Guangzhou R&F Properties Co., Ltd. — M&A Activity 2014

Dec 15, 2014

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.

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(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2777)

CONNECTED TRANSACTION ACQUISITION OF 100% INTEREST IN HUIZHOU GOLDEN SWAN HOT SPRING CO. LTD.

On 15 December 2014, the Company entered into the Acquisition Agreement with Mr. Li and Mr. Zhang pursuant to which the Company agreed to acquire, and Mr. Li and Mr. Zhang agreed to sell, the entire registered capital of Golden Swan.

Golden Swan is owned as to 50% by Mr. Li and as to 50% by Mr. Zhang. Each of Mr. Li and Mr. Zhang is a Director and a substantial shareholder of the Company and is a connected person of the Company for the purpose of Chapter 14A of the Listing Rules. Accordingly, the entering into of the Acquisition Agreement constitutes a connected transaction for the Company. As all the relevant percentage ratios in respect of the Acquisition are more than 0.1% but less than 5%, the Acquisition is subject to the reporting and announcement requirements but exempted from the independent shareholders’ approval requirement under the Listing Rules.

INTRODUCTION

On 15 December 2014, the Company entered into the Acquisition Agreement with Mr. Li and Mr. Zhang pursuant to which the Company agreed to acquire, and Mr. Li and Mr. Zhang agreed to sell, the entire registered capital of Golden Swan. A summary of the principal terms of the Acquisition Agreement and the details of Golden Swan are set out below.

THE ACQUISITION AGREEMENT

Date : 15 December 2014

Parties :

(a) Mr. Li (as one of the two vendors); (b) Mr. Zhang (as one of the two vendors); and (c) the Company (as the purchaser).

Assets to be acquired : the entire registered capital of Golden Swan.

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Consideration:

RMB530.00 million (equivalent to approximately HK$670.45 million)

The consideration was arrived at after arm’s length negotiations between the parties with reference to the appraised value of Golden Swan by an independent valuer made on 31 August 2014. The appraised value has been arrived at using a combination of comparative method and residual method.

The consideration will be payable on the date of Completion and will be funded through the Company’s internal resources.

INFORMATION ON GOLDEN SWAN

Registered and paid up RMB50,000,000 capital :

Principal business : The main scopes of business are (1) tourism investment; (2) industry investment; and (3) property development.

Golden Swan was established in 2004 and owns the Intercontinental Huizhou Resort located in Hengli Town, Huizhou, China. The Intercontinental Huizhou Resort is a fivestar resort hotel with 200 rooms and 21 vacation houses. The hotel offers hot spring facilities attracting customers from the major cities in the region.

Golden Swan also owns certain land around the hotel which can be used for development of residential vacation houses for sale. Part of the land has been developed on which a total of 79 residential vacation houses had been built. Of these completed vacation houses, 23 units had been sold while 56 units with a saleable area of 20,580 sq. m. are available for sale. The yet undeveloped land has a site area of 328,000 sq. m. on which residential vacation houses with a GFA of 148,200 sq. m. can be developed for sale.

Financial information : Set out below is the unaudited financial information of Golden Swan for the two most recent financial years:

	Year Ended 31 December 2013	Year Ended 31 December 2012
	RMB	RMB
Netloss before taxation	92,226,929	102,687,811
Netloss aftertaxation	92,226,929	102,687,811

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The profit to be derived from the sale of 19 units of residential vacation houses (as referred to in the description of “Principal business” above) has not been recognized and therefore not included in the results presented above.

As at 31 August 2014, the net asset value of Golden Swan was RMB50,000,000 based on its internal management accounts.

To the best knowledge of the Directors, the original cost of acquisition of the entire interest in Golden Swan to Mr. Li and Mr. Zhang was RMB50,000,000.

REASON FOR THE TRANSACTION

The Group is principally engaged in the development and sale of properties and hotel operations in the PRC. It currently has three property projects in the Huizhou area and a portfolio of eight hotels nation-wide, including the Renaissance Huizhou Hotel. The Group is of the view that Huizhou provides a favourable environment for property development and hotel business. The economy of Huizhou has maintained stable growth with GDP doubled in the last five years. Huizhou also saw a steady increase in tourism which in 2013 amounted to a year-on-year increase of 14%. These two factors are expected to lift the demand for higherend residential properties and luxury resort hotels in the area. Golden Swan is well positioned to take advantage of this evolving market trend. The business of Golden Swan is in line with the overall business direction of the Group and the Acquisition will strengthen the Group’s product line in Huizhou in terms of both scale and product range. The Acquisition also increased the diversity of the Group’s hotel portfolio by adding a resort hotel to the portfolio of city hotels of the Group.

Given the above and that the consideration was determined based on the appraised value of Golden Swan, the Directors (including the independent non-executive Directors) are of the view that the terms of the Acquisition Agreement are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole.

GENERAL

The Group is principally engaged in the development and sale of properties, property investment, hotel operation and other property development related services in the PRC.

IMPLICATIONS UNDER THE LISTING RULES

Golden Swan is owned as to 50% by Mr. Li and as to 50% by Mr. Zhang. Each of Mr. Li and Mr. Zhang is a Director and a substantial shareholder and hence a connected person of the Company for the purpose of Chapter 14A of the Listing Rules. Accordingly, the entering into of the Acquisition Agreement constitutes a connected transaction of the Company. As all the relevant percentage ratios in respect of the Acquisition are more than 0.1% but less than 5%, the Acquisition is subject to the reporting and announcement requirements but exempted from independent shareholders’ approval requirement under the Listing Rules.

Mr. Li and Mr. Zhang as the owner of Golden Swan are considered to have a material interest in the Acquisition. Ms. Helen Li and Ms. Zhang Lin, both being non-executive Directors, are

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the sisters of Mr. Li and Mr. Zhang, respectively. Accordingly, each of Ms. Helen Li and Ms. Zhang Lin is also considered to be interested in the Acquisition. Each of Mr. Li, Mr. Zhang, Ms. Helen Li and Ms. Zhang Lin had abstained from voting on the board resolution in relation to the Acquisition. Save as disclosed, no other Director has a material interest in the Acquisition.

DEFINITION

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

“Acquisition”	the acquisition of the entire registered capital	the acquisition of the entire registered capital	of Golden
	Swan by the Company pursuant to the Acquisition
	Agreement;
“Company”	Guangzhou R&F Properties	Co., Ltd., a	company
	incorporated in the People’s Republic of China		with its H
	shares listed and traded on the	main board of	the Stock
	Exchange;
“Completion”	completion of the Acquisition in	accordance with the terms
	of the Acquisition Agreement which shall not be later than 31
	March 2015;
“Director(s)”	the director(s) of the Company;
“GFA”	gross floor area;
“Golden Swan”	惠州市金鵝實業有限公司Huizhou Golden		Swan Hot
	Spring Co. Ltd., a limited liability	company established in the
	People’s Republic of China;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong;
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China;
“Listing Rules”	the Rules Governing the Listing	of Securities on the Stock
	Exchange;
“Mr. Li”	Mr. Li Sze Lim, an executive	Director and a	substantial
	shareholder of the Company;
“Mr. Zhang”	Mr. Zhang Li, an executive Director and a		substantial
	shareholder of the Company;
“PRC”	the People’s Republic of China;

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“RMB” Renminbi, the lawful currency of the People’s Republic of China; “Shareholders” holders of shares of the Company; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “sq. m” square meter; and “%” per cent.

For illustration purposes, amounts in HK$ in this announcement have been translated at RMB1.00 = HK$1.265.

By order of the Board Guangzhou R&F Properties Co., Ltd. Chow Oi Wah, Fergus Company Secretary

Hong Kong, 15 December 2014

As at the date of this announcement, the executive directors of the Company are Li Sze Lim, Zhang Li, Lu Jing and Zhou Yaonan, and the non-executive directors are Zhang Lin and Li Helen, and the independent nonexecutive directors are Huang Kaiwen, Lai Ming, Joseph and Zheng Ercheng.

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