Folangsi Co., Ltd — M&A Activity 2024

Jul 18, 2024

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.

==> picture [184 x 51] intentionally omitted <==

FOLANGSI CO., LTD 廣州佛朗斯股份有限公司

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

(Stock Code: 2499)

DISCLOSEABLE TRANSACTION ACQUISITION OF THE ENTIRE EQUITY INTEREST IN THE TARGET COMPANY

THE ACQUISITION

On 18 July 2024, the Board has resolved to approve the Purchaser, a direct wholly-owned subsidiary of the Company, the Vendor, the Target Company, the Company (as the Purchaser’s guarantor) and the Vendor Guarantor to enter into the Equity Transfer Agreement, pursuant to which (i) the Vendor conditionally agrees to sell and the Purchaser conditionally agrees to acquire the entire equity interest in the Target Company for a consideration of RMB33,923,000 (subject to adjustment); (ii) the Company agrees to guarantee the performance of the obligations of the Purchaser under the Equity Transfer Agreement; and (iii) the Vendor Guarantor agrees to guarantee the performance of the obligations of the Vendor under the Equity Transfer Agreement.

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition are more than 5% but are less than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules and is therefore subject to the notification and announcement requirements as set out in Chapter 14 of the Listing Rules.

As the Completion is subject to the fulfillment or waiver of the Conditions Precedents, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

THE ACQUISITION

On 18 July 2024, the Board has resolved to approve the Purchaser, a direct wholly-owned subsidiary of the Company, the Vendor, the Target Company, the Company (as the Purchaser’s guarantor) and the Vendor Guarantor to enter into the Equity Transfer Agreement.

1

THE EQUITY TRANSFER AGREEMENT

The principal terms of the Equity Transfer Agreement are summarized as follows:

• Parties: (1) the Purchaser;

• (2) the Vendor;

• (3) the Target Company;

• (4) the Company; and

• (5) the Vendor Guarantor.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor, the Vendor Guarantor and their respective ultimate beneficial owners are third parties independent of the Company and the connected persons of the Company.

SUBJECT MATTER

Pursuant to the Equity Transfer Agreement, the Vendor conditionally agrees to sell and the Purchaser conditionally agrees to acquire the entire equity interest in the Target Company for a consideration of RMB33,923,000 (subject to adjustment).

CONSIDERATION

The consideration payable by the Purchaser to the Vendor for the entire equity interest in the Target Company is RMB33,923,000 (subject to adjustment). The consideration will be adjusted pursuant to the difference between the expected and actual net asset value of the Target Company during the Transitional Period.

The Purchaser shall pay 70% of the consideration (i.e. RMB23,746,100) within three working days upon fulfillment of the conditions set out in the paragraph headed “Conditions Precedent” in this announcement. The remaining consideration (as adjusted, if applicable) shall be paid by the Purchaser to the Vendor within three working days upon the parties have agreed on the adjustment to the consideration based on the financial statements of the Target Company.

The consideration will be settled by internal resources and/or bank loan(s) available to the Group.

BASIS OF THE CONSIDERATION

The consideration of RMB33,923,000 (subject to adjustment) was arrived after arm’s length negotiations between the parties after taking into account, inter alia, (i) the historical financial information of the Target Company; and (ii) the impact of the Vendor’s capital increase in the Target Company for the amount of US$29,564,000 (equivalent to approximately RMB214 million) and the expected net profit or loss incurred by the Target Company during the Transitional Period on the financial position and expected net assets of the Target Company. The Directors (including the independent non-executive Directors) consider that the consideration under the Equity Transfer Agreement is fair and reasonable.

2

TRANSITIONAL ARRANGEMENTS

During the Transitional Period, (i) the Target Company shall not carry out any distribution of profit; (ii) unless agreed by the Purchaser in writing, the Vendor and/or the Target Company shall not create any mortgage, charge or other encumbrance on, or dispose of, provide guarantee or investment with the assets of the Target Company; (iii) unless agreed by the Purchaser in writing, the Vendor and the Target Company shall not alter the production and operation status of the Target Company; (iv) the Purchaser shall open a co-managed account for payment of the consideration; and (v) the parties to the Equity Transfer Agreement shall proceed with the handover procedures in relation to the Target Company.

CONDITIONS PRECEDENT

The Acquisition is conditional upon the satisfaction of the following conditions:

• (i) the Vendor has dealt with all employment related matters of the Target Company to the satisfaction of the Purchaser;

• (ii) the Vendor has made a capital injection in the amount of US$29,564,000 (equivalent to approximately RMB214 million) into the Target Company for the purpose of repayment of loan and other obligations;

• (iii) the Vendor has agreed to enter into an agreement regarding the usage of the Target Company’s name, trademarks, and the agency affairs of the Nichiyu brand’s global and all series products in the PRC;

• (iv) the Purchaser has completed the due diligence process relating to the Target Company;

• (v) all parties to the Equity Transfer Agreement have obtained the internal authorizations and approvals related to the Acquisition and have duly executed the Equity Transfer Agreement; and

• (vi) all parties to the Equity Transfer Agreement have completed the business and commercial approval and/or registration procedures in relation to the Acquisition.

COMPLETION

Completion shall take place on the day when the Target Company completes the industrial and commercial registration procedures in relation to the transfer of the equity interest in the Target Company.

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and the financial results and assets and liabilities of the Target Company will be consolidated into the consolidated financial statements of the Company.

GUARANTEE

Under the Equity Transfer Agreement, the Company guarantees to the Vendor the performance of the obligations of the Purchaser, and the Vendor Guarantor guarantees to the Purchaser the performance of the obligations of the Vendor.

3

INFORMATION ON THE TARGET COMPANY

The Target Company is a company established in the PRC with limited liability and is principally engaged in the sale, service and leasing business of Nichiyu brand’s all series high-quality forklifts. As at the date of this announcement, the Target Company is a wholly-owned subsidiary of the Vendor.

Set out below is the audited financial information of the Target Company for the two financial years ended 31 December 2022 and 2023:

	For the financial	year ended
	31 December
	2022	2023
	(audited)	(audited)
	RMB	RMB
Net loss before tax	20,314,389	23,322,144
Net loss after tax	20,314,389	23,341,312

As at 31 December 2023, the total assets and net liability of the Target Company were approximately RMB140.7 million and RMB63.6 million, respectively.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is a leading intralogistics equipment solution provider in the PRC. Focusing on intralogistics equipment subscription services, the Group strives to provide enterprises with onestop solutions for intralogistics equipment utilization and management. The Target Company is principally engaged in the sale, service and leasing business of Nichiyu brand’s all series highquality forklifts. Its sales and after-sales service network covers the entire PRC and enjoys a high brand reputation in the forklift industry. It has accumulated extensive industry experience, knowledge and a wide range of customer resources.

One of the condition precedent to the Completion is that the Vendor shall make a capital injection into the Target Company for the purpose of repayment of loan and other obligations. As a result, the financial conditions of the Target Company will improve while avoiding the risk and burden of transferring liability to the Purchaser. Through the Acquisition, the Group’s asset scale will rapidly expand. In addition, considering the Target Company’s rich and high-quality high-end customer resources, the Completion will effectively broaden the scope and depth of the Group’s customer base and regional coverage. As a premium international forklift brand, Nichiyu’s outstanding brand effect will facilitate the accelerated synergy effect of brand resources for the Group upon Completion, further enhancing its market share.

The Directors (including the independent non-executive Directors) consider that the Acquisition is in line with the principal activities of the Group and is carried out on normal commercial terms which are fair and reasonable and in the interests of the Company and its Shareholders a whole.

4

INFORMATION ABOUT THE GROUP AND THE PARTIES

The Group and the Company

The Company is a joint stock limited company established in the PRC and the Group is principally engaged in (i) intralogistics equipment subscription services; (ii) maintenance and repair services; and (iii) sales of intralogistics equipment and parts.

The Purchaser

The Purchaser is a limited company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company. The Purchaser is principally engaged in the sale of intralogistics equipment and accessories and investment in related industry.

The Vendor

The Vendor is a company established under the laws of Japan and the shares of which are listed on Tokyo Stock Exchange (stock code: 7105). The Vendor is principally engaged in the manufacture, sale and maintenance services of forklift trucks and other logistics equipment and maintenance parts. As at the date of this announcement, the Vendor is owned as to 64.61% by Mitsubishi Heavy Industries, Ltd. (三菱重工業株式會社) (“ MHI ”), a company established under the laws of Japan and the shares of which are listed on Tokyo Stock Exchange (stock code: 7011). MHI does not have a controlling shareholder.

The Vendor Guarantor

The Vendor Guarantor is a limited company established in the PRC and is principally engaged in the sale of logistics equipment and maintenance parts. As at the date of this announcement, the Vendor Guarantor is a wholly-owned subsidiary of the Vendor.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition are more than 5% but are less than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules and is therefore subject to the notification and announcement requirements as set out in Chapter 14 of the Listing Rules.

As the Completion is subject to the fulfillment or waiver of the Conditions Precedents, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

5

DEFINITIONS

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

“Acquisition”	the proposed acquisition of the entire equity interest in the Target
	Company by the Purchaser from the Vendor as contemplated under the
	Equity Transfer Agreement
“Board”	the board of Directors
“Company”	FOLANGSI CO., LTD (廣州佛朗斯股份有限公司), a company
	established in the PRC on 25 November 2016 as a joint stock company
	with limited liability and the H Shares of which are listed on the Stock
	Exchange (stock code: 2499)
“Completion”	completion of the Acquisition pursuant to the Equity Transfer
	Agreement
“connected person(s)”	has the meaning ascribed to it under the Listing Rules
“Director(s)”	director(s) of the Company
“Equity Transfer	the equity transfer agreement to be entered into by the Purchaser,
Agreement	the Vendor, the Target Company, the Company (as the Purchaser’s
	guarantor) and the Vendor Guarantor in relation to the Acquisition
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“PRC	the People’s Republic of China, and for the purpose of this
	announcement, excluding Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“Purchaser”	Folangsi (Hong Kong) Co., Limited (佛朗斯(香港)有限公司), a
	company incorporated in Hong Kong and a direct wholly-owned
	subsidiary of the Company
“RMB”	Renminbi, the lawful currency of the PRC
“Shareholder(s)”	shareholder(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

6

“Target Company” Nichiyu Forklift (Shanghai) Co., Ltd.* (力至優叉車(上海)有限公 司), a company established in the PRC with limited liability and a direct wholly-owned subsidiary of the Vendor as at the date of this announcement

“Tokyo Stock Exchange” The Tokyo Stock Exchange, Inc.

“Transitional Period” the period from 31 December 2023 (exclusive) to the date of Completion (inclusive)

“Vendor” Mitsubishi Logisnext Co., Ltd. (三菱物捷仕株式會社), a company established under the laws of Japan, the shares of which are listed on Tokyo Stock Exchange (stock code: 7105)

“Vendor Guarantor Logisnext Forklift (Shanghai) Co., Ltd.* (物捷仕叉車(上海)有限公 司), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Vendor

“%”

per cent.

By order of the Board FOLANGSI CO., LTD Hou Zekuan Chairman of the Board and Executive Director

Guangzhou City, the PRC 18 July 2024

As at the date of this announcement, the Board comprises Mr. Hou Zekuan as the chairman of the Board and executive Director, Mr. Hou Zebing, Mr. Qian Xiaoxuan, Ms. Ma Li and Mr. Zhou Limin as executive Directors, Mr. Yu Chuanfen as non-executive Director, and Mr. Chiang Edward, Dr. Fan Xia and Mr. Du Lizhu as independent non-executive Directors.

• For identification purpose only

7