Qingling Motors Co. Ltd — M&A Activity 2018

Apr 3, 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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(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1122)

VOLUNTARY ANNOUNCEMENT

REGARDING THE MERGER OF QINGLING ISUZU (CHONGQING) ENGINE CO., LTD. AND ISUZU QINGLING (CHONGQING) AUTOPARTS CO., LTD.

This announcement is made by Qingling Motors Co., Ltd (the “ Company ”, together with its subsidiaries, the “ Group ”) on a voluntary basis.

BACKGROUND

Reference is made to the announcement of the Company dated 26 September 2016 in relation to (among others) the entering into of a cooperation agreement between Isuzu Motors Limited (“ Isuzu ”) and Qingling Motors (Group) Company Limited (“ Qingling Group ”) on 26 September 2016, pursuant to which, both parties were intended to endeavour to realise the merger of two engine companies, namely 慶鈴五十鈴(重慶)發動機有限公司 (transliterated as Qingling Isuzu (Chongqing) Engine Co., Ltd.) (“ Qingling Isuzu Engine ”) (a joint venture company owned as to 50% by each of the Company and Isuzu, respectively) and 五十鈴慶鈴 ( 重慶 ) 汽車零部件 有限公司 (transliterated as Isuzu Qingling (Chongqing) Autoparts Co., Ltd.) (“ Isuzu Qingling Autoparts ”) (a joint venture company owned as to 49% and 51% by Qingling Group and Isuzu, respectively) (the “ Merger ”). The merged company (the “ New Engine Company ”) will become a subsidiary of Isuzu (detailed shareholding ratio is subject to further negotiation), and Isuzu will continuously introduce new models of engines and relevant technologies to the New Engine Company to strengthen the development, production and marketing functions of the New Engine Company.

CONSENSUS REACHED

Subsequently, Isuzu, Qingling Group and the Company conducted several exchanges and negotiations on the Merger. Currently, the three parties have reached a preliminary consensus (as set out below) on aspects such as the merger method, the recognition basis of shareholding ratio in the New Engine Company and the business scope of the New Engine Company so as to further advance the Merger.

1. Method of merger: The Merger is proposed to be conducted by way of absorption with Qingling Isuzu Engine as the surviving company and Isuzu Qingling Autoparts as the invalid company.

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1. Shareholding ratio of shareholders in the New Engine Company: As calculated based on the carrying amounts as presented in the 2016 audit reports of Qingling Isuzu Engines and Isuzu Qingling Autoparts, it is estimated that the New Engine Company will be held as to approximately 19.33%, 30.06% and 50.61% by the Company, Qingling Group and Isuzu, respectively, and the final shareholding ratio will be determined on an aggregate basis based on the carrying amounts of the assets of Qingling Isuzu Engines and Isuzu Qingling Autoparts as reflected by the valuation conducted by a third party professional institution on the valuation base date jointly confirmed by the parties (i.e. 31 December 2017).

2. Principal business scope of the New Engine Company: Manufacturing and sales (including export) of parts of engines and engine assemblies, after-sales services and export of vehicles and components.

3. Composition of the board of directors of the New Engine Company: The board of directors of the New Engine Company shall comprise of 7 directors, of which 4, 2 and 1 director(s) will be designated by Isuzu, Qingling Group and the Company, respectively.

As the details of the Merger are yet to be finalized, all parties are still required to conduct negotiation about the joint venture contract and articles of association in relation to the Merger. The Merger is also subject to the approval from independent shareholders of the Company, the State-owned Assets Supervision and Administration Commission and other regulatory authorities.

REASONS FOR CONDUCTING THE MERGER

As the domestic environmental protection provisions and requirements are increasingly stringent in the PRC, in order to comply with and conform to the relevant laws and regulations on emissions, the manufacturing of automobile engine currently incurs increasingly high development costs. The implementation of the Merger is beneficial to the concentration of engine production integration and development resources which are currently scattered in Qingling Isuzu Engine and Isuzu Qingling Autoparts and is also conducive to introduction of the latest engine products and technologies from Isuzu, cultivation of a team for research and development of engine technologies, strengthening export sales of engines and expansion of the engine industry. Upon completion of the Merger, the Group will purchase engines from the New Engine Company to ensure stable supply of engine assemblies in line with the latest regulations on emission and energy conservation for the automobiles produced, to satisfy market demands.

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The shareholders of the Company and potential investors should note that, as at the date of this announcement, since the details of the Merger are yet to be finalized, the parties have not entered into any formal agreement in relation to the Merger and the Merger is also subject to approval by the independent shareholders of the Company, the State-owned Assets Supervision and Administration Commission and other regulatory authorities, the Merger may or may not be materialised. Shareholders of the Company and potential investors are advised to exercise caution when dealing in the securities of the Company. The Company will make further disclosures and/or seek for approval from the shareholders of the Company (if applicable) in due course in accordance with relevant provisions under the Listing Rules if any formal agreement is entered into.

By Order of the Board Qingling Motors Co. Ltd LUO Yuguang Chairman

Chongqing, the PRC, 30 March 2018

As at the date of this announcement, the Board comprises 10 Directors, of which Mr. LUO Yuguang, Mr. Keiichiro MAEGAKI, Mr. Masanori OTA, Mr. Etsuo YAMAMOTO, Mr. LI Juxing and Mr. XU Song are executive Directors and Mr. LONG Tao, Mr. SONG Xiaojiang, Mr. LIU Tianni and Mr. LIU Erh Fei are independent non-executive Directors.

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