Jiashili Group Limited

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.

嘉士利集團有限公司

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 1285)

DISCLOSEABLE TRANSACTION ACQUISITION OF 85% EQUITY INTEREST OF DONGGUAN KAMTAI FOODS COMPANY LIMITED AND SILANG FOODS (HUAIBEI) COMPANY LIMITED

The Company hereby announced that on April 29, 2018, the Board of Guangdong Jiashili Food Group Company Limited, a subsidiary of the Company, approved the terms of the Share Transfer Agreement. The Vendor (Kam Tai Investment & Trading Company Limited), the Purchaser (Guangdong Jiashili Food Group Company Limited) and the Target Companies (Dongguan Kamtai Foods Company Limited, a sales company to sell products under the brand ‘‘Silang’’ and Silang Foods (Huaibei) Company Limited, to produce a series of products under the brand ‘‘Silang’’) entered into an Equity Interest Transfer Agreement, pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire 85% equity interest of the Target Companies. The Consideration shall be RMB68,000,000 (equivalent to approximately HK$84,243,000).

The acquired business scope of the Target Companies excludes production and sales of cake, OEM, mooncake and export and foreign trading business.

As the highest applicable percentage ratios defined under Rule 14.07 of the Hong Kong Listing Rules regarding the acquisition of the Target Companies exceed 5% but are lower than 25%, the acquisition constitutes a discloseable transaction of the Company under Chapter 14 of the Hong Kong Listing Rules and subject to the notification and announcement requirements.

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ACQUSITION

The Board hereby announced that on April 29, 2018, the Board of the Purchaser approved the terms of the Share Transfer Agreement entered with the Vendor for the acquisition of 85% equity interest of the Target Companies. The Share Transfer Agreement was signed on April 29, 2018. After completion of the acquisition, Guangdong Jiashili Food Group Company Limited shall hold 85% equity interest each of Dongguan Kamtai Foods Company Limited and Silang Foods (Huaibei) Company Limited.

SHARE TRANSFER AGREEMENT

The major terms of the Equity Interest Transfer Agreement are set out as follows:

Date

April 29, 2018

Parties

(1) Guangdong Jiashili Food Group Company Limited (as the Purchaser)
(2) Kam Tai Investment & Trading Company Limited (as the Vendor)
(3) Dongguan Kamtai Foods Company Limited and Silang Foods (Huaibei) Company Limited (as the Target Companies)

Assets to be acquired

Pursuant to the Equity Interest Transfer Agreement, the Vendor agreed to sell and the Purchaser agreed to acquire 85% equity interest of the Target Companies.

Consideration

The Consideration of the acquisition of the shares sold shall be RMB68,000,000 (equivalent to approximately HK$84,243,000). The Consideration was determined after negotiation on an arm’s length basis based on net value of the Target Companies as at September 30, 2017 and December 31, 2017 (excluding the cake, OEM, mooncake and export and foreign trading business), the prospects of functional and coarse grain cracker market in PRC, the economic value of the brand ‘‘Silang’’ and the operating condition of the Target Companies.

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Payment Terms

The Purchaser shall pay 30% of the Consideration to the Vendor after 5 Business Days upon signing of the Share Transfer Agreement. The Purchaser shall pay 60% of the Consideration to the Vendor after 5 Business Days upon completion of the change and registration of transfer of equity interest of the Target companies (as determined by the issue dates of the business licences of the Target Companies). The Purchaser shall pay 10% of the Consideration to the Vendor within 10 Business Days upon completion of the spin-off of the unacquired businesses, other creditors, rights and debtors.

The Consideration shall be paid out of the internal resources of the Group.

Settlement

The Settlement Date was May 1, 2018. The Settlement shall only proceed upon the satisfaction or waiver of precedent conditions on any other date agreed by the Parties in written form.

Precedent Conditions

(i) the relevant Parties executed the new Articles of Association;
(ii) the Target Companies have made/obtained all necessary written notices and/or consents required by creditors of the Target Companies;
(iii) provided assistance or alternations in respect of the patent acquisition and approval application of certain healthcare crackers;
(iv) any other items to be performed by the Vendor and the Target Companies prior to the Settlement specified under the Equity Interest Transfer Agreement.

Events After the Settlement

The Purchaser, the Vendor and the Target Companies agreed to repay the outstanding bank loans of approximately RMB75,000,000 (equivalent to approximately HK$92,916,000) to the bank creditors of Dongguan Kamtai Foods Company Limited after the Settlement Date. All necessary funds shall be provided by the Purchaser and the Vendor to Dongguan Kamtai Foods Company Limited in proportion to their respective shareholdings in a proper manner.

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The Purchaser, the Vendor and the Target Companies unanimously agreed that from the Settlement Date, the original cake operation, OEM, foreign trading business under the trademark ‘‘Silang’’ and the production and sales of mooncake under the trademark ‘‘Silang’’ by the Vendor, connected person of the Vendor and the Actual Controller shall remain unchanged. The Vendor, connected person of the Vendor and the Actual Controller warrant and undertake that:

(a) within 180 days from the Settlement Date, production and sales of any foreign trading, packing materials of cake and goods inventory which were currently marked with the trademark ‘‘Silang’’ shall be consumed completely;
(b) within 10 Business Days after the Mid-Autumn Festival in 2018 (which is September 24, 2018), production and sales of any inventory of mooncake packing materials which were currently marked with the trademark ‘‘Silang’’ shall be consumed completely;
(c) 180 days after the Settlement Date, shall not carry on the business of any production of crackers under the trademark ‘‘Silang’’ and any other PRC own brand. If the trademark of ‘‘Silang’’ is continued to be used in any foreign trading business, this shall be taken up by the Target Companies in terms of the operation;
(d) starting from the Settlement Date, the Vendor, Actual Controller and its connected person shall not directly or indirectly engage in any business which competes with the Target Companies (‘‘Competing Business’’) and shall not directly or indirectly hold any interest in any entities which constitute Competing Business with the Target Companies or engage in any activities which prejudice the interest of the Target Companies.

CORPORATE GOVERNANCE OF THE TARGET COMPANIES

After completion of the acquisition under the Share Transfer Agreement, the Boards of the Target Companies shall consist of five directors, out of which, the Purchaser shall be entitled to appoint three directors (including one chairman, who shall be the legal representative of the Target Companies at the same time).

Information about the Target Company, Dongguan Kamtai Foods Company Limited

Dongguan Kamtai Foods Company Limited is a company incorporated in PRC with limited liability and wholly owned by the Vendor. The company principally engages in sales of prepackaged food, crackers, puffed food, sweets, bottled pure water, mooncake, cake, rice and noodle products, and wholesale, import and export business of crackers, puffed food, sweets, bread and cake, rice and noodle products, chocolates and coffee, as well as wholesale of healthcare food.

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The unaudited loss (before and after tax) of Dongguan Kamtai Foods Company Limited for the year ended December 31, 2017 was approximately RMB2,400,000 (equivalent to approximately HK$2,973,000) and the unaudited net asset value was approximately RMB26,750,000 (equivalent to approximately HK$33,140,000).

Information about the Target Company, Silang Foods (Huaibei) Company Limited

Silang Foods (Huaibei) Company Limited is a company incorporated in PRC with limited liability and wholly owned by the Vendor. The company principally engages in production and sales of its own crackers, mooncake, bread, cake, eggroll, sweets, puffed food, instant food, rice and noodle products, milk and dairy products, coffee and coffee products, healthcare food and food addictives.

The unaudited loss (before and after tax) of Silang Foods (Huaibei) Company Limited for the year ended December 31, 2017 was approximately RMB9,500,000 (equivalent to approximately HK$11,769,000) and the unaudited net asset value was approximately RMB39,100,000 (equivalent to approximately HK$48,440,000).

Information about the Vendor, Kam Tai Investment & Trading Company Limited

Kam Tai Investment & Trading Company Limited is a company incorporated in Hong Kong with limited liability and owns 100% of the equity interest of the Target Companies.

Information about the Purchaser, Guangdong Jiashili Food Group Company Limited

Guangdong Jiashili Food Group Company Limited is a company incorporated in PRC with limited liability. Its place of operation is Kaiping City, Guangdong Province. It is a large cracker manufacturer with long history and has leading position in the enormous cracker market in PRC.

REASONS FOR AND BENEFITS OF THE TRANSACTION

In recent years, the Group has actively developed and captured the opportunity to acquire if appropriate, as a means to effectively inject new growth momentum to the existing and sustainable growing cracker business.

The Target Companies have been producing and selling products under the brand ‘‘Silang’’ for twenty years. It is one of the best sellers in both domestic and overseas markets and has entered into international branded supermarkets and renowned large supermarkets in PRC. The trademark ‘‘Silang’’ is rated as well-known trademark of PRC and its digestive crackers under the series of ‘‘Good-Vita(纖麩)’’ are popular among the consumers from different places, which drive the development and production of coarse grain digestive crackers in the food industry.

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The acquisition of the Target Companies broadens the product portfolio of the Group, in particular, complementing the lack of functional crackers, coarse grain and sugar free category. Based on ‘‘Good-Vita(纖麩)’’, we shall strengthen and develop a series of products such as coarse grain and sugar free products in response to healthy appeal. This shall further enhance the strategic synergy of the resources for cracker products of the Group. After the acquisition of the Target Companies, two cracker production lines shall be added to the Group. Meanwhile the market coverage ratio of the Group in Southern China, Central China and Eastern China of the Group shall also be strengthened. Operational synergies shall be created in respect of sales channels.

After taking into account of the above, the Directors consider that the acquisition of the Target Companies has been entered into according to normal business terms and is fair and reasonable, in the interest of the Company and its Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

DEFINITION

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

‘‘Board’’ the board of Directors of the Company ‘‘Company’’ Jiashili Group Limited, a company incorporated in the Cayman Islands, its Shares are listed on the Main Board of the Stock Exchange of Hong Kong Limited

‘‘Group’’ the Company and its subsidiaries ‘‘Directors’’ the directors of the Company ‘‘Shareholders’’ the shareholders of the Company

‘‘Equity Interest an equity interest transfer agreement dated April 29, 2018 Transfer entered into by the Vendor, the Purchaser and the Target Agreement’’ Companies for this transaction

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‘‘Business Day’’ any day except Saturday, Sunday or public holidays in PRC ‘‘Settlement’’ settlement of this transaction under the Equity Interest Transfer Agreement
‘‘Precedent precedent conditions of the Settlement as required under the Conditions’’ Equity Interest Transfer Agreement, summarised under the section headed ‘‘Equity Interest Transfer Agreement — Precedent Conditions’’ of this announcement
‘‘Consideration’’ RMB68,000,000, the consideration to be payable by the Purchaser to the Vendor for the acquisition of the equity interests of Target Companies
‘‘connected person’’, have the meanings as ascribed to them under the Hong Kong ‘‘applicable Listing Rules percentage ratios’’
‘‘Target Companies’’ Dongguan Kamtai Foods Company Limited and Silang Foods (Huaibei) Company Limited
‘‘Hong Kong Listing the Rules governing the Listing of Securities on the Stock Rules’’ Exchange of Hong Kong Limited
‘‘Parties’’ the Vendor, the Purchaser and the Target Companies (Each a ‘‘Party’’ and collectively, ‘‘Parties’’)
‘‘PRC’’ the People’s Republic of China, for the purpose of this announcement, excluding Hong Kong, Macau Special Administrative Region and Taiwan
‘‘Hong Kong’’ Hong Kong Special Administrative Region of the PRC ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘New Articles of Articles of Association of the Target Companies to be executed Association’’ by the Vendor and the Purchaser for this transaction
‘‘Actual Controller’’ a party who can actually exercise the control power of the company in the Vendor
‘‘%’’ per cent.

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Unless otherwise specified in this announcement and for illustration purpose only, sums in RMB are translated at the rates of RMB1 = HK$1.23888. This does not represent that RMB have been or could be converted at such exchange rates or any other exchange rates.

By order of the Board Jiashili Group Limited Huang Xianming Chairman

Hong Kong, May 8, 2018

As at the date of this announcement, the Board comprises Mr. Huang Xianming, Mr. Tan Chaojun, Mr. Chen Minghui as executive Directors; Mr. Lin Xiao as non-executive Director; Mr. Kam Robert, Ms. Ho Man Kay, and Mr. Ma Xiaoqiang as independent nonexecutive Directors.

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AI assistant

Jiashili Group Limited M&A Activity 2018

49825_rns_2018-05-08_c345f7bf-f611-4a3b-99fa-f19222365c75.pdf

嘉士利集團有限公司