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Newborn Town Inc. — Capital/Financing Update 2021
Oct 10, 2021
10221_rns_2021-10-10_fb963c0e-b3f7-4496-ad7d-84999f7ecbf9.pdf
Capital/Financing Update
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
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NEWBORN TOWN INC. 赤子城科技有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 9911)
DISCLOSEABLE TRANSACTION CONNECTED TRANSACTION
ENTERING INTO EQUITY TRANSFER AGREEMENT INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE
Financial adviser to the Company
Independent Financial Adviser to the Independent Board Committee and Independent Shareholders
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DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION
The Board is pleased to announce that on 9 October 2021, the Company (as the purchaser) entered into the Equity Transfer Agreement with BGFG Limited (as the Vendor), pursuant to which the Vendor has conditionally agreed to sell, and the Company has conditionally agreed to acquire 21,850,000 shares of NBT Social Networking Inc. as held by the Vendor (which accounts for approximately 11.50% of the total shares of the Target Company) for the total consideration of HK$727,580,000. The consideration comprises of two parts, being a cash consideration of HK$281,580,000, and the issuance of 100,000,000 Shares of the Company to the Vendor at the issue price of HK$4.46 per Share by the Company. As at the date of the announcement, the Target Company is a non-wholly owned subsidiary of the Company, in which the Company owns 92,898,260 shares of the Target Company, which accounts for approximately 48.89% of its total shares. Upon the Completion, the Company will hold 114,748,260 shares of the Target Company, which accounts for approximately 60.39% of its total shares.
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LISTING RULES IMPLICATIONS
As at the date of this announcement, NBT Social Networking Inc. is a significant subsidiary of the Company, and BGFG Limited is a substantial shareholder of NBT Social Networking Inc. As such, BGFG Limited is a connected person at the subsidiary level of the Company under the Listing Rules. Therefore, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition exceed 5% but are less than 25%, therefore, the Acquisition constitutes (i) a discloseable transaction of the Company which is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules; and (ii) a non-exempt connected transaction of the Company which is subject to the notification, announcement, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER
The Independent Board Committee, comprising all the independent non-executive Directors, has been established to consider the Equity Transfer Agreement and the transactions contemplated thereunder, and to advise the Independent Shareholders as to whether granting the specific mandate for the allotment and issuance of consideration shares. Somerley Capital Limited is appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same respect.
GENERAL
The Company will convene a general meeting to approve, among other things, the Equity Transfer Agreement and the transactions contemplated thereunder, and the granting of specific mandate for the allotment and issuance of consideration shares. To the best of the Directors’ knowledge, information and belief, no Shareholder and its respective associates has material interest in the Equity Transfer Agreement and the transactions contemplated thereunder, and the granting of specific mandate for the allotment and issuance of Share Consideration (as defined below).
A circular containing, among other things, a notice that contains further details of the Equity Transfer Agreement and the transactions contemplated thereunder, and the granting of specific mandate for the allotment and issuance of Share Consideration (as defined below), a letter from the Independent Board Committee and the advice from Somerley Capital Limited, is expected to be despatched to the Shareholders after fifteen business days after this announcement is published.
Shareholders and potential investors of the Company should be aware that the Completion is subject to satisfaction (or, if applicable, waiver) of certain conditions and consequently the Acquisition may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the Shares.
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The Board is pleased to announce that on 9 October 2021, the Company (as the purchaser) entered into the Equity Transfer Agreement with BGFG Limited (as the Vendor), pursuant to which the Vendor has conditionally agreed to sell, and the Company has conditionally agreed to acquire 21,850,000 shares of NBT Social Networking Inc. as held by the Vendor (which accounts for approximately 11.50% of the total shares of the Target Company) for the total consideration of HK$727,580,000. The consideration comprises of two parts, being a cash consideration of HK$281,580,000, and the issuance of 100,000,000 Shares of the Company to the Vendor at the issue price of HK$4.46 per Share by the Company. As at the date of the announcement, the Target Company is a non-wholly owned subsidiary of the Company, in which the Company owns 92,898,260 shares of the Target Company, which accounts for approximately 48.89% of its total shares. Upon the Completion of the Acquisition, the Company will hold 114,748,260 shares of the Target Company, which accounts for approximately 60.39% of its total shares.
DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION
Details of the Equity Transfer Agreement are set out below:
Date
9 October 2021
Parties
-
(i) the Company;
-
(ii) the Vendor; and
-
(iii) the Obligor
Shares to be acquired
Pursuant to the Equity Transfer Agreement, the Vendor has conditionally agreed to sell and the Company has conditionally agreed to acquire 21,850,000 shares of NBT Social Networking Inc. as held by the Vendor, which accounts for approximately 11.50% of the total shares of the Target Company.
Conditions precedent
Pursuant to the terms of the Equity Transfer Agreement, unless waived in accordance with the Equity Transfer Agreement, the Company’s obligation to settle the consideration of the Acquisition shall be subject to the fulfilment of the following conditions precedent:
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(1) the representations and warranties given by the Vendor and the Obligor being true and accurate in all material respects as at the Completion and the Vendor and the Obligor’s material undertakings contained in the Equity Transfer Agreement having been complied with in all material respects;
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(2) the necessary resolution(s) having been passed by the shareholders of the Company at the shareholders’ general meeting and by the directors of the Company approving the Equity Transfer Agreement and all and any transactions contemplated hereunder and all and any matters related to such transactions in accordance with the requirements of the Hong Kong Listing Rules;
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- (3) all necessary filings, approvals, announcements and circulars required by SEHK, SFC and/or under the Hong Kong Listing Rules and/or under any other laws, rules, code and regulations of Hong Kong have been duly completed or obtained.
The condition (1) above may only be waived by the Company in writing and the conditions (2) and (3) may not be waived in any event by any parties under the Equity Transfer Agreement.
If the Acquisition has not completed on or before 31 December 2022, the Equity Transfer Agreement shall automatically terminate unless the parties to the Equity Transfer Agreement otherwise agree.
Completion
Completion shall take place within 20 business days after the fulfilment (or waiver, if applicable) of all the conditions precedent under the Equity Transfer Agreement or such other date as the Vendor and Company may mutually agree upon in writing.
Consideration and terms of payment
The total consideration is HK$727,580,000, which comprises of two parts, being a cash consideration (“ Cash Consideration ”) of HK$281,580,000, and the issuance of 100,000,000 shares of the Company to the Vendor at the issue price of HK$4.46 per Share by the Company (“ Share Consideration ”).
On Completion, the Company shall issue and allot the consideration share to Vendor for free. The Share Consideration comprises of a total of 100,000,000 Shares which shall be issued in accordance with the specific mandate that will be sought at the extraordinary general meeting. The consideration shares account for approximately 10.01% of the existing issued share capital of the Company as at the date of this announcement, and approximately 9.10% of the issued capital of the Company enlarged by the allotment and issuance of the consideration shares (assuming there will not be any other issue or repurchase of Shares prior to the Completion).
Subject to the successful Completion, the Company shall:
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(1) pay to the Vendor HK$140,790,000 in cash on or before the Post-Completion Payment Date or 31 December 2021, whichever is later; and
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(2) pay to the Vendor another HKD140,790,000 in cash on or before the Post-Completion Payment Date or 30 June 2022, whichever is later.
Any payment to be made pursuant to the Equity Transfer Agreement by or on behalf of the Company to the Vendor shall be made to the Vendor’s bank account provided in writing no later than three business days prior to the due date for payment in immediately available funds by electronic transfer on the due date for payment. Receipt of the full amount due shall be an effective discharge of the relevant payment obligation.
The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the consideration shares. The consideration shares, when allotted and issued, shall be credited as fully paid and at all times rank pari passu among themselves and with the Shares in issue as at the date of issue of the consideration shares, except that they shall not be entitled to receive any dividend, distribution or entitlement declared, paid or made by reference to a record date prior to the date of allotment and issue of the consideration shares (as the case may be).
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The issue price of consideration shares of HK$4.46 per Share was determined after arm’s length negotiation between the parties to the Equity Transfer Agreement with reference to the higher of the closing price on the date of entering into of the Equity Transfer Agreement and the average closing price for the last five trading days.
Mandate to issue the consideration shares
The consideration shares will be allotted and issued pursuant to the specific mandate to be sought at the extraordinary general meeting.
EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY
The shareholding structures of the Company (i) as at the date of this announcement; and (ii) immediately upon the Completion (assuming there will not be any other issue or repurchase of Shares prior to the Completion) are set out as follows:
| Shareholders Spriver Tech Limited(1) Parallel World Limited(2) Phoenix Auspicious FinTech Investment L.P.(3) Public shareholders BGFG Limited(4) Total |
As at the date of the announcement Immediately upon the Completion (assuming there will not be any other issue or repurchase of Shares prior to the Completion) Number of shares Approximate percentage to the number of issued Shares Number of shares Approximate percentage to the number of issued Shares 235,806,646 23.61% 235,806,646 21.46% 73,121,774 7.32% 73,121,774 6.65% 89,210,948 8.93% 89,210,948 8.12% 600,710,632 60.14% 600,710,632 54.67% – – 100,000,000 9.10% 998,850,000 100.00% 1,098,850,000 100.00% |
|---|---|
Notes:
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(1) Spriver Tech Limited is directly and wholly owned by Mr. Liu Chunhe. Mr. Liu Chunhe is therefore deemed to be interested in all the Shares held by Spriver Tech Limited under the Securities and Futures Ordinance.
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(2) Parallel World Limited is directly and wholly owned by Mr. Li Ping. Mr. Li Ping is therefore deemed to be interested in all the Shares held by Parallel World Limited under the Securities and Futures Ordinance.
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(3) Phoenix Auspicious FinTech Investment L.P. is indirectly controlled by Mr. Du Li. Mr. Du Li is therefore deemed to be interested in all the Shares held by Phoenix Auspicious FinTech Investment L.P. under the Securities and Futures Ordinance.
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(4) BGFG Limited is directly and wholly owned by Mr. Wang Xinming. Mr. Wang Xinming is therefore deemed to be interested in all the Shares held by BGFG Limited under the Securities and Futures Ordinance.
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BASIS OF DETERMINATION OF THE CONSIDERATION
The payment of HK$727,580,000 by the Company to the Vendor in accordance to the agreement has been agreed by the parties through arm’s length negotiation after taking into consideration of a number of factors, including but not limited to the value of Target Company determined by the independent valuer in accordance to market approach, the business prospect of the Target Company, and the reasons and benefits of entering into the Equity Transfer Agreement as set out in the section “Reasons and Benefits of Entering Into the Equity Transfer Agreement” below.
INFORMATION ON THE PARTIES TO THE EQUITY TRANSFER AGREEMENT
The Company
The Company is the largest company in overseas platform of social networking in the PRC. The Company focuses on the global open social networking sector, as well as emerging modes in social networking including video and audio formats, creating a range of diversified social networking products including video social networking, audio social networking and live-streaming social networking. Its representative products include Yumy, MICO and YoHo, which are highly popular in areas such as Middle East, North America, Southeast Asia and South Asia.
The Vendor
BGFG Limited is an investment holding company incorporated in the British Virgin Islands with limited liability, and holds 21.44% of shares of the Target Company. Wang Xinming holds 100% of shares of BGFG Limited.
Target Company
NBT Social Networking Inc. is a company incorporated in the Cayman Islands with limited liability, which is the foreign corresponding entity of Beijing Mico upon reorganization and operates a social network platform with users from over 150 countries and regions. The core applications of the Target Company include MICO and YoHo, creating a range of diversified social networking products including audio social networking and live-streaming social networking, which are highly popular in areas such as Middle East, North America, Southeast Asia and South Asia.
Set out below is the shareholding structure of the Target Company before the Completion and as at the date of this announcement:
| Shareholders The Company The Vendor JZZT Limited JJQJ Partners Limited Total |
Percentage of shareholding 48.89% 21.44% 24.86% 4.81% 100% |
|---|---|
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After the Completion, the Company will hold approximately 60.39% equity interest of Target Company, and its shareholding structure is set out below:
| Shareholders The Company The Vendor JZZT Limited JJQJ Partners Limited Total |
Percentage of shareholding 60.39% 9.94% 24.86% 4.81% 100% |
|---|---|
JZZT Limited is an investment holding company incorporated in the British Virgin Islands with limited liability, and holds 24.86% of shares of NBT Social Networking Inc. The equity of JZZT comprises of participating shares and non-participating shares. The Company holds one participating shares with voting rights and without income rights. The remaining shareholders of NBT Social Networking Inc. hold non-participating shares with income rights and without voting rights.
JJQJ Partners Limited is an investment holding company incorporated in the British Virgin Islands with limited liability, and is the share holding platform under the equity incentive plan for the staff of NBT Social Networking Inc. JJQJ Partners Limited holds 4.81% of shares of NBT Social Networking Inc. All shares of JJQJ Partners Limited are held by TMF Trust (HK) Limited in the capacity of trustee.
The table below sets forth a summary of unaudited key financial information of the Target Company for the years ended 31 December 2019 and 2020 and six month ended 30 June 2021, which has been prepared in accordance with International Financial Reporting Standards:
| For the | |||
|---|---|---|---|
| For the | For the | six months | |
| year ended | year ended | ended | |
| 31 December | 31 December | 30 June | |
| 2019 or as at | 2020 or as at | 2021 or as at | |
| 31 December | 31 December | 30 June | |
| 2019 | 2020 | 2021 | |
| RMB’000 | RMB’000 | RMB’000 | |
| Net profit before taxation | 33,731 | 233,668 | 210,781 |
| Net profit after taxation | 27,359 | 228,372 | 199,595 |
| Total assets less current liabilities | 219,482 | 443,214 | 643,312 |
| Net assets | 213,083 | 438,133 | 635,757 |
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The Target Company experienced a rapid growth in its net profit since 2019, which was mainly attributable to a significant increase in the income generated from the core applications of the Target Company. During the period between 2019 and the end of June 2021, leveraging its efforts on optimising the operation of its applications and the enhanced content quality on its applications, the Target Company was able to increase not only its number of paying users and average monthly active users, but also the average revenue per paying user of its applications. Along with the increased popularity of its applications and the growth in its operating metrics, the Target Company expands its business operations from Middle East and Southeast Asia to other regions such as North America, Japan and Korea, and its effort on new market exploration continues. The continuous growth in the profit of the Target Company are attributable to (i) the Target Company continues to optimize the market strategy, leading to a gradual decrease in the percentage of sales fees, and (ii) the gradual optimization of core products and the exploration of developed markets, which result in a continuous growth in income.
REASONS AND BENEFITS OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT
The Board considers that the valuation and consideration of the Acquisition of the Target Company are reasonable. In consideration of the recent rapid growth of the Target Company, it is now the suitable time for the Group to further increase its shareholding in the Target Company. The Group intends to further increase its shareholding in the Target Company to capture more economic benefits from the Target Company, while further increases the profit attributable to owners of the Company arising from the Target Company.
The Board (including the independent non-executive Directors) considers that the terms of the Acquisition are fair and reasonable and the Acquisition is on normal commercial terms or better and in the interest of the Company and the Shareholders as a whole. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no member of the Board has any material interest in the Acquisition.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Target Company is a significant subsidiary of the Company, and BGFG Limited is the substantial shareholder of Target Company. As such, BGFG Limited is a connected person at the subsidiary level of the Company under the Listing Rules. Therefore, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition exceed 5% but are less than 25%, therefore, the Acquisition constitutes (i) a discloseable transaction of the Company which is subject to the announcement requirements under Chapter 14 of the Listing Rules; and (ii) a non-exempt connected transaction of the Company which is subject to the announcement, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
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INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER
The Independent Board Committee, comprising all the independent non-executive Directors, has been established to consider the Equity Transfer Agreement and the transactions contemplated thereunder, and to advise the Independent Shareholders as to whether granting the specific mandate for the allotment and issuance of consideration shares. Somerley Capital Limited is appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same respect.
GENERAL
The Company will convene a general meeting to approve, among others things, the Equity Transfer Agreement and the transactions contemplated thereunder. To the best of the Directors’ knowledge, information and belief, no Shareholder and its respective associates has material interest in the Equity Transfer Agreement and the transactions contemplated thereunder, and the granting of specific mandate for the allotment and issuance of consideration shares.
A circular containing, among other things, a notice that contains further details of the Equity Transfer Agreement and the transactions contemplated thereunder, and the granting of specific mandate for the allotment and issuance of consideration shares, a letter from the Independent Board Committee and the advice from Somerley Capital Limited, is expected to be despatched to the Shareholders after fifteen business days after this announcement is published.
Shareholders and potential investors of the Company should be aware that the Completion is subject to satisfaction (or, if applicable, waiver) of certain conditions and consequently the Acquisition may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the Shares.
DEFINITIONS
“Acquisition” the proposed acquisition of 21,850,000 shares of NBT Social Networking Inc. (which accounts for approximately 11.50% of the total shares of the Target Company) held by the Vendor by the Company pursuant to the Equity Transfer Agreement
“Beijing Mico” Beijing Mico World Technology Co., Ltd. (北京米可世界科技有限公 司), a company incorporated under the laws of the PRC with limited liability on 30 May 2014
“Board” the board of directors of the Company
“Company” Newborn Town Inc. (赤子城科技有限公司), a company with limited liability incorporated in the Cayman Islands whose shares are listed on the Stock Exchange
“Completion” completion of the Acquisition contemplated under the Equity Transfer Agreement
“Completion Date” the date which is the 20th business day after the date on which all conditions precedent under the Equity Transfer Agreement are satisfied or waived, or such other date as the Vendor and the Company may agree in writing
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| “Director(s)” | the directors of the Company |
|---|---|
| “Equity Transfer | the equity transfer agreement entered into by the Company and Vendor |
| Agreement” | on 9 October 2021 |
| “Group” | the Company and its subsidiaries |
| “Listing Rules” | the Rules Governing the Listing of Securities on the Stock Exchange |
| “Obligor” | Mr. Wang Xinming |
| “Post-Completion | the date which is the 120th business day after the Completion Date, or |
| Payment Date” | such other date as the Vendor and the Purchaser may agree in writing |
| “PRC” | the People’s Republic of China, and for the purpose of this |
| announcement only, excluding the Hong Kong Special Administrative | |
| Region of the PRC, the Macau Special Administrative Region of the | |
| PRC and Taiwan Region | |
| “RMB” | Renminbi, the lawful currency in the PRC |
| “Shares” | ordinary share(s) in the share capital of our Company with a par value |
| of US$0.0001 each | |
| “Shareholder(s)” | the holder of Share(s) |
| “Stock Exchange” | The Stock Exchange of Hong Kong Limited |
| “Target Company” | NBT Social Networking Inc., a company incorporated under the laws |
| of the Cayman Islands with limited liability | |
| “Vendor” | BGFG Limited, a company incorporated under the laws of the British |
| Virgin Islands with limited liability | |
| “%” | per cent. |
| By order of the Board | |
| Newborn Town Inc. | |
| LIU Chunhe | |
| Chairman |
Beijing, 10 October 2021
As at the date of this announcement, the executive Directors of the Company are Mr. LIU Chunhe, Mr. LI Ping, Mr. YE Chunjian and Mr. SU Jian; and the independent non-executive Directors of the Company are Mr. GAO Ming, Mr. CHI Shujin and Mr. HUANG Sichen.
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