Road King Infrastructure Limited

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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(Incorporated in Bermuda with limited liability)

(Stock Code: 1098)

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF 40% EQUITY INTERESTS IN BOTH SHANGHAI JUNTONG AND SHANGHAI JUNZHU

The Board is pleased to announce that on 27 December 2019, Greatmind Developments (an indirect wholly-owned subsidiary of the Company) and Shanghai Hongmai entered into the Share Transfer Agreements pursuant to which Greatmind Developments agreed to acquire and Shanghai Hongmai agreed to sell 40% equity interests in each of Shanghai Juntong and Shanghai Junzhu at a consideration of approximately RMB145.79 million (approximately HK$162.44 million) and of approximately RMB314.50 million (approximately HK$350.42 million) respectively. The consideration for the Proposed Acquisitions will be paid in cash pursuant to the Share Transfer Agreements.

Each of Shanghai Juntong and Shanghai Junzhu is indirectly owned as to 60% by the Company. Upon completion of the Proposed Acquisitions, Shanghai Juntong and Shanghai Junzhu will become indirect wholly-owned subsidiaries of the Company.

As at the date of this announcement, Shanghai Hongmai holds 40% equity interests in Shanghai Juntong and Shanghai Junzhu (each a subsidiary of the Company within the meanings of the Listing Rules) respectively and is therefore a connected person of the Company at the subsidiary level. Accordingly, the Proposed Acquisitions constitute a connected transaction of the Company but are exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Rule 14A.101 of the Listing Rules. In addition, as the highest of all applicable percentage ratios of the Proposed Acquisitions calculated in accordance with Chapter 14 of the Listing Rules is more than 5% but less than 25%, the Proposed Acquisitions also constitute a discloseable transaction of the Company.

INTRODUCTION

SHARE TRANSFER AGREEMENTS

Apart from those relating to the subject of the Proposed Acquisitions and the consideration payable by Greatmind Developments, the principal terms of the Share Transfer Agreements are substantially the same and are as follows:

Date: 27 December 2019 Parties: (1) Greatmind Developments (2) Shanghai Hongmai (3) Shanghai Juntong or Shanghai Junzhu (as the case may be) Subject Matter: 40% equity interests in Shanghai Juntong or Shanghai Junzhu (as the case may be) Consideration: The consideration of approximately RMB145.79 million (approximately HK$162.44 million) and of approximately RMB314.50 million (approximately HK$350.42 million) for the 40% equity interests in Shanghai Juntong and Shanghai Junzhu respectively will be paid in cash within 3 working days after the fulfillment of the conditions precedent set out in the relevant Share Transfer Agreement or they are waived by Greatmind Developments in writing.

Conditions precedent in the Share Transfer Agreements include:

(i) completion of registration of share transfer with Administration for Industry and Commerce and registration with Administration of Foreign Exchange and obtaining of required approvals from relevant government authorities;
(ii) alteration of articles of association to reflect share transfer and change of directors, supervisor and legal representative;
(iii) no prohibition on share transfer promulgated by relevant government authorities and no litigation nor legal proceedings;
(iv) representations and warranties of Greatmind Developments and Shanghai Hongmai remaining true, accurate and not misleading, and Shanghai Hongmai providing a valid foreign currency account for payment of the consideration;

(v) completion of work related to the share transfer in Shanghai Juntong or Shanghai Junzhu (as the case may be); and
(vi) pre-emptive right waived by the existing shareholder(s) of Shanghai Juntong or Shanghai Junzhu (as the case may be), which are all indirect wholly-owned subsidiaries of the Company.

The consideration for the Proposed Acquisitions was determined with reference to (i) the net asset value of each of Shanghai Juntong and Shanghai Junzhu; and (ii) market value of the properties of each of Shanghai Juntong and Shanghai Junzhu based on a valuation report prepared by an independent valuer.

Shanghai Hongmai is a company established in the PRC which is indirectly wholly-owned by 南通三建控股有限公司 (Nantong Sanjian Holdings Co., Ltd.*), a company controlled by the Nantong Individuals, and its principal business is property development and operation, construction of municipal public works, construction decoration and design, sales of building decoration materials, investment management and consultancy and design and production of advertisements.

The original acquisition cost of the 40% equity interests in each of Shanghai Juntong and Shanghai Junzhu to Shanghai Hongmai was RMB24 million (approximately HK$26.74 million) and RMB391.52 million (approximately HK$436.23 million) respectively, which represented the aggregate amount of capital contributed by Shanghai Hongmai to Shanghai Juntong and Shanghai Junzhu, as the case may be.

INFORMATION AND FINANCIAL INFORMATION OF SHANGHAI JUNTONG AND SHANGHAI JUNZHU

Each of Shanghai Juntong and Shanghai Junzhu was established for the development and sales of a residential and commercial project, both on the lands situated at Xiaokunshan Town, Songjiang District, Shanghai. Prior to the entering into of the Share Transfer Agreements, each of Shanghai Juntong and Shanghai Junzhu is indirectly owned as to 60% by the Company.

Set out below is a summary of certain financial information of Shanghai Juntong and Shanghai Junzhu for each of the years ended 31 December 2017 and 2018 prepared and audited in accordance with the generally accepted accounting principles in the PRC (the “PRC GAAP”):

Shanghai Juntong:

	For the year ended 31 December	For the year ended 31 December
	2017	2018
	(audited)	(audited)
Net profit before taxation	approximately	approximately
	RMB23.95 million	RMB203.02 million
	(approximately	(approximately
	HK$26.69 million)	HK$226.21 million)
Net profit after taxation	approximately	approximately
	RMB18.25 million	RMB152.10 million
	(approximately	(approximately
	HK$20.33 million)	HK$169.47 million)

Shanghai Junzhu:

	For the year ended 31 December	For the year ended 31 December
	2017	2018
	(audited)	(audited)
Net loss before taxation	approximately	approximately
	RMB3.63 million	RMB17.98 million
	(approximately	(approximately
	HK$4.04 million)	HK$20.03 million)
Net loss after taxation	approximately	approximately
	RMB3.63 million	RMB12.61 million
	(approximately	(approximately
	HK$4.04 million)	HK$14.05 million)

The unaudited net asset value of Shanghai Juntong and Shanghai Junzhu as at 30 November 2019 under the PRC GAAP was approximately RMB290.35 million (approximately HK$323.51 million) and approximately RMB867.59 million (approximately HK$966.67 million) respectively, and their respective properties are booked at cost.

REASONS FOR AND BENEFITS OF THE PROPOSED ACQUISITIONS

The Group is principally engaged in investment in, and development, operation and management of, property development in the PRC and Hong Kong, with a focus in residential developments, and is evaluating increased investment in developing commercial properties. The Group also invests in, and manages, through joint ventures, expressways in the PRC and Southeast Asia. As demand for residential and commercial properties in Shanghai is expected to remain relatively strong, the Company considers the Proposed Acquisitions will allow the Group to enjoy full control over the development, marketing and sale of the projects held by Shanghai Juntong and Shanghai Junzhou following completion of such acquisitions as well as greater flexibility in managing the revenue and cashflow generated by those projects.

The Directors (including the Independent Non-executive Directors) are of the view that the terms of the Share Transfer Agreements are fair and reasonable, on normal commercial terms and in the ordinary and usual course of business of the Group and in the interests of the Company and its shareholders as a whole. None of the Directors has a material interest in respect of the Proposed Acquisitions and therefore required to abstain from voting on the relevant board resolution.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, Shanghai Hongmai holds 40% equity interests in Shanghai Juntong and Shanghai Junzhu (each a subsidiary of the Company within the meanings of the Listing Rules) respectively and is therefore a connected person of the Company at the subsidiary level. Accordingly, the Proposed Acquisitions constitute a connected transaction of the Company. In addition, as the highest of all applicable percentage ratios of the Proposed Acquisitions calculated in accordance with Chapter 14 of the Listing Rules is more than 5% but less than 25%, the Proposed Acquisitions also constitute a discloseable transaction of the Company.

Further, as (a) Shanghai Hongmai is a connected person at the subsidiary level of the Company; (b) the Board has approved the Proposed Acquisitions; and (c) the Independent Non-executive Directors have confirmed that the terms of the Share Transfer Agreements are fair and reasonable, on normal commercial terms and in the interests of the Company and its shareholders as a whole, the Proposed Acquisitions are subject to the reporting and announcement requirements, but are exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Rule 14A.101 of the Listing Rules.

DEFINITIONS

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

“Board” the board of Directors “Company” Road King Infrastructure Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange
“connected person(s)” the meaning ascribed to it under the Listing Rules “Director(s)” the director(s) of the Company “Greatmind Developments” Greatmind Developments (HK) Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Nantong Individuals” Eight individuals, namely 黃裕輝 (Huang Yuhui), 周炳高(Zhou Binggao), 施暉(Shi Hui), 衛波(Wei Bo), 王衛衝 (Wang Weichong), 徐挺 (Xu Ting), 袁備(Yuan Bei) and 張福斌(Zhang Fubin), who based on latest public record available to the Company in aggregate hold approximately 48.92% equity interests in 南通三建控股有限公司(Nantong Sanjian Holdings Co., Ltd.*)

“PRC” the People’s Republic of China

“Proposed Acquisitions” the proposed acquisitions of 40% equity interests in Shanghai Juntong and Shanghai Junzhu by Greatmind Developments pursuant to the Share Transfer Agreements

“RMB” Renminbi, the lawful currency of the PRC

“Shanghai Hongmai” 上海鴻麥房地產有限公司 (Shanghai Hongmai Property Co., Ltd.*), a company incorporated under the laws of the PRC
“Shanghai Juntong” 上海雋通置業有限公司 (Shanghai Juntong Real Estate Co., Ltd.*), a company incorporated under the laws of the PRC, the equity interests of which are indirectly owned as to 60% by the Company and directly owned as to 40% by Shanghai Hongmai
“Shanghai Junzhu” 上海雋築置業有限公司 (Shanghai Junzhu Real Estate Ltd.*), a company incorporated under the laws of the PRC, the equity interests of which are indirectly owned as to 60% by the Company and directly owned as to 40% by Shanghai Hongmai
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company
“Share Transfer Agreements” the two share transfer agreements dated 27 December 2019 entered into between Greatmind Developments, Shanghai Hongmai and Shanghai Juntong or Shanghai Junzhu (as the case may be) in relation to the Proposed Acquisitions
“Shareholder(s)” the holder(s) of the Share(s)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“%” per cent

By Order of the Board Road King Infrastructure Limited Zen Wei Pao, William Co-Chairman

Note: For the purpose of this announcement and for illustrative purpose only, RMB is converted into HK$ at the rate of RMB0.8975:HK$1. No representation is made that any amounts in RMB has been or could be converted at the above rates or at any other rates.

Hong Kong, 27 December 2019

As at the date of this announcement, the Board comprises Messrs. Zen Wei Pao, William, Zen Wei Peu, Derek, Ko Yuk Bing and Fong Shiu Leung, Keter as Executive Directors, Messrs. Mou Yong and Dong Fang as Non-executive Directors and Messrs. Lau Sai Yung, Tse Chee On, Raymond and Wong Wai Ho as Independent Non-executive Directors.

For identification purpose only

AI assistant

Road King Infrastructure Limited M&A Activity 2019

49683_rns_2019-12-27_57aff90e-0d44-49bb-af79-b4eb16507b09.pdf