Differ Group Auto Limited — Capital/Financing Update 2018

Sep 18, 2018

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.

DIFFER GROUP HOLDING COMPANY LIMITED 鼎豐集團控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 6878)

DISCLOSABLE AND CONNECTED TRANSACTION AT SUBSIDIARY LEVEL IN RELATION TO (i) ACQUISITION OF TARGET LOAN AND

(ii) TAKING UP OF 30% EQUITY INTEREST EACH IN JINGNING DIFFER REAL ESTATE LIMITED AND LISHUI FU FENG CULTURAL TOURS LIMITED**

THE TRANSACTION

(i) Target Loan

The Board is pleased to announce that on 18 September 2018 (after trading hours), the Purchaser (an indirect wholly-owned subsidiary of the Company) entered into the Agreement with the Creditor, the Vendor A and the Vendor B, pursuant to which the Purchaser has conditionally agreed to acquire, and the Creditor has conditionally agreed to assign the Target Loan to the Purchaser at the Loan Consideration of RMB190 million (equivalent to approximately HK$218,391,000).

(ii) Target Equity A and the Target Equity B

Pursuant to the Agreement, the Purchaser has conditionally agreed to take up, the Vendor A and the Vendor B have conditionally agreed to give up, the Target Equity A and the Target Equity B, representing the 30% equity interest in each of the Subsidiary A and the Subsidiary B, respectively, for full settlement of the Target Loan of RMB190 million (equivalent to approximately HK$218,391,000) immediately upon the assignment of the Target Loan from the Creditor to the Purchaser.

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As at the date of this announcement, each of the Subsidiary A and the Subsidiary B is an indirect 70% owned subsidiary of the Company. Upon completion for the assignment of the Target Loan, the Purchaser will become the creditor of the Vendors for the total loan amount of RMB190 million. Upon completion for the transfer of the Target Equity A and the Target Equity B, the Subsidiary A and the Subsidiary B will both become indirect wholly-owned subsidiaries of the Company. The financial results of the Subsidiary A and the Subsidiary B will continue to be consolidated into the financial results of the Group.

LISTING RULES IMPLICATIONS

As one or more of the relevant percentage ratios (as defined under the Listing Rules) in respect of the acquisition of the Target Loan or the taken up of the Target Equity A and the Target Equity B exceeds 5% but all relevant percentage ratios are less than 25%, each of the acquisition of the Target Loan and the taken up of the Target Equity A and the Target Equity B constitute discloseable transaction for the Company under the Listing Rules and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules. Given the different nature of the acquisition of the Target Loan and the taken up of the Target Equity A and the Target Equity B, the two transactions should not be aggregated for calculation of all relevant percentage ratios. However, in order to be prudent, the Company has aggregated the Transaction and notes that one or more of the relevant percentage ratios (as defined under the Listing Rules) in respect of the Transaction exceeds 5% but all relevant percentage ratios in respect of the Transaction are less than 25%, the Transaction constitutes a discloseable transaction for the Company under the Listing Rules and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As the Vendor A and Vendor B hold the Target Equity A and Target Equity B, respectively, representing 30% equity interest in each of the Subsidiary A and Subsidiary B, they are substantial shareholders of the Subsidiary A and Subsidiary B, respectively, hence connected persons of the Company at the subsidiary level under the Listing Rules.

Since (i) each of the Vendor A and Vendor B is a connected person of the Company at subsidiary level; (ii) the Directors (including the independent non-executive Directors) have approved the terms of the Agreement and the Transaction; (iii) the independent non-executive Directors have confirmed that the terms of the Agreement and the Transaction are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, the Agreement and the Transaction will constitute connected transactions which are only subject to the reporting and announcement requirements, but are exempted from the circular, independent financial advice and shareholders’ approval requirements pursuant to Rule 14A.101 of the Listing Rules.

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None of the Directors has any material interest in the Agreement and the transactions contemplated thereunder, and none of the Directors has abstained from voting on the board resolution approving the Agreement and the transactions contemplated thereunder.

Shareholders and potential investors of the Company should note that Completion is subject to the fulfilment (or, as the case may be, waiver) of the conditions precedent under the Agreement. The Transaction may or may not proceed. Shareholders and potential investors of the Company are therefore urged to exercise caution when dealing in the Shares and other securities of the Company.

INTRODUCTION

The Board is pleased to announce that on 18 September 2018 (after trading hours), the Purchaser (an indirect wholly-owned subsidiary of the Company) entered into the Agreement with the Creditor, the Vendor A and the Vendor B, pursuant to which the Purchaser has conditionally agreed to acquire, and the Creditor has conditionally agreed to assign the Target Loan to the Purchaser at the Loan Consideration of RMB190 million (equivalent to approximately HK$218,391,000).

Pursuant to the Agreement, the Purchaser has conditionally agreed to take up, and the Vendor A and the Vendor B have conditionally agreed to give up, the Target Equity A and the Target Equity B, representing the 30% equity interest in each of the Subsidiary A and the Subsidiary B, respectively, for full settlement of the Target Loan of RMB190 million (equivalent to approximately HK$218,391,000) immediately upon the assignment of the Target Loan from the Creditor to the Purchaser.

THE TRANSACTION

The Agreement

Date: 18 September 2018 (after trading hours)

Parties: (i) Cultural Tours Limited (文旅有限公司), an indirect wholly-owned subsidiary of the Company, being the Purchaser; (ii) Wu Yukai* (吳筱凱), being the Vendor A; (iii) Wu Jianfei* (吳建飛), being the Vendor B; and (iv) Hong Qiaosi* (洪巧絲), being the Creditor.

As the Vendor A and the Vendor B holds the Target Equity A and the Target Equity B, respectively, representing 30% equity interest in each of the Subsidiary A and the Subsidiary B, they are substantial shareholders of the Subsidiary A and the Subsidiary B, respectively, hence connected persons of the Company at the subsidiary level.

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

Assets to be taken up

Target Loan

Pursuant to the Agreement, the Creditor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Target Loan of RMB190 million (equivalent to approximately HK$218,391,000), representing the total amount due from the Vendors to the Creditor as at the date of the Agreement.

As advised by the Creditor and the Vendors, the Vendors’ repayment obligations of the Target Loan have been secured by the Target Equity A and the Target Equity B in favour of the Creditor.

Target Equity A and Target Equity B

Pursuant to the Agreement, the Vendors have conditionally agreed to give up, and the Purchaser has conditionally agreed to take up, the Target Equity A and the Target Equity B, representing the 30% equity interest in each of the Subsidiary A and the Subsidiary B, respectively for full satisfaction of the payment obligation under the Target Loan. As advised by the Vendor A, part of the registered capital for the Target Equity A in the sum of RMB5,700,000 has not yet been paid. As advised by the Vendor B, the relevant registered capital for the Target Equity B has been fully paid.

As at the date of this announcement, Xiamen Differ directly owns the remaining 70% equity interest in each of the Subsidiary A and the Subsidiary B, hence the Subsidiary A and the Subsidiary B are indirect non-wholly owned subsidiaries of the Company as to 70%.

Upon Completion, the Subsidiary A and the Subsidiary B will both become indirect wholly-owned subsidiaries of the Company. The financial results of the Subsidiary A and the Subsidiary B will continue to be consolidated into the financial results of the Group.

Consideration and conditions precedent

Loan Consideration and conditions precedent

The Loan Consideration for the Target Loan is RMB190 million (equivalent to approximately HK$218,391,000), which will be payable by the Purchaser to the Creditor within 20 days from the date of the Agreement and conditional on the occurrence of the following events to the satisfaction of the Purchaser:

• (i) the Target Loan having been, or in the process of being, assigned by the Creditor to the Purchaser (with the documentary proof to the satisfaction of the Purchaser); and

• (ii) the Target Equity A and the Target Equity B having been, or in the process of being, transferred from the Vendors to the Purchaser or its nominee, free from encumbrance, save as subject to the Target Loan.

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Upon payment of the Loan Consideration by the Purchaser to the Creditor, all security against the Target Equity A and the Target Equity B shall be immediately discharged.

The Loan Consideration was determined after arm’s length negotiations between the Creditor and the Purchaser on normal commercial terms with reference to the outstanding amount owed by the Vendors to the Creditor as at the date of the Agreement. Accordingly, the Directors (including the independent non-executive Directors) consider that the Loan Consideration is fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

Payable Amount and conditions precedent

The Payable Amount is in aggregate of RMB190 million (equivalent to approximately HK$218,391,000), which will be payable by the Purchaser upon the occurrence of all the same events to the satisfaction of the Purchaser as set out under the sub-paragraph headed “Loan Consideration” above in this announcement. The Payable Amount will be settled by the Purchaser by way of set off against the Target Loan.

The Payable Amount was determined after arm’s length negotiations between the Vendors and the Purchaser on normal commercial terms with reference to the unaudited adjusted consolidated net asset value of the Target Group as at 30 June 2018 (the “ Adjusted NAV ”) in the sum of RMB612,407,000.

The Adjusted NAV of RMB612,407,000 represents an aggregate value of:

• (i) the unaudited consolidated net asset value of the Target Group as at 30 June 2018 in the amount of approximately RMB334,283,000; and

• (ii) the revaluation surplus arising on the properties developments held by the Target Group in the amount of approximately RMB278,124,000 with reference to the preliminary valuation of the market value of the said properties developments as at 30 June 2018 prepared by the independent valuer.

As the Vendors have 30% interests in the Target Group, the Adjusted NAV attributable to the Vendors as at 30 June 2018 was approximately RMB183,722,000.

Accordingly, the Directors (including the independent non-executive Directors) consider that the Payable Amount is fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

The Group will fund the Loan Consideration from its internal resources while the Payable Amount will be settled by setting off against the Target Loan after the Target Loan having been assigned to the Purchaser by the Creditor.

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Completion

Completion for the assignment of the Target Loan shall take place on the date that Loan Consideration is paid by the Purchaser to the Creditor.

Completion for the taken up of the Target Equity A and the Target Equity B by the Purchaser shall take place on the date that the Payable Amount is set off against the Target Loan.

Upon the completion for the assignment of the Target Loan, the Purchaser will become the creditor of the Vendors for the total loan amount of RMB190 million. Upon the completion for the transfer of the Target Equity A and the Target Equity B, the Subsidiary A and the Subsidiary B will both become indirect wholly-owned subsidiaries of the Company. The financial results of the Subsidiary A and the Subsidiary B will continue to be consolidated into the financial results of the Group.

INFORMATION ON THE CREDITOR AND VENDORS

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, as advised by the Creditor, she is a citizen and businesswoman in the PRC, who is an Independent Third Party.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, as advised by the Vendors, they are citizens and businessmen in the PRC. As the Vendor A and the Vendor B hold the Target Equity A and the Target Equity B, respectively, representing 30% equity interest in each of the Subsidiary A and the Subsidiary B, they are substantial shareholders of the Subsidiary A and the Subsidiary B, respectively, hence connected persons of the Company at the subsidiary level.

INFORMATION ON THE SUBSIDIARY A AND THE SUBSIDIARY B

As at the date of this announcement, the Subsidiary A, being owned by Xiamen Differ and the Vendor A as to 70% and 30%, respectively, is a limited company incorporated in the PRC and its principal businesses are (i) real estate development; (ii) real estate agency services; (iii) car park management; and (iv) property management.

As at the date of this announcement, the Subsidiary B, being owned by Xiamen Differ and the Vendor B as to 70% and 30%, respectively, is a limited company incorporated in the PRC and its principal businesses are (i) tourism project development and investment; (ii) sales of tourism commodity; and (iii) cultural transmission.

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FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below are the consolidated financial information of the Subsidiary A and the Subsidiary B for each of the two financial years ended 31 December 2016 and 31 December 2017 and for the six months ended 30 June 2018 (for illustration purposes only):

	For the	For the	For the
	year ended	year ended	six months
	31 December	31 December	ended
	2016	2017	30 June 2018
	(audited)	(unaudited)	(unaudited)
	RMB’000	RMB’000	RMB’000
Net profit before taxation	5,497	16,222	164,901
Net profit after taxation	5,497	13,433	120,598

Based on the management accounts of the Subsidiary A and the Subsidiary B, the unaudited total asset value and net asset value of the Subsidiary A and the Subsidiary B as at 30 June 2018 were approximately RMB1,554,978,000 and RMB334,283,000, respectively.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The Group is principally engaged in the provision of (i) asset management services (including investment in properties, equities and distressed assets); (ii) finance lease services and (iii) financial services (including express loan services, financial consultancy services, guarantee services and supply chain agency services).

The Board believes that the Transaction would allow the Company to gain full ownership in Subsidiary A and Subsidiary B, ensure effective implementation of the Company’s growth strategies in the PRC and also enable full consolidation of the Subsidiary A and the Subsidiary B at the Company level, enhancing financial transparency to the Shareholders and eliminating any value leakage associated with a sizable minority interest otherwise held by the Vendors. Furthermore, through the Transaction, the Company can also avoid operating the businesses of the Subsidiary A and the Subsidiary B with any unfamiliar third party, such as the Creditor or other potential buyer of the Target Equity A and the Target Equity B when the security of the Target Equity A and the Target Equity B become enforceable by the Creditor.

Accordingly, the Directors (including the independent non-executive Directors) consider that the terms of the Agreement and the Transaction, are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

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IMPLICATION UNDER THE LISTING RULES

As one or more of the relevant percentage ratios (as defined under the Listing Rules) in respect of the acquisition of the Target Loan or the taken up of the Target Equity A and the Target Equity B exceeds 5% but all relevant percentage ratios are less than 25%, each of the acquisition of the Target Loan and the taken up of the Target Equity A and the Target Equity B constitute discloseable transaction for the Company under the Listing Rules and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules. Given the different nature of the acquisition of the Target Loan and the taken up of the Target Equity A and the Target Equity B, the two transactions should not be aggregated for calculation of all relevant percentage ratios. However, in order to be prudent, the Company has aggregated the Transaction and notes that one or more of the relevant percentage ratios (as defined under the Listing Rules) in respect of the Transaction exceeds 5% but all relevant percentage ratios in respect of the Transaction are less than 25%, the Transaction constitutes a discloseable transaction for the Company under the Listing Rules and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As the Vendor A and the Vendor B hold the Target Equity A and the Target Equity B, respectively, representing 30% equity interest in each of the Subsidiary A and the Subsidiary B, they are substantial shareholders of the Subsidiary A and the Subsidiary B, respectively, hence connected persons of the Company at the subsidiary level under the Listing Rules.

Since (i) each of the Vendor A and the Vendor B is a connected person of the Company at subsidiary level; (ii) the Directors (including the independent non-executive Directors) have approved the terms of the Agreement and the Transaction; (iii) the independent non-executive Directors have confirmed that the terms of the Agreement and the Transaction are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, the Agreement and the Transaction will constitute connected transactions which are only subject to the reporting and announcement requirements, but are exempted from the circular, independent financial advice and shareholders’ approval requirements pursuant to Rule 14A.101 of the Listing Rules.

None of the Directors has any material interest in the Agreement and the transactions contemplated thereunder, and none of the Directors has abstained from voting on the board resolution approving the Agreement and the transactions contemplated thereunder.

Shareholders and potential investors of the Company should note that Completion is subject to the fulfilment (or, as the case may be, waiver) of the conditions precedent under the Agreement. The Transaction may or may not proceed. Shareholders and potential investors of the Company are therefore urged to exercise caution when dealing in the Shares and other securities of the Company.

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DEFINITIONS

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

“Agreement” the sale and purchase agreement dated 18 September 2018 entered into among the Creditor, the Vendors and the Purchaser in respect of the Transaction

“Board” the board of Directors

• “BVI” the British Virgin Islands “Company” Differ Group Holding Company Limited, 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 and conditions of the Agreement

• “connected person” has the meanings as ascribed thereto under the Listing Rules

• “Creditor” H o n g Q i a o s i * ( 洪巧絲 ) , a c i t i z e n a n d businesswoman in the PRC, who is an Independent Third Party

• “Directors” director(s) of the Company

• “Group” the Company and its subsidiaries

• “Hong Kong” Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Third Party(ies)” any person or company and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are not connected persons of the Company and are third parties independent of the Company and its connected persons in accordance with the Listing Rules

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

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“Loan Consideration”

• the consideration of RMB190 million payable by the Purchaser to the Creditor for the Target Loan

“Payable Amount”

the total consideration of RMB190 million payable by the Purchaser to the Vendors for the Target Equity A and the Target Equity B

• “PRC” the People’s Republic of China, and for the purpose of this Agreement, excluding Taiwan, Hong Kong and Macau Special Administrative Region

“Purchaser”

• Cultural Tours Limited (文旅有限公司), an indirect wholly-owned subsidiary of the Company, which is a limited company incorporated in the BVI and is principally engaged in investment holding

• “Share(s)” ordinary share(s) of HK$0.0025 each in the issued share capital of the Company

• “Shareholder(s)”

  • holder(s) of the Shares

• “Stock Exchange”

  • The Stock Exchange of Hong Kong Limited

• “Subsidiary A”

  • Jingning Differ Real Estate Limited* (景寧鼎豐置 業有限公司), a limited liability company established in the PRC, which is owned by Xiamen Differ and the Vendor A as to 70% and 30%, respectively

• “Subsidiary B”

  • Lishui Fu Feng Cultural Tours Limited* (麗水市富 豐文化旅遊有限公司), a limited liability company established in the PRC, which is owned by Xiamen Differ and the Vendor B as to 70% and 30%, respectively

• “Target Equity A” the registered capital of the Subsidiary A of RMB6 million, being 30% equity interest in the Subsidiary A

• “Target Equity B” the registered capital of the Subsidiary B of RMB15 million, being 30% equity interest in the Subsidiary B

• “Target Group”

collectively, the Subsidiary A and the Subsidiary B

“Target Loan” the amount due by the Vendors to the Creditor, as at the date of the Agreement, in the sum of RMB190 million

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• “Transaction” the acquisition of the Target Loan, and taking up of the Target Equity A and the Target Equity B by the Purchaser pursuant to the terms of the Agreement

• “Vendor A”

Wu Yukai* (吳筱凱), a citizen and businessman in the PRC, who is a connected person of the Company at subsidiary level

• “Vendor B” Wu Jianfei* (吳建飛), a citizen and businessman in the PRC, who is a connected person of the Company at subsidiary level

• “Vendors”

collectively the Vendor A and the Vendor B

• “Xiamen Differ”

  • Xiamen Differ Cultural Tours Group Co., Ltd. (廈門鼎豐文化旅遊集團有限公司 ), an indirect wholly-owned subsidiary of the Company, which is a limited company incorporated in the PRC

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

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

• “%”

per cent.

• For identification purpose only.

By order of the Board Differ Group Holding Company Limited HONG Mingxian Chairman and Executive Director

Hong Kong, 18 September 2018

For the purposes of illustration only, any amount denominated in RMB in this announcement was translated into HK$ at the rate of HK$1=RMB0.87. Such translations should not be construed as a representation that the amounts in question have been, could have been or could be, converted at any particular rate at all.

If there is any inconsistency in this announcement between the Chinese and English versions, the English version shall prevail.

As at the date of this announcement, the executive Directors are Mr. HONG Mingxian, Mr. NG Chi Chung and Mr. CAI Huatan; the non-executive Directors are Mr. CAI Jianfeng and Mr. WU Qinghan; and the independent non-executive Directors are Mr. CHAN Sing Nun, Mr. LAM Kit Lam and Mr. ZENG Haisheng.

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