Grand Baoxin Auto Group Limited — M&A Activity 2018

Mar 25, 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.

==> picture [67 x 67] intentionally omitted <==

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code:1293)

DISCLOSEABLE TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE EQUITY INTEREST OF THE TARGET COMPANIES

THE ACQUISITION AGREEMENT

The Board is pleased to announce that on 25 March 2018, the Purchaser entered into the Acquisition Agreement with the Vendors, pursuant to which the Purchaser has conditionally agreed to acquire, and each of the Vendors has conditionally agreed to sell, the entire equity interest of each of the Target Companies which are principally engaged in the distribution of BMW vehicles and maintenance services in the PRC.

The Total Consideration payable by the Purchaser under the Acquisition Agreement shall be no more than RMB619 million (equivalent to approximately HK$769.5 million) in cash.

Upon completion of the Acquisition, each of the Target Companies will become an indirect wholly-owned subsidiary of the Company.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios under Chapter 14 of the Listing Rules regarding the Acquisition exceed 5% but are lower than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules, which is subject to the reporting and announcement requirements under the Listing Rules.

— 1 —

WARNING: Completion of the Acquisition is conditional upon the fulfillment (or, where applicable, waiver) of the conditions precedent under the Acquisition Agreement. Accordingly, the Acquisition may or may not complete. Shareholders of the Company and potential investors are advised to exercise caution in dealing in the securities of the Company.

INTRODUCTION

The Board is pleased to announce that on 25 March 2018, the Purchaser entered into the Acquisition Agreement with the Vendors, pursuant to which the Purchaser has conditionally agreed to acquire, and each of the Vendors has conditionally agreed to sell, the entire equity interest of each of the Target Companies. The Total Consideration payable by the Purchaser under the Acquisition Agreement shall be no more than RMB619 million (equivalent to approximately HK$769.5 million) in cash.

Upon completion of the Acquisition, each of the Target Companies will become an indirect wholly-owned subsidiary of the Company.

THE ACQUISITION AGREEMENT

Signing date: 25 March 2018 Parties: (i) the Purchaser (ii) the Vendors Nature of the Pursuant to the Acquisition Agreement, the Purchaser Acquisition: has conditionally agreed to acquire, and each of the Vendors has conditionally agreed to sell, the entire equity interest of each of the Target Companies.

— 2 —

Consideration:

The Base Consideration for the Acquisition is RMB619 million (equivalent to approximately HK$769.5 million) which is subject to certain completion adjustments by reference to the net asset value of the Target Companies, provided that the Total Consideration payable by the Purchaser under the Acquisition Agreement shall not exceed RMB619 million (equivalent to approximately HK$769.5 million).

The Total Consideration was determined after arm’s length negotiations among the Purchaser and the Vendors in respect of the Acquisition, having taken into account, among other things, (i) the net asset value of the Target Companies and (ii) the future prospect and development of the business of the Target Companies.

The Purchaser will settle the Total Consideration in cash in the following manner:

• (i) a total sum of RMB147.6 million (equivalent to approximately HK$183.5 million) (the “ First Payment ”) will be paid to a bank account designated by the Vendors within five Business Days after the date of the Acquisition Agreement;

• (ii) a total sum of RMB228.78 million (equivalent to approximately HK$284.4 million) (the “ Second Payment ”) will be paid to the Vendors on the Closing Date;

• (iii) the third payment (equivalent to 70% of the Total Consideration minus the First Payment and the second payment) (the “ Third Payment ”) will be paid to the Vendors after the later of (x) the date when the Second Payment has been fully paid, and (y) the date when the Total Consideration is determined and the completion audit is concluded;

— 3 —

• (iv) the fourth payment (equivalent to 20% of the Total Consideration) (the “ Fourth Payment ”) will be paid to the Vendors on the later of the date when the Third Payment has been fully paid, and (y) the date when the Purchaser has been registered as the owner of the entire equity interest of each of the Target Companies by the relevant administration(s) of industry and commerce in the PRC; and

• (v) the fifth payment (equivalent to 10% of the Total Consideration) (the “ Fifth Payment ”) will be paid to the Vendors after the expiration date of the six (6) months period after the Handover Date.

The Total Consideration under the Acquisition Agreement will be settled by the internal resources of the Purchaser.

Conditions Precedent:

Completion of the Acquisition Agreement by the Purchaser is conditional upon the fulfillment (or, where applicable, waiver) of the following conditions:

• (i) the rights to direct the operation and management of the Target Companies having been transferred to the Purchaser in accordance with the terms of the Acquisition Agreement;

• (ii) all necessary automobile suppliers’ consents required for the completion of the Acquisition having been obtained;

• (iii) all representations and warranties given or made by the Vendors as set out in the Acquisition Agreement being true and accurate as at the date of the Acquisition Agreement and remaining true and accurate as at the Handover Date, there being no major omission to the representations and warranties given or made by the Vendors as at the date of the Acquisition Agreement and the Handover Date, and none of the Vendors having breached any undertaking or obligation under the Acquisition Agreement;

— 4 —

• (iv) no governmental department or regulatory body in the PRC having promulgated, issued or enforced any laws, regulations, rules, orders or notices prohibiting the Acquisition, there being no legal action, arbitration, dispute, investigation or other legal proceedings or unresolved matters that will prohibit or have a material adverse effect on the Acquisition or resulting in the Acquisition Agreement being invalid or not being able to be performed on the part of the Vendors and the Target Companies; and

• (v) since the date of the Acquisition Agreement, (x) there being no changes to the Target Companies that will have a material adverse effect on the Target Companies or the Acquisition, and (y) none of the Target Companies being insolvent or in liquidation.

Completion of the Acquisition Agreement by the Vendors is conditional upon the fulfillment (or, where applicable, waiver) of the following conditions:

• (i) the Purchaser having paid the First Payment to the Vendors in accordance with the terms of the Acquisition Agreement; and

• (ii) all representations and warranties given or made by the Purchaser as set out in the Acquisition Agreement being true and accurate as at the date of the Acquisition Agreement and remaining true and accurate as at the Handover Date, and the Purchaser not having materially breached any undertaking or obligation under the Acquisition Agreement.

— 5 —

Non-Competition

Unless otherwise agreed with the Purchaser, within three (3) years after the Handover Date, the Vendors shall not be directly or indirectly interested in or by any other methods (including being an owner, shareholder, partner, director, management officer, counsel or consultant) be engaged in the operation of any 4S stores of the same automobile brand as currently operated by the Target Companies in the same cities at prefecture-level where the Target Companies are located, unless in cooperation with the Purchaser and its connected parties.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Target Companies are principally engaged in the distribution of BMW vehicles and maintenance services in the PRC. The Target Companies own and operate a total of three BMW 4S stores and one secondhand BMW 4S store.

The Group is a leading luxury 4S dealership group in the PRC and is principally engaged in the sale and service of motor vehicles. After completion of the Acquisition, the Group expects to achieve synergies in terms of brand coverage, regional layout and operational efficiency by combining the assets of the Target Companies and the existing assets of the Group.

The Directors are of the view that the entering into of the Acquisition Agreement is consistent with the long-term development goals of the Company, and that the terms of the Acquisition are fair and reasonable and in the interests of the Company and its shareholders as a whole.

— 6 —

LISTING RULES IMPLICATIONS

As the applicable percentage ratios under Chapter 14 of the Listing Rules regarding the Acquisition exceed 5% but are lower than 25%, the Acquisition constitutes a discloseable transaction of the Company under the Listing Rules, which is subject to the reporting and announcement requirements under the Listing Rules.

INFORMATION ON THE TARGET COMPANIES

1. Shanghai Zhongguo Baohong Automotive Distribution Services Co., Ltd.* (上海眾國寶泓汽車銷售服務有限公司) (“Zhongguo Baohong”)

Zhongguo Baohong is established in the PRC with limited liability. It is owned by Shanghai Zhongguo Group as to 70% and Heifei Ganrong as to 30% as at the date of this announcement. It is principally engaged in the distribution of BMW vehicles.

Based on the consolidated audited financial statements of Zhongguo Baohong, the net asset value of Zhongguo Baohong as of 31 December 2017 was approximately RMB28.5 million.

Set out below is the financial information of Zhongguo Baohong for the years ended 31 December 2016 and 2017 as extracted from its consolidated audited financial statements:

	For the year ended	For the year ended
	31 December
	2016	2017
	RMB	RMB
Net profits before taxation and
extraordinary items	10,735,473.72	10,883,427.2
Net profits after taxation and extraordinary
items	10,735,473.72	10,712,936.22

1. Shanghai Putuo Baohong Used Automotive Distribution Services Co., Ltd.* (上海普陀寶泓二手車銷售服務有限公司) (“Putuo Baohong”)

Putuo Baohong is established in the PRC with limited liability. It is owned by Shanghai Zhongguo Group as to 70% and Heifei Ganrong as to 30% as at the date of this announcement. It is principally engaged in the distribution of used BMW vehicles.

— 7 —

Based on the consolidated audited financial statements of Putuo Baohong, the net asset value of Putuo Baohong as of 31 December 2017 was approximately RMB20.2 million.

Set out below is the financial information of Putuo Baohong for the years ended 31 December 2016 and 2017 as extracted from its consolidated audited financial statements:

	For the year ended	For the year ended
	31 December
	2016	2017
	RMB	RMB
Net profits before taxation and
extraordinary items	2,003,723.57	25,325.68
Net profits after taxation and extraordinary
items	1,885,907.19	(15,553.91)

1. Hefei Baohong Automotive Distribution Services Co., Ltd.* (合肥寶泓汽車銷 售服務有限公司) (“Hefei Baohong”)

Hefei Baohong is established in the PRC with limited liability. It is owned by Shanghai Zhongguo Group as to 70% and Heifei Ganrong as to 30% as at the date of this announcement. It is principally engaged in the distribution of BMW vehicles.

Based on the consolidated audited financial statements of Hefei Baohong, the net asset value of Hefei Baohong as of 31 December 2017 was approximately RMB-10.3 million.

Set out below is the financial information of Hefei Baohong for the years ended 31 December 2016 and 2017 as extracted from its consolidated audited financial statements:

	For the year ended	For the year ended
	31 December
	2016	2017
	RMB	RMB
Net profits before taxation and
extraordinary items	(18,120,694.10)	19,201,192.16
Net profits after taxation and extraordinary
items	(18,120,694.10)	19,201,192.16

— 8 —

1. Wuhu Zhongguo Baohong Automotive Distribution Services Co., Ltd.* (蕪湖 眾國寶泓汽車銷售服務有限公司) (“Wuhu Zhongguo ” )

Wuhu Zhongguo is established in the PRC with limited liability. It is wholly owned by Shanghai Zhongguo Group as at the date of this announcement. It is principally engaged in the distribution of BMW vehicles.

Based on the consolidated audited financial statements of Wuhu Zhongguo, the net asset value of Wuhu Zhongguo as of 31 December 2017 was approximately RMB-4.5 million.

Set out below is the financial information of Wuhu Zhongguo for the years ended 31 December 2016 and 2017 as extracted from its consolidated audited financial statements:

	For the year ended	For the year ended
	31 December
	2016	2017
	RMB	RMB
Net profits before taxation and
extraordinary items	(5,554,447.54)	(1,047,441.71)
Net profits after taxation and extraordinary
items	(5,554,447.54)	(1,047,441.71)

INFORMATION ON THE VENDORS

1. Shanghai Zhongguo Automotive Group Co., Ltd. (上海眾國汽車集團有限公司) (“ Shanghai Zhongguo Group* ”) is established in the PRC with limited liability. It is principally engaged in the distribution of automobiles and their parts and other products.

2. Hefei Gangrong Hotel Management Co., Ltd. (合肥港榮酒店管理有限公司) (“ Hefei Gangrong* ”) is established in the PRC with limited liability. It is principally engaged in hotel business.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, each of the Vendors and the Target Companies (including their respective ultimate beneficial owners) is a third party independent of the Company and its connected persons (as defined under the Listing Rules) and not a connected person of the Company.

— 9 —

INFORMATION ON THE GROUP

The Group is a leading luxury 4S dealership group in the PRC and is principally engaged in the sale and service of motor vehicles.

The Purchaser is principally engaged in the automobile repair and maintenance services, automobile insurance services, distribution of BMW-Brilliance, imported BMW and MINI automobiles, sales of various automobile parts, electromechanical equipment and other products, and consultancy services.

WARNING: Completion of the Acquisition is conditional upon the fulfillment (or, where applicable, waiver) of the conditions precedent under the Acquisition Agreement. Accordingly, the Acquisition may or may not complete. Shareholders of the Company and potential investors are advised to exercise caution in dealing in the securities of the Company.

DEFINITIONS

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

• “Acquisition”

• the acquisition in relation to the entire equity interest of each of the Target Companies pursuant to the terms and conditions of the Acquisition Agreement

• “Acquisition Agreement”

• the acquisition agreement dated 25 March 2018 amongst the Purchaser and the Vendors in relation to the Acquisition

• “Base Consideration” RMB619 million (equivalent to approximately HK$769.5 million)

• “Board” the board of Directors

• “Business Day” a calendar day (other than Saturdays, Sundays, statutory holidays in the PRC or a day on which banks in the PRC are not open in accordance with applicable laws)

• “Company”

• Grand Baoxin Auto Group Limited (廣匯寶信汽車集團 有限公司), a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1293)

— 10 —

• “Closing Date”

• the date on which the Vendors issue the closing certificate to the Purchaser after fulfillment (or, where applicable, waiver) of all the conditions precedent to the completion of the Acquisition Agreement

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

• “Group” the Company and its subsidiaries

• “Handover Date”

• the date of the the confirmation to be signed by the Purchaser and the Vendors on the Closing Date in relation to the handover of the rights to direct the operation and management of the Target Companies from the Vendors to the Purchaser

• “HK$”

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong “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” or “China” the People’s Republic of China, for the purpose of this announcement, excluding Hong Kong, the Special Administrative Region of Macau of the People’s Republic of China and Taiwan

• “Purchaser”

• Suzhou Baoxin Automotive Distribution Services Co., Ltd.* (蘇州寶信汽車銷售服務有限公司), a company incorporated in the PRC and an indirect wholly-owned subsidiary of the Company

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

• “Shareholder(s)” the registered holder(s) of the Shares

• “Share(s)”

• the ordinary share(s) of HK$0.01 each in the capital of the Company

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

— 11 —

• “Target Companies”

• (1) Shanghai Zhongguo Baohong Automotive Distribution Services Co., Ltd.(上海眾國寶泓汽車銷 售服務有限公司); (2) Shanghai Putuo Baohong Used Automotive Distribution Services Co., Ltd. (上海普陀 寶泓二手車銷售服務有限公司); (3) Hefei Baohong Automotive Distribution Services Co., Ltd. (合肥寶泓 汽車銷售服務有限公司); and (4) Wuhu Zhongguo Baohong Automotive Distribution Services Co., Ltd. (蕪湖眾國寶泓汽車銷售服務有限公司)

• “Total Consideration”

• an aggregate consideration payable by the Purchaser to the Vendors under the Acquisition Agreement

• “Vendors”

• Shanghai Zhongguo Automotive Group Co., Ltd. (上海眾國汽車集團有限公司) and Hefei Gangrong Hotel Management Co., Ltd. (合肥港榮酒店管理有限公 司)

• “%” per cent

By order of the Board Grand Baoxin Auto Group Limited Mr. Li Jianping Chairman

Shanghai, the PRC

25 March 2018

As at the date of this announcement, the executive Directors are Mr. Li Jianping, Mr. Wang Xinming, Mr. Lu Ao and Mr. Qi Junjie; the non-executive Directors are Mr. Zhou Yu and Ms. Xu Xing; and the independent non-executive Directors are Mr. Diao Jianshen, Mr. Wang Keyi and Mr. Chan Wan Tsun Adrian Alan.

Unless the context requires otherwise, amounts denominated in RMB have been converted, for the purpose of illustration only, into HK$ at an exchange rate of RMB0.8044 = HK$1. Such exchange rate is for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be converted at the above rate and any other rate or at all.

• For identification purposes only

— 12 —