Macau E&M Holding Limited - M&A Activity 2014

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.

This announcement is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares or other securities of the Company.

==> picture [317 x 53] intentionally omitted <==

(Incorporated in Hong Kong with limited liability)

(Stock Code: 604)

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF SHENZHEN BIO-AGRICULTURE COMPANY LIMITED; AND

(2) NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Financial adviser to Shenzhen Investment Limited

THE ACQUISITION

The Board is pleased to announce that on 27 January 2014 (after trading hours), the Company, the Vendor (a wholly-owned subsidiary of Shum Yip Group), Nongke (a subsidiary of the Target Company held through the WFOE) and Shum Yip Group entered into the Acquisition Agreement pursuant to which, among others, the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire issued share capital of the Target Company.

The Consideration shall be RMB5,623,000,000 (equivalent to HK$7,228,760,110), subject to adjustments (if any). Upon Completion, (i) as to HK$3,614,380,054.87 (equivalent to approximately RMB2,811,500,000), representing approximately 50% of the Consideration before any adjustment, shall be satisfied by the Company by way of an allotment and issue of 1,099,933,066 Consideration Shares credited as fully paid up at the issue price of HK$3.286 per Consideration Share to the Vendor at Completion; and (ii) as to HK$3,073,673,169.84 (equivalent to approximately RMB2,390,903,000) shall be satisfied by the Company in cash. As to the balance of the Consideration of HK$540,706,885.29 (equivalent to RMB420,597,000), if payable, shall be paid at such time after Completion as further described in the sub-section headed “The Consideration” of the section headed “(B) The Acquisition” below.

Through the Acquisition, the Company will acquire the entire equity interests in the Target Company, which, through its subsidiaries, is engaged in property development and investment, property management, garden design and construction, manufacture and sale of agricultural products. Based on the unaudited consolidated financial information of the Target Group for the years ended 31 December 2013, the property investment and development division and the property management division accounted for approximately 94.9% of the total segment revenue of the Target Group for the year ended 31 December 2013 and 98.6% of the total segment assets of the Target Group as at 31 December 2013.

Upon Completion, members of the Target Group will become subsidiaries of the Company and the financial results of the Target Group will be consolidated into the Group.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

On 27 January 2014, Nongke and Shum Yip Group entered into the Agricultural Land Entrustment Agreement pursuant to which with effect from the Completion Date, Shum Yip Group will appoint Nongke (i) to hold and manage the Agricultural Lands and Related Assets on its behalf; and (ii) to authorise Nongke and its wholly-owned subsidiaries to manage the Agricultural Lands and Related Assets in accordance with their then existing operations, in each case, at the cost of Shum Yip Group and Nongke will be entitled to a management fee of RMB1,613,529.42 (equivalent to approximately HK$2,074,305) per annum, payable by Shum Yip Group quarterly in arrears and for a term commencing on the Completion Date and ending on 31 December 2016 or such earlier date as provided under the Agricultural Land Entrustment Agreement.

On 27 January 2014, Nongke and Shum Yip Group entered into the Nongke Flora Market Entrustment Agreement pursuant to which with effect from the Completion Date, Shum Yip Group will appoint Nongke (i) to handle the legal procedures with respect to the implementation plan regarding the Nongke Flora Market Investment & Operations; and (ii) to demolish all the building structures currently erected on the Nongke Flora Market pursuant to the relevant requirements, at the cost of Shum Yip Group and for a management fee RMB1 million (equivalent to approximately HK$1.29 million) per annum, payable by Shum Yip Group quarterly in arrears and for a term commencing on the Completion Date and ending on 31 December 2016 or such earlier date as provided under the Nongke Flora Market Entrustment Agreement.

Pursuant to the Entrustment Agreements, the parties to the Entrustment Agreements agreed that (i) although the land use rights certificates of the land parcels under the Agricultural Lands and Related Assets have Nongke as the beneficiary of the land parcels; and (ii) Nongke has the Nongke Flora Market Related Rights, all the beneficial rights and interests in the Agricultural Lands and Related Assets and the Nongke Flora Market Related Rights are deemed to be owned by Shum Yip Group and all income arising from the Agricultural Lands and Related Assets and the Nongke Flora Market Related Rights shall be enjoyed by Shum Yip Group and all relevant expenses incurred in respect of the Agricultural Lands and Related Assets and the Nongke Flora Market Related Rights shall be borne by Shum Yip Group.

LISTING RULES IMPLICATIONS

As some of the applicable percentage ratios for the Acquisition exceed 25% but all of them are less than 100%, the Acquisition constitutes a major transaction of the Company and is subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, the Target Company is wholly-owned by the Vendor and the Vendor is a wholly-owned subsidiary of Shum Yip Group. As the Vendor is the direct controlling shareholder of the Company, together with its associates, holding approximately 60.59% interest in the issued share capital of the Company, both the Vendor and Shum Yip Group are connected persons of the Company. Accordingly, the Acquisition also constitutes a connected transaction for the Company and is subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As the Entrustment Agreements are on better terms to the Company, the transactions contemplated under the Entrustment Agreements will, upon Completion, constitute non-exempt continuing connected transactions of the Company and will be subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules notwithstanding that all of the applicable percentage ratios based on the Annual Caps are less than 0.1%.

The Vendor and its associates will abstain from voting in respect of the resolution(s) approving the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps at the EGM.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, in compliance with the Listing Rules, has been established to consider the terms of the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps and to advise the Independent Shareholders as to whether they are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole and to give its recommendation as to how the Independent Shareholders shall vote in respect of the resolutions to be proposed at the EGM for approving the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps, after taking into account the recommendation of the Independent Financial Adviser. In this connection, the Independent Financial Adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

DESPATCH OF CIRCULAR

A circular containing, among other things, (i) further information on the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps; (ii) the accountants’ report on the Target Group; (iii) the unaudited pro forma financial information of the Enlarged Group; (iv) the valuation report on the property interests of the Target Group; (v) the recommendation of the Independent Board Committee regarding the terms of the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps; (vi) the advice of the Independent Financial Adviser regarding the terms of the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps; and (vii) the notice of the EGM, shall be despatched to the Shareholders on or before 7 April 2014, as additional time is required for Nongke to enter into the land grant contract with the relevant land and resources regulatory authority in Shenzhen in respect of the Mingren Land, details of which will be included in the circular to be despatched to the Shareholders.

Completion is subject to the satisfaction and/or waiver of the conditions precedent under the Acquisition Agreement and therefore, may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

(A) INTRODUCTION

The Board is pleased to announce that on 27 January 2014 (after trading hours), the Company, the Vendor (a wholly-owned subsidiary of Shum Yip Group), Nongke and Shum Yip Group entered into the Acquisition Agreement pursuant to which, among others, the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire issued share capital of the Target Company.

(B) THE ACQUISITION

The Acquisition Agreement

Date: 27 January 2014 (after trading hours)

Parties: the Company (as purchaser); the Vendor (as vendor); Shum Yip Group; and Nongke

The Vendor is an investment holding company. As at the date of this announcement, the Vendor is the direct controlling shareholder of the Company, together with its associates, holding 3,260,164,941 Shares, representing approximately 60.59% of the issued share capital of the Company. The Vendor is wholly-owned by Shum Yip Group.

Shum Yip Group is a company established in the PRC and the holding company of the Vendor, which is ultimately wholly-owned by Shenzhen Municipal Peoples Government through 深圳市人民政府國有資產監督管理委員會 (Shenzhen SASAC). Shum Yip Group is principally engaged in a range of operations including property development, property investment, property management, infrastructure construction and operation, transportation services and modern agriculture.

Nongke is a wholly-owned subsidiary of the Target Company held through the WFOE and thus an indirect wholly-owned subsidiary of the Vendor as at the date of this announcement. Nongke is principally engaged in property development and investment, property management, garden design and construction, manufacture and sale of agricultural products.

Assets to be acquired

Pursuant to the Acquisition Agreement, the Purchaser has conditionally agreed to acquire the entire issued share capital of the Target Company from the Vendor, which, through its subsidiaries, conducts property development and investment, property management, garden design and construction, manufacture and sale of agricultural products. Based on the unaudited consolidated financial information of the Target Group for the year ended 31 December 2013, the property investment and development division and the property management division accounted for approximately 94.9% of the total segment revenue of the Target Group for the year ended 31 December 2013 and 98.6% of the total segment assets of the Target Group as at 31 December 2013.

The principal property of the Target Group is the Mingren Land, which is located at 中國深圳市福田區紅荔西路 (Hongli West Road, Futian District, Shenzhen, the PRC*) with a total land area of approximately 39,158 sq.m. and an expected total planned GFA of approximately 259,332 sq.m.. The Target Group also owns other property projects, which are set out in the sub-section headed “List of target properties” under the section headed “(C) Information on the Target Group” below. For the avoidance of doubt, (i) the Agricultural Lands and Related Assets, (ii) the Replacement Land and the Replacement Land Premium Prepayment, and (iii) the Nongke Flora Market Related Rights do not form part of the assets to be acquired by the Company under the Acquisition, details of which are set out in the sub-sections headed “Mechanisms for dealing with the Land Resumption” and “Mechanisms for dealing with the Nongke Flora Market Related Rights” below respectively.

Upon Completion, members of the Target Group will become subsidiaries of the Company.

The Consideration

The Consideration shall be RMB5,623,000,000 (equivalent to approximately HK$7,228,760,110 subject to adjustments (if any) as mentioned below, which has been agreed after arm’s length negotiation between the Purchaser and the Vendor. The Consideration has been determined with reference to, among other things, the Reassessed NAV, being the unaudited consolidated net asset value attributable to owners of the Target Company as at 31 December 2013 after having adjusted for (i) the preliminary valuation of the property interests held by the Target Group, using the direct comparison valuation method, in the amount of approximately RMB10,793.6 million; (ii) the Estimated Land Premium of RMB3,305 million; and (iii) the estimated potential tax liabilities of the Target Group. The Consideration represents a discount of approximately 4.3% to the Reassessed NAV.

The Consideration shall be settled in the following manner:

(i) as to HK$3,614,380,054.87 (equivalent to approximately RMB2,811,500,000), representing approximately 50% of the Consideration before any adjustment, shall be satisfied by the Company at Completion by way of an allotment and issue of 1,099,933,066 Consideration Shares credited as fully paid up at the issue price of HK$3.286 per Consideration Share to the Vendor at Completion Date;
(ii) as to HK$321,980,005.49, representing equivalent amount of the Longxi Garden Relocation Fee receivable by Nongke of RMB250,457,000, shall be withheld by the Company at Completion, and shall be settled in cash by the Company within 7 Business Days after the receipt of the entire amount of Longxi Garden Relocation Fee by Nongke provided that such fee is received by Nongke within 3 years after the Completion Date (the “ 3-Year Period ”). In the event that the Longxi Garden Relocation Fee remains outstanding after the expiry of the 3-Year Period, the Consideration shall be adjusted downward by the entire amount of the Longxi Garden Relocation Fee, further details of which are set out in the sub-section headed “Adjustments to the Consideration” below;
(iii) as to HK$218,726,879.80, representing the equivalent amount of preliminary valuation of the Seized Units for the purpose of the Acquisition of RMB170,140,000, shall be withheld by the Company at Completion, and shall be settled by the Company within 7 Business Days after the fulfillment of all the following conditions:
(a) Nongke has completed the legal procedures to release all of the Seized Units;
(b) Nongke has obtained the property ownership certificates of all of the Seized Units;

(c) all of the Seized Units shall not be subject to any third party rights and legal proceedings; and
(d) the PRC legal advisers engaged by the Purchaser and the Vendor having issued a legal opinion confirming the fulfillment of the conditions mentioned in (a), (b) and (c) above

(collectively, the “ Seized Units Conditions ”),

provided that all the Seized Units Conditions shall be fulfilled within the 3-Year Period. In the event any of the Seized Units Conditions is not satisfied within the 3-Year Period, the Consideration shall be adjusted downward by the full amount of the aforesaid preliminary valuation of the Seized Units, further details of which are set out in the sub-section headed “Adjustments to the Consideration” below; and

(iv) as to the remaining part of the Consideration, being HK$3,073,673,169.84 (equivalent to approximately RMB2,390,903,000), shall be satisfied by the Company in cash at Completion.

Adjustments to the Consideration

The Consideration is (where applicable) subject to the adjustments mentioned below:

(i) Longxi Garden Relocation Fee

As Nongke holds certain units in 龍溪花園 (Longxi Garden) (the details of 龍溪花園 (Longxi Garden) are set out in the sub-section headed “List of target properties” under the section headed “(C) Information on the Target Group” below), where 龍溪花園 (Longxi Garden) has been the subject of demolition and investment operation by an independent third party property developer. On 3 September 2012, Nongke entered into an agreement with such property developer, pursuant to which the property developer agreed to pay Nongke the Longxi Garden Relocation Fee of RMB250,457,000 (equivalent to HK$321,980,005.49) for the relocation of certain shops, canteens, community health centers, kindergartens, dormitories and other buildings, structures, appurtenances of 龍溪花園 (Longxi Garden).

As at the date of the Acquisition Agreement, a deposit in the amount of RMB30.0 million had been received by Nongke in relation to the Longxi Garden Relocation Fee. In the event that the balance of the Longxi Garden Relocation Fee is not received by Nongke in full and the same together with the aforesaid deposit were not accounted for as revenue in the amount of RMB250,457,000 in accordance with the applicable accounting principles within the 3-Year Period, then, upon the expiry of the 3-Year Period, (a) the Consideration shall be adjusted downward by an amount of RMB250,457,000 such that the Company shall not be obliged to pay the Vendor for the said RMB250,457,000; and (b) the deposit mentioned above together with any other amount received, for which Nongke has no legal obligation to refund to such property developer, before the expiry of the 3-Year Period by Nongke as part of the payment of Longxi Garden Relocation Fee shall be returned to the Vendor. Subject to the Company having received the Longxi Garden Relocation Fee of RMB250,457,000 in full, the Company shall pay the same amount to the Vendor to satisfy such part of the Consideration mentioned in paragraph (ii) of the sub-section headed “The Consideration” above. If, after the Consideration is adjusted downward as aforesaid, Nongke shall receive any part of the Longxi Garden Relocation Fee, the Company shall return such amount to the Vendor within 7 Business Day after the receipt thereof.

(ii) Preliminary Valuation of the Seized Units

Nongke holds certain units in 香珠花園 (Xiangzhu Garden) (the details of 香珠花園 (Xiangzhu Garden) are set out in the sub-section headed “List of target properties” under the section headed “(C) Information on the Target Group” below), 香珠花園 (Xiangzhu Garden) is a joint property development project amongst Nongke and two other independent third party developers. Upon completion of development, Nongke was allocated certain units of 香珠花園 (Xiangzhu Garden), some of which were sold. Due to the failure of the joint project partners to obtain the completion certificate from the government authority and to complete the procedure for obtaining the building ownership certificates for the buyers of 香珠花園 (Xiangzhu Garden), substantially all the 65 units held by Nongke in 香珠花園 (Xiangzhu Garden) have been subject to judicial seizure and remained under such judicial seizure (i.e. the Seized Units) as at the date of this announcement. The relevant properties under the judicial seizure are part of the Acquisition which have been preliminarily valued at RMB170,140,000 (equivalent to HK$218,726,879.80).

The Vendor and the Purchaser agreed that in the event that any of the Seized Units Conditions is not satisfied within the 3-Year Period, the Consideration shall be adjusted downward by RMB170,140,000, being the amount of preliminary valuation of the Seized Units, upon the expiry of the 3-Year Period, such that the Company shall not be obliged to pay the Vendor for the said RMB170,140,000 and subject to the downward adjustment of the Consideration, any rights and interest in the Seized Units shall be deemed to be owned by the Vendor. Thereafter, any benefit or interest received by Nongke in relation to the Seized Units shall be returned to the Vendor (or its nominee) in a manner as agreed by the Vendor and the Company or by transferring the same to a third party as directed by the Vendor provided that, in each case, such manner is permitted by the PRC laws and regulations.

The Consideration Shares

The Consideration Shares will be issued at HK$3.286 per Consideration Share, which:

(i) represents a premium of approximately 21.70% over the closing price of HK$2.70 per Share as quoted on the Stock Exchange on the Last Trading Date;
(ii) represents a premium of approximately 17.36% over the average closing price of HK$2.80 per Share for the last five trading days up to and including the Last Trading Date;
(iii) represents a premium of approximately 17.06% over the average closing price of HK$2.807 per Share for the last ten trading days up to and including the Last Trading Date; and
(iv) represents a premium of approximately 15.34% over the average closing price of HK$2.849 per Share for the last thirty trading days up to and including the Last Trading Date; and
(v) represents a discount of approximately 28.87% to the unaudited consolidated net assets value attributable to equity holders of the Company per Share of approximately HK$4.62, calculated based on the Group’s unaudited consolidated net asset value of HK$23,768.3 million as at 30 June 2013 and 5,143,044,270 Shares in issue on 30 June 2013, less the interim dividend for the six months ended 30 June 2013 of HK7.00 cents per Share.

When allotted and issued in whole at Completion, the Consideration Shares will represent approximately:

(i) 20.44% of the existing issued share capital of the Company as at the date of this announcement; and
(ii) 16.97% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The Consideration Shares are to be issued by the Company under specific mandate to be sought from the Independent Shareholders at the EGM. The Consideration Shares, when allotted and issued, will rank pari passu in all respects with all the Shares then in issue. There is no restriction for the subsequent sale of the Consideration Shares upon issue.

The issue price of HK$3.286 per Consideration Share was arrived at after arm’s length negotiations between the parties to the Acquisition Agreement after taking into account, among others, the prevailing market price of the Shares, the financial performance of the Group and the current market conditions.

An application will be made to the Stock Exchange by the Company for the listing of, and permission to deal in, the Consideration Shares.

Conditions precedent

Completion is subject to the following conditions being satisfied:

(i) the passing of an ordinary resolution(s) by the Independent Shareholders at the EGM approving the Acquisition Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares to the Vendor, and the Entrustment Agreements;
(ii) the Listing Committee granting or agreeing to grant the listing of, and permission to deal in, the Consideration Shares on the Stock Exchange;
(iii) the Vendor having provided all relevant documents of the Target Group as required by the Purchaser from time to time; and the Purchaser having completed due diligence on the Target Group (including but not limited to in respect of the establishment, approvals, legal, financial, engineering, land, property, management, labour, insurance, environmental protection, foreign exchange, lending and borrowing, guarantee and investment of relevant companies) and being reasonably satisfied with the results of the due diligence;
(iv) the Purchaser’s PRC legal adviser having issued a legal opinion to the reasonable satisfaction of the Purchaser in respect of (including but not limited to) the due establishment and existence of the members of the Target Group (other than the Target Company) and their business operations and scopes, and properties;
(v) the approvals having been obtained by the Vendor from 深圳市人民政府國有資產監督管理委員會 (Shenzhen SASAC) for the sale and purchase of the entire issued share capital in the Target Company (including the entrustment arrangements in respect of the Agricultural Lands and Related Assets and the Nongke Flora Market Investment & Operations) pursuant to the Acquisition Agreement;

(vi) the land grant contract having been entered into by Nongke with the relevant PRC government authority in respect of the adjustments to be made to the uses and plot ratio of Mingren Land, the land premium payable thereunder shall be RMB3,305 million and the contents of which shall fully comply with planning specifications provided in the Acquisition Agreement (which are summarised below) and there shall be no difference in substance or wording:
(a) land parcel numbered 2014-002-0007 with a site area of 36,192.94 sq.m., for commercial office, residential (category two) and commercial uses with plot ratio of not exceeding 6.6 and a total construction area of about 238,873 sq.m. of which commercial office of 60,628 sq.m., commercial apartment of 63,185 sq.m., residential area of 78,000 sq.m., commercial area of 19,500 sq.m., hotel of 7,200 sq.m., ancillary kindergarten with 6 classes separately occupying a site area of not less than 1,800 sq.m. and having a construction area of not less than 1,750 sq.m., cultural activity room of 1,500 sq.m., community health service centre of 1,500 sq.m., community elderly day care center of 1,500 sq.m., post office of 150 sq.m., cable television sub-centers of 150 sq.m., public toilets of 60 sq.m., community management area of 300 sq.m., convenient service station of 300 sq.m., community police station of 50 sq.m., 110KV substation of 2,800 sq.m. (which may be either semi-underground or underground), property services area of 300 sq.m., and community sports activities area of 1,500 sq.m.; and
(b) land parcel numbered 2014-002-0009, with a site area of 2,965 sq.m., for commercial office use with plot ratio of not exceeding 6.9 and a total construction area of about 20,459 sq.m. of which office of 19,919 sq.m., commercial area of 500 sq.m. and property services area of 40 sq.m.; and
(vii) the warranties given by the Vendor under the Acquisition Agreement remaining true and accurate in all material respects and not misleading.

The Purchaser may waive conditions precedent (iii), (iv) and/or (vii) above by notice in writing to the Vendor. If the above conditions precedent are not fulfilled (or waived as aforesaid) on or before 30 June 2014 (or such other later date or longer period as agreed by the Vendor and the Purchaser in writing), the Acquisition Agreement shall terminate automatically and whereupon none of the parties shall have any obligations towards the others save and except for any antecedent breach.

The Vendor has agreed that, if other approval, filing or permission from the relevant PRC government departments in respect of the sale and purchase of the entire issued share capital in the Target Company (including the entrustment arrangements in respect of the Agricultural Lands and Related Assets and the Nongke Flora Market Investment & Operations) pursuant to the Acquisition Agreement in addition to that referred to in (v) above is required, it will comply with such approval, filing or permission requirement in a timely manner and to fully indemnify the Purchaser for any all losses incurred by the Purchaser as a result of the Vendor’s failure to do so.

Completion

Upon fulfillment and/or (where relevant) waiver of all the conditions precedent set out above, Completion shall take place on the Completion Date.

Indemnities and undertakings

Under the Acquisition Agreement, the Purchaser and the Vendor and/or Shum Yip Group have agreed to indemnify the other party for losses, liabilities or expenses, directly or indirectly incurred by such other party, arising from, as a result of or based on its non-compliance of any provision of the Acquisition Agreement including any terms, representations, undertakings and warranties.

Pursuant to the Acquisition Agreement, the Vendor has given certain undertakings, and also have agreed to indemnify the Purchaser for losses, liabilities or expenses, directly or indirectly incurred by the Purchaser, arising from, as a result of or based on, among others, (i) certain actual or potential claims or legal or administrative proceeding involving certain members of the Nongke Group; (ii) title to, benefit or interest in, certain properties of the Nongke Group; and (iii) certain breaches or non-compliance of the relevant PRC laws, regulations, policies, notices, approvals, measures, court orders and/or judgments by certain members of the Nongke Group or irregularities relating to certain affairs of certain members of the Nongke Group.

In addition, upon Completion, the Vendor and the Purchaser will enter into a tax indemnity deed pursuant to which, among other things, the Vendor will undertake to indemnify the Purchaser for, among others, (i) any loss incurred by the Target Group where the Target Group is required to bear any tax liabilities of the Vendor which may arise from the transactions pursuant to the Acquisition Agreement; and (ii) any tax liabilities or claims due to or with reference to any income, profits or gains earned, accrued or received, transactions carried out by the Target Group prior to the Completion Date.

Mechanisms for dealing with the Land Resumption

(i) Exclusion of the Subject Lands from the scope of the Acquisition

In respect of the resumption by the Shenzhen Government of a land parcel owned by Nongke in 2005, the relevant land and resources government authorities in Shenzhen agreed to compensate the Target Group the Replacement Land in Longgang, Shenzhen, the PRC with a land area of approximately 100,000 sq.m. for industrial use. As part of the overall compensation for such resumption of land, the relevant land and resources government authorities in Shenzhen had withheld the Replacement Land Premium Prepayment which amounted to RMB27 million.

The Target Group currently owns the Agricultural Lands and Related Assets in Ping Shan Town and Dapeng Town in Longang District, Shenzhen. The Agricultural Lands and Related Assets are four administrative allocated agricultural land parcels owned by Nongke, of which three of the land parcels are located at 中國深圳市龍崗區坪山鎮湯坑坪環村錦龍大道 (Jinlong Boulevard, Ping Huan Village, Tang Kang, Ping Shan Town, Longang District, Shenzhen, the PRC) with a total land area of 423,635.95 sq.m.; and one of the land parcels are located at 中國深圳市龍崗區大鵬鎮鵬盛村 (Pengsheng Village, Dapeng Town, Longang District, Shenzhen, the PRC) with a total land area of 112,234.20 sq. m and the buildings situated on these land parcels.

The Replacement Land, Replacement Land Premium Prepayment and Agricultural Lands and Related Assets are collectively known as the Subject Lands. Under the relevant PRC laws, the Subject Lands are not yet transferable. As a result, the Subject Lands are excluded from the scope of the Acquisition and all rights and interests associated with the Subject Lands shall be that of Shum Yip Group.

It was understood that it is the intention of the Shenzhen Government to resolve the issues involving the Subject Lands at the same time and to deal with them by way of the Land Resumption. The Target Group is currently under negotiation and discussion with the Shenzhen Government in respect of the Land Resumption, whereby the Subject Lands are expected to be acquired by the UPLRCS in exchange for the New Replacement Land, which is for property development purpose.

The Vendor has undertaken to procure the Target Group to terminate any non-compliance with respect to the operations in the Agricultural Lands and Related Assets before the Completion Date, and has agreed to indemnify the Purchaser for losses, liabilities or expenses, directly or indirectly incurred by the Purchaser, arising from, as a result of or based on such non-compliance and/or termination.

(ii) The Agricultural Land Entrustment Agreement

Subject to Completion, the term of the Agricultural Land Entrustment Agreement (the “ Agricultural Land Entrustment Period ”) will commence from the Completion Date and will remain valid until 31 December 2016. The Agricultural Land Entrustment Agreement can be terminated prior to 31 December 2016 should the following occur (whichever is earlier in time):

(a) when the Purchaser (or its nominee(s)) having acquired the New Replacement Land from the Vendor in accordance with paragraph (iv) below;
(b) when the New Replacement Land is legally transferred back to the Vendor (or its nominee(s)) in accordance with paragraph (iv) below;
(c) when all of the Agricultural Lands and Related Assets are confiscated or prohibited from operation; or
(d) when all of the Agricultural Lands and Related Assets are disposed or transferred by Shum Yip Group to a relevant third party.

provided that in the event that only part of the Agricultural Lands and Related Assets is acquired, assigned or resumed as described in (a), (b) or (c) above respectively, the entrustment arrangements between Shum Yip Group and Nongke and the Agricultural Land Entrustment Period in respect of such portion of the Agricultural Lands and Related Assets will be terminated. The entrustment arrangements between Shum Yip Group and Nongke and the Agricultural Land Entrustment Period for the remaining portion of the Agricultural Lands and Related Assets will continue.

During the Agricultural Land Entrustment Period, Shum Yip Group, being the beneficial owner of the Agricultural Lands and Related Assets, shall be entitled to all the economic benefits of the Agricultural Lands and Related Assets. Such economic benefits will be collected by Nongke on behalf of Shum Yip Group and be repatriated to Shum Yip Group (or its nominee(s)), in the manner as permitted by the PRC laws and regulations and after deducting the management fee payable to Nongke for its property management services rendered under the Agricultural Land Entrustment Agreement, all the relevant expenses incurred by Nongke during the course of managing the Agricultural Lands and Related Assets and taxes. In the event that such economic benefits are less than the management fee payable to Nongke, Shum Yip Group shall arrange to pay such shortfall to Nongke in a timely manner. On the other hand, during the Agricultural Land Entrustment Period, Shum Yip Group, being the beneficial owner of the Agricultural Lands and Related Assets, shall bear all costs, taxes and other liabilities in respect of the Agricultural Lands and the Related Assets in such manner permitted by the relevant PRC laws and regulations.

The AL Entrustment Annual Caps for each of the years ending 31 December 2014, 2015 and 2016 are RMB1.1 million (equivalent to approximately HK$1.4 million), RMB1.7 million (equivalent to approximately HK$2.2 million) and RMB1.7 million (equivalent to approximately HK$2.2 million) respectively. The AL Entrustment Annual Caps have been based on the management fee agreed under the Agricultural Land Entrustment Agreement which in turn was determined after arm’s length negotiations between Nongke and Shum Yip Group with reference to the average historical annual income generated by Agricultural Lands and Related Assets for the three years ended 31 December 2013.

(iii) Conditions for the transfer of the New Replacement Land

Under the Acquisition Agreement, the Purchaser and Shum Yip Group agreed that the pricing and the transfer of the New Replacement Land will be subject to the following conditions:

(a) the relevant land and resources government authorities in Shenzhen confirming the compensation arrangements for the Subject Lands and completion of all relevant legal procedures for the proper transfer of the New Replacement Land in accordance with the PRC laws; and
(b) the transfer price of the New Replacement Land shall comply with the applicable legal and regulatory requirements of the relevant SASAC department(s) and the relevant land and resources bureau(s) and the obtaining of all necessary approvals, permissions and payment of the relevant fees (if applicable) as required by the relevant SASAC department(s) and the relevant land and resources bureau(s).

(iv) Land Acquisition Option

Since the Subject Lands are not yet transferable under PRC laws, pursuant to the Acquisition Agreement, subject to Completion, the fulfillment of all the conditions set out in paragraph (iii) above and during the Agricultural Land Entrustment Period, the Purchaser (by itself or through its nominee(s)) has the Land Acquisition Option to acquire the New Replacement Land at market valuation on terms set out below:

(a) in reliance on the authorisation of Shum Yip Group, Nongke (or its nominee(s)), having entered into the New Replacement Land Grant Contract and other related legal documents with the relevant PRC government authorities in respect of the New Replacement Land with such terms and conditions acceptable to the Company;

(b) Shum Yip Group having paid in full or provided sufficient funds for Nongke (or its nominee(s)) to settle all land premium, taxes and any other related expenses required under the New Replacement Land Grant Contract and other related legal documents;
(c) in reliance on the authorisation of Shum Yip Group, Nongke (or its nominee(s)) having obtained the property ownership certificate of the New Replacement Land with Nongke (or its nominee(s)) as the land use right owner;
(d) the relevant SASAC department(s) having agreed the Purchaser (or its nominee(s)) to purchase the New Replacement Land from Shum Yip Group at market valuation; and
(e) the New Replacement Land is permitted to be used for property development.

Within 7 business days after all the above conditions being fulfilled, a property valuer shall be jointly appointed by the Purchaser and Shum Yip Group for the valuation of the New Replacement Land as at the date of issue of the relevant land use right certificate. The Company shall inform the Vendor in writing as to whether it shall exercise the Land Acquisition Option within 1 year (or such later time as required by the Company pursuant to the requirements under the Listing Rules or the Codes on Takeovers and Mergers, in such case, the Company will be required to notify Shum Yip Group such later time) after the market valuation of the New Replacement Land is confirmed (the “ Option Period ”). For the avoidance of doubt, the New Replacement Land cannot be transferred to any other parties or mortgaged, pledged or subject to any other third party rights before Shum Yip Group receives the written notification from the Company during the Option Period.

If the Company decides not to exercise the Land Acquisition Option, both the Company and Shum Yip Group agreed that until then, subject to what is permitted under the PRC laws, the Company will procure Nongke (or its nominee(s)) to return the New Replacement Land to, which will be held in its name as nominee for, Shum Yip Group (or its nominee(s)), subject to the compliance of all PRC legal and regulatory requirements and Shum Yip Group also has the right to instruct Nongke (or its nominee(s)) to legally transfer the New Replacement Land to other third party and to repatriate the relevant income derived from such transfer to Shum Yip Group or its nominee(s)) in the manner which is in compliance of all PRC legal and regulatory requirements (the Purchaser shall accept the aforesaid instruction from Shum Yip Group, subject to the compliance of the Company’s applicable legal and regulatory requirements and those imposed by its regulatory authorities). Shum Yip Group has agreed to bear all the legal and policies risks, taxes and other costs relating to such return or transfer. Shum Yip Group also undertakes to indemnify the Purchaser and/or the Target Group in respect of all losses it suffered from such return or transfer.

If and when the Company, at its discretion, exercises the Land Acquisition Option (when it becomes exercisable) the Company will take steps to comply with the applicable requirements under Chapters 14 and 14A of the Listing Rules (where required).

Mechanisms for dealing with the Nongke Flora Market Related Rights

(i) Exclusion of the Nongke Flora Market Related Rights from the scope of the Acquisition

Pursuant to the relevant documents of the Shenzhen Government, the Shenzhen Government has in principle agreed to grant Nongke the rights to the investment operation and management of 農業科普和花卉展示博覽園 (Nongke Popular Science and Flora Expo*) and the social car parking space and a minimum amount of commercial facilities of the Nongke Flora Market, for a period of 40 years, i.e. the Nongke Flora Market Related Rights. Nongke is required to remove and demolish all the building structures currently erected on, and to evict all the current lessees of, the Nongke Flora Market after the Chinese New Year, and to deliver to the Futian Government, the Nongke Flora Market by the end of April 2014. The specific implementation plan of the Nongke Flora Market Investment & Operations is yet to be ascertained.

In light of the above, the Nongke Flora Market Related Rights cannot be reliably valued, hence, the parties to the Acquisition Agreement agreed that the Nongke Flora Market Related Rights shall be excluded from the scope of the Acquisition and all rights and interests and all income associated with the Nongke Flora Market Related Rights shall be that of Shum Yip Group.

Furthermore, pursuant the Acquisition Agreement, the Purchaser and Shum Yip Group have agreed that although Nongke will be responsible for the Nongke Flora Market Investment & Operations, (i) all relevant income derived from the Nongke Flora Market shall belong to Shum Yip Group; (ii) all relevant investment and operational management costs and expenses associated with Nongke Flora Market Investment & Operations shall be borne by Shum Yip Group; and (iii) all the legal and policies risks, taxes and other costs associated with the Nongke Flora Market Investment & Operations shall be borne by Shum Yip Group in full. Shum Yip also undertakes to indemnify the Purchaser in respect of all losses it suffered from the Nongke Flora Market Investment & Operations.

(ii) The Nongke Flora Market Entrustment Agreement

On 27 January 2014, Nongke and Shum Yip Group entered into the Nongke Flora Market Entrustment Agreement pursuant to which with effect from the Completion Date, Shum Yip Group will appoint Nongke (i) to handle the legal procedures with respect to the implementation plan of the Nongke Flora Market Investment & Operations; and (ii) to demolish all the building structures currently erected on the Nongke Flora Market pursuant to the relevant requirements, at the cost of Shum Yip Group and for a management fee RMB1 million (equivalent to approximately HK$1.29 million) per annum, payable by Shum Yip Group quarterly in arrears and for a term commencing on the Completion Date and ending on 31 December 2016 or such earlier date as provided under the Nongke Flora Market Entrustment Agreement. Such management fee is determined after arm’s length negotiations between Nongke and Shum Yip Group with reference to the estimated work load associated with scope of work pursuant to the Nongke Flora Market Entrustment Agreement.

The term of the Nongke Flora Market Entrustment Agreement will commence at the Completion Date and will remain valid until 31 December 2016. The Nongke Flora Market Entrustment Agreement can also be terminated earlier than 31 December 2016 (amongst others, whichever occurs earlier in time) when the specific implementation plan of the Nongke Flora Market Investment & Operations is ascertained and confirmed. During such entrustment period, Shum Yip Group, being the ultimate beneficiary of the Nongke Flora Market Investment & Operations, shall be entitled to all the income of the Nongke Flora Market Investment & Operations. Such income will be collected by Nongke for and on behalf of Shum Yip Group and be repatriated to Shum Yip Group (or its nominee(s)), in accordance with PRC laws and after deducting all the relevant expenses incurred by Nongke during the course of managing the Nongke Flora Market (which includes the management fee payable to Nongke for its management services rendered under the Nongke Flora Market Entrustment Agreement), taxes and other expenses. In the event that such economic benefits are less than the management fee payable to Nongke, Shum Yip Group shall arrange to pay such shortfall to Nongke in a timely manner .

The NFM Entrustment Annual Caps for each of the years ending 31 December 2014, 2015 and 2016 are RMB0.7 million (equivalent to approximately HK$0.9 million), RMB1.0 million (equivalent to approximately HK$1.3 million) and RMB1.0 million (equivalent to approximately HK$1.3 million) respectively. The NFM Entrustment Annual Caps have been based on the management fee agreed under the Nongke Flora Market Entrustment Agreement which in turn was determined after arm’s length negotiations between Nongke and Shum Yip Group with reference to the estimated work load associated with scope of work pursuant to the Nongke Flora Market Entrustment Agreement.

Pursuant to the Nongke Flora Market Entrustment Agreement, the parties to the Nongke Flora Market Entrustment Agreement agreed that although the Nongke Flora Market Related Rights (if granted) will be held by Nongke, all the beneficial rights and interests of the Nongke Flora Market Investment & Operations are deemed to be owned by Shum Yip Group and all income arising from the Nongke Flora Market Investment & Operations shall be enjoyed by Shum Yip Group and all relevant expenses incurred by Nongke in relation to the Nongke Flora Market Investment & Operations shall be borne by Shum Yip Group.

(C) INFORMATION ON THE TARGET GROUP

Information on the Target Group

The Target Company was incorporated in the BVI and, through the WFOE, controls the Nongke Group. Both the Target Company and the WFOE are special purpose companies which have been established for the purpose of holding the Nongke Group to facilitate the Acquisition and they do not have any operation and other assets.

Nongke was established in the PRC and, through its subsidiaries, is principally engaged in property development and investment, property management, garden design and construction, manufacture and sale of agricultural products.

Shum Yip Group acquired Nongke and wholly owned its share capital by way of administrative allocation by the Shenzhen SASAC in 2009.

List of target properties

The Target Group, through its subsidiaries, owns and operates 12 property development projects and holds properties (including the Mingren Land) in Shenzhen for investment. As at the date of this announcement, the total GFA of the properties attributable to the Target Group is approximately 384,775 sq.m.. Brief details of the property interests of the Target Group are set out in the table below:

				Total GFA
Property project	Location	Use	Status	(sq.m.)
Certain units in荔林苑,荔翠閣	Shenzhen,	Residential	Completed and	374.00
(Li Cui Court, Li Lin Terrace*)	the PRC		currently vacant
Certain units in俊安苑	Shenzhen,	Residential	Completed and	3,136.73
(Jun An Yuan*)	the PRC		currently vacant
Certain units in香珠花園	Shenzhen,	Residential,	Completed and partly	7,627.19
(Xiangzhu Garden*)	the PRC	commercial	held for rental and
			partly vacant
Certain units in農科綠洲辦公樓	Shenzhen,	Office	Completed and partly	8,756.12
(Nongke Oasis Office Tower*)	the PRC		occupied for self-use
			and partly vacant
Certain units in天御香山花園	Shenzhen,	Residential	Completed and	32,680.46
(Tianyu Xiangshan Garden*)	the PRC		currently vacant
The Mingren Land	Shenzhen,	Residential,	Properties under future	259,332.00
	the PRC	commercial, hotel	development
Certain units in香荔綠洲會所	Shenzhen,	Club house	Completed and held for	2,212.09
(Xiangli Oasis Club*)	the PRC		rental

				Total GFA
Property project	Location	Use	Status	(sq.m.)
Certain units in時代科技大廈	Shenzhen,	Office	Completed and partly	57,824.95
(Times Technology Building*)	the PRC		held for rental and
			partly occupied for
			self-use
Certain units in龍溪花園	Shenzhen,	Residential	Completed and partly	6,822.17
(Longxi Garden*)	the PRC		held for rental and
			partly occupied for
			self-use as staff
			quarters and ancillary
			facilities
Certain units in香荔花園	Shenzhen,	Residential	Completed and	2,560.00
(Xiangli Garden*)	the PRC		held for rental
Certain units in農科中心園藝情報	Shenzhen,	Office	Completed and	2,996.35
實驗樓(Nongke Center Gardening	the PRC		occupied for self-used
Intelligence Laboratory Building*)
Certain units in深圳龍崗區坪山鎮碧	Shenzhen,	Residential	Completed and	452.60
嶺路福安西一巷(Fuanxi First Lane,	the PRC		occupied for self-use
Biling Road, Pingshan Town,			as dormitory
Longgang District, Shenzhen,
the PRC*)

Shareholding structure of the Target Group

Set out below are the shareholding structure charts of the Target Group (i) as at the date of this announcement; and (ii) immediately after Completion:

(i) As at the date of this announcement

==> picture [313 x 370] intentionally omitted <==

----- Start of picture text -----

Shum Yip Group
(PRC)
100%
Vendor
(HK)
100%
Target Company
(BVI)
100%
WFOE
(PRC)
100%
Nongke
(PRC)
Nongke
Subsidiaries [(Note)]
Garden design and
Property investment and
construction, manufacture
development and property
and sale of agricultural
management
products and others
----- End of picture text -----

Note: All of the Nongke Subsidiaries are wholly-owned by Nongke except for 深圳市天翔達鴿業有限公司 (Shenzhen Tianxiangda Pigeon Industry Limited*) which is owned as to 58% by Nongke.

(ii) Immediately after Completion

==> picture [311 x 416] intentionally omitted <==

----- Start of picture text -----

Shum Yip Group
(PRC)
100%
Vendor
(HK)
67.27% [(Note 1)]
Company
(HK)
100%
Target Company
(BVI)
100%
WFOE
(PRC)
100%
Nongke
(PRC)
Nongke
Subsidiaries [(Note 2)]
Garden design and
Property investment and
construction, manufacture
development and property
and sale of agricultural
management
products and others
----- End of picture text -----

Notes:

1. Assuming that there will be no change in the shareholding structure of the Company other than as a result of the Acquisition.

2. All of the Nongke Subsidiaries are wholly-owned by Nongke except for 深圳市天翔達鴿業有限公司 (Shenzhen Tianxiangda Pigeon Industry Limited*) which is owned as to 58% by Nongke.

Financial Information of the Target Group

Set out below is the unaudited consolidated financial information of the Target Group for the years ended 31 December 2012 and 2013 as taken from the management accounts of the Target Group:

	For the year ended	For the year ended
	31 December 2013	31 December 2012
	HK$’000	HK$’000
Profit before taxation and extraordinary
items for the year	1,643,064	918,640
Profit after taxation and extraordinary
items for the year	965,433	492,630

Based on the aforesaid management accounts of the Target Group, the unaudited consolidated net asset value attributable to owners of the Target Company as at 31 December 2013 was HK$3,773.6 million.

As at the date of this announcement, the total amounts owing by the Target Group to the Vendor were approximately RMB12.2 million and those owing by the Vendor and its related parties to the Target Group were approximately RMB1,226.8 million resulting in the net amount owing from the Vendor and its related parties to the Target Group of approximately RMB1,214.6 million. Pursuant to the Acquisition Agreement, the Vendor has agreed to, and has agreed to procure Shum Yip Group and the Target Group to, fully settle the aforesaid indebtedness before Completion.

(D) REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

The Group is principally engaged in a range of operations including property development, property investment, property management, infrastructure construction and operation, transportation services and modern agriculture.

The Target Group holds a portfolio of properties in which the value of Mingren Land accounted for about 56.7% of the total preliminary valuation of the property interests held by the Target Group. The Mingren Land is conveniently located at the prime location of 中國深圳市福田區紅荔西路 (Hongli West Road, Futian District, Shenzhen, the PRC), with land parcels numbered 2014-002-0007 and 2014-002-0009. According to 關於深圳市農科集團公司改制為國有獨資有限責任公司土地資產處置方案的批覆 (深規土2012211號文) (The Approval In Relation To The Methods Dealing With Land Assets of Nongke Upon Its Restructuring Into A State-Owned Limited Liability Company) (UPLRCS Circular Number 2012211), the land use of the Mingren Land is currently confined to non-commercial use and Nongke has applied to the relevant land and resources regulatory authority to change the land use, plot ratio and planning GFA of the Mingren Land. Nongke expects to enter into a land grant contract with the relevant PRC government authority on or before the despatch date of the circular. The Mingren Land will have a total land area of approximately 39,158 sq.m. and an expected total planned GFA of approximately 259,332 sq.m.. The Mingren Land is expected to be developed into a mixed-use property for office, residential and commercial uses. Construction work for the Mingren Land is not yet commenced.

In the first half of 2013, the central government implemented the austerity control policy of “State Council’s Five Measures” to continue curbing the investment and speculative demand of real estate properties to facilitate the healthy development of the real estate market. Under the background of relatively loosened monetary policies and strong rigid housing demand, the real estate market in China was picking up continuously, in particular, in the first and second-tier cities, the real estate transactions were active with a strong recovery. Therefore, the Directors believe the Acquisition represents an excellent opportunity for the Group to increase its investments in properties located in prime business sites in Shenzhen.

The increase in land bank in Shenzhen is vital for the Group’s long-term development as the Directors believe that the demand for high quality properties in Shenzhen will continue to increase in the future as a result of its continuous improving economic environment. Following the Acquisition, the land bank of the Group (in terms of total GFA) will be increased by over 259,332 sq.m.. Furthermore, upon the exercise of the Land Acquisition Option, the land bank of the Group (in terms of total GFA) will be further increased. In addition to having land and properties interests located at prime locations of Shenzhen, the Target Group also has agriculture, forestry and animal husbandry businesses. Although these businesses account for less than 10% of the Target Group’s assets and revenue, they command important position in both Shenzhen and their respective industries. Upon Completion, the Group will continue to maintain these businesses, and to explore the synergistic effects between these businesses and the Group’s real estate development business.

Upon Completion, members of the Target Group will become subsidiaries of the Company and the financial results of the Target Group will be consolidated into the Group.

The Directors (excluding the members of the Independent Board Committee whose views will, after receiving the advice from the Independent Financial Adviser, be set out in the letter from the Independent Board Committee in the circular to be despatched to the Shareholders) are of the view that (i) the Acquisition, which replenishes the Group’s land bank, will further improve the profitability of the Company and facilitate the sustainable development of the Company in the long run; and (ii) the transactions as contemplated under the Entrustment Agreements are necessary transitional arrangements designed to facilitate (a) (in the case of dealing with the Land Resumption) the possible exercise of the Land Acquisition Option by the Company in the foreseeable future; and (b) (in the case of dealing with the Nongke Flora Market Related Rights) the implementation of the Nongke Flora Market Investment & Operations before the Company can proceed with a possible acquisition of the Nongke Flora Market Related Rights from Shum Yip Group in the foreseeable future; and that the terms of the Acquisition Agreement are on normal commercial terms or, in the case of the Entrustment Agreements, on better terms to the Company, and the Acquisition and the Non-exempt Continuing Connected Transactions and the Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

(E) SHAREHOLDING STRUCTURES OF THE COMPANY

Set out below is the shareholding structure of the Company (i) as at the date of this announcement; and (ii) immediately upon Completion, assuming that no other Share will be issued from the date of this announcement until the date of issue of the Consideration Shares:

The Vendor and its associate Directors LU Hua WU Jiesi LI Wai Keung Sub-total Public Shareholders Total	As at the date of this announcement No. of Shares Approximately % 3,260,164,941 60.59% 1,093,895 0.02% 3,534,767 0.06% 1,131,866 0.02% 3,265,925,469 60.69% 2,115,129,836 39.31% 5,381,055,305 100.00%	Immediately upon Completion No. of Shares Approximately % 4,360,098,007 67.27% 1,093,895 0.02% 3,534,767 0.05% 1,131,866 0.02% 4,365,858,535 67.36% 2,115,129,836 32.63% 6,480,988,371 100.00%

(F) LISTING RULES IMPLICATIONS

Listing Rules implications

As at the date of this announcement, the Target Company is wholly-owned by the Vendor and the Vendor is a wholly-owned subsidiary of Shum Yip Group. As the Vendor is the direct controlling shareholder of the Company, together with its associates, holding approximately 60.59% interest in the issued share capital of the Company, both the Vendor and Shum Yip Group are connected persons of the Company. Accordingly, the Acquisition also constitutes a connected transaction for the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Vendor and its associates will abstain from voting in respect of the resolution(s) approving the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps at the EGM.

Independent Board Committee

The Independent Board Committee, in compliance with the Listing Rules, has been established to consider the terms of the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps and to advise the Independent Shareholders as to whether they are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole and to give its recommendation as to the voting in respect of the resolutions to be proposed at the EGM for approving the Acquisition, the Non-exempt Continuing Connected Transactions and the Annual Caps, after taking into account the recommendation of the Independent Financial Adviser. In this connection, the Independent Financial Adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard.

(G) DESPATCH OF CIRCULAR

Completion is subject to the satisfaction and/or waiver of the conditions precedent under the Acquisition Agreement and therefore, may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

(H) DEFINITIONS

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

“Acquisition”

the proposed acquisition of the entire issued share capital of the Target Company by the Purchaser from the Vendor pursuant to the terms and conditions of the Acquisition Agreement

“Acquisition Agreement” the sale and purchase agreement entered into on 27 January 2014 (after trading hours) amongst the Purchaser, the Vendor and Shum Yip Group in respect of the Acquisition

“Agricultural Land the agreement dated 27 January 2014 entered into between Nongke Entrustment Agreement” and Shum Yip Group in respect of entrustment management arrangements of the Agricultural Lands and Related Assets

“Agricultural Lands and	four administrative allocated agricultural land parcels owned by
Related Assets”	Nongke, which are (i) three land parcels located at中國深圳市龍
	崗區坪山鎮湯坑坪環村錦龍大道(Jinlong Boulevard, Ping Huan
	Village, Tang Kang, Ping Shan Town, Longang District, Shenzhen,
	the PRC*) with a total land area of 423,635.95 sq.m.; and (ii) one
	land parcel located at中國深圳市龍崗區大鵬鎮鵬盛村(Pengsheng
	Village, Dapeng Town, Longang District, Shenzhen, the PRC*)with
	a total land area of 112,234.20 sq. m and the buildings situated on
	these land parcels, all of which are subject to the Land Resumption
“AL Entrustment	the maximum aggregate annual transaction amounts set for the
Annual Caps”	transactions contemplated under the Agricultural Land Entrustment
	Agreement for each of the three years ending 31 December 2014,
	2015 and 2016
“Annual Caps”	the AL Entrustment Annual Caps and the NFM Entrustment Annual
	Caps
“associate(s)”	has the same meaning as defined in the Listing Rules
“Board”	the board of the Directors
“Business Day”	a day (other than a Saturday, Sunday or a public holiday or a day on
	which tropical cyclone warning signal No. 8 or above or a “black”
	rain storm warning is in force in Hong Kong at any time between
	9:00 a.m. and 5:00 p.m.) on which licensed banks are generally open
	for business in Hong Kong
“BVI”	the British Virgin Islands
“Company” or “Purchaser”	Shenzhen Investment Limited, a company incorporated in Hong
	Kong with limited liability, the Shares of which are listed on the
	main board of the Stock Exchange
“Completion”	completion of the Acquisition
“Completion Date”	the date falling on the second Business Day after all the conditions
	precedent under the Acquisition Agreement have been fulfilled and/
	or waived by the Purchaser (or such other date as the Vendor and
	the Purchaser may agree in writing)
“connected person(s)”	has the same meaning as defined in the Listing Rules
“Consideration”	the consideration of RMB5,623,000,000 (equivalent to
	HK$7,228,760,110), subject to adjustment, payable by the Purchaser
	for acquisition of the entire issued share capital of the Target
	Company pursuant to the Acquisition Agreement
“Consideration Share(s)”	1,099,933,066 new Shares, credited as fully paid up, to be allotted
	and issued by the Company to the Vendor upon Completion at the
	issued price of HK$3.286 per new Share, as partial settlement of
	the Consideration

“controlling shareholder”	has the same meaning as defined in the Listing Rules
“Director(s)”	the director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be convened
	for the purpose of considering and, if thought fit, approving the
	Acquisition Agreement and the transactions contemplated thereunder
	(including, but not limited to the issue of the Consideration Shares),
	the Non-exempt Continuing Connected Transactions and the Annual
	Caps
“Enlarged Group”	the Group as enlarged by the Acquisition
“Entrustment Agreements”	Agricultural Land Entrustment Agreement and Nongke Flora Market
	Entrustment Agreement
“Estimated Land Premium”	RMB3,305 million, being the estimated land premium payable by
	Nongke to UPLRCS in respect of the Mingren Land and part of the
	conditions precedent to Completion
“GFA”	gross floor area
“Group”	the Company and its subsidiaries from time to time
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board	an independent committee of the Board to be established to advise
Committee”	the Independent Shareholders as regards the terms of the Acquisition
	and the Non-exempt Continuing Connected Transactions
“Independent Financial	the independent financial adviser to be appointed to advise the
Adviser”	Independent Board Committee and the Independent Shareholders in
	relation to the terms of the Acquisition, the Non-exempt Continuing
	Connected Transactions and the Annual Caps
“Independent Shareholders”	the Shareholders other than the Vendor and its associates
“Last Trading Date”	27 January 2014, being the last trading date of the Shares before
	the issue of this announcement
“Land Acquisition Option”	the right to exercise an option to acquire the New Replacement Land
	at fair market value, details of which are set out in the sub-section
	headed “Mechanisms for dealing with the Land Resumption” under
	the section headed “(B) The Acquisition” above

“Land Resumption”

“Replacement Land”
“Replacement Land Premium Prepayment”
“Listing Committee”
“Listing Rules”
“Longxi Garden Relocation Fee”
“Mingren Land”
“New Replacement Land”
“New Replacement Land Grant Contract”
the proposal to exchange the Subject Lands with the New Replacement Land, details of which are set out in the sub-section headed “Mechanisms for dealing with the Land Resumption” under the section headed “(B) The Acquisition” above
the replacement land after the compulsory resumption of a land parcel owned by Nongke in 2005, which is expected to be located in Longgang, Shenzhen, the PRC with a land area of approximately 100,000 sq.m. for industrial use as undertaken by the relevant land and resources government authorities in Shenzhen to the Target Group
a prepayment amount of RMB27.0 million withheld by the relevant land and resources government authorities in Shenzhen in respect of the Replacement Land, the amount of which was expected to fully discharge the land premium payable to secure the Replacement Land
the listing sub-committee of the board of directors of the Stock Exchange
the Rules Governing the Listing of Securities on the Stock Exchange
the fee in the amount of RMB250,457,000 payable by an independent third party to Nongke pursuant to an agreement entered into between Nongke and such independent third party on 3 September 2012 for relocation of certain shops, canteens, community health centers, kindergartens, dormitories and other buildings, structures, appurtenances of 龍溪花園 (Longxi Garden) (the details of 龍溪花園 (Longxi Garden) are set out in the sub-section headed “List of target properties” under the section headed “(C) Information on the Target Group” below), and as at the date of the Acquisition Agreement, RMB30.0 million of which was already received by Nongke
the land parcels numbered 2014-002-0007 and 2014-002-0009 owned by Nongke with a total land area of approximately 39,158 sq.m. and an expected total planned GFA of approximately 259,332 sq.m. located at 中國深圳市福田區紅荔西路 (Hongli West Road, Futian District, Shenzhen, the PRC*)
the replacement land parcel to be obtained by the Target Group from relevant land and resources government authorities in Shenzhen pursuant to the Land Resumption
the land grant contract in respect of the New Replacement Land

“NFM Entrustment the maximum aggregate annual transaction amounts set for Annual Caps” the transactions contemplated under the Nongke Flora Market Entrustment Agreement for each of the three years ending 31 December 2014, 2015 and 2016 “Non-exempt Continuing the transactions to be carried out pursuant to the Entrustment Connected Transactions” Agreements “Nongke” 深圳市農科集團有限公司 (Shenzhen Nongke Holdings Company Limited), a company established in the PRC and a member of the Target Group “Nongke Flora Market” a land parcel located at 中國深圳市福田區香蜜湖片區 (Xiangmihu Area, Futian District, Shenzhen, the PRC) which is currently used and managed by Nongke “Nongke Flora Market the investment and operations management agreement dated 27 Entrustment Agreement” January 2014 entered into between Nongke and Shum Yip Group in respect of the Nongke Flora Market Related Rights “Nongke Flora Market the investment operation and management of 農業科普和花卉展示 Investment & Operations” 博覽園 (Nongke Popular Science and Flora Expo) and the social car parking space and a minimum amount of commercial facilities of the Nongke Flora Market

“Nongke Flora Market the rights given to Nongke for it to carry out the Nongke Flora Related Rights” Market Investment & Operations for a period of 40 years pursuant to the requirements of the relevant documents of Shenzhen Government

“Nongke Group”

Nongke and the Nongke Subsidiaries

“Nongke Subsidiaries” the subsidiaries of Nongke, being 深圳市農科房地產開發有限公司 (Shenzhen Nongke Property Development Limited), 深圳市農科物業管理有限公司 (Shenzhen Nongke Property Management Limited). 深圳市農科園林裝飾工程有限公司 (Shenzhen Nongke Garden Design and Construction Limited), 深圳市綠得寶保健食品有限公司 (Shenzhen Lvdebao Healthy Foods Limited), 深圳市天翔達鴿業有限公司 (Shenzhen Tianxiangda Pigeon Industry Limited), 深圳市天翔達牧工貿有限公司 (Shenzhen Tianxiangdamu Industry and Trading Limited), 深圳市新科泰實業有限公司 (Shenzhen Xinketai Limited), 深圳市農業生物技術發展有限公司 (Shenzhen Agricultural Biotechnology Limited), 深圳市農科蔬菜科技有限公司 (Shenzhen Nongke Vegetable Technology Limited), 深圳市農科苑科技實業有限公司 (Shenzhen Nongkeyuan Limited) and 深圳市農科植物克隆種苗有限公司 (Shenzhen Nongke Plant and Clone Seed Limited*)

“PRC” or “China”

the People’s Republic of China and, for the purpose of this announcement, excluding Hong Kong, Macao Special Administrative Region of the People’s Republic of China and Taiwan

“Reassessed NAV”	the unaudited consolidated net asset value attributable to owners of
	the Target Company as at 31 December 2013 after having adjusted
	for (i) the preliminary valuation of the property interests held by the
	Target Group, using the direct comparison valuation method, in the
	amount of approximately RMB10,793.6 million; (ii) the Estimated
	Land Premium of RMB3,305 million; and (iii) the estimated
	potential tax liabilities of the Target Group
“RMB”	Renminbi, the lawful currency of the PRC
“SASAC”	國有資產監督管理委員會(the State-owned Assets Supervision and
	Administration Commission)
“Seized Units”	65 units in香珠花園(Xiangzhu Garden*) which are being seized
	under the PRC court orders forming part of the assets to be acquired
	by the Company under the Acquisition
“Share(s)”	the ordinary share(s) with par value of HK$0.05 each in the issued
	share capital of the Company
“Shareholder(s)”	the holder(s) of the Share(s)
“Shum Yip Group”	深業集團有限公司(Shum Yip Group Limited*), a company
	established in the PRC and the holding company of the Vendor,
	which is ultimately wholly-owned by Shenzhen Municipal People’s
	Government and under the administration of深圳市人民政府國有
	資產監督管理委員會(Shenzhen SASAC)
“sq.m.”	square meter(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subject Lands”	the Agricultural Lands and Related Assets, the Replacement Land
	and the Replacement Land Premium Prepayment
“Target Company”	Shenzhen Bio-Agriculture Company Limited (深圳生物農業有限公
	司), a company incorporated in the BVI with its entire issued share
	capital currently held by the Vendor
“Target Group”	the Target Company and its subsidiaries (namely, WFOE, Nongke
	and the Nongke Subsidiaries)
“UPLRCS”	深圳市規劃和國土資源委員會(Urban Planning and Land
	Resources Commission of Shenzhen)
“Vendor”	Shum Yip Holdings Company Limited (深業（集團）有限公司), a
	company incorporated in Hong Kong and wholly-owned by Shum
	Yip Group

“WFOE”

深圳市深業農業發展有限公司 (Shenzhen Shum Yip Agriculture Development Limited*), a wholly foreign owned enterprise established in the PRC and a member of the Target Group

“%”

per cent.

By order of the Board of Shenzhen Investment Limited LU Hua Chairman

Hong Kong, 27 January 2014

Unless otherwise specified, translations of RMB into HK$ in this announcement are based on the exchange rate of RMB1.0 =HK$1.28557. No representation is made that any amounts in RMB or HK$ can be or could have been converted at the relevant dates at the above rate or any other rates at all.

As at the date of this announcement, the Board comprises 9 Directors, of which Mr. LU Hua, Mr. GAO Shengyuan, Mr. MOU Yong and Mr. LIU Chong are the executive Directors, Dr. WU Jiesi and Mr. HUANG Yige are the non-executive Directors and Mr. WU Wai Chung, Michael, Mr. LI Wai Keung and Dr. WONG Yau Kar, David are the independent non-executive Directors.

For identification purpose only

AI assistant

Macau E&M Holding Limited — M&A Activity 2014

49906_rns_2014-01-27_c35b55f2-bdb1-4e63-8286-c67f1ced936e.pdf

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF SHENZHEN BIO-AGRICULTURE COMPANY LIMITED; AND

(2) NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Financial adviser to Shenzhen Investment Limited

THE ACQUISITION

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE

DESPATCH OF CIRCULAR

(A) INTRODUCTION

(B) THE ACQUISITION

The Acquisition Agreement

Assets to be acquired

The Consideration

(collectively, the “ Seized Units Conditions ”),

Adjustments to the Consideration

(ii) Preliminary Valuation of the Seized Units

The Consideration Shares

Conditions precedent

Completion

Indemnities and undertakings

Mechanisms for dealing with the Land Resumption

(iii) Conditions for the transfer of the New Replacement Land

(iv) Land Acquisition Option

Mechanisms for dealing with the Nongke Flora Market Related Rights

(ii) The Nongke Flora Market Entrustment Agreement

(C) INFORMATION ON THE TARGET GROUP

Information on the Target Group

List of target properties

Shareholding structure of the Target Group

(ii) Immediately after Completion

Financial Information of the Target Group

(D) REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

(E) SHAREHOLDING STRUCTURES OF THE COMPANY

(F) LISTING RULES IMPLICATIONS

Listing Rules implications

Independent Board Committee

(G) DESPATCH OF CIRCULAR

Completion is subject to the satisfaction and/or waiver of the conditions precedent under the Acquisition Agreement and therefore, may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

(H) DEFINITIONS

More from Macau E&M Holding Limited

Macau E&M Holding Limited M&A Activity 2014