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Kinetic Development Group Limited M&A Activity 2024
49818_rns_2024-12-06_c8b8e7ea-6629-49a5-b4b4-c64b3b825319.pdf
M&A Activity
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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.
力量发展
KINETIC DEVELOPMENT GROUP
Kinetic Development Group Limited
力量發展集團有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1277)
DISCLOSABLE TRANSACTION
ACQUISITION OF QINHUANGDAO JIFU
AND
TERMINATION OF THE PROPERTY PURCHASE
FRAMEWORK AGREEMENT
INTRODUCTION
Reference is made to the announcement of the Company dated 30 May 2022 (the "Announcement").
On 30 May 2022, the Vendor entered into the Property Purchase Framework Agreement with Kinetic Qinhuangdao, an indirectly wholly-owned subsidiary of the Company, pursuant to which the Vendor agreed to sell, and Kinetic Qinhuangdao agreed to purchase, the Target Properties for a consideration of RMB1,000,939,241 (inclusive of value-added tax).
As at the date of this announcement, Kinetic Qinhuangdao has already paid RMB564,625,000 to R&F Properties and/or its affiliates as requested by the Vendor for the purchase of the Target Properties under the Property Purchase Framework Agreement.
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ACQUISITION OF QINHUANGDAO JIFU
The Board is pleased to announce that, on 6 December 2024 (after trading hours), Kinetic Qinhuangdao, the Vendor, R&F Properties, Beijing R&F City, Beijing R&F Tianchuang and Qinhuangdao Jifu entered into the Acquisition Framework Agreement, pursuant to which, among others, (i) Kinetic Qinhuangdao agreed to acquire, Beijing R&F City and Beijing R&F Tianchuang agreed to sell, 100% equity interests in Qinhuangdao Jifu at nil consideration (the “Acquisition”); (ii) R&F Properties agreed to transfer to Kinetic Qinhuangdao, and Kinetic Qinhuangdao agreed to receive, the creditor’s rights held by R&F Properties against Qinhuangdao Jifu totaling RMB617,394,474.70 (the “Creditor’s Rights”) for a consideration of RMB564,625,000 (the “Creditor’s Rights Transfer”); (iii) the Vendor agreed to transfer to R&F Properties, and R&F Properties agreed to receive, the debt owed by the Vendor to Kinetic Qinhuangdao (i.e. the amount paid by Kinetic Qinhuangdao under the Property Purchase Framework Agreement) in the amount of RMB564,625,000 (the “Debt Transfer”); and (iv) the Vendor and Kinetic Qinhuangdao agreed to terminate the Property Purchase Framework Agreement. The consideration payable by Kinetic Qinhuangdao for the Creditor’s Rights Transfer shall be fully set off by the equivalent amount payable by R&F Properties under the Debt Transfer.
On the same day, Beijing R&F City, Beijing R&F Tianchuang, Kinetic Qinhuangdao and Qinhuangdao Jifu entered into the Share Transfer Agreement which details the terms of the Acquisition.
TERMINATION OF THE PROPERTY PURCHASE FRAMEWORK AGREEMENT
Pursuant to the Acquisition Framework Agreement, upon Closing, the Property Purchase Framework Agreement will be terminated with immediate effect. Except for the amount paid by Kinetic Qinhuangdao under the Property Purchase Framework Agreement, which shall be fully set off against the consideration payable by Kinetic Qinhuangdao for the Creditor’s Rights Transfer under the Acquisition Framework Agreement, neither the Vendor nor Kinetic Qinhuangdao shall have any other obligations under the Property Purchase Framework Agreement.
LISTING RULES IMPLICATIONS
As one of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the Acquisition is more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction, and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.
INTRODUCTION
Reference is made to the Announcement.
On 30 May 2022, the Vendor entered into the Property Purchase Framework Agreement with Kinetic Qinhuangdao, an indirectly wholly-owned subsidiary of the Company, pursuant to which the Vendor agreed to sell, and Kinetic Qinhuangdao agreed to purchase, the Target Properties for a consideration of RMB1,000,939,241 (inclusive of value-added tax).
As at the date of this announcement, Kinetic Qinhuangdao has already paid RMB564,625,000 to R&F Properties and/or its affiliates as requested by the Vendor for the purchase of the Target Properties under the Property Purchase Framework Agreement.
ACQUISITION OF QINHUANGDAO JIFU
The Board is pleased to announce that, on 6 December 2024 (after trading hours), Kinetic Qinhuangdao, the Vendor, R&F Properties, Beijing R&F City, Beijing R&F Tianchuang and Qinhuangdao Jifu entered into the Acquisition Framework Agreement, pursuant to which, among others, (i) Kinetic Qinhuangdao agreed to acquire, Beijing R&F City and Beijing R&F Tianchuang agreed to sell, 100% equity interests in Qinhuangdao Jifu at nil consideration; (ii) R&F Properties agreed to transfer to Kinetic Qinhuangdao, and Kinetic Qinhuangdao agreed to receive, the creditor’s rights held by R&F Properties against Qinhuangdao Jifu totaling RMB617,394,474.70 for a consideration of RMB564,625,000; (iii) the Vendor agreed to transfer to R&F Properties, and R&F Properties agreed to receive, the debt owed by the Vendor to Kinetic Qinhuangdao (i.e. the amount paid by Kinetic Qinhuangdao under the Property Purchase Framework Agreement) in the amount of RMB564,625,000; and (iv) the Vendor and Kinetic Qinhuangdao agreed to terminate the Property Purchase Framework Agreement. The consideration payable by Kinetic Qinhuangdao for the Creditor’s Rights Transfer shall be fully set off by the equivalent amount payable by R&F Properties under the Debt Transfer.
On the same day, Beijing R&F City, Beijing R&F Tianchuang, Kinetic Qinhuangdao and Qinhuangdao Jifu entered into the Share Transfer Agreement which details the terms of the Acquisition.
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The principal terms of the Acquisition Framework Agreement are set out below:
Date: 6 December 2024
Parties:
(i) The Vendor
(ii) Kinetic Qinhuangdao
(iii) R&F Properties
(iv) Beijing R&F City
(v) Beijing R&F Tianchuang
(vi) Qinhuangdao Jifu
Assets to be Acquired: 100% equity interests in Qinhuangdao Jifu.
Equity Consideration: Nil.
Creditor's Rights to be Transferred: R&F Properties agreed to transfer to Kinetic Qinhuangdao, and Kinetic Qinhuangdao agreed to receive, the Creditor's Rights for a consideration of RMB564,625,000.
Debt to be Transferred: The Vendor agreed to transfer to R&F Properties, and R&F Properties agreed to receive, the debt owed by the Vendor to Kinetic Qinhuangdao in the amount of RMB564,625,000.
Payment Terms: The consideration for the Creditor's Rights Transfer payable by Kinetic Qinhuangdao shall be fully set off by the equivalent amount in the Debt Transfer payable by R&F Properties.
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The principal terms of the Share Transfer Agreement are set out below:
Date: 6 December 2024
Parties:
(i) Beijing R&F City
(ii) Beijing R&F Tianchuang (together with Beijing R&F City, collectively the "Sellers")
(iii) Kinetic Qinhuangdao
(iv) Qinhuangdao Jifu (the "Target Company")
Assets to be Acquired: 100% equity interests in Qinhuangdao Jifu.
Equity Consideration: Nil.
Debt Assumption: The Sellers shall bear the Target Company's development and construction-related liabilities in the amount of RMB118,914,171 (the "Development Liabilities"). If the Target Company and/or Kinetic Qinhuangdao incurs any losses, fees or other expenses due to matters related to the Development Liabilities, the Sellers shall promptly compensate the Target Company and/or Kinetic Qinhuangdao in full for all such losses, fees or other expenses.
Closing: Subject to the closing conditions specified in the section "Conditions Precedent to Closing" below (the "Conditions Precedents") having been fulfilled, or waived by Kinetic Qinhuangdao in writing, completion of the Acquisition (the "Closing") shall take place on the date when the registration with competent authorities for the transfer of the 100% equity interests of Qinhuangdao Jifu to Kinetic Qinhuangdao is completed.
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Conditions Precedent to Closing:
The Closing shall take place within five business days once all Conditions Precedents have either been satisfied or waived by Kinetic Qinhuangdao in writing, but no later than 31 December 2024 (the “Closing Date”).
Completion of the Acquisition is conditional upon various conditions having been fulfilled, or waived by Kinetic Qinhuangdao in writing:
(i) all requisite approvals (including but not limited to approvals from the Shareholders and/or Stock Exchange, if applicable) and consents from third-party creditors (if applicable) having been obtained;
(ii) Kinetic Qinhuangdao is satisfied with the due diligence findings on Qinhuangdao Jifu (including but not limited to financial, legal, and commercial due diligence); and
(iii) there is no breach of the Acquisition Framework Agreement and the Share Transfer Agreement.
Although Kinetic Qinhuangdao is entitled to waive any of the above conditions (i) to (iii), it currently has no intention to waive any such conditions.
Key Representations and Warranties:
Each of the Sellers and the Target Company represents and warrants to Kinetic Qinhuangdao that:
(i) the Sellers legally own the equity securities of the Target Company, free and clear of any encumbrances;
(ii) the information disclosed by the Sellers and the Target Company to Kinetic Qinhuangdao (including but not limited to finance, property, assets, contracts, qualifications, litigation, arbitration, administrative penalties, labor and personnel, taxation, etc.) is true, accurate, complete and valid;
(iii) the financial statements of the Target Company as at and for the eight months ended 31 August 2024 prepared in accordance with PRC laws and applicable accounting standards and practices, truly and fairly reflect the operating conditions, profits and losses of the Target Company as of the base date (as recorded in the relevant financial statements);
(iv) there are no undisclosed loans, debts, guarantees, assurances, commitments, litigations, arbitrations, illegal activities, or violations of the Target Company. The Sellers shall bear any undisclosed debts and legal responsibilities occurred prior to the Closing Date, or if such debts are assumed by the Target Company, the Sellers shall provide full compensation to the Target Company within seven business days and bear the losses, damages and costs (including but not limited to reasonable attorney fees, litigation fees, notary fees, execution fees, etc.) incurred or suffered by Kinetic Qinhuangdao and/or the Target Company; and
(v) if the commencement and/or completion and/or delivery of the real estate development project of the Target Company is delayed due to reasons unilaterally caused by the Sellers prior to the Closing Date, resulting in default liabilities (including but not limited to default liabilities under the State-owned Construction Land Use Right Transfer Contract (國有建設用地使用權出讓合同) and pre-sale contracts for commercial housing), the Sellers shall bear all legal responsibilities and make compensation accordingly. In case of losses incurred by Kinetic Qinhuangdao and/or the Target Company, the Sellers shall promptly and fully compensate Kinetic Qinhuangdao and/or the Target Company (including but not limited to reasonable attorney fees, litigation costs, notary fees, enforcement costs, etc.). After the Closing Date, Kinetic Qinhuangdao shall advance the progress of project construction and delivery. If project completion or delivery is delayed due to the fault of Kinetic Qinhuangdao, Kinetic Qinhuangdao shall bear the corresponding legal liability.
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Termination of the Share Transfer Agreement:
Unless otherwise agreed in the Share Transfer Agreement, the Share Transfer Agreement shall be terminated upon the occurrence of the following circumstances:
(i) both parties agree to terminate the Share Transfer Agreement; or
(ii) the purpose of the Share Transfer Agreement could not be achieved due to force majeure.
BASIS OF DETERMINATION OF CONSIDERATION FOR THE ACQUISITION
The nil consideration for the acquisition of 100% equity interests in Qinhuangdao Jifu was arrived at after arm's length negotiations among Beijing R&F City, Beijing R&F Tianchuang and Kinetic Qinhuangdao because Qinhuangdao Jifu is still at the development stage and had no positive net assets as at 31 August 2024. The Directors (including the independent non-executive Directors) considered that the nil consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.
INFORMATION ON QINHUANGDAO JIFU
Qinhuangdao Jifu, an indirectly wholly-owned subsidiary of R&F Properties, is a limited liability company established in the PRC with the registered share capital of RMB30,100,000. It principally engages in real estate development and is currently developing a real estate project located south of Songshi Golf, west of Tuofeng Road, and north of Planning Secondary Road 7 (松石高爾夫以南、駝峰路以西、規劃次乾路七以北), Beidaihe District, Qinhuangdao City, Hebei Province (the "Qinhuangdao Project"). The Qinhuangdao Project will include villas, apartments and commercial buildings, with a total site area of 166,900 square meters and a total gross floor area of 87,989 square meters. The Qinhuangdao Project is currently under construction and expected to be completed by 2030.
Set out below is the financial information of Qinhuangdao Jifu as extracted from its unaudited financial statements for the years ended 31 December 2022 and 2023:
| For the year ended 31 December 2022 | For the year ended 31 December 2023 | ||
|---|---|---|---|
| Net loss before taxation (RMB) | Net loss after taxation (RMB) | Net loss before taxation (RMB) | Net loss after taxation (RMB) |
| (8,280,097) | (7,963,847) | (1,948,213) | (1,948,213) |
As at 31 August 2024, the total assets and net assets of Qinhuangdao Jifu were RMB901,942,683 and negative RMB74,053,968 respectively.
INFORMATION OF THE GROUP AND THE PARTIES INVOLVED
The Group is principally engaged in the extraction and sales of coal products.
Kinetic Qinhuangdao is a limited liability company incorporated in the PRC and an indirectly wholly-owned subsidiary of the Company. It principally engages in the wholesale and retail of coal and products, metals and metal mines, machinery and equipment and hardware products, import of coal, warehousing, and leasing and management of its own properties.
The Vendor is a limited liability company established in the PRC and an indirectly wholly-owned subsidiary of R&F Properties. It primarily engages in the development and management of real estate properties, marketing and sales activities and consulting services for tourism projects.
R&F Properties is a joint stock limited company incorporated in the PRC with limited liability and listed on the main board of the Stock Exchange (Stock Code: 2777). It primarily engages in property development, as well as diversified businesses including hotel development, commercial operation, culture, recreation and tourism, healthcare and architectural and engineering design.
Beijing R&F City is a limited liability company established in the PRC and an indirectly wholly-owned subsidiary of R&F Properties. It primarily engages in property development and sales.
Beijing R&F Tianchuang is a limited liability company established in the PRC and an indirectly wholly-owned subsidiary of R&F Properties. It primarily engages in advertisement design and production.
Qinhuangdao Jifu is a limited liability company established in the PRC. It principally engages in real estate development. As at the date of this announcement, Qinhuangdao Jifu is held as to 99.7% by Beijing R&F City and as to 0.3% by Beijing R&F Tianchuang. Upon completion of the Acquisition, Qinhuangdao Jifu will become an indirectly wholly-owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.
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Mr. Zhang Li, a substantial shareholder of the Company, has approximately 27.77% interest in R&F Properties as at the date of this announcement. Save as disclosed above, to the best of the Directors' knowledge, information and belief, the Vendor, R&F Properties, Beijing R&F City, Beijing R&F Tianchuang, Qinhuangdao Jifu and their ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.
REASONS FOR AND BENEFITS OF THE ACQUISITION
As at the date of this announcement, Kinetic Qinhuangdao has already paid RMB564,625,000 to the Vendor for the acquisition of Target Properties pursuant to the Property Purchase Framework Agreement. However, the overall progress of the property registration procedures in relation to the Target Properties has been delayed and not yet been completed. To protect and safeguard the interests of the Company and the Shareholders, the Vendor and Kinetic Qinhuangdao have agreed to terminate the Property Purchase Framework Agreement. Upon Closing, the Property Purchase Framework Agreement will be terminated with immediate effect. Except for the amount paid by Kinetic Qinhuangdao under the Property Purchase Framework Agreement of RMB564,625,000, which shall be fully set off against the consideration payable by Kinetic Qinhuangdao for the Creditor's Rights Transfer under the Acquisition Framework Agreement, neither the Vendor nor Kinetic Qinhuangdao shall have any other obligations under the Property Purchase Framework Agreement. Kinetic Qinhuangdao could benefit from the Creditor's Rights Transfer as the Vendor agreed to transfer the creditor's rights worth RMB617,394,474.70 to Kinetic Qinhuangdao. Such commercial arrangement was reached after arm's length negotiations between the Vendor and Kinetic Qinhuangdao, taking into account all the circumstances of the acquisition of Target Properties under the Property Purchase Framework Agreement, the Acquisition, the Creditor's Rights Transfer and Debt Transfer under the Acquisition Framework Agreement and the Share Transfer Agreement. In addition, Kinetic Qinhuangdao will acquire the 100% equity interests of Qinhuangdao Jifu at nil consideration from the Sellers under the Share Transfer Agreement. Although Qinhuangdao Jifu is still at the development stage, after taking into account the prospect and potential of business of Qinhuangdao Jifu, in particular the Qinhuangdao Project, which is still under construction and expected to be completed by 2030, the Acquisition is therefore considered by the Board to be a good opportunity to generate return for its Shareholders.
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The Directors (including the independent non-executive Directors) consider that the terms of the Acquisition Framework Agreement and Share Transfer Agreement, are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Ms. Zhang Lin, a non-executive Director and an associate of Mr. Zhang Li, has abstained from voting on the Board meeting approving the Acquisition Framework Agreement and Share Transfer Agreement.
TERMINATION OF THE PROPERTY PURCHASE FRAMEWORK AGREEMENT
Pursuant to the Acquisition Framework Agreement, upon Closing, the Property Purchase Framework Agreement will be terminated with immediate effect. Except for the amount paid by Kinetic Qinhuangdao under the Property Purchase Framework Agreement, which shall be fully set off against the consideration payable by Kinetic Qinhuangdao for the Creditor's Rights Transfer under the Acquisition Framework Agreement, neither the Vendor nor Kinetic Qinhuangdao shall have any other obligations under the Property Purchase Framework Agreement.
LISTING RULES IMPLICATIONS
As one of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the Acquisition is more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction, and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
"Acquisition"
the proposed acquisition of 100% equity interests in Qinhuangdao Jifu by Kinetic Qinhuangdao from Beijing R&F City and Beijing R&F Tianchuang pursuant to the terms of the Share Transfer Agreement;
“Acquisition Framework Agreement” the acquisition framework agreement dated 6 December 2024 entered into among the Vendor, R&F Properties, Beijing R&F City, Beijing R&F Tianchuang and Qinhuangdao Jifu in relation to (i) the Acquisition; (ii) the Creditor’s Rights Transfer; and (iii) the Debt Transfer and (iv) the termination of the Property Purchase Framework Agreement;
“associate” has the meaning ascribed to it under the Listing Rules;
“Beijing R&F City” Beijing R&F City Real Estate Development Co., Ltd.*（北京富力城房地產開發有限公司），a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of R&F Properties;
“Beijing R&F Tianchuang” Beijing R&F Tianchuang Advertising Co., Ltd.*（北京富力天創廣告有限公司），a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of R&F Properties;
“Board” the board of Directors;
“Company” Kinetic Development Group Limited (formerly known as Kinetic Mines and Energy Limited), a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange;
“connected person(s)” has the meaning ascribed to it under the Listing Rules;
“Director(s)” the director(s) of the Company;
“Group” the Company and its subsidiaries;
“Hong Kong” the Hong Kong Special Administrative Region of the PRC;
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“Kinetic Qinhuangdao”
Kinetic (Qinhuangdao) Energy Group Co., Ltd.（力量（秦皇島）能源集團有限公司），formerly known as Kinetic (Qinhuangdao) Energy Co., Ltd.（力量（秦皇島）能源有限公司），a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of the Company;
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange;
“PRC”
The People’s Republic of China, and for the purpose of this announcement only, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan;
“Property Purchase Framework Agreement”
the Framework Agreement on Sale and Purchase of Properties entered into between the Vendor and Kinetic Qinhuangdao on 30 May 2022;
“Qinhuangdao Jifu”
Qinhuangdao Jifu Real Estate Development Co., Ltd. *（秦皇島極富房地產開發有限公司），a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of R&F Properties;
“RMB”
Renminbi, the lawful currency of the PRC;
“R&F Properties”
Guangzhou R&F Properties Co., Ltd.（廣州富力地產股份有限公司），a joint stock limited company incorporated in the PRC with limited liability and listed on the main board of the Stock Exchange (Stock Code: 2777);
“Shares”
ordinary share(s) with a nominal value of US$0.001 each in the share capital of the Company;
“Shareholder(s)”
holder(s) of the Shares;
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“Share Transfer Agreement”
the share transfer agreement dated 6 December 2024 entered into among Beijing R&F City, Beijing R&F Tianchuang, Kinetic Qinhuangdao and Qinhuangdao Jifu in relation to acquisition of 100% equity interests in Qinhuangdao Jifu;
“Stock Exchange”
The Stock Exchange of Hong Kong Limited;
“Vendor”
Hainan Hangxiao Real Estate Development Co., Ltd.*（海南航孝房地產開發有限公司），a limited liability company established in the PRC and an indirect wholly-owned subsidiary of R&F Properties;
“%”
per cent
- The English translation of the Chinese names of the respective companies in this announcement, where indicated, is included for information purpose only, and should not be regarded as the official English names of the respective companies.
By Order of the Board
Kinetic Development Group Limited
Ju Wenzhong
Chairman and Executive Director
Hong Kong, 6 December 2024
As at the date of this announcement, the Board comprises seven Directors, of whom three are executive Directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive Officer) and Mr. Ji Kunpeng; one is a non-executive Director, namely Ms. Zhang Lin, and three are independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan and Ms. Xue Hui.