Hephaestus Holdings Limited — M&A Activity 2016

Jun 10, 2016

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.

UNION ASIA ENTERPRISE HOLDINGS LTD

萬亞企業控股有限公司

(Formerly known as Pan Asia Mining Limited)

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

DISCLOSABLE TRANSACTION IN RELATION TO ACQUISITION OF 100% EQUITY INTEREST IN THE TARGET

THE ACQUISITION

The Board is pleased to announce that on 10 June 2016 (after trading hours), the Purchaser, a direct wholly-owned subsidiary of the Company, entered into the SPA with the Vendor, pursuant to which, the Purchaser has agreed to acquire and the Vendor has agreed to sell the Sale Shares at the Consideration of HK$12,500,000 which has been satisfied as to (i) HK$4,000,000 in cash; and (ii) HK$8,500,000 by the issue of the Promissory Note to the Vendor. Completion of the Acquisition has taken place simultaneously upon signing of the SPA. Upon Completion, the Target has become an indirect wholly-owned subsidiary of the Company and accordingly, the financial information of the Target will be consolidated into the accounts of the Group.

GEM LISTING RULES IMPLICATIONS

As some of the applicable percentage ratios (as defined under the GEM Listing Rules) in respect of the Acquisition are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company and is therefore subject to the reporting and announcement requirements under Chapter 19 of the GEM Listing Rules.

INTRODUCTION

The Board is pleased to announce that on 10 June 2016 (after trading hours), the Purchaser and the Vendor entered into the SPA, pursuant to which, the Purchaser has agreed to acquire and the Vendor has agreed to sell, the Sale Shares at the Consideration of HK$12,500,000 which has been satisfied as to (i) HK$4,000,000 in cash; and (ii) HK$8,500,000 by the issue of the Promissory Note to the Vendor. Completion of the Acquisition has taken place simultaneously upon signing of the SPA. Upon Completion, the Target has become an indirect wholly-owned subsidiary of the Company and accordingly, the financial information of the Target will be consolidated into the accounts of the Group.

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THE SPA

Date

10 June 2016 (after trading hours)

Parties

1. The Purchaser: Zhanhui Limited
2. The Vendor: Link Long Limited

Immediately before Completion, the Target is owned as to 100% by the Vendor.

To the best knowledge, information and belief of the Directors after having made all reasonable enquiries, as at the date of this announcement, the Vendor and its ultimate beneficial owner(s) are Independent Third Parties.

Assets to be acquired

Pursuant to the SPA, the Purchaser has agreed to acquire the Sale Shares, representing the entire issued share capital of the Target. Immediately before Completion, the Vendor is the beneficial owner of the Sale Shares.

Consideration

Pursuant to the terms of the SPA, the Consideration of HK$12,500,000 for the Sale Shares has been satisfied by the Purchaser to the Vendor in the following manner at Completion:

(a) HK$4,000,000 shall be paid in cash to the Vendor; and
(b) the remaining balance of HK$8,500,000 has been satisfied by the Promissory Note.

Further details of the Promissory Note are set out in the section headed "Promissory Note" below.

Basis of the Consideration

The Consideration was arrived at based on normal commercial terms after arm's length negotiations between the Purchaser and the Vendor with reference to the following factors:

(a) the business development and future prospects of the Target;
(b) the preliminary valuation of 100% equity interest in the Target of approximately HK$14,000,000 as at 31 March 2016 prepared by an independent professional valuer; and
(c) the reasons and benefits of the Acquisition as stated under the section headed "Reasons for and benefits of the Acquisition" in this announcement.

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In view of the above, the Board considers that the terms and conditions (including the Consideration) of the SPA are fair and reasonable and on normal commercial terms and in the interest of the Company and the Shareholders as a whole.

Completion

Completion has taken place simultaneously upon the signing of the SPA.

Upon Completion, the Company holds 100% equity interest in the Target and the Target has become an indirect wholly-owned subsidiary of the Company and accordingly, the financial information of the Target will be consolidated into the accounts of the Group.

There is no provision in the SPA which grants any right to the Vendor to nominate their nominees to be appointed as Director.

PROMISSORY NOTE

The terms of the Promissory Note have been negotiated on an arm’s length basis and the principal terms of which are as follows:

Issuer:	The Company
Date of issue:	10 June 2016
Principal amount:	HK$8,500,000
Interest:	Interest shall accrue on the outstanding amount commencing from the date of the Promissory Note at the rate of ten per cent (10%) per annum. The Company shall pay to the Noteholder interest on the outstanding amount on the Maturity Date (as defined below) in one lump sum. Interest shall accrue from day to day, shall be calculated on the basis of the actual number of days elapsed and a 365 day year.
Maturity Date:	The third anniversary of the date of the Promissory Note or such other date as the Company and the Noteholder may agree in writing (the “Maturity Date”).
Early redemption by the Company:	The Company may prepay all or part of the Promissory Note together with interest accrued thereon at any time prior to the Maturity Date by giving prior written notice 7 days in advance to the Noteholder.
Transferability:	The Noteholder may not assign or transfer the Promissory Note or any part thereof to any third party by endorsement without the prior written consent of the Company.

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The terms of the Promissory Note are determined after arm's length commercial negotiation between the Purchaser and the Vendor with reference to the prevailing market condition and the financial position of the Group. In view of the above, the Directors consider the terms of the Promissory Note are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

SHAREHOLDING STRUCTURE OF THE TARGET

Set out below is the shareholding structure of the Target (i) immediately before Completion; and (ii) immediately after Completion:

Shareholding structure of the Target immediately before Completion

Shareholding structure of the Target immediately after Completion

INFORMATION ON THE TARGET

The Target is incorporated in Hong Kong with limited liability. The Target is principally engaged in trading of stainless steel wires in Hong Kong and the PRC.

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FINANCIAL INFORMATION OF THE TARGET

Set out below are the financial information of the Target as prepared in accordance with Hong Kong Accounting Standards for the year ended 31 March 2015 and 2016 respectively:

| | Year ended
31 March
2015
(Audited)
HK$'000 | Year ended
31 March
2016
(Audited)
HK$'000 |
| --- | --- | --- |
| Turnover | 20,127 | 8,045 |
| Net profit/(loss) before taxation | 975 | (970) |
| Net profit/(loss) after taxation | 898 | (970) |

According to the financial information of the Target as at 31 March 2016, the Target recorded an audited net assets of approximately HK$1,091,000.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in exploration and exploitation of mineral resources and trading of coals, metals, bunker fuel and beverages.

The Target is principally engaged in trading of stainless steel wires in Hong Kong and the PRC. The products of the Target are widely applied in the manufacturing of electric appliances, mobile communication equipment and high precision surgical instruments.

In view of the continuous growth of the smartphone market, the rapid development of the mobile communication and the rising demand for advanced medical equipment in Hong Kong and the PRC, demand of stainless steel wires from mobile communication and medical industries as raw materials thus increased steadily which will drive the demand for products of the Target. As such, the Directors consider that the prospect of the Target will be promising.

Given the unsatisfactory financial performance of the Group over the past few years with loss-making, the management of the Group continued to review its existing businesses from time to time and strived to improve the business operation and financial position of the Group. It has been the business strategy of the Group to proactively seek potential investment opportunities in order to enhance value of the Shareholders. The Directors consider that it is beneficial for the Group to seek suitable investment opportunities from time to time to diversify its existing business portfolio into new line of business with growth potential and to broaden its source of income. In this connection, the Directors consider the Acquisition as an opportunity for the Group to expand its business in an industry with growth potential.

The Directors consider that the terms of the SPA and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole.

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GEM LISTING RULES IMPLICATIONS

As some of the applicable percentage ratios (as defined under the GEM Listing Rules) in respect of the Acquisition are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company and is therefore subject to the reporting and announcement requirements under Chapter 19 of the GEM Listing Rules.

DEFINITIONS

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

"Acquisition" the proposed acquisition of the Sale Shares pursuant to the SPA

"associate(s)" the meaning ascribed thereto in the GEM Listing Rules

"Board" the board of Directors

"Business Day" a day (other than a Saturday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

"Company" Union Asia Enterprise Holdings Limited 萬亞企業控股有限公司, formerly known as Pan Asia Mining Limited 寰亞礦業有限公司, a company incorporated in the Cayman Islands with limited liability, the issued shares of which are listed on GEM (stock code: 8173)

"Completion" completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the SPA

"Completion Date" the date of Completion

"connected persons" has the meaning ascribed to it under the GEM Listing Rules

"Consideration" the consideration of HK$12,500,000 payable by the Purchaser for the Acquisition of the Sale Shares under the SPA

"Director(s)" director(s) of the Company

"GEM" the Growth Enterprise Market of the Stock Exchange

"GEM Listing Rules" the Rules Governing the Listing of Securities on GEM

"Group" the Company and its subsidiaries

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

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

“Independent Third Party(ies)” third party(ies) who is/are independent of, and not connected with, the Company and its connected persons (as defined in the GEM Listing Rules)

“Noteholder(s)” holder(s) of the Promissory Note

“PRC” the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Taiwan and the Macau Special Administrative Region of the People’s Republic of China

“Promissory Note” the promissory note in the principal amount of HK$8,500,000 issued by the Company in favour of the Vendor in settlement of the Consideration

“Purchaser” Zhanhui Limited, a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Company

“Sale Shares” 1,000,000 ordinary shares in the Target, representing the entire issued share capital of the Target

“Share(s)” ordinary share(s) of HK$0.08 each in the issued share capital of the Company

“Shareholder(s)” holder(s) of the Share(s)

“SPA” the agreement to acquire the Sale Shares entered into among the Purchaser and the Vendor dated 10 June 2016

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Target” Fu Hang Metal (Asia) Limited, a company incorporated in Hong Kong with limited liability

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“Vendor”

Link Long Limited, a company incorporated in the British Virgin Islands with limited liability and it is an Independent Third Party

“%”

per cent

By order of the Board
Union Asia Enterprise Holdings Limited
Yip Man Yi
Chairman

Hong Kong, 10 June 2016

As at the date of this announcement, the Board comprises two executive Directors, Ms. Yip Man Yi and Mr. Shiu Chi Tak, Titus, two non-executive Directors, Mr. Liang Tongwei and Mr. Wong Chi Man, and six independent non-executive Directors, Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze, Mr. Fung Kwok Leung, Dr. Wan Ho Yuen, Terence, Mr. Li Kwok Chu and Mr. Lau Shu Yan.

This announcement, for which the Directors jointly and individually accept full responsibility, including the particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

This announcement will remain on the page of “Latest Company Announcement” on the GEM website for at least 7 days from the date of its posting and on the website of the Company www.unionasiahk.com.