PegBio Co., Ltd. — M&A Activity 2010

Feb 11, 2010

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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POLY DEVELOPMENT HOLDINGS LIMITED 保興發展控股有限公司[*]

(Incorporated in Bermuda with limited liability) (Stock Code: 1141)

Financial Adviser

DISCLOSEABLE TRANSACTION

ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF BEIJING UNIONCOM PHARMACEUTICAL COMPANY LIMITED

The Board is pleased to announce that on 10 February 2010, the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Vendors, pursuant to which the Purchaser agreed to acquire from the Vendors the entire equity interests of Beijing Unioncom for a total consideration of RMB15,000,000 (equivalent to approximately HK$17,145,000).

As the applicable percentage ratios (as set out in the Listing Rules) are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company under the Listing Rules and is subject to the announcement requirements under Chapter 14 of the Listing Rules.

The Board is pleased to announce that on 10 February 2010, the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Vendors, pursuant to which the Purchaser agreed to acquire from the Vendors the entire equity interests of Beijing Unioncom for a total consideration of RMB15,000,000 (equivalent to approximately HK$17,145,000).

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THE EQUITY TRANSFER AGREEMENT

Date

10 February 2010

Parties

Purchaser: 維康依感（北京）科技發展有限公司 (Weikang Yigan (Beijing) Technology Development Company Limited*), an indirect whollyowned subsidiary of the Company

Vendors: 魏舒文女士, Vendor 1 魏小兵女士, Vendor 2

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendors are Independent Third Parties.

Assets to be acquired

The entire equity interests of Beijing Unioncom, a limited liability company established in the PRC with a registered capital of RMB25,000,000 (equivalent to approximately HK$28,575,000). As at the date of the Equity Transfer Agreement, the entire equity interests of Beijing Unioncom were being held as to 80% by Vendor 1, 15% by Vendor 2 and the remaining 5% by a third party shareholder. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the third party shareholder and its ultimate beneficial owner(s) are Independent Third Parties.

Major terms of the Equity Transfer Agreement

Pursuant to the Equity Transfer Agreement, the Purchaser agreed to acquire:

• (i) from Vendor 1, the 80% equity interests of Beijing Unioncom already held by her as well as the 5% equity interests of Beijing Unioncom to be acquired by her from the third party shareholder; and

• (ii) from Vendor 2, the 15% equity interests of Beijing Unioncom held by her.

The Equity Transfer Agreement provides that Vendor 1 shall acquire the remaining 5% equity interests in Beijing Unioncom then held by the third party shareholder and transfer such 5% equity interests in Beijing Unioncom to the Purchaser. In this respect, Vendor 1 has undertaken to the Purchaser:

• (i) to complete the acquisition of the 5% equity interests in Beijing Unioncom from the third party shareholder within 90 days upon execution of the Equity Transfer Agreement; and

• (ii) to complete the onward transfer of the 5% equity interests in Beijing Unioncom to the Purchaser within three working days thereafter.

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The Vendors have jointly undertaken to the Purchaser that transfer of the 95% equity interests in Beijing Unioncom to the Purchaser shall be completed within five working days upon receipt of the first installment payment (to be further set out below).

The parties further agreed that upon receipt of the first installment payment, the Vendors shall surrender all rights and entitlements pertaining to the 95% equity interests of Beijing Unioncom (including without limitation rights of management and business operations, entitlement of income and profits) to the Purchaser.

Under the Equity Transfer Agreement, the parties have agreed on the total liabilities of Beijing Unioncom as at 8 February 2010 as being RMB45,000,000 (equivalent to approximately HK$51,435,000) (“ Agreed Liabilities ”), to be assumed by the Purchaser commencing from the date of execution of the Equity Transfer Agreement. In this respect, it is agreed that:

• (i) during the period commencing from the execution of the Equity Transfer Agreement and ending on the date which is the later of (a) completion of transfer by Vendor 1 to the Purchaser of the remaining 5% equity interests in Beijing Unioncom then held by the third party shareholder; and (b) the 90th day of execution of the Equity Transfer Agreement, if additional liabilities as at 8 February 2010 in excess of the Agreed Liabilities are discovered by the Purchaser which results in a revised total liabilities of Beijing Unioncom as at 8 February 2010 (the “ Upward Revised Liabilities ”) being more than the Agreed Liabilities, the Purchaser shall have the right to deduct from the balance consideration payable an amount equal to the difference between the Upward Revised Liabilities and the Agreed Liabilities; and

• (ii) within three months from the execution of the Equity Transfer Agreement, if the total liabilities of Beijing Unioncom as at 8 February 2010 as subsequently confirmed by the relevant creditors (“ Downward Revised Liabilities ”) are less than the Agreed Liabilities, the Purchaser shall pay to the Vendors an amount equal to 50% of the difference between the Agreed Liabilities and the Downward Revised Liabilities.

The Equity Transfer Agreement does not contain any restriction on any subsequent disposal of the equity interests of Beijing Unioncom.

Consideration and terms of payment

The total consideration for the Acquisition is RMB15,000,000 (equivalent to approximately HK$17,145,000), which shall be payable as to:

• (i) RMB3,789,500 (equivalent to approximately HK$4,331,000) and RMB710,500 (equivalent to approximately HK$812,000) respectively (representing in aggregate 30% of the total consideration) to each of Vendor 1 and Vendor 2 on the next working day following execution of the Equity Transfer Agreement as first installment payment;

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• (ii) RMB3,789,500 (equivalent to approximately HK$4,331,000) and RMB710,500 (equivalent to approximately HK$812,000) respectively (representing in aggregate 30% of the total consideration) to each of Vendor 1 and Vendor 2 on the next working day following completion of transfer of the 95% equity interests in Beijing Unioncom to the Purchaser as second installment payment; and

• (iii) RMB5,052,600 (equivalent to approximately HK$5,775,000) and RMB947,400 (equivalent to approximately HK$1,083,000) respectively (representing in aggregate 40% of the total consideration) to each of Vendor 1 and Vendor 2 within three days following the date which is the later of (a) completion of transfer by Vendor 1 to the Purchaser of the remaining 5% equity interests in Beijing Unioncom then held by the third party shareholder; and (b) the 90th day of execution of the Equity Transfer Agreement.

The total consideration, which is to be settled by internal resources of the Company, was arrived at after arm’s length negotiations among the parties with reference to the appraised net asset value of Beijing Unioncom of approximately RMB10,278,000 (equivalent to approximately HK$11,748,000) as at 8 February 2010 as valued by a PRC assets appraisal firm for the purpose of the Acquisition and taking into consideration that the medicine production plant of Beijing Unioncom is certified to be GMP compliant.

INFORMATION ON BEIJING UNIONCOM

Beijing Unioncom is a limited liability company established in the PRC in 1998 and is principally engaged in the manufacture of Chinese medicines and health care products. Beijing Unioncom owns and occupies a GMP compliant medicine production plant and other ancillary warehouse structures and office buildings, all housed under a parcel of land with site area of approximately 56,268 square meters owned by Beijing Unioncom.

Beijing Unioncom holds a production permit for medicine products 《藥品生產許可 證》issued by Beijing Drug Administration (北京市藥品監督管理局) with a validity up to 31 December 2010. It also holds a GMP Certificate issued by Beijing Drug Administration with a validity up to 20 June 2011, which covers the manufacture of various forms of medicine products including tablets, granules, capsules, oral solution, syrup, tincture and medicinal teas.

For the years ended 31 December 2008 and 2009, Beijing Unioncom reported turnover of approximately RMB9,047,000 (equivalent to approximately HK$10,341,000) and RMB21,372,000 (equivalent to approximately HK$24,428,000), and net loss both before and after taxation and extraordinary items of approximately RMB1,297,000 (equivalent to approximately HK$1,482,000) and RMB673,000 (equivalent to approximately HK$769,000), respectively, based on the PRC audited financial statements of Beijing Unioncom for the corresponding two financial years.

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Beijing Unioncom reported net liabilities of approximately RMB12,955,000 (equivalent to approximately HK$14,808,000) based on its PRC audited financial statements for the period ended 8 February 2010. Based on a valuation report issued by a PRC assets appraisal firm for the purpose of the Acquisition, Beijing Unioncom was valued as having a net asset value of approximately RMB10,278,000 (equivalent to approximately HK$11,748,000) as at 8 February 2010. The discrepancy on the net asset/liability position of Beijing Unioncom of approximately RMB23,233,000 (equivalent to approximately HK$26,555,000) was principally arising from the revaluation of its land use rights, which value was reported under the PRC audited financial statements of Beijing Unioncom on historical cost basis.

REASONS AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in supply and procurement business, provision of finance and securities investment. With a view to diversifying into the Chinese medicine business and to enhance its revenue base and profitability, the Group completed the acquisition of the Yu Sheng Tang Group (as announced on 29 January 2010), which holds the right to commence production and sale of Jinhua Qinggan, a Chinese medicine aimed at treating patients who have been infected with Influenza A (H1N1) and other types of influenza, as prescription drug for clinical use.

The Directors consider the Acquisition to be in line with the Group’s planned diversification into the Chinese medicine business. The Directors also consider that the Acquisition will serve to build up the Group’s production capacity for the manufacture of Jinhua Qinggan in a more expedient and efficient manner, particularly given the medicine production plant of Beijing Unioncom has already been certified as GMP compliant. The Directors believe that the Acquisition will enhance the Group’s capability to capture the business opportunities arising from the future demand for Jinhua Qinggan.

The Directors (including independent non-executive Directors) consider the terms of the Equity Transfer Agreement to be fair and reasonable as far as the Shareholders are concerned and that the Equity Transfer Agreement is in the interest of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios (as set out in the Listing Rules) are more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company under the Listing Rules and is subject to the announcement requirements under Chapter 14 of the Listing Rules.

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TERMS AND DEFINITIONS

• “Acquisition”

the acquisition of the entire equity interests of Beijing Unioncom pursuant to the Equity Transfer Agreement

“Beijing Unioncom” 北京協和康友製藥有限公司 (Beijing Unioncom Pharmaceutical Company Limited *), a limited liability company established in the PRC

• “Board”

the board of Directors

• “Company”

• Poly Development Holdings Limited, a company incorporated under the laws of Bermuda with limited liability whose shares are listed on the Stock Exchange

• “Director(s)” director(s) of the Company

• “Equity Transfer Agreement”

• the equity transfer agreement entered into on 10 February 2010 among the Purchaser and the Vendors for the purpose of the Acquisition

• “GMP”

• Good Manufacturing Practices, the guidelines and regulations issued from time to time pursuant to the Law of the People’s Republic of China on the Administration of Pharmaceuticals (中國人民共和 國藥品管理法) and to provide quality assurance and ensure that pharmaceutical products subject to the guidelines and regulations are consistently produced and controlled to the quality and standards appropriate for the intended use

• “GMP Certificate” Certificate of Good Manufacturing Practices for Pharmaceutical Products, People’s Republic of China 《中華人民共和國藥品GMP證書》

• “Group”

• the Company and its subsidiaries

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Independent Third Party” a third party who is not a connected person (as defined under the Listing Rules) of the Company and who together with its ultimate beneficial owner(s) are independent of the Company and its connected persons (as defined under the Listing Rules)

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“Jinhua Qinggan”	金花清感, a Chinese medicine aimed at treating
	patients who have been infected with Influenza A
	(H1N1) and other types of influenza
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“PRC”	the People’s Republic of China
“Purchaser”	維康依感（北京）科技發展有限公司(Weikang Yigan
	(Beijing) Technology Development Company Limited*),
	an indirect wholly-owned subsidiary of the Company
“RMB”	Renminbi, the lawful currency of the PRC
“Shareholder(s)”	the holders of Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendor 1”	魏舒文女士
‘Vendor 2”	魏小兵女士
“Vendors”	Vendor 1 and Vendor 2
“Yu Sheng Tang Group”	Beijing Yu Sheng Tang Holdings Limited and its
	subsidiaries, namely北京御生堂文化傳播有限公
	司(Beijing Yu Sheng Tang Cultural Broadcasting
	Company Limited*),維康依感（北京）科技發展
	有限公司(Weikang Yigan (Beijing) Technology
	Development Company Limited*) and北京御生堂中
	醫門診部有限公司(Beijing Yu Sheng Tang Chinese
	Medicine Clinic Company Limited*)

Translations of RMB into HK$ are made in this announcement, for illustration only, at the rate of RMB1.00 to HK$1.143.

By Order of the Board Suen Cho Hung, Paul Chairman

Hong Kong, 10 February 2010

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As at the date of this announcement, the Board comprises Mr. Suen Cho Hung, Paul (Chairman), Mr. Sue Ka Lok (Chief Executive Officer), Mr. Bai Jianjiang and Mr. Chau Chung Tak as Executive Directors and Mr. Wong Kwok Tai, Mr. Weng Yixiang, Mr. Lu Xinsheng and Mr. Xiong Wei as Independent Non-executive Directors.

• for identification only

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