EQUITY INTEREST IN QINGHAI SALT LAKE

MAJOR AND CONNECTED TRANSACTION

Reference is made to the announcement of the Company dated 13 October 2014 in relation to the proposed exercise of the Option by Sinochem Fertilizer, an indirect wholly owned subsidiary of the Company, to acquire from Sinochem Corporation its 15.01% equity interest in Qinghai Salt Lake.

The Board wishes to announce that on 9 December 2014, the Board resolved to exercise the Option. In this connection, Sinochem Fertilizer proposed to enter into the Share Transfer Agreement with Sinochem Corporation, pursuant to which Sinochem Fertilizer shall acquire, and Sinochem Corporation shall sell, 238,791,954 issued shares of Qinghai Salt Lake, representing 15.01% of its total issued share capital, at a total consideration of RMB3,890,101,118.75 (equivalent to HK$4,917,087,814.10).

As at the date of this announcement, Sinochem Fertilizer owns 142,260,369 shares of Qinghai Salt Lake, representing 8.94% of its total issued share capital. Upon completion of the Acquisition, Sinochem Fertilizer will hold 381,052,323 shares of Qinghai Salt Lake, representing 23.95% of the total issued share capital and will become the second largest shareholder of Qinghai Salt Lake.

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GENERAL

Sinochem Corporation is the indirect controlling shareholder of the Company holding an effective interest of approximately 52.65% in the Company, and is therefore a connected person of the Company. As such, the Acquisition constitutes a connected transaction of the Company under the Listing Rules. Given that one or more of the applicable percentage ratios in respect of the Acquisition are more than 5%, the Acquisition is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Furthermore, as one or more of the applicable percentage ratios in respect of the Acquisition are more than 25% but less than 100%, the Acquisition also constitutes a major transaction of the Company under Chapter 14 of the Listing Rules, and is subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The Company will convene a SGM to seek approval from the Independent Shareholders in respect of the Acquisition. An Independent Board Committee of the Company has been formed to advise the Independent Shareholders in respect of the Acquisition. Guotai Junan Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition.

A circular containing, among other things, details of the Share Transfer Agreement and the Acquisition, a letter from the Independent Board Committee, a letter from the independent financial adviser, financial information of the Group and Qinghai Salt Lake, and a notice to convene the SGM will be dispatched to the shareholders of the Company. As additional time is required to prepare and finalize the financial information of the Group and Qinghai Salt Lake, the circular will be dispatched to the shareholders of the Company on or about 26 January 2015.

After the approval from the Independent Shareholders is obtained at the SGM, Sinochem Fertilizer and Sinochem Corporation will enter into the Share Transfer Agreement, which will contain substantially the same terms as those disclosed in this announcement and approved by the Independent Shareholders at the SGM. Any material amendment or change in the terms will be subject to the approval by the Independent Shareholders. The Acquisition is conditional upon the obtaining of the approval from SASAC and relevant authorities with respect to the Share Transfer Agreement and the Acquisition.

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BACKGROUND

THE SHARE TRANSFER AGREEMENT

Parties

Purchaser: Sinochem Fertilizer Seller: Sinochem Corporation

Interest to be acquired

238,791,954 shares of Qinghai Salt Lake, representing 15.01% of its total issued share capital.

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Consideration

The total consideration for the Acquisition is RMB3,890,101,118.75 (equivalent to HK$4,917,087,814.10).

The consideration was arrived at after arm’s length negotiations between Sinochem Corporation and the Company based primarily on the pricing mechanism stipulated in the relevant rules and regulations of SASAC governing disposal of listed shares by state-owned enterprises (Sinochem Corporation being a state-owned enterprise). The consideration of approximately RMB16.29 per share represents 90% of the 30-trading day average of the daily volume weighted average price of approximately RMB18.10 per share from 20 August 2014 to 8 October 2014 (being the last trading day of the Shares of Qinghai Salt Lake preceding the date of the indicative announcement of Qinghai Salt Lake in relation to the Acquisition). The consideration per share of RMB16.29 also represents an approximately 27.60% discount to Qinghai Salt Lake’s closing price of RMB22.51 per share on 8 December 2014.

The Company is considering a number of options for financing the Acquisition, including internal cash resources and debt financing.

Payment

The consideration for the Acquisition shall be paid by Sinochem Fertilizer to Sinochem Corporation in cash in two instalments as follows:

(a) unless otherwise waived by Sinochem Corporation in accordance with (c) below, within five business days of signing of the Share Transfer Agreement, Sinochem Fertilizer shall pay 30% of the consideration as deposit to Sinochem Corporation in cash;
(b) within ten business days upon satisfaction of the condition of the Acquisition, Sinochem Fertilizer shall pay the remaining 70% of the consideration to Sinochem Corporation in cash; and
(c) where Sinochem Corporation, upon approval by SASAC, waives the deposit payment as described in (a) above, Sinochem Fertilizer shall pay the consideration in full within ten business days upon satisfaction of the condition of the Acquisition.

Condition of the Acquisition

Sinochem Fertilizer and Sinochem Corporation will enter into the Share Transfer Agreement after the approval from the Independent Shareholders is obtained at the SGM. The Acquisition is conditional upon the obtaining of the approval from SASAC and relevant authorities with respect to the Share Transfer Agreement and the Acquisition.

If the condition of the Acquisition is not satisfied by 31 March 2015, either party shall have the right to terminate the Share Transfer Agreement and all moneys paid by Sinochem Fertilizer (if any) to Sinochem Corporation shall be refunded in full to Sinochem Fertilizer.

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Completion

Within ten business days after the condition of the Acquisition is satisfied, Sinochem Corporation shall cooperate with Sinochem Fertilizer to complete the registration of the share transfer with China Securities Depository and Clearing Corporation Limited.

Completion of the Acquisition shall take place on the date when the registration of the share transfer is completed.

INFORMATION ON QINGHAI SALT LAKE

Qinghai Salt Lake is a joint stock limited liability company established in the PRC whose shares are traded on the Shenzhen Stock Exchange. Its principal activities are the production and sale of chlorine potassium, potassium sulfate and potassium carbonate, sale of potassium hydroxide, and outdoor exploitation of potash. Other activities include the production and sale of carnallite, low adopt carnallite and other mining products.

In 2006, Sinochem Group subscribed for 526,000,000 shares of 青海鹽湖工業集團股份有限公司 (“ Salt Lake Group ”) at a consideration of RMB800 million, representing 23.45% of the then issued share capital of Salt Lake Group. Following Salt Lake Group’s listing on the Shenzhen Stock Exchange in 2008, Sinochem Group’s interest in Salt Lake Group was diluted to 22.74%. In 2009, Sinochem Corporation was established and Sinochem Group transferred its interest in Salt Lake Group to Sinochem Corporation. In 2011, Salt Lake Group merged with 青海鹽湖鉀肥股份有限公司 (Qinghai Salt Lake Potash Co. Ltd., “ Salt Lake Potash ”), whereby Salt Lake Potash became the surviving entity and was renamed as 青海鹽湖工業股份有限公司 (Qinghai Salt Lake Industry Co., Ltd., i.e. Qinghai Salt Lake). Sinochem Corporation’s interest in Qinghai Salt Lake was changed to 15.01% as a result of the above merger.

Qinghai Salt Lake has the mining right of Chaerhan Salt Lake in Qinghai province, which is the largest potassium mine in the PRC and has a potassium chloride reserve of 540 million tons, accounting for 97% of the proven potassium chloride reserve in the PRC. Qinghai Salt Lake has an annual production capacity of potash of 3.5 million tons, being the largest potash production enterprise in the PRC.

Based on the audited financial statements of Qinghai Salt Lake prepared in accordance with Chinese Accounting Standards for Business Enterprises, the audited net asset value of Qinghai Salt Lake as at 31 December 2013 was RMB18,005 million, and the audited profits of Qinghai Salt Lake for the years ended 31 December 2012 and 31 December 2013 were as follows:

	For the year ended	For the year ended
	31 December 2012	31 December 2013
	(RMB million)	(RMB million)
Audited profit before taxation	3,220	1,431
Audited profit after taxation	2,752	1,066

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REASONS FOR AND BENEFITS OF THE ACQUISITION

The Acquisition can enhance the efficiency of Sinochem Fertilizer’s management over Qinghai Salt Lake, maximize the value and use of the distribution network of Sinochem Fertilizer, and further improve its bargaining power and consolidate its leading position in potassium fertilizer industry of the PRC.

The Directors (excluding the independent non-executive Directors whose opinions will be set out in the letter from the Independent Board Committee to be included in the circular) are of the view that the Acquisition is conducted by the Company in its ordinary and usual course of business, on normal commercial terms, is fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION ON THE COMPANY AND SINOCHEM CORPORATION

The Company is principally engaged in the production, procurement and sale of fertilizers and related products in the PRC. The main business comprises research and development, production, procurement and distribution of fertilizers and forms a vertically integrated business model combining upstream and downstream businesses. The Company aims to serve the agricultural industry in the PRC by introducing quality resources from overseas and to ensure food security in the PRC.

Sinochem Fertilizer is engaged in the production, import, export, distribution, wholesale and retail of fertilizer raw materials and products, as well as research and development and services in the field of fertilizer-related business and products.

Sinochem Corporation, through its subsidiaries, is principally engaged in exploration and management of petroleum and natural gas, manufacturing and management of fertilizer, seeds, pesticides and agricultural products, development and management of chemical products and pharmaceutical products, development and management of mineral resources and new energy, development and operation of hotels and real properties, etc.

LISTING RULES IMPLICATIONS

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DEFINITIONS

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

“Acquisition”	the proposed acquisition of 238,791,954 shares of Qinghai Salt
	Lake, representing 15.01% of its total issued share capital
“associate(s)”	has the same meaning ascribed to it under the Listing Rules
“Board”	the board of Directors of the Company
“Company”	Sinofert Holdings Limited, a company incorporated on 26 May
	1994 in Bermuda with limited liability, the ordinary shares of
	which are listed on the Stock Exchange
“connected person”	has the same meaning ascribed to it under the Listing Rules
“controlling shareholder”	has the same meaning ascribed to it under the Listing Rules
“Director(s)”	the director(s) of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC
“Independent Board	the independent board committee of the Company formed to
Committee”	advise the Independent Shareholders in respect of the terms
	of the Acquisition, comprising all independent non-executive
	Directors, namely Mr. Ko Ming Tung, Edward and Mr. Tse Hau
	Yin, Aloysius
“Independent Shareholders”	shareholders other than Sinochem Group and its associates

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“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Option” an option granted by Sinochem Group to Sinochem Fertilizer on 25 December 2008, pursuant to which Sinochem Fertilizer may require Sinochem Group to sell its entire shareholding in Qinghai Salt Lake at fair market value
“PRC” the People’s Republic of China, which for the purposes of this announcement only, excludes Hong Kong, Macao Special Administrative Region and Taiwan
“Qinghai Salt Lake” 青海鹽湖工業股份有限公司 (Qinghai Salt Lake Industry Co., Ltd., formerly known as 青海鹽湖鉀肥股份有限公司 (Qinghai Salt Lake Potash Co. Ltd.)), a joint stock limited liability company established in the PRC whose shares are listed on the Shenzhen Stock Exchange
“RMB” Renminbi, the lawful currency of the PRC “SASAC” State-owned Assets Supervision and Administration Commission of the State Council of the PRC
“SGM” the special general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, the Share Transfer Agreement and the Acquisition
“Share Transfer Agreement” the share transfer agreement proposed to be entered into between Sinochem Fertilizer (as purchaser) and Sinochem Corporation (as seller) in relation to the Acquisition
“shareholder(s)” registered holder(s) of ordinary share(s) of HK$0.10 each in the capital of the Company
“Sinochem Corporation” 中國中化股份有限公司 (Sinochem Corporation), a joint stock company with limited liability established under the laws of the PRC, an immediate holding company of Sinochem HK, and a subsidiary of Sinochem Group
“Sinochem Fertilizer” 中化化肥有限公司 (Sinochem Fertilizer Company Limited), a limited liability company incorporated in the PRC and an indirect wholly-owned subsidiary of the Company
“Sinochem Group” 中國中化集團公司 (Sinochem Group), a state-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company

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“Sinochem HK” Sinochem Hong Kong (Group) Company Limited, a company incorporated in Hong Kong with limited liability, which is wholly-owned by Sinochem Corporation and is the immediate controlling shareholder of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary(ies)” has the same meaning ascribed to it under the Listing Rules “%” percent

For the purposes of illustration only, the exchange rate of RMB1.00 = HK$1.264 has been used for currency translation. No representation is made that any amount in RMB has been or could be converted at the above rate or at any other rates or at all.

For and on behalf of the Board SINOFERT HOLDINGS LIMITED Wang Hong Jun Executive Director and Chief Executive Officer

Hong Kong, 9 December 2014

As at the date of this announcement, the executive directors of the Company are Mr. Wang Hong Jun (Chief Executive Officer) and Mr. Harry Yang; the non-executive directors of the Company are Mr. Liu De Shu (Chairman), Mr. Yang Lin, Dr. Stephen Francis Dowdle and Ms. Xiang Dandan; and the independent non-executive directors of the Company are Mr. Ko Ming Tung, Edward and Mr. Tse Hau Yin, Aloysius.

for identification only

– 9 –

AI assistant

CWT International Limited M&A Activity 2014

49269_rns_2014-12-09_bc9a65cf-e399-4f17-b760-2507c8c5089b.pdf

**SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司[*]**

MAJOR AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF 15.01% EQUITY INTEREST IN QINGHAI SALT LAKE

MAJOR AND CONNECTED TRANSACTION

GENERAL

BACKGROUND

THE SHARE TRANSFER AGREEMENT

Parties

Interest to be acquired

Consideration

Payment

Condition of the Acquisition

Completion

INFORMATION ON QINGHAI SALT LAKE

REASONS FOR AND BENEFITS OF THE ACQUISITION

INFORMATION ON THE COMPANY AND SINOCHEM CORPORATION

LISTING RULES IMPLICATIONS

DEFINITIONS

For and on behalf of the Board SINOFERT HOLDINGS LIMITED Wang Hong Jun Executive Director and Chief Executive Officer

AI assistant

CWT International Limited — M&A Activity 2014

49269_rns_2014-12-09_bc9a65cf-e399-4f17-b760-2507c8c5089b.pdf

SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司[*]

MAJOR AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF 15.01% EQUITY INTEREST IN QINGHAI SALT LAKE

MAJOR AND CONNECTED TRANSACTION

GENERAL

BACKGROUND

THE SHARE TRANSFER AGREEMENT

Parties

Interest to be acquired

Consideration

Payment

Condition of the Acquisition

Completion

INFORMATION ON QINGHAI SALT LAKE

REASONS FOR AND BENEFITS OF THE ACQUISITION

INFORMATION ON THE COMPANY AND SINOCHEM CORPORATION

LISTING RULES IMPLICATIONS

DEFINITIONS

For and on behalf of the Board SINOFERT HOLDINGS LIMITED Wang Hong Jun Executive Director and Chief Executive Officer

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CWT International Limited M&A Activity 2014

**SINOFERT HOLDINGS LIMITED 中化化肥控股有限公司[*]**