Global Corn Group Limited — Capital/Financing Update 2017

Jul 21, 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibilities for the content 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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GLOBAL BIO-CHEM TECHNOLOGY GLOBAL SWEETENERS HOLDINGS GROUP COMPANY LIMITED LIMITED 大成生化科技集團有限公司 * 大成糖業控股有限公司 *

(Incorporated in the Cayman Islands with limited liability) (Incorporated in the Cayman Islands with limited liability) (Stock Code: 00809) (Stock Code: 03889)

JOINT ANNOUNCEMENT

TRANSFER OF TWO SUBSIDIARIES IN CHANGCHUN FROM GSH GROUP TO GBT GROUP

DISCLOSEABLE TRANSACTION MAJOR TRANSACTION IN RELATION TO DISPOSAL AND CONNECTED TRANSACTION

S&P AGREEMENT

On 21 July 2017, the Vendors entered into the S&P Agreement with the Purchaser, being an indirect wholly-owned subsidiary of GBT, for the sale and purchase of the Sale Interest.

DISCLOSEABLE TRANSACTION OF GBT

As the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Transaction are more than 5% but less than 25%, the Transaction constitutes a discloseable transaction of GBT under Rule 14.06 of the Listing Rules.

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MAJOR TRANSACTION IN RELATION TO DISPOSAL AND CONNECTED TRANSACTION OF GSH

As the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Transaction are more than 25% but less than 75%, the Transaction constitutes a major transaction in relation to disposal of GSH under Rule 14.06 of the Listing Rules. Besides, as the Purchaser is wholly-owned by GBT (a controlling shareholder of GSH) and hence is an associate of GBT, the Transaction also constitutes a connected transaction for GSH and is subject to the reporting, announcement and GSH Independent Shareholders’ approval requirements under the Listing Rules. GBT, Global Corn Bio-chem, and any other shareholders of GSH having a material interest in the Transaction and their respective associates are therefore required to abstain from voting on the resolution proposed to be passed at the EGM for approving the Transaction.

GENERAL

In view of the foregoing, GSH will convene an EGM to seek the approval of the GSH Independent Shareholders by way of poll on the Transaction.

The GSH IBC comprising all the independent non-executive directors of GSH has been established to advise the GSH Independent Shareholders as to whether the terms of the Transaction and the transactions contemplated thereunder are on normal commercial terms, are fair and reasonable and in the interests of GSH and its shareholders as a whole. The GSH IFA will be appointed by GSH to advise the GSH IBC and the GSH Independent Shareholders in this regard.

A circular containing, among other things, (1) further information on the Transaction; (2) the recommendation of the GSH IBC to the GSH Independent Shareholders; (3) the advice from the GSH IFA to the GSH IBC and the GSH Independent Shareholders; and (4) a notice of the EGM, is expected to be despatched to the shareholders of GSH on or before 11 August 2017 in accordance with the Listing Rules.

S&P AGREEMENT

Date 21 July 2017 Parties Vendors: Global Sweeteners (China) Limited Global Starch (Changchun) Investments Limited Global Sorbitol (H.K.) Company Limited

Purchaser: Global Corn Chemical Investments Limited

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Assets involved

Pursuant to the S&P Agreement, the Purchaser has conditionally agreed to purchase the Sale Interest.

Conditions

Completion is conditional upon fulfillment of the following conditions:

• (1) the approval by the GSH Independent Shareholders being obtained in respect of the S&P Agreement and the transactions contemplated thereby;

• (2) the relevant members of the GSH Group having obtained the release of all guarantees and/or charges given by the relevant members of the GSH Group in respect of the indebtedness of the Target Companies;

• (3) all consents and approvals having been obtained by the Purchaser and the Target Companies in relation to the S&P Agreement, the transfer of the Sale Interest and the adoption of the new articles for the Target Companies and that such consent and approvals do not contain any condition or restriction which is not acceptable to the Purchaser;

• (4) the Purchaser having received a PRC legal opinion in respect of the Target Companies, in form and substance reasonably satisfactory to the Purchaser;

• (5) the warranties given by the Vendors under the S&P Agreement being true and accurate in all material respects; and

• (6) the Purchaser having satisfied with the results of its due diligence review of the Target Companies.

The Purchaser may (but not obliged to) waive and/or vary any of the conditions (4), (5) and (6) as stated above. All other conditions as set out above may not be waived or varied by any of the parties to the S&P Agreement. If any of the conditions set out above is not fulfilled or, as the case may be, waived or varied by the Purchaser on or before the Long Stop Date, then (with prejudice to any other remedies available to the other party) the obligations of the parties shall cease and terminate and neither party shall have any claim under the S&P Agreement against the other save in respect of any antecedent breaches.

Consideration

The consideration for the Sale Interest is HK$60,971,000 which shall be payable by the Purchaser at Completion.

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The consideration was determined after arm-length’s negotiations between the Vendors and the Purchaser with reference to the net asset value of the Target Companies and the fair value of the Target Properties which is based on current use (i.e. industrial).

UNDERTAKING BY GLOBAL SWEETENERS (CHINA) LIMITED AND GLOBAL STARCH (CHANGCHUN) INvESTMENTS LIMITED

Under the S&P Agreement, Global Sweeteners (China) Limited and Global Starch (Changchun) Investments Limited have jointly and severally undertaken to the Purchaser that, subject to Completion, they shall fully indemnify the Purchaser and Dihao Foodstuff for all liabilities and reasonable cost which may arise as a result of the guarantee provided by Dihao Foodstuff in favor of China Construction Bank in respect of the indebtedness of Jinzhou Yuancheng Bio-chem Technology Co., Ltd., which is a member of the GSH Group.

Completion

Completion shall take place on the tenth Business Day after the fulfillment or, as the case may be, waiver of the abovementioned conditions or such other date as agreed in writing among the parties to the S&P Agreement.

Upon Completion, the Target Companies will become indirect wholly-owned subsidiaries of GBT and cease to be the subsidiaries of GSH.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The purpose of the Transaction is to restructure and rationalize the corporate structure of GBT Group and GSH Group.

From management perspective, the Target Companies are both situated in Changchun, the PRC where the major production facilities of GBT Group are situated while all other production facilities of GSH Group are situated elsewhere in the PRC. As such, the Transaction would enable the Target Companies to be managed under the ambit of GBT Group with other members of GBT Group in Changchun, which could enhance the cost and operational efficiency, create potential synergies and reduce the connected transactions between GBT Group and GSH Group.

The Target Companies have been loss-making since 2014, due to the concentration of low-end users in the sweeteners market in Northeast China, economic slowdown in China in the past years and the protectionist agricultural policy in favor of corn farmers. As such, GSH Group has suspended/ optimized operation of the Target Companies since March 2014. The continued operation of the Target Companies in Luyuan District will continue to exert pressure to GSH’s cash flow. Although the Target Companies can take the opportunity of relocating their production facilities to the Xinglongshan site to restructure the product mix and capacity to better suit local market needs, the relocation plan is expected to incur HK$203 million of capital expenditure, in addition to working capital of HK$255 million upon the resumption of operation. This will pose further pressure on the financial position of GSH Group. As such, GSH Group will be financially burdened to maintain the Target Companies, no matter whether they are in operation or to be relocated. The Transaction will enable GSH to direct its resources to high value-added markets, while GBT could operate with higher flexibility with a feedstock in place to better supply its downstream production.

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The Target Companies and certain members of GBT Group are owners of certain land and buildings in Luyuan District in Changchun. As announced by GBT and GSH on 14 April 2016 and 2 March 2017, such land and buildings are intended to be disposed of. Notwithstanding the production site in Luyuan District is planned for rezoning to non-industrial use, the current land use right held by the Target Companies is still under the category of industrial land use. It is uncertain whether and when the rezoning of the land would take place, if at all. As the part of land owned by the Target Companies accounts for approximately one-fifth of the total site area in Luyuan District, it would be more efficient for GBT to be in charge of the negotiation, valuation of land and execution of the land transfer as quicker decision-making process and less administrative hurdles are expected if only one party is involved. Since it is uncertain as to the timetable of the completion of the disposal of land, it could linger for a much longer time than expected for both GSH and GBT to reach a final decision on the disposal. The Transaction could help expedite the process of negotiation with potential buyer as well as process of completion as such transaction would be handled by the management of GBT Group without involving management of GSH Group. At the same time, GSH could concentrate its effort in the operation in other operation sites.

In addition, as announced by GBT and GSH on 8 August 2016, Dihao Foodstuff is one of the guarantors to the Supplier Loan. As the other guarantors for the Supplier Loan are all members of GBT Group but not GSH Group, the Transaction could relieve GSH Group from the potential liability from such guarantee but without adding additional financial burden to GBT Group.

Based on the above reasons, the directors of GBT consider that the Transaction is fair and reasonable and in the interest of GBT and its shareholders as a whole.

Based on the above reasons, the directors of GSH (excluding the independent non-executive directors) consider that the Transaction is fair and reasonable and in the interest of GSH and its shareholders as a whole.

FINANCIAL EFFECTS OF THE DISPOSAL BY GSH GROUP

Based on the aggregate net book value of the Target Companies of approximately HK$25,193,000 as of 31 December 2016, and the consideration for the Sale Interest of HK$60,971,000, it is expected that the unaudited gain before taxation accrued to GSH Group as a result of the Transactions would be approximately HK$35,778,000.

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USE OF PROCEEDS FROM THE TRANSACTION

The GSH Group intends to use the sale proceeds for general working capital purpose.

INFORMATION ON THE TARGET COMPANIES

Dihao Crystal Sugar

Dihao Crystal Sugar is situated in Changchun City, Jilin Province, the PRC and is a wholly foreignowned enterprise established on 15 May 2006 under the laws of the PRC with a registered and paidup capital of US$22,200,000. The principal business of Dihao Crystal Sugar is manufacture and sale of crystallized sugar. As the production facilities of Dihao Crystal Sugar is pending to be relocated to Xinglongshan, its production has been suspended since March 2014.

Dihao Foodstuff

Dihao Foodstuff is situated in Changchun City, Jilin Province, the PRC and is a wholly foreignowned enterprise established on 10 May 1999 under the laws of the PRC with a registered capital of RMB325,100,000 and of which approximately RMB192,000,000 has been paid up. The principal business of Dihao Foodstuff is manufacture and sale of corn starch, other corn refined products and corn based sweetener products.

Due to the lackluster performance of the upstream business of GSH Group, the production facilities of Dihao Foodstuff for production of corn starch and other corn refined products have been suspended since April 2014. The downstream production facilities of Dihao Foodstuff is in the course of relocation to Xinglongshan. In April 2017, the production facilities of Dihao Foodstuff in Xinglongshan for the production of maltose has commenced trial run. It is expected that the relocation of other production facilities of Dihao Foodstuff to Xinglongshan will be completed in the second quarter of 2018.

Financial information of Dihao Crystal Sugar and Dihao Foodstaff

Set out below are certain financial information of Dihao Crystal Sugar and Dihao Foodstaff:

	Net assets
	(liabilities)
	value as	Net profit (loss) before		Net profit	(loss) after
	of 31	tax for the	year ended	tax for the	year ended
	December	31 December		31 December
	2016	2016	2015	2016	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Dihao Crystal Sugar	354,854	2,044	(6,486)	5,836	(6,486)
Dihao Foodstuff	(329,661)	(233,194)	(191,449)	(185,546)	(191,449)

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BACKGROUND INFORMATION OF GBT GROUP AND GSH GROUP

GBT Group is principally engaged in the manufacture and sale of corn refined products and corn based biochemical products.

GSH Group is principally engaged in the manufacture and sale of corn refined products and corn based sweetener products.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Transaction are more than 5% but less than 25%, the Transaction constitutes a discloseable transaction of GBT under Rule 14.06 of the Listing Rules.

As the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Transaction are more than 25% but less than 75%, the Transaction constitutes a major transaction in relation to disposal of GSH under Rule 14.06 of the Listing Rules. Besides, as the Purchaser is wholly-owned by GBT (a controlling shareholder of GSH) and hence is an associate of GBT, the Transaction also constitutes a connected transaction for GSH and is subject to the reporting, announcement and GSH Independent Shareholders’ approval requirements under the Listing Rules. GBT, Global Corn Bio-chem, and any other shareholders of GSH having a material interest in the Transaction and their respective associates are therefore required to abstain from voting on the resolution proposed to be passed at the EGM for approving the Transaction.

GENERAL

GSH will convene an EGM to seek the approval of the GSH Independent Shareholders by way of poll on the Transaction.

The GSH IBC comprising all the independent non-executive directors of GSH has been established to advise the GSH Independent Shareholders as to whether the terms of the Transaction and the transactions contemplated thereunder are on normal commercial terms, are fair and reasonable and in the interests of GSH and its shareholders as a whole. The GSH IFA will be appointed by GSH to advise the GSH IBC and the GSH Independent Shareholders in this regard.

A circular containing, among other things, (1) further information on the Transaction; (2) the recommendation of the GSH IBC to the GSH Independent Shareholders; (3) the advice from the GSH IFA to the GSH IBC and the GSH Independent Shareholders; and (4) a notice of the EGM is expected to be despatched to the shareholders of GSH on or before 11 August 2017 in accordance with the Listing Rules.

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DEFINITIONS

Unless the context otherwise requires, the following terms shall have the meanings set out below:

• “associate(s)” shall have the same meaning as ascribed to it under the Listing Rules “Business Day” any day (other than Saturdays) on which licensed banks in Hong Kong are open for business

• “Completion” completion of the S&P Agreement in accordance with its terms

• “Dihao Crystal Sugar” 長春帝豪結晶糖開發實業有限公司 (Changchun Dihao Crystal Sugar Industry Development Co., Ltd.), a wholly foreign-owned enterprise established in the PRC and a wholly-owned subsidiary of GSH

• “Dihao Foodstuff” 長春帝豪食品發展有限公司 (Changchun Dihao Foodstuff Development Co., Ltd.), a wholly foreign-owned enterprise established in the PRC and a wholly-owned subsidiary of GSH

• “EGM” the extraordinary general meeting of GSH to be convened and held to consider and approve the Transaction

• “GBT” Global Bio-chem Technology Group Company Limited, a company incorporated in the Cayman Islands and the issued shares of which are listed on the Stock Exchange

• “GBT Board” the board of directors of GBT “GBT Group” GBT and its subsidiaries which, for the purpose of this announcement, excludes the GSH Group

• “Global Corn Bio-chem” Global Corn Bio-chem Technology Company Limited, a company incorporated in the British Virgin Islands which is a wholly-owned subsidiary of GBT

• “GSH” Global Sweeteners Holdings Limited, a company incorporated in the Cayman Islands and the issued shares of which are listed on the Stock Exchange

• “GSH Board” the board of directors of GSH “GSH Group” GSH and its subsidiaries

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• “GSH IBC” the independent board committee of the GSH Board comprising Mr. Ho Lic Ki, Mr. Lo Kwing Yu and Mr. Yuen Tsz Chun, the independent nonexecutive directors, appointed by the GSH Board for the purpose of advising the GSH Independent Shareholders in relation to the Transaction

• “GSH IFA” the independent financial advisers to be appointed by the GSH Board and approved by the GSH IBC for the purpose of advising the GSH IBC and the GSH Independent Shareholders in relation to the Transaction

• “GSH Independent any shareholder of GSH that is not required to abstain from voting at a Shareholders” general meeting, if necessary, to approve a connected transaction

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

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

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

• “Long Stop Date” the date falling 180 days after the date of the S&P Agreement, or such later date as the Vendors and the Purchaser may agree

• “PRC” People’s Republic of China

• “Purchaser” Global Corn Chemical Investments Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of GBT

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

• “S&P Agreement” the agreement in relation to the Transaction dated 21 July 2017 entered into between the Vendors and the Purchaser

• “Sale Interest” the entire equity interest in the Target Companies

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Supplier Loan” indebtedness due and owing by Changchun Dajincang Corn Procurement Co., Ltd. to Bank of China Weifeng International Branch with maximum guaranteed amount of RMB2.5 billion

• “Target Companies” Dihao Crystal Sugar and Dihao Foodstuff

• “Target Properties” the land and properties owned by the Target Companies in Luyuan District in Changchun City, Jilin Province, the PRC

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“Transaction”

the acquisition by the Purchaser and the disposal by the Vendors of the Sale Interest pursuant to the S&P Agreement

“US$”

United States dollars, the lawful currency of the United States of America

“Vendors” Global Sweeteners (China) Limited, Global Starch (Changchun) Investments Limited and Global Sorbitol (H.K.) Company Limited, all being wholly-owned subsidiaries of GSH

By order of the GBT Board By order of the GSH Board Global Bio-chem Technology Group Global Sweeteners Holdings Limited Company Limited Kong Zhanpeng Yuan Weisen Chairman Chairman

Hong Kong, 21 July 2017

As at the date of this announcement, the GBT Board comprises two executive directors, namely Mr. Yuan Weisen and Mr. Zhang Zihua; and three independent non-executive directors, namely, Mr. Ng Kwok Pong, Mr. Yeung Kit Lam and Ms. Chiu Lai Ling Shirley.

As at the date of this announcement, the GSH Board comprises two executive directors, namely Mr. Kong Zhanpeng and Mr. Zhang Zihua; and three independent non-executive directors, namely, Mr. Ho Lic Ki, Mr. Lo Kwing Yu and Mr. Yuen Tsz Chun.

• For identification purposes only

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