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KLN Logistics Group Limited M&A Activity 2025
49356_rns_2025-06-10_c70c2a5e-b288-41c4-965f-28f75f88a050.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.
KLN Logistics Group Limited
(Incorporated in the British Virgin Islands and continued into Bermuda as an exempted company with limited liability)
Stock Code 636
CONNECTED TRANSACTION IN RESPECT OF THE DISPOSAL OF 100% EQUITY INTERESTS IN THE TARGET COMPANY
The Board is pleased to announce that on 10 June 2025, the Buyer and the Seller entered into the Equity Transfer Agreement in relation to the Disposal.
THE DISPOSAL
Pursuant to the Equity Transfer Agreement, the Seller conditionally agreed to sell, and the Buyer conditionally agreed to buy, the Sale Interests in accordance with the terms and conditions of the Equity Transfer Agreement. The Sale Interests represent 100% equity interests in the Target Company. Upon Completion of the Disposal, the Target Company will cease to be a subsidiary of the Company.
LISTING RULES IMPLICATIONS
The Buyer is an indirect wholly-owned subsidiary of S.F. Holding, which is a controlling shareholder of the Company. The Buyer is therefore a connected person of the Company. As such, the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios in respect of the Disposal exceed 0.1% but all are less than 5%, the Disposal is subject to the announcement requirement but are exempt from the circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
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INTRODUCTION
The Board is pleased to announce that on 10 June 2025, the Buyer and the Seller entered into the Equity Transfer Agreement in relation to the Disposal.
THE PRINCIPAL TERMS OF THE EQUITY TRANSFER AGREEMENT
- Date
10 June 2025
- Parties
(i) Buyer: Guangdong Shunhe Supply Chain Management Co., Ltd.* (廣東順合供應鏈管理有限公司), an indirect wholly-owned subsidiary of S.F. Holding; and
(ii) Seller: Kerry IMS Chemical Logistics Ltd.* (嘉里化工物流有限公司), an indirect wholly-owned subsidiary of the Company.
- Interest to be sold
Pursuant to the Equity Transfer Agreement, the Seller conditionally agreed to sell, and the Buyer conditionally agreed to buy, the Sale Interests in accordance with the terms and conditions of the Equity Transfer Agreement.
The Sale Interests represent 100% equity interest in the Target Company. Upon Completion of the Disposal, the Target Company will cease to be a subsidiary of the Company.
- Total Consideration and basis of determination
The Total Consideration is RMB151,000,000, which was determined based on arm's length negotiation between the parties with reference to the valuation on the Sale Interests based on fair value as at 31 December 2024 (the "Valuation Date") conducted by an independent valuer appointed by the Company.
Valuation
The appraised fair value of the Sale Interests as at the Valuation Date was RMB151,349,590.
According to the valuation report prepared by the independent valuer appointed by the Company, the valuation was determined using income approach, which derives the fair value of the Sales Interests by discounting the future free cash flows expected to be generated by the Target Company to a present value by using a discount rate of 11.22%. The 11.22% discount rate adopted was a weighted average cost of capital, which represents an average cost of capital from all sources of financing, calculated based on the cost of equity of 15.85% and the after-tax cost of debt of 3.68% weighted by the expected capital structure.
The independent valuer considered three approaches, namely asset approach, market approach and income approach in the valuation exercise. The asset approach and market approach have not been applied, considering (i) a separately identifiable cash flows attributable to the Target Company was available; (ii) the Target Company was not in an early stage nor under liquidation; and (iii) the future growth pattern and cost structure of the Target Company may differ from the listed comparable companies, and they may not be perfectly comparable in terms of their differences in size, market share, geographical location and other operating and financial status.
The valuation was also subject to the following major assumptions:
(a) there will be no material change in the existing political, legal, technological, fiscal or economic conditions which might adversely affect the economy in general and the business of the Target Company;
(b) the financial projections for the period from 1 January 2025 to 31 December 2029 as provided by the Company;
(c) the long-term debt-to-equity ratio of the Target Company is assumed to converge to the industry average, as estimated from comparable listed companies;
(d) the applicable tax rate is assumed to be the statutory rate of 25% in the PRC, reflecting the expected long-term effective tax rate for the Target Company; and
(e) the long-term growth rate of the Target Company is assumed to be the long-term real GDP growth rate of 3.3% in the PRC.
The Board has reviewed the valuation report prepared by the independent valuer, and discussed with the management of the Target Company on, amongst other things, the valuation method and basis of preparation of the valuation of the Sale Interests, the assumptions adopted in the valuation, and the professional qualification and experience of the independent valuer. The Board had also undertaken various steps to ascertain the fairness, reasonableness and appropriateness of the valuation, including but not limited to (i) reviewing the financial statements and financial forecasts of the Target Company to understand the financial performance and position of the Target Company; and (ii) discussing the business nature and business model of the Target Company together with the management of the Target Company. Based on the foregoing, and taking into account that the valuation method, namely the income approach used in determining the valuation of the Sale Interests is a commonly adopted approach, the Board (including the independent non-executive Directors) considers that the valuation method and the assumptions used in the valuation of the Sale Interests are fair and reasonable, and that the Total Consideration for the Disposal is fair and reasonable, and in the interests of the Company and the Shareholders as a whole.
Payment of Total Consideration
The Total Consideration shall be payable to the Seller by the Buyer in cash as follows: (i) 90% of the Total Consideration shall be paid within 10 business days upon fulfillment or waiver of the condition precedents to the handover (the "First Phase Consideration"); and (ii) the remaining 10% shall be paid within 10 business days upon fulfillment or waiver of the condition precedents to the Completion (the "Second Phase Consideration").
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- Conditions precedent
Conditions precedents to handover
The payment of the First Phase Consideration is conditional on the fulfilment or waiver of the following conditions precedent to the handover:
(i) the Equity Transfer Agreement having been duly executed by the parties and having become effective;
(ii) the representations and warranties made by the Seller and the Target Company remain true, accurate, complete, and not misleading from the signing date until the handover date, and the Seller and the Target Company having fulfilled all their commitments and obligations under the Equity Transfer Agreement by the handover date;
(iii) there are no applicable laws, court judgments, arbitration awards, or government orders that restrict, prohibit, or hinder the Disposal, nor any pending or potential litigation or arbitration that could materially adversely affect the Disposal;
(iv) the Target Company having passed a shareholder and board resolution to approve the Equity Transfer Agreement, the relevant changes to the Target Company’s legal representative, directors, general manager, financial officer, and supervisor as requested by the Buyer, and the corresponding amendments to the articles of the Target Company;
(v) the Target Company and Seller having obtained all necessary government and regulatory approvals (except for the registration procedures related to this equity transfer) and third-party consents or waivers as may be required;
(vi) all registration or filing procedures with the State Administration for Market Regulation related to the changes of the relevant directors and senior management and amendments to the articles of the Target Company having been completed;
(vii) since signing date of the Equity Transfer Agreement, no events having occurred that could cause a material adverse effect on the Target Company’s existence, business, core assets, financial condition, licenses, or ability to perform obligations, nor is such an event reasonably expected;
(viii) the Seller having signed a letter consenting with the key personnel of the Target Company holding positions in the Buyer and its affiliated companies;
(ix) the Seller having provided the Buyer with the Target Company’s authorised license agreements for the relevant IT systems;
(x) the Buyer having obtained the relevant internal approvals related to the Equity Transfer Agreement; and
(xi) the Seller and the Target Company having jointly issued a letter confirming that all the above conditions precedent have been met.
As of the date of this announcement, conditions set out in paragraph (i) above have been satisfied. If the conditions to handover have not been satisfied or otherwise waived within 3 months after the signing date of the Equity Transfer Agreement, such Disposal may be terminated by the Buyer in writing.
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Conditions precedents to Completion
The payment of the Second Phase Consideration and the Completion of the Disposal is conditional on the fulfilment or waiver of the following conditions precedent:
(i) the Equity Transfer Agreement remains effective, and all other necessary completion documents having been executed by the parties;
(ii) there are no applicable laws, court judgments, arbitration awards, or government orders that restrict, prohibit, or hinder the Disposal, nor any pending or potential litigation or arbitration that could materially adversely affect the Disposal;
(iii) the Target Company having passed a shareholder and board resolution to approve the Equity Transfer Agreement and the transactions contemplated thereunder, the relevant changes to the Target Company’s legal representative, directors, general manager, financial officer, and supervisor as requested by the Buyer, and the corresponding amendments to the articles of the Target Company;
(iv) the Target Company and Seller having obtained all necessary government and regulatory approvals and third-party consents or waivers as may be required;
(v) all registration or filing procedures with the State Administration for Market Regulation related to the changes of the relevant directors and senior management of the Target Company and the equity transfer having been completed;
(vi) the Target Company having renewed the relevant core licenses and provided the renewed licences to the Seller;
(vii) since signing date of the Equity Transfer Agreement, no events having occurred or are reasonably expected that could cause a material adverse effect on the Target Company (excluding events or facts caused by the Buyer and/or its personnel, representatives or agents);
(viii) the Target Company having obtained written consent from the relevant banks of the Target Company confirming their awareness and consent to the Disposal;
(ix) the Target Company having obtained written consents from its suppliers, customers and business partners (where necessary) confirming their awareness and consent to the Disposal, and the Target Company having received no notice from any of its suppliers, customers or business partners stating their intention to terminate business relationship with the Target Company;
(x) the Target Company having entered into a fee settlement agreement with the Seller and its affiliates in relation to the settlement of relevant operating expenses and costs, and all relevant fees having been settled in accordance with such fee settlement agreement;
(xi) the Target Company having terminated the relevant employment relationship with staff not affiliated with the Target Company, and provided proof of such termination of employment relationship to the Buyer;
(xii) the Seller and the Target Company having signed a lease agreement with the relevant owner of the office premises of the Target Company; and
(xiii) the Seller and the Target Company having jointly issued a letter confirming that all the above conditions precedent have been met.
As of the date of this announcement, none of the conditions to Completion have been satisfied and/or waived. If the conditions to Completion have not been satisfied or otherwise waived by the Long Stop Date, such Disposal may be terminated by the Buyer in writing.
REASONS FOR AND BENEFITS OF THE DISPOSAL
The Disposal represents the continuation of the Group's strategy to streamline its operations, reconfigure resources and refocus on its integrated logistics and international freight forwarding businesses. The Directors are of the view that the Disposal will improve its cash position, and thus allow the Group to restructure its strategic business position and focus on pursuing opportunities in its core businesses in the future.
The Equity Transfer Agreement was arrived at after arm's length negotiations between the parties. The Directors (including the independent non-executive Directors, and excluding each of Mr WANG Wei, Mr HO Chit and Ms OOI Bee Ti who has abstained from voting on the relevant resolutions approving the Equity Transfer Agreement and transactions contemplated thereunder) are of the view that the Disposal is on normal commercial terms which are fair and reasonable, and is in the interests of the Company and its Shareholders as a whole.
Mr WANG Wei, the chairman of the Board and a non-executive Director, is an executive director, chairman of the board of directors and general manager and controlling shareholder of S.F. Holding. Mr HO Chit, an executive Director and the chief strategy officer of the Company, is an executive director, deputy general manager and chief financial officer of S.F. Holding and he is interested in 122,000 ordinary shares (A Shares) in S.F. Holding and options granted under the 2022 stock option incentive plan of S.F. Holding to subscribe for 244,000 ordinary shares (A Shares) in S.F. Holding (representing approximately 0.01% in the issued share capital (A Shares) of S.F. Holding). Ms OOI Bee Ti, a non-executive Director, is the head of treasury center of S.F. Holding and she is interested in 71,400 ordinary shares (A Shares) in S.F. Holding and options granted under the 2022 stock option incentive plan of S.F. Holding to subscribe for 136,000 ordinary shares (A Shares) in S.F. Holding (representing less than 0.01% in the issued share capital (A Shares) of S.F. Holding). Each of Mr WANG Wei, Mr HO Chit and Ms OOI Bee Ti therefore abstained from voting on the relevant resolutions of the Board approving the Equity Transfer Agreement and transactions contemplated thereunder. Save as disclosed above, none of the other Directors has a material interest in the Equity Transfer Agreement, or was required to abstain from voting on the relevant resolutions of the Board.
INFORMATION ON THE PARTIES
Information about the Group
The Group operates as a leading logistics service provider in Asia with a highly diversified business portfolio and global presence in 59 countries and territories. Headquartered in Hong Kong, the Group offers a broad range of supply chain solutions from integrated logistics, international freight forwarding (air, ocean, road, rail and multimodal), industrial project logistics, to cross-border e-commerce and infrastructure investment.
Information about Seller
The Seller is a company established in the PRC and an indirect wholly-owned subsidiary of the Company engaging in investment holding and management of the Company's chemical logistics subsidiaries in the PRC.
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Information about the Buyer
The Buyer is a company established in the PRC and is currently engaged in investment holding. It is an indirect wholly-owned subsidiary of S.F. Holding, which is a leading global integrated logistics services provider.
Information about Target Company
The Target Company is a limited liability company established in the PRC, engaging in logistics services with a specialization on chemicals' logistics and warehousing services with chemical logistics centers in the PRC.
Set out below is a summary of the audited financial information of the Target Companies for the two years ended 31 December 2023 and 2024:
For the year ended 31 December
| | 2023
(audited)
(RMB'000) | 2024
(audited)
(RMB'000) |
| --- | --- | --- |
| Net profit/loss before taxation | -9,584 | 4,763 |
| Net profit/loss after taxation | -10,125 | 5,140 |
The audited net asset value of the Target Company was approximately RMB23,874,000 as at 31 December 2024, and the unaudited net asset value of the Target Company approximately RMB28,725,000 as at 30 April 2025.
The original investment cost of the Sale Interests was approximately RMB145,600,000. It is expected that the Disposal (before deducting the related expenses) will not result in any changes to the retained earnings of the Group given that the gain on disposal to be recognized in the profit or loss will be set off by the transfer of reserves to the retained earnings upon the completion of the Disposal.
The Group intends to use the proceeds from the Disposal to repay its loans.
LISTING RULES IMPLICATIONS
The Buyer is an indirect wholly-owned subsidiary of S.F. Holding, which is a controlling shareholder of the Company. The Buyer is therefore a connected person of the Company. As such, the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios in respect of the Disposal exceed $0.1\%$ but all are less than $5\%$, the Disposal is subject to the announcement requirement but are exempt from the circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
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DEFINITIONS
Unless the context requires otherwise, the following expressions shall have the following meanings in this announcement:
"Board"
the board of Directors
"Buyer"
Guangdong Shunhe Supply Chain Management Co., Ltd.* (廣東順合供應鏈管理有限公司), a company established in the PRC and an indirect wholly-owned subsidiary of S.F. Holding
"Company"
KLN Logistics Group Limited (formerly Kerry Logistics Network Limited), incorporated in the British Virgin Islands and continued into Bermuda to become an exempted company with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 636)
"Completion"
completion of the Disposal, which will take place on the date on which all the condition precedents to the Disposal have been fulfilled or waived in accordance with the terms of the Equity Transfer Agreement
"connected person"
has the meaning ascribed to it under the Listing Rules
"controlling shareholder(s)"
has the meaning ascribed to it under the Listing Rules
"Director(s)"
director(s) of the Company
"Disposal"
the sale and transfer by the Seller to the Buyer of the Sale Interests pursuant to the terms of the Equity Transfer Agreement
"Equity Transfer Agreement"
the equity transfer agreement dated 10 June 2025, entered into by and among the Buyer, the Seller and the Target Company
"Group"
the Company and its subsidiaries
"HK$"
Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"
Hong Kong Special Administrative Region of the PRC
"Listing Rules"
the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time
"Long Stop Date"
6 December 2025, or such other date as the parties may agree
"PRC"
the People's Republic of China
"Sale Interests"
100% equity interests in the Target Company, which will be sold and transferred to the Buyer at Completion
"Seller"
Kerry IMS Chemical Logistics Ltd.* (嘉里化工物流有限公司), a company established in the PRC and an indirect wholly-owned subsidiary of the Company
"S.F. Holding"
S.F. Holding Co., Ltd., a joint stock company established in the PRC with limited liability, the domestic ordinary shares of which are listed on the Shenzhen Stock Exchange (stock code: 002352.SZ) and the overseas listed foreign ordinary shares of which are listed on the Main Board of the Stock Exchange (stock code: 06936), and one of the controlling shareholders of the Company
"Share(s)"
share(s) of nominal value of HK$0.50 each of the Company, or, if there has been a subdivision, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary share capital of the Company
"Shareholder(s)"
holder(s) of any Share(s)
"Stock Exchange"
The Stock Exchange of Hong Kong Limited
"subsidiary(ies)"
has the meaning ascribed to it under the Listing Rules
"Target company"
Kerry IMS Chemical Storage and Transport (Shanghai) Co., Ltd.* (嘉里化工儲運（上海）有限公司), a limited liability company established in the PRC. As at the date of the Equity Transfer Agreement, the Target Company is a wholly-owned subsidiary of the Seller.
"Total Consideration"
the total consideration payable by the Buyer to the Seller for the Disposal
"%"
per cent
- For identification purpose only
By Order of the Board
KLN Logistics Group Limited
LEE Pui Nee
Company Secretary
Hong Kong, 10 June 2025
As at the date of this announcement, the Directors of the Company are:
Chairman, Non-executive Director:
Mr WANG Wei
Vice Chairman, Non-executive Director:
Mr KUOK Khoon Hua
Executive Directors:
Mr CHEUNG Ping Chuen Vicky, Mr CHENG Chi Wai and Mr HO Chit
Non-executive Directors:
Ms CHEN Keren and Ms OOI Bee Ti
Independent Non-executive Directors:
Dr CHEUNG Wai Man, Mr LAI Sau Cheong Simon, Mr TAN Chuen Yan Paul and Ms WONG Yu Pok Marina
This announcement is published on the websites of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the Company (www.kln.com).
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