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Litu Holdings Limited Proxy Solicitation & Information Statement 2025
49624_rns_2025-06-10_a98b9e8b-2039-404c-8f56-67fe32be3fc0.pdf
Proxy Solicitation & Information Statement
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in doubt as to any aspect of this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares of Litu Holdings Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.
LITU HOLDINGS LIMITED
力圖控股有限公司
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 1008)
MAJOR TRANSACTION:
DISPOSAL OF EQUITY INTEREST IN A PRC COMPANY
Capitalised terms used on this cover shall have the same meanings as those defined in this circular, unless the context requires otherwise. A letter from the Board is set out on pages 4 to 16 of this circular.
The Company has obtained written Shareholders' approval for the Disposal Agreement and the transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules from a closely allied group of Shareholders together holding more than 50% of the voting rights at a general meeting to approve the Disposal Agreement and the transactions contemplated thereunder. Accordingly, no Shareholders' meeting will be held to approve the Disposal Agreement and the transactions contemplated thereunder pursuant to Rule 14.44 of the Listing Rules. This circular is being despatched to the Shareholders for information only.
10 June 2025
CONTENTS
Page
DEFINITIONS ... 1
LETTER FROM THE BOARD ... 4
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP ... I-1
APPENDIX II — GENERAL INFORMATION ... II-1
- i -
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
“Announcement” the announcement of the Company dated 20 May 2025 in relation to the Disposal
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Board” the board of Directors
“Business Day” a day (other than a Saturday or Sunday or public holiday) on which banks are open in the PRC for general commercial business
“China Tobacco Hunan” 湖南中煙投資管理有限公司 (China Tobacco Hunan Investment Management Co., Ltd., a member of a state-owned provincial-level or equivalent cigarette manufacturer group in the PRC which is subordinated to 中國煙草總公司 (China National Tobacco Corporation), a national corporation responsible for the management of the tobacco industry in the PRC
“Company” Litu Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on the main board of the Stock Exchange (stock code: 1008)
“Completion” completion of the Disposal
“connected person(s)” 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 proposed disposal of the Sale Equity by the Vendor to the Purchaser pursuant to the Disposal Agreement
“Disposal Agreement” the conditional sale and purchase agreement dated 20 May 2025 and entered into between the Vendor and the Purchaser in relation to the Disposal
- 1 -
DEFINITIONS
“Disposal Company”
Changde Gold Roc Printing Co., Ltd. (常德金鹏印刷有限公司), a company established in the PRC with limited liability, the equity interest of which is owned as to 69% by China Tobacco Hunan and 31% by the Company through the Vendor as at the Latest Practicable Date
“Group”
the Company and its subsidiaries
“Hong Kong”
Hong Kong Special Administrative Region of the People’s Republic of China
“Independent Third Party(ies)”
person(s) who is(are) independent of and not connected with the Company and any of its connected persons
“Latest Practicable Date”
5 June 2025, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“PRC”
the People’s Republic of China, which for the purpose of this circular excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“Purchaser”
Hunan Caixin Investment Holding Group Co. Ltd. (湖南財鑫資本管理有限公司), a company established in the PRC and an Independent Third Party
“Sale Equity”
the 31% equity interest in the Disposal Company held by the Company through the Vendor
“Share(s)”
ordinary share(s) of HK$0.005 each in the share capital of the Company
“Shareholder(s)”
holder(s) of Share(s)
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Vendor”
Litu Investment & Development Limited (力圖投資發展有限公司), a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
- 2 -
DEFINITIONS
"RMB"
Renminbi, the lawful currency of the PRC
"%"
per cent.
The English translation of Chinese names marked with “#” in this circular, where indicated, is included for identification purpose only, and should not be regarded as the official English translation of such Chinese names.
For the purpose of this circular, unless otherwise indicated, the exchange rate at RMB0.9326 = HK$1 has been used, where applicable, for the purpose of illustration only and not constitute a representation that any amounts have been, could have been or may be exchanged.
Certain amounts and percentage figures in this circular have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables and charts may not be an arithmetic aggregation of the figures preceding them.
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LETTER FROM THE BOARD
LITU HOLDINGS LIMITED
力圖控股有限公司
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 1008)
Board of Directors
Executive Directors:
Mr. Huang Wanru (Chairman)
Ms. Chen Lin Lin Caddie
Non-executive Director:
Ms. Li Li
Independent non-executive Directors:
Mr. Lui Tin Nang
Mr. Lam Ying Hung, Andy
Mr. Siu Man Ho, Simon
Dr. Wan Xiaoxia
Registered Office:
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
Head office and principal place of business in Hong Kong:
3/F, 38 On Lok Mun Street
On Lok Tsuen, Fanling
New Territories
Hong Kong
10 June 2025
To the Shareholders
Dear Sir/Madam,
MAJOR TRANSACTION:
DISPOSAL OF EQUITY INTEREST IN A PRC COMPANY
INTRODUCTION
Reference is made to the Announcement.
On 20 May 2025, the Vendor, being a wholly-owned subsidiary of the Company, entered into the Disposal Agreement with the Purchaser in relation to the Disposal, pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, the Sale Equity at the cash consideration of RMB142.5 million (equivalent to approximately HK$152.8 million).
LETTER FROM THE BOARD
The purpose of this circular is to provide the Shareholders with, among other things, further details of the Disposal Agreement and the transactions contemplated thereunder and other information as required under the Listing Rules.
THE DISPOSAL AGREEMENT
The principal terms of the Disposal Agreement are set forth below:
Date
20 May 2025
Parties
(1) The Vendor as vendor
(2) The Purchaser as purchaser
To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, the Purchaser is a company established in the PRC principally engaged in investment holding, management of industrial funds, participation in market-oriented funds and project investment and wholly-owned by Hunan Caixin Investment Holding Group Co., Ltd. (湖南財鑫投資控股集團有限公司), a company established in the PRC which is in turn owned as to approximately 66.8% by the Changde Municipal Finance Bureau (常德市財政局) of the PRC, with the remaining 33.2% owned by four other PRC state-owned entities as at the Latest Practicable Date, and the Purchaser and its ultimate beneficial owners are Independent Third Parties.
Subject matter
Pursuant to the Disposal Agreement, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, all of its 31% equity interest in the Disposal Company, being the Sale Equity.
Consideration
The consideration of the Disposal is RMB142.5 million (equivalent to approximately HK$152.8 million) payable in cash by the Purchaser. The Vendor and the Purchaser agreed that after the signing of the Disposal Agreement, a joint management account (the "Joint Account") will be opened and maintained with a bank mutually agreed upon by both parties for the transfer of the consideration.
The consideration of the Disposal shall be paid by the Purchaser to the Vendor in the following manner:
(i) RMB28.5 million (equivalent to approximately HK$30.6 million), i.e. 20% of the total consideration, shall be deposited by the Purchaser into the Joint Account, within three (3) Business Days from the date of signing of the Disposal Agreement and the opening of the Joint Account;
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LETTER FROM THE BOARD
(ii) RMB57.0 million (equivalent to approximately HK$61.1 million), i.e. 40% of the total consideration, shall be deposited by the Purchaser into the Joint Account within three (3) Business Days after the Company has complied with all the requirements pursuant to the Listing Rules in respect of the Disposal Agreement and the transactions contemplated thereunder, including the despatch of the circular;
(iii) RMB57.0 million (equivalent to approximately HK$61.1 million), i.e. 40% of the total consideration, shall be deposited by the Purchaser into the Joint Account, within three (3) Business Days after the completion of the relevant industrial and commercial registration in respect of the transfer of the Sale Equity in the PRC; and
(iv) after the relevant industrial and commercial registration is completed and the obtaining of the tax compliance certificate, and the Vendor has confirmed that all conditions have been met, the Vendor shall issue a transfer notice to the Purchaser. Thereafter, the Purchaser shall, within five (5) Business Days after receiving the transfer notice and confirming that all conditions have been met, cooperate with the Vendor to issue a payment instruction to the bank to transfer the entire consideration of the Disposal of RMB142.5 million (equivalent to approximately HK$152.8 million) from the Joint Account to a designated account of the Vendor, after the bank has deducted the taxes and corresponding fees payable by the Vendor in accordance with the relevant tax requirements for withholding tax.
In the event that there occurs any material non-operational events to the Disposal Company before Completion which causes material change of more than 5% to its net asset value as at 31 December 2023, the Vendor and the Purchaser may further discuss and determine whether any adjustment shall be made to the consideration.
The consideration was arrived at after arm's length negotiation between the Vendor and the Purchaser taking into account a number of factors, namely, the minority stake and the lack of board seat entitlement of the Company in the Disposal Company and the factors contained in the section headed "Reasons for and benefits of the Disposal", such as the business operations of the Disposal Company, the unsatisfactory performance of the Disposal Company over the recent years, and the uncertainty of the future operation duration of the Disposal Company, which is currently due to expire on 30 June 2025, as well as the reference value of the entire equity interests of the Disposal Company of approximately RMB495.3 million as at 31 December 2024 based on an independent valuation using market approach. In view of the foregoing, the Board considers that the consideration is fair and reasonable.
- 6 -
LETTER FROM THE BOARD
The reference value of the entire equity interests of the Disposal Company of approximately RMB495.3 million as at the valuation date of 31 December 2024 was arrived at based on the independent valuation on market approach basis conducted by Zhong Wei Zheng Xin (Beijing) Asset Appraisal Co., Ltd. $^{#}$ (中威正信(北京)資產評估有限公司), an independent qualified valuer engaged by the Company for its valuation of the entire equity interests of the Disposal Company. Pursuant to the Disposal Agreement, the Vendor may conduct its own valuation for reference purpose only. The valuation was not relied upon in the negotiation between the Vendor and the Purchaser and not the primary factor in determining the consideration but a factor considered only by the Company among other factors set out above. The independent valuer is independent from, and has no material connection or involvement with the Disposal Company, the Company and its subsidiaries, associates, or affiliates.
The valuation was conducted by adopting market approach after the assessment of different valuation methodologies, in accordance with necessary valuation procedures and the requirements under relevant laws, administrative regulations and asset valuation standards, and following the principle of independence, objectivity and fairness. The income approach determines the value of the valuation target by capitalising or discounting the expected income. The market approach determines the value of the valuation target by comparing the valuation target with comparable listed companies or comparable transaction cases. The cost approach determines the value of the valuation target based on the balance sheet of the enterprise as at the valuation date, and involves a reasonable evaluation of the value of all assets and liabilities, both within and outside the balance sheet.
As the Disposal Company's equipment and facilities are running below full capacity, meaning their actual economic value is lower than their book value, using replacement cost would overestimate their worth because idle assets don't generate much income. Further, low usage causes extra costs (such as higher maintenance or outdated technology), but these losses are difficult to calculate accurately, leading to potential errors. Historically, the Disposal Company earned strong profits but recently struggled with losses or minimal profits due to market downturns. The cost approach focuses on assets and liabilities, not income or expenses. Since such approach does not account for these changes, it was not considered appropriate. Further, having considered the nature of the cigarette label printing business of the Disposal Company, the market and relevant industry which it operates in, the market transactions involving companies similar or comparable to the Disposal Company in the domestic equity transfer market, the poor overall business performance of the cigarette label printing industry, with fluctuating earnings among enterprises, and future earnings are greatly affected by factors such as market environment, corporate management, and environmental regulation, the independent valuer considered that the market approach can better reflect the market valuation level of the Disposal Company in the current capital market and therefore was adopted for conducting the valuation.
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LETTER FROM THE BOARD
Given the change in the business operating environment and ever-changing factors that affect asset value, the valuation was conducted based on, among others, the following principal assumptions:
General assumptions
- It is assumed that the business of the Disposal Company operates legally and that no unforeseen factors will disrupt its continuity. It is also assumed that the assets of the Disposal Company will continue to be used in their current form and location without change.
- It is assumed that all assets of the Disposal Company are already in the process of being traded. The value is estimated by simulating market conditions based on the terms of the hypothetical transaction. This assumption serves as the most fundamental premise enabling asset valuation to proceed.
- It is assumed that the assets of the Disposal Company traded in the market, or were intended to be traded in the market, and are exchanged between parties with equal standing, each having the opportunity and time to obtain sufficient market information. This enables them to make rational judgments regarding the asset's function, purpose, and transaction price. The open market assumption is based on the premise that the asset can be freely bought and sold in the market.
Specific assumptions
- It is assumed that the region where the Disposal Company operates, as well as the PRC's broader socio-economic environment, will not undergo significant changes. Current national laws, regulations, policies, and industry management frameworks are expected to remain substantially unchanged, with no major shifts in market conditions or industry dynamics.
- It is assumed that key financial variables, including interest rates, exchange rates, tax rates, and government-imposed fees, will not experience material changes.
-
The Disposal Company is assumed to be in full compliance with all applicable laws and regulations.
-
8 -
LETTER FROM THE BOARD
-
The management of the Disposal Company is assumed to be responsible and capable, executing the Disposal Company's business plans effectively. The Disposal Company's operations, revenue, costs, expenses, and sales strategies are assumed to align with forecasted performance.
-
The accounting policies applied in future periods are assumed to be materially consistent with those used in preparing the valuation.
-
It is assumed that the Disposal Company will continue operating without disruption, maintaining its current business scope, with assets remaining in their existing use post-valuation.
-
No legal, ownership, or economic disputes are anticipated, nor are any unforeseeable events expected to materially adversely affect the Disposal Company.
In the course of the valuation, the independent valuer has obtained understanding on the business of the Disposal Company from the relevant personnel of the Disposal Company, analysed and verified the relevant property rights certification and accounting records, conducted on-site investigation on the assets and inventory checking, performed market research and assessment, and prepared the valuation based on generally accepted valuation procedures.
The nature and source of information relied upon included the applicable laws and regulations, shareholders' resolutions, valuation codes, principles and guidelines, title documents of assets, industry-specific handbooks and reference materials, market research (e.g. Mergerstat Review, Mergerstat/Shannon Pratt's Control Premium Study), site visits, which are either publicly available, directly acquired by the independent valuer or provided by the Group.
The independent valuer had identified 7 companies in label printing businesses (the "Comparable Companies") which are comparable to the Disposal Company based on the following criteria:
(i) The company has a relatively stable operations and sufficient operating history of not less than 24 months in the same or similar business as the Disposal Company; and
(ii) The company is the subject of a similar transaction which is publicly announced within 1 year prior to the valuation reference date.
- 9 -
LETTER FROM THE BOARD
Based on the abovementioned selection criteria, considering the significant changes in the cigarette label printing industry in recent years, in order to reduce the discrepancies between transaction cases and obtain a valuation closer to the true value of the Disposal Company at the relevant time, after excluding Comparable Companies which fell out of the financial parameters of maintaining revenue and total assets between RMB50 million and RMB1 billion, with net assets (equity) falling between RMB50 million and RMB500 million, or did not involve in a transaction for equity transfer purposes only, or did not engage specifically in cigarette label printing business but only label printing business in general, or did not undergo the transaction within three months prior to the valuation reference date, 3 of the 7 Comparable Companies with similar transactions (i.e. they were the subject company of disposal transactions of listed issuers) that took place close to the valuation reference date were selected by the independent valuer as appropriate market comparables. The independent valuer has assessed the following factors of the 3 Comparable Companies, based on the public information available as published by the respective listed issuers disposing of the equity interests in the Comparable Companies:
| Comparable 1 | Comparable 2 | Comparable 3 | ||
|---|---|---|---|---|
| Name of company | 安徽杰新包装科技有限公司 (formerly known as 安徽集友纸業包装有限公司) | 昆明彩印有限责任公司 | 廣西真龍彩印包装有限公司 | |
| Transaction date | 11 October 2024 | 19 October 2024 | 24 December 2024 | |
| Transaction-related | Transaction type | Transfer by agreement | Transfer by agreement | Transfer by agreement |
| Shareholding involved | 100% | 41.61% | 49% | |
| Payment method | Cash | Cash | Cash | |
| Corporate-related | Industry | Printing and recorded media reproduction industry | Printing and recorded media reproduction industry | Printing and recorded media reproduction industry |
| Total assets | RMB234,430,900 | RMB210,018,600 | RMB798,269,800 | |
| Net assets | RMB172,030,700 | RMB103,422,200 | RMB490,836,000 | |
| Operating income | RMB101,792,500 | RMB9,531,200 | RMB536,248,500 | |
| Net profit attributable to shareholders of the parent company | RMB31,413,700 | RMB9,508,700 | RMB30,721,800 |
The above transactions of Comparable Companies all involved disposal by listed issuer of subject company principally engaged in the cigarette label printing industry. The valuer did not identify any Comparable Companies which fall within the scope of selection criteria with recent acquisition transactions.
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LETTER FROM THE BOARD
Given the Disposal Company is a manufacturing company with substantial tangible assets, its net assets are highly related to its corporate value. Therefore, the independent valuer has used the price-to-book multiple ("P/B") for the valuation.
After comparing the Disposal Company with the Comparable Companies and adjusting the difference in the transaction date, the transaction- and corporate-related factors set out above, the P/B of the Comparable Companies and the Disposal Company are calculated as follows:
P/B of Comparable Companies = Market price of Comparable Companies/Net assets of Comparable Companies as of the valuation base date
P/B of the Disposal Company = Σ P/B of Comparable Companies × Adjustment coefficient ÷ Number of Comparable Companies
In which the adjustment coefficient is the product of the adjustment ratios of the factors.
| Comparable Companies | P/B | Adjustment coefficients | Adjusted P/B |
|---|---|---|---|
| Comparable 1 | 1.1045 | 1.0430 | 1.1520 |
| Comparable 2 | 1.1249 | 1.0430 | 1.1733 |
| Comparable 3 | 1.0174 | 0.9615 | 0.9782 |
| P/B of the Disposal Company | 1.1012 |
For the purpose of the valuation, as the Sale Equity represents non-controlling rights, it was necessary to adjust the results for the lack of control discount. The research on the control premium and lack of control discount mainly includes the relevant research done by the U.S. valuation community such as MergerstatReview research and Mergerstat/Shannon Pratt's Control Premium Study. Drawing on the above research and referring to the statistical analysis of listed company cases collected by relevant institutions, the valuation has adopted the overall average value of the lack of control discount rate of non-listed companies in recent period is $9.08\%$ . Since the transactions of the Comparable Companies are all equity transaction cases of non-listed companies, the transactions all represent a lack of liquidity. The Disposal Company, being the subject of the valuation, is also a non-listed company, the lack of liquidity discount was not considered necessary.
Using the above valuation parameters and inputs, the valuation of the entire equity interests of the Disposal Company of approximately RMB495.3 million was arrived at using the below formula:
Adjusted P/B x (1 - discount for lack of control) x net assets of the Disposal Company as at the valuation date (i.e. 1.1012 x (1-9.08%) x RMB494.72 million) = RMB495.33 million.
LETTER FROM THE BOARD
The Directors have reviewed the valuation and considered that, taking into account the short remaining time of the operation duration of the Disposal Company and the uncertainty surrounding its future operation and revenue prospects, the market approach, is appropriate, and the methodology and assumptions used in the valuation are fair, reasonable and appropriate.
Conditions precedent
Completion is conditional upon the satisfaction of the following conditions precedent:
(i) the Disposal Company having obtained approval from its shareholders in accordance with the applicable laws and regulations and its constitutional documents in respect of the Disposal, including the Vendor having approved the transfer of Sale Equity, and China Tobacco Hunan, being the holder of the other 69% of equity interest in the Disposal Company, having given a waiver in writing of its right of first refusal in respect of the Sale Equity;
(ii) the Company having obtained a written approval from its shareholders and having complied with all other requirements pursuant to the Listing Rules in respect of the Disposal Agreement and the transactions contemplated thereunder, including the publication of the relevant announcement and circular by the Company, on or before 15 June 2025 (except where the delay is caused by reasons beyond the Vendor's control); and
(iii) the Purchaser having obtained approval from its shareholders and board of directors in respect of the Disposal Agreement and the transactions contemplated thereunder, including the relevant procedures (if any) that may be required to be completed in accordance with the internal management mechanism of state-owned enterprises.
The Vendor and the Purchaser agree to actively assist and cooperate with each other in completing the registration procedures and tax-related formalities for the transfer of the Sale Equity with the property rights registration authority, industrial and commercial administration authority, and tax authority in the PRC. In particular, the Vendor has undertaken to complete the industrial and commercial registration for the transfer of the Sale Equity by 30 June 2025, unless such delay is caused by reasons beyond the Vendor's control. As at the Latest Practicable Date, save for the written approval from Sinorise International Limited and Profitcharm Limited, none of the above conditions have been fulfilled.
Completion
Completion shall take place on the next Business Day following the payment of the consideration from the Joint Account to a designated account of the Vendor.
Upon Completion, the Company will cease to have any equity interest in the Disposal Company.
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LETTER FROM THE BOARD
INFORMATION ON THE DISPOSAL COMPANY
The Disposal Company is a company established in the PRC on 28 April 1995 with limited liability and is principally engaged in the provision of cigarette printing package services. As at the Latest Practicable Date, the Disposal Company has a registered capital of RMB163,052,000, which is owned as to 69% by China Tobacco Hunan and as to 31% by the Company through the Vendor.
Set out below is the unaudited financial information of the Disposal Company for the years ended 31 December 2023 and 2024:
| For the year ended 31 December 2023 (unaudited) RMB'000 | For the year ended 31 December 2024 (unaudited) RMB'000 | |
|---|---|---|
| Profit (Loss) before tax | (94,775) | 11,212 |
| Profit (Loss) after tax | (88,938) | 10,415 |
| As at 31 December 2024 (unaudited) RMB'000 | ||
| Net assets | 494,727 |
REASONS FOR AND BENEFITS OF THE DISPOSAL
The Group is principally engaged in the provision of the printing of cigarette packages, manufacturing of paper packaging materials, printing of packages and decoration matters, research and development on printing technology, wholesale, import and export of the packaging products and other related services and leasing of investment properties.
Since as early as April 2023, the Company has been reviewing and exploring the Disposal in view of the unsatisfactory performance of the Disposal Company. As disclosed in the annual reports of the Company for the past few financial years, the share of results of associates of the Company decreased by 97.8% from approximately HK$70.1 million for the year ended 31 December 2021 to approximately HK$1.6 million for the year ended 31 December 2022, and further turned to share of losses of approximately HK$30.4 million for the year ended 31 December 2023 due to the deterioration in profitability. The Group received a dividend of approximately HK$39.7 million (2021: HK$76.8 million, 2022: HK$87.1 million) from the Disposal Company for the year ended 31 December 2023.
LETTER FROM THE BOARD
As disclosed in the announcement of the Company dated 28 December 2023, the Group entered into a framework agreement to dispose of its 31% equity interest in the Disposal Company to China Tobacco Hunan. Such framework agreement was subsequently terminated. However, as the Group was committed to sell the Sale Equity and had been actively identifying a buyer and the Sale Equity was intended to be recovered principally through a sale transaction rather than continuing use, the Sale Equity continued to be classified as assets held for sale in accordance with Hong Kong Financial Reporting Standards in the consolidated financial statements of the Company. During the year ended 31 December 2024, no share of profit or loss of the Disposal Company was recorded in the financial results of the Company and no dividend was received by the Company from the Disposal Company.
Reference is also made to the announcements of the Company dated 28 April 2023, 28 December 2023, 6 May 2024, 31 March 2025 and 22 April 2025, in which it was disclosed, among other matters, that, the operation status of the Disposal Company has been extended on several occasions for short periods of less than a year, with its current operation duration due to expire on 30 June 2025. Combined with the prolonged period of dwindling financial performance of the Disposal Company, after ongoing assessment of a potential divestment in the Disposal Company over the years, the Board has resolved to enter into a framework agreement with the Purchaser on 22 April 2025 to dispose of the Sale Equity, representing all of the 31% equity interest which is held by the Company through the Vendor in the Disposal Company.
Having made prudent assessments on the above and considering the unsatisfactory financial performance and the prevailing market conditions, the Board considers that the Disposal represents a good opportunity for the Group to divest its investment in the Disposal Company and recover its investment costs to the furthest extent possible.
Given the highly specialised nature of the Disposal Company's business in cigarette packaging printing, a strictly regulated industry with limited market participants due to the specialised expertise and operational experience required, the pool of potential buyers is significantly constrained, making it extremely challenging for the Company to identify an interested purchaser over an extended period since as early as 2023.
Additionally, the Disposal Company's financial performance has been unsatisfactory in recent years, with consistent reduction in profits and eventual losses, and an uncertain future as its operation duration nears expiration on 30 June 2025. If the operation duration is not extended after its expiry, the Disposal Company may lose its legal capacity to conduct its principal business thereafter. Given these challenges, the Company has a pressing need to divest its stake to recoup its investment and reallocate resources to other strategic priorities within the Group. The prolonged struggle to find a buyer underscores the rarity of this opportunity, and the Board believes that securing a transaction now is preferable to retaining an underperforming asset with diminishing prospects. In light of these factors, namely, limited buyer interest, regulatory constraints, poor financial performance, and operational uncertainty, the Board determined that the consideration is not only fair and reasonable but also represents a prudent and opportunistic exit strategy for the Company.
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LETTER FROM THE BOARD
The net proceeds are expected to be approximately RMB141.8 million (equivalent to approximately HK$152.0 million) and are proposed to be applied for the general working capital of the Group or any other future investment opportunities. As at the Latest Practicable Date, the Group has not identified any specific potential targets for investment and has not entered into any agreement in relation to any potential new projects.
Taking into account the foregoing matters, the Board considered that it would be more beneficial to the Company to divest its investments in the Disposal Company and utilise the resources and funds to focus on its core businesses and the net proceeds from the Disposal would strengthen its liquidity and meet its working capital requirements. Based on the factors above, the Directors are of the view that the terms of the Disposal are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
FINANCIAL EFFECT OF THE DISPOSAL
Upon Completion, the Company will cease to have any interest in the Disposal Company.
It is estimated that an unaudited loss of approximately HK$23.4 million will arise from the Disposal. Such estimated unaudited loss is calculated with reference to (i) the consideration for the Disposal of approximately RMB142.5 million (equivalent to approximately HK$152.8 million) (which is approximately HK$22.6 million less than the audited carrying value of the Sale Equity); (ii) the audited carrying value of the Group's interest in the Disposal Company of approximately HK$175.4 million as at 31 December 2024; and (iii) all relevant expenses and taxes incidental to the Disposal of approximately RMB0.7 million (equivalent to approximately HK$0.8 million). Shareholders shall note that the above estimation is for information purpose only, the actual amount of loss will be subject to final audit by the auditors of the Company.
The financial effect of the Disposal on the earnings, and assets and liabilities of the Group is expected to be as follows:
Earnings
As the Sale Equity is classified as assets held for sale in accordance with Hong Kong Financial Reporting Standards in the consolidated financial statements of the Company and no share of profit or loss of the Disposal Company is recorded in the financial results of the Company. There will be no financial effect on the earnings of the Company as a result of the Disposal.
Assets and Liabilities
Based on the consideration for the Disposal of approximately RMB142.5 million (equivalent to approximately HK$152.8 million), the assets of the Company is expected to be reduced by HK$23.4 million, representing the estimated loss on the Disposal. The actual gain or loss to be recorded by the Company will be subject to final audit to be performed by the auditors of the Company. There will be no change to the liabilities of the Company arising from the Disposal.
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LETTER FROM THE BOARD
Save as disclosed above, the Disposal is not expected to have any material adverse impact on the earnings, and assets and liabilities of the Group.
GENERAL
As the highest applicable percentage ratio (as defined in the Listing Rules) in respect of the Disposal exceeds 25% but is less than 75%, the Disposal constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders' approval requirements under Chapter 14 of the Listing Rules.
To the best of the Directors' knowledge, information and belief, after having made all reasonable enquiries, no Shareholder is required to abstain from voting if the Company were to convene an extraordinary general meeting for approving the Disposal Agreement and the transactions contemplated thereunder. The Company has obtained a written approval for the Disposal Agreement and the transactions contemplated thereunder from Sinorise International Limited and Profitcharm Limited (being the controlling shareholders of the Company holding in aggregate 901,456,892 Shares, representing approximately 57.5% of the issued share capital of the Company as at the Latest Practicable Date). Such written approval has been accepted in lieu of holding a general meeting of the Company for approving the Disposal. Therefore, no extraordinary general meeting of the Company to approve the Disposal Agreement and the transactions contemplated thereunder will be convened pursuant to Rule 14.44 of the Listing Rules.
Completion is conditional upon the satisfaction of the conditions set out in the section headed "The Disposal Agreement — Conditions precedent" in this circular. Therefore, the Disposal may or may not proceed. Shareholders and potential investors are therefore advised to exercise caution when dealing in the Shares.
RECOMMENDATION
The Board considers that the terms of the Disposal Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.
ADDITIONAL INFORMATION
Your attention is also drawn to the additional information contained in the appendices to this circular.
By order of the Board
Litu Holdings Limited
Huang Wanru
Chairman
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APPENDIX I
FINANCIAL INFORMATION OF THE GROUP
1. FINANCIAL INFORMATION OF THE GROUP
The audited consolidated financial statements of the Group for each of the financial years ended 31 December 2022, 2023 and 2024 were disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.lituholdings.com) respectively:
- annual report of the Company for the year ended 31 December 2022 published on 27 April 2023 (pages 64 to 216):
https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0427/2023042702154.pdf
- annual report of the Company for the year ended 31 December 2023 published on 25 April 2024 (pages 66 to 228):
https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0425/2024042502011.pdf.
- annual report of the Company for the year ended 31 December 2024 published on 24 April 2025 (pages 63 to 224):
http://www1.hkexnews.hk/listedco/listconews/sehk/2025/0424/2025042402127.pdf.
2. INDEBTEDNESS STATEMENT
Borrowings
At the close of business on 30 April 2025, being the latest practicable date for the purpose of this indebtedness statement, the Group had unguaranteed and unsecured bank borrowings of approximately HK$126.5 million.
Pledge of assets
At the close of business on 30 April 2025, being the latest practicable date for the purpose of this indebtedness statement, the Group's banking facilities on (i) unguaranteed bills payables were secured by charges over pledged bank deposits of approximately HK$84.6 million, for which the pledged bank deposits will be released upon the settlement of relevant bills payables; and (ii) unguaranteed banking facilities were secured by the Group's property, plant and equipment with carrying amount of approximately HK$160.9 million, investment properties with carrying amount of approximately HK$35.7 million and corporate guarantee issued by the Company.
Contingent liabilities
The Group had no contingent liabilities at the close of business on 30 April 2025.
APPENDIX I
FINANCIAL INFORMATION OF THE GROUP
Commitment
At the close of business on 30 April 2025, being the latest practicable date for the purpose of this indebtedness statement, the Group had the capital expenditure contracted but not provided for in respect of acquisition of property, plant and equipment of approximately HK$8.0 million.
Disclaimer
Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, at the close of business on 30 April 2025, the Group did not have any other loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans of other borrowings, indebtedness in the nature of borrowings, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other contingent liabilities. The Directors confirmed that there has been no material change in the indebtedness and contingent liabilities of the Group since 30 April 2025 up to the date of this Circular.
3. WORKING CAPITAL SUFFICIENCY
After due and careful consideration, the Directors are of the opinion that, taking into account the financial resources available to the Group including but not limited to the existing cash and bank balances, cash flows generated from the operating activities, available facilities and the effect of the Disposal, the Group will have sufficient working capital for its requirements for at least 12 months from the date of this circular, in the absence of unforeseen circumstances.
The Company has obtained the relevant confirmation as required under Rule 14.66(12) of the Listing Rules.
4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP
The Group is principally engaged in the provision of the printing of cigarette packages, manufacturing of paper packaging materials, printing of packages and decoration matters, research and development on printing technology, wholesale, import and export of the packaging products and other related services and leasing of investment properties.
With the further relaxation of COVID-19 control policies in the PRC in December 2022 and the subsequent issuance of various policies and measures aimed at stabilising and recovering the PRC's economy in 2024, the global economy and the PRC's economic outlook remain uncertain due to global inflation, escalating competition between the United States and
APPENDIX I
FINANCIAL INFORMATION OF THE GROUP
the PRC on various fronts, the downturn of the property market in the PRC, the ongoing war between Russia and Ukraine and the unpredictable impact of the monetary policies of the U.S. Federal Reserve, all of which may adversely affect the PRC's economy and the Group's operating environment in 2025.
Looking ahead, the Group will continue to rely on paper packaging as a solid foundation for the Group's development and seek to maximise income from investment properties. The Group will continue to increase its participation in tenders, while actively expanding into other packaging markets, and will continue to reduce the pressure of decreasing gross profit through measures such as cost control, efficiency boosting and resource consolidation. The Group's corporate mission is to continue to develop ways to improve financial performance, provide growth drivers for the Group and broaden revenue streams within acceptable risk levels.
The Group, as purchaser, entered into a provision agreement on 24 March 2025 and a formal agreement on 17 April 2025 with three vendors in respect of the sale and purchase of properties representing about 86.67% of undivided shares of the 17-storey commercial building named "Kam Chung Building" in the prime location of Wan Chai, Hong Kong, with an aggregate saleable area of approximately 50,169 sq. ft.. Details of the acquisition are set out in the circular of the Company dated 26 May 2025. The acquisition will be part of the expansion of the Group's existing business of leasing of investment properties. The Board believes that the acquisition is a well-timed investment that balances income stability with future growth opportunities, ultimately creating value for the Shareholders. The acquisition would enable the Group to strengthen its investment property business by providing a stable rental income to the Group, alongside its existing core businesses.
The Group will continue to optimise its asset portfolio and focus on developing core businesses through disposal of non-core assets and businesses. The Group will also continue to explore the possibility of acquisition of new investment, disposal of subsidiary or associate or diversification into other profitable businesses in the interests of the Group and its shareholders as a whole, with a view to achieving sustainable growth, improving profitability and ultimately maximising returns for Shareholders.
5. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, save for the proposed Disposal and the unaudited loss estimated at approximately HK$23.4 million which is expected to arise therefrom (subject to audit), the Directors were not aware of any other material adverse change in the financial or trading position of the Group since 31 December 2024 (being the date to which the latest published audited consolidated financial statements of the Group were made up).
APPENDIX II
GENERAL INFORMATION
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the 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 contained in this circular 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 circular misleading.
2. DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS
As at the Latest Practicable Date, the interests or short positions of the Directors and chief executives of the Company in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required, pursuant to the Model Code for Securities Transactions by Directors adopted by the Company (the "Model Code") to be notified to the Company and the Stock Exchange, were as follows:
Long positions in the Shares
| Name of Director | Capacity/nature of interest | Number of Shares held | Approximate percentage of shareholdings |
|---|---|---|---|
| Mr. Huang Wanru | Beneficial owner | 1,735,204 | 0.11% |
| Ms. Li Li | Interest of controlled corporation(2) | 250,551,964 | 15.98% |
Save as disclosed above, so far as was known to the Directors, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to notify to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.
APPENDIX II
GENERAL INFORMATION
3. SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than the Directors and the chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares of the Company (i) which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or (ii) which were recorded in the register required to be kept by the Company under Section 336 of the SFO:
Long positions in the Shares
| Name of Director | Capacity/ nature of interest | Number of Shares held | Approximate percentage of shareholdings |
|---|---|---|---|
| Mr. Cai Xiao Ming, David^{(Note 1)} | Interest of controlled corporation | 901,456,892 | 57.50% |
| Profitcharm Limited^{(Note 1)} | Beneficial owner | 274,325,278 | 17.50% |
| Sinorise International Limited^{(Note 1)} | Beneficial owner | 627,131,614 | 40.00% |
| Masterwork Group Co., Ltd.^{(Note 2)} | Interest of controlled corporation | 250,551,964 | 15.98% |
| Masterwork Machinery (H.K.) Limited^{(Note 2)} | Beneficial owner | 250,551,964 | 15.98% |
| Tianjin Dehou Investment Management Partnership (Limited Partnership) | Interest of controlled corporation | 103,555,231 | 6.60% |
Notes:
(1) Mr. Cai Xiao Ming, David ("Mr. Cai") beneficially owns the entire share capital of Profitcharm Limited and Sinorise International Limited. By virtue of the SFO, Mr. Cai is deemed to be interested in a total of 901,456,892 shares held by Profitcharm Limited and Sinorise International Limited. Mr. Cai is also a director of Profitcharm Limited and Sinorise International Limited.
(2) Masterwork Group Co. Ltd. ("Masterwork") beneficially owns the entire share capital of Masterwork Machinery (H.K.) Limited. By virtue of the SFO, Masterwork is deemed to be interested in 250,551,964 shares held by Masterwork Machinery (H.K.) Limited. Ms. Li Li, a non-executive Director, is a Chairman of the board of directors of Masterwork.
APPENDIX II
GENERAL INFORMATION
Save as disclosed above, so far as was known to the Directors, as at the Latest Practicable Date, no person had, or were deemed to have, an interest or short position in the Shares or underlying Shares of the Company (i) which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or (ii) which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or was a substantial shareholder of the Company.
4. DIRECTORS’ INTERESTS IN ASSETS, CONTRACTS AND OTHER INTERESTS
(a) Directors’ interests in contracts
As at the Latest Practicable Date, there is no contract or arrangement entered into by any member of the Group subsisting at the date of this circular in which any Director is materially interested and which is significant to the business of the Group.
(b) Directors’ interests in assets
As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2024, being the date to which the latest published audited consolidated financial statements of the Group were made up.
(c) Competing business
As at the Latest Practicable Date, none of Directors and their respective associates were interested in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.
5. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which does not expire or is not terminable by the relevant member of the Group within one year without payment of compensation, other than statutory compensation.
6. LITIGATION
As at the Latest Practicable Date, there were no litigation or claims of material importance pending or threatened against any member of the Group.
APPENDIX II
GENERAL INFORMATION
7. MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Group within the two years immediately preceding and including the Latest Practicable Date and were or might be material:
(i) the restated provisional agreement for sale and purchase dated 24 March 2025 and the formal agreement dated 17 April 2025, both entered into among Winland Centre Limited (永倫中心有限公司), Winland Culture Limited (永倫文化有限公司) and Winland Property Holding Limited (永倫興業有限公司), as vendors, and Gold In Properties Limited (創金置業有限公司), Sky Union Properties Limited (天聯置業有限公司) and Profit Rich Management Limited (利富管理有限公司), all being companies wholly-owned subsidiaries of the Company, as purchasers, in relation to the sale and purchase of the Properties at the cash consideration of HK$388,000,000; and
(ii) the Disposal Agreement.
8. MISCELLANEOUS
(i) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
(ii) The head office and principal place of business of the Company is situated at 3/F, 38 On Lok Mun Street, On Lok Tsuen, Fanling, New Territories, Hong Kong.
(iii) The company secretary of the Company is Mr. Chan Wing Chung. Mr. Chan Wing Chung is an associate member of The Hong Kong Chartered Governance Institute and a fellow member of the Hong Kong Institute of Certified Public Accountants.
(iv) The Company's Principal Share Registrar and Transfer Office is Suntera (Cayman) Limited, at Royal Bank House 3rd Floor, 24 Shedden Road P.O. Box 1586 Grand Cayman KY1-1110 Cayman Islands. The Company's Hong Kong Branch Share Registrar and Transfer Office is Tricor Investor Services Limited, at 17/F, Far East Finance Centre 16 Harcourt Road Hong Kong.
(v) This circular has been printed in English and Chinese; in the event of inconsistency, the English version shall prevail.
9. DOCUMENTS ON DISPLAY
A copy of the Disposal Agreement will be available on (i) the website of the Company (www.lituholdings.com); and (ii) the website of the Stock Exchange (www.hkex.com) during the period of 14 days from the date of this circular.
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