MS Group Holdings Limited — M&A Activity 2018

Jul 25, 2018

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.

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FULLSUN INTERNATIONAL HOLDINGS GROUP CO., LIMITED 福 晟 國 際 控 股 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

DISCLOSEABLE TRANSACTION ACQUISITION OF 95% EQUITY INTEREST IN THE TARGET COMPANY

THE EQUITY TRANSFER AGREEMENT

On 25 July 2018 (after the trading hours of the Stock Exchange), the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Vendor, pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire 95% equity interest in the Target Company at the Consideration of RMB953 million.

As more than one applicable percentage ratios in respect of the Acquisition contemplated under the Equity Transfer Agreement exceed 5% but all such ratios are less than 25%, such Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

THE EQUITY TRANSFER AGREEMENT

On 25 July 2018 (after the trading hours of the Stock Exchange), the Vendor and the Purchaser entered into the Equity Transfer Agreement, particulars of the principal terms of which are set out below:

Date

25 July 2018

Parties

1. Fujian Huadingxing Investment Co., Ltd.* (福建華鼎興投資有限公司), as the Vendor

2. Fuzhou Fullsun Group Co., Ltd.* (福州福晟集團有限公司), as the Purchaser

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To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the date of this announcement, each of the Vendor and its ultimate beneficial owners is a third party independent of the Company and its connected persons.

Assets to be acquired

Pursuant to the Equity Transfer Agreement, the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire the Target Equity Interest at the Consideration of RMB953 million.

As at the date of this announcement, the equity interest of the Target Company is 95% registered under the name of Wuhan Ruifu and 5% registered under the name of and owned by the Purchaser. The Target Equity Interest is being held by Wuhan Ruifu as security for a loan (the ‘‘Wuhan Ruifu Loan’’) with outstanding principal amount of RMB450 million advanced by Wuhan Ruifu to the Target Company as working capital. In December 2017 after the establishment of the Target Company, the Purchaser acquired the 5% equity interest of the Target Company from a third party independent of the Company and its connected persons at nil consideration and the net asset value of the Target Company was approximately nil at the date of such initial acquisition. As at the date of this announcement, the Target Company owns all the equity interest in Hunan Deruida. Further particulars of the Target Group are set out in the section headed ‘‘Information on the Target Group and the Project’’ below.

Wuhan Ruifu will give an undertaking (the ‘‘Wuhan Ruifu Undertaking’’) in writing in favour of the Vendor and the Purchaser that upon receipt of the repayment of the outstanding principal amount of the Wuhan Ruifu Loan in full, it will transfer the Target Equity Interest to the Purchaser at nil consideration.

As provided under the Equity Transfer Agreement, the Vendor shall procure that the registration of the transfer of the Target Equity Interest to the Purchaser be completed within one month from the date on which the principal amount of the Wuhan Ruifu Loan is repaid.

Consideration and payment terms

The Consideration is RMB953 million, of which:

• (i) RMB450 million shall be paid in cash by the Purchaser within seven Business Days from the date of the Equity Transfer Agreement to the Target Company for repaying the outstanding principal amount of the Wuhan Ruifu Loan in full. The payment of such sum by the Purchaser to the Target Company shall be regarded by the parties to the Equity Transfer Agreement as payment by the Purchaser of an equivalent sum of the Consideration to the Vendor; and

• (ii) the remaining amount of RMB503 million shall be paid in cash by the Purchaser to the Vendor within 45 Business Days from the date on which the Target Equity Interest is transferred to and registered under the name of the Purchaser.

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According to the terms of the Equity Transfer Agreement, the Vendor is obliged (i) to procure the Target Company to repay the principal amount of the Wuhan Ruifu Loan in full before the date of Completion; (ii) to net-off a loan together with interest accrued thereon due to the Vendor with an amount of approximately RMB463.04 million; and (iii) to settle on behalf of the Target Company for a sum due to a third party of approximately RMB39.96 million immediately after the receipt of the balance of the Consideration in the sum of RMB503 million.

The Consideration will be financed by the Group’s internal resources.

The Consideration was determined upon arm’s length negotiation between the parties and the Group has taken into account the following factors: (i) the location, the current development plan and status and the prospect of the Project; (ii) the valuation of the Project as indicated by an independent valuer as at 30 June 2018 of approximately RMB922 million; and (iii) the synergistic effect that can be created between the Group and the Target Group.

Conditions Precedent

The transfer of the Target Equity Interest contemplated under the Equity Transfer Agreement is conditional upon satisfactions (or, where applicable, waiver) of the following conditions:

(i) with respect to the Target Equity Interest

• the Vendor shall deliver to the Purchaser the Wuhan Ruifu Undertaking within seven Business Days from the date of the Equity Transfer Agreement;

• from the date of the Equity Transfer Agreement up to Completion, without the written consent of the Purchaser, there shall be no change in the Target Equity Interest held by Wuhan Ruifu/the Vendor and no encumbrances shall be created over the Target Equity Interest;

• no third party shall have made to, or brought against, Wuhan Ruifu/the Vendor (a) any query involving, or any claim for compensation or other economic remedies in relation to, the transfer (the ‘‘Present Transfer’’) of the Target Equity Interest as contemplated under the Equity Transfer Agreement; or (b) any proceedings the consequences of which may impede or delay the Present Transfer or may lead to the Present Transfer becoming illegal or may in any other way affect the Present Transfer;

• the Vendor shall have fully performed and complied with its obligations, duties, agreements and covenants under the Equity Transfer Agreement that shall have been performed and complied with before or at Completion;

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• (ii) with respect to the Target Company

• since the establishment of the Target Company up to Completion, it has been operating legally, no violation of laws and regulations has occurred, and there has been no undisclosed administrative penalties, breach of criminal law or legal proceedings;

• other than the indebtedness disclosed in the Equity Transfer Agreement, no encumbrances exists over the assets of the Target Company;

• save for the contracts and documents already disclosed to the Purchaser, there is no contracts, agreements or arrangements to which the Target Company is a party and is bound, no notice, complaint, claim or legal proceedings in relation to breaching any of such contracts, agreements or arrangements has been received, and no facts, circumstances or impediments has occurred or exists which may lead to the Target Company becoming unable at present or in the future to conduct its business operations legally;

• up to the date of Completion, all licences, approvals and consents for the Target Company and/or the Project shall have remained valid and in full force and effect and no circumstances or events shall have occurred or exist that may result in the revocation and/or cancellation of such licences, approvals and consents;

• there shall be no undisclosed debt;

• from the date of the Equity Transfer Agreement up to Completion, there shall be no material adverse change in respect of the Target Company;

• the Target Company shall have fully performed and complied with its obligations, duties, agreements and covenants under the Equity Transfer Agreement that shall have been performed and complied with before or at Completion;

• (iii) with respect to the Project

• all the materials and information, including the project construction information, technical documentation, floor plans, administrative and financial information in relation to the Project as required by the Purchaser are complete; and

• (iv) with respect to the Listing Rules

• (where applicable) the Company shall have obtained the approval of its shareholders for the Equity Transfer Agreement and the transactions contemplated thereunder in accordance with the requirements of the Listing Rules.

If any of the Conditions has not been fulfilled (unless waived by the Purchaser), the Purchaser shall have the right to terminate the Equity Transfer Agreement and seek damages from the Vendor and the Vendor shall return the Consideration (to the extent already paid by the Purchaser) within seven Business Days upon demand by the Purchaser. The Purchaser shall have the right to waive any of the above Conditions (other than that under paragraph (iv) above).

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If as at Completion any of the Conditions has not been fulfilled (or, where applicable, waived), the Purchaser shall have the right to require the Vendor to continue to procure such Conditions to be fulfilled, failing which the Vendor shall be treated as having breached the Equity Transfer Agreement.

Completion

The date of Completion shall fall on the date on which the registration in respect of the transfer of the Target Equity Interest to the Purchaser with the relevant Administration of Industry and Commerce Bureau has been completed.

Upon Completion, under the accounting policy of the Group each of the Target Company and Hunan Deruida will become wholly owned by the Purchaser and a subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

It is intended that after Completion, the Target Company will obtain a loan in the principal amount of approximately RMB900 million from a financial institution for financing the future development of the Project. It is also expected that 49% equity interest in Hunan Deruida will be transferred by the Target Company to such financial institution and 51% equity interest in Hunan Deruida will be pledged by the Target Company by way of security as collateral for the repayment obligations of Hunan Deruida in respect of such loan. Accordingly, the financial institution will become a substantial shareholder of Hunan Deruida and therefore a connected person of the Company at subsidiary level, resulting in such loan constituting a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. In this regard, the Company will make further announcement(s) and comply with the applicable requirements under Listing Rules as and when appropriate. Although 49% equity interest in Hunan Deruida will be held by the financial institution under the above arrangement, under the accounting policy of the Company, the Group will continue to treat Hunan Deruida as its subsidiary with 100% effective equity interest.

INFORMATION ON THE TARGET GROUP AND THE PROJECT

The Target Company was established in the PRC in December 2017 and is principally engaged in investment holding in the PRC. As at the date of this announcement, the equity interest of the Target Company is 95% registered under the name of Wuhan Ruifu and 5% registered under the name of and owned by the Purchaser and the registered capital of the Target Company is RMB10,000,000. The Target Equity Interest is being held by Wuhan Ruifu as security for the Wuhan Ruifu Loan. In December 2017 after the establishment of the Target Company, the Purchaser acquired the 5% equity interest of the Target Company from a third party independent of the Company and its connected persons at nil consideration and the net asset value of the Target Company was approximately nil at the date of such initial acquisition.

Hunan Deruida was established in the PRC in 2017 and is principally engaged in property development in Hunan Province, the PRC. As at the date of this announcement, the Target Company owns all the equity interest in Hunan Deruida and the registered capital of Hunan Deruida is RMB50,000,000.

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As at the date of this announcement, the principal assets of the Target Group is the Project which is a parcel of land located at Huanhu Road West, Meixi Lake, Yuelu Qu* (岳麓區梅 溪湖環湖路西), Changsha City, Hunan Province, the PRC with site area of approximately 18,200 square metres. The use of the land is planned for development of a residential and commercial complex with planned construction area of approximately 129,000 square metres. Hunan Deruida acquired the Project through public bidding at cost of approximately RMB919,870,000.

Set out below is the combined financial information of the Target Group extracted from their unaudited management accounts for the period ended from its incorporation date to 30 June 2018:

			For period
			ended
			30 June
			2018
			Approximately
			RMB’000
Net	loss	before taxation	698
Net	loss	after taxation	698

As at 30 June 2018, the unaudited combined net liabilities of the Target Group amounted to approximately RMB698,000.

INFORMATION ON THE VENDOR AND WUHAN RUIFU

The Vendor is a company established in the PRC with limited liability and is principally engaged in real estate development. Wuhan Ruifu is a company established in the PRC with limited liability and is principally engaged in investment holding.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the date of this announcement, each of the Vendor, Wuhan Ruifu and their respective ultimate beneficial owners is a third party independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT

The Company in an investment holding company and the Group is principally engaged in the development and sale of properties and property investment in the PRC including Hong Kong. The Purchaser was established in the PRC with limited liability and is principally engaged in equity investment.

The Board believes that the Acquisition will provide an opportunity to expand the property development portfolio in the PRC. The Project is located at a prime location in Changsha City, the Group, after the Completion, intends to develop the Project into residential and commercial complex. The Group expects the pre-sale of the Project may commence in year 2019 and the construction of the Project be completed in year 2021. The Acquisition will enable the Group to generate income and provide capital appreciation potential to the Group.

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Based on the above, the Directors consider that the terms of the Equity Transfer Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

As more than one applicable percentage ratios in respect of the Acquisition contemplated under the Equity Transfer Agreement exceed 5% but all such ratios are less than 25%, such Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

DEFINITIONS

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

• ‘‘Acquisition’’ the proposed acquisition of the Target Equity Interest by the Purchaser

• ‘‘Board’’ the board of Directors ‘‘Business Day(s)’’ a day (other than Saturday, Sunday or a public holiday in the PRC) on which banks are open in the PRC for general business

• ‘‘Company’’ Fullsun International Holdings Group Co., Limited (福晟國 際控股集團有限公司), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange

• ‘‘Completion’’ completion of the Equity Transfer Agreement in accordance with its terms

• ‘‘Conditions’’ the conditions precedent to, among others, the transfer of the Target Equity Interest contemplated under the Equity Transfer Agreement, details of which are set out in the paragraph headed ‘‘Conditions precedent’’ in this announcement

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Consideration’’ the total consideration in the sum of RMB953 million payable by the Purchaser to the Vendor for the Target Equity Interest under the Equity Transfer Agreement

• ‘‘Directors’’ the directors of the Company

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‘‘Equity Transfer Agreement’’	the equity transfer agreement dated 25 July 2018 between
	the Vendor as vendor and the Purchaser as purchaser in
	relation to the sale and purchase of the Target Equity
	Interest
‘‘Group’’	the Company and its subsidiaries
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC
‘‘Hunan Deruida’’	Hunan Deruida Property Development Co., Ltd.* (湖南德瑞
	達房地產開發有限公司), a company established in the PRC
	with limited liability
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock
	Exchange
‘‘PRC’’	the People’s Republic of China, excluding Hong Kong,
	Macau Special Administrative Region and Taiwan for the
	purpose of this announcement
‘‘Project’’	a parcel of land located at Huanhu Road West, Meixi Lake,
	Yuelu Qu* (岳麓區梅溪湖環湖路西), Changsha City,
	Hunan Province, which is owned by Hunan Deruida as at
	the date of this announcement
‘‘Purchaser’’	Fuzhou Fullsun Group Co., Ltd.* (福州福晟集團有限公司),
	a company established in the PRC with limited liability and
	an indirect wholly-owned subsidiary of the Company
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Target Company’’	Fuzhou Kangan Lixin Investment Co., Ltd.* (福州康安利信
	投資有限公司), a company established in the PRC with
	limited liability
‘‘Target Equity Interest’’	95% of the equity interest in the Target Company
‘‘Target Group’’	the group comprising the Target Company and Hunan
	Deruida
‘‘Vendor’’	Fujian Huadingxing Investment Co., Ltd.* (福建華鼎興投資
	有限公司), a company established in the PRC with limited
	liability

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‘‘Wuhan Ruifu’’

Wuhan Ruifu Kaide Trading Co., Ltd.* (武漢瑞福凱德貿易 有限公司), a company established in the PRC with limited liability

‘‘%’’

per cent.

• for identification purpose only

By Order of the Board Fullsun International Holdings Group Co., Limited Pan Weiming Chairman

Hong Kong, 25 July 2018

As at the date of this announcement, the Board comprises seven executive Directors, namely Mr. Pan Weiming, Mr. Pan Jungang, Ms. Chen Weihong, Mr. Li Jinrong, Mr. Tang Kwok Hung, Ms. Wu Jihong and Mr. Wu Yang and four independent non-executive Directors, namely Mr. Mak Ka Wing, Patrick, Mr. Yuen Chee Lap, Carl, Mr. Yang Xiaoping and Dr. Cheung Wai Bun, Charles J.P..

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