Time Interconnect Technology Limited — M&A Activity 2018

Aug 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 respresentation 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 the Cayman Islands with limited liability)

(Stock Code: 1729)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF HUIZHOU CHUANGXIANG

Financial adviser to the Company

THE PROPOSED ACQUISITION

The Board is pleased to announce that on 3 August 2018 (after trading hours), the Purchaser, a wholly-owned subsidiary of the Company, entered into the Agreement with the Vendor, pursuant to which the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the entire equity interest in Huizhou Chuangxiang at the Consideration of RMB145,250,100.

As at the date of this announcement, the registered capital of Huizhou Chuangxiang is RMB145,250,100. Pursuant to the Agreement, the Vendor will contribute capital to Huizhou Chuangxiang at an amount equivalent to the registered capital of Huizhou Chuangxiang of RMB145,250,100 by way of asset injection before the Completion. As a result of which, Huizhou Chuangxiang will own the entire interest in the Target Property.

Upon Completion, Huizhou Chuangxiang will become an indirect wholly-owned subsidiary of the Company and the financial information of Huizhou Chuangxiang will be consolidated into the consolidated financial statements of the Company.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under the Listing Rules) are greater than 5% but less than 25%, the proposed Acquisition constitutes a discloseable transaction for the Company under the Listing Rules. As at the date of this announcement, (i) 94% equity interest of the Vendor is indirectly owned by United Luminous, a company which is wholly owned by Mr. Paul Lo, the Chairman, non-executive Director and a Controlling Shareholder; and (ii) Mr. Cua Tin Yin Simon, an executive Director and Chief Executive Officer, holds directorships in certain members of United Luminous Group, the Vendor is therefore a connected person of the Company and hence the proposed Acquisition also constitutes a connected transaction under the Listing Rules. Accordingly, the proposed Acquisition is subject to the reporting, announcement and the independent shareholders’ approval requirements under the Listing Rules.

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The Independent Board Committee has been formed to consider, and to advise the Independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder. Shang International Finance Limited has been appointed as the Independent Financial Adviser to make recommendations to the Independent Board Committee and the Independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder.

The EGM will be convened for the Independent Shareholders to consider and, if thought fit, to approve the Agreement and the transactions contemplated thereunder. A circular containing, among other things (i) details of the proposed Acquisition, (ii) a letter from the Independent Board Committee containing its recommendation to the Independent Shareholders, (iii) a letter from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders and (iv) the notice of EGM, will be despatched to the Shareholders no later than 30 August 2018.

Completion is subject to the fulfilment of certain conditions precedent set out in the Agreement and therefore may or may not proceed. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the Shares.

INTRODUCTION

On 3 August 2018 (after trading hours), the Purchaser, a wholly-owned subsidiary of the Company, entered into the Agreement with the Vendor, pursuant to which the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the entire registered capital of Huizhou Chuangxiang at the Consideration of RMB145,250,100 in respect of the proposed Acquisition, the principal terms and conditions of the Agreement are set out below.

PRINCIPAL TERMS OF THE AGREEMENT

Date

3 August 2018

Parties

• Purchaser:

Time Interconnect Technology (Huizhou) Limited (formerly known as Huizhou TIME Wire Products Limited), an indirect wholly-owned subsidiary of the Company

Vendor:

Huizhou Light Engine

As at the date of this announcement, 94% equity interest of Huizhou Light Engine is owned by Light Engine Technologies Limited, a direct wholly-owned subsidiary of United Luminous, which in turn is wholly owned by Mr. Paul Lo, the Chairman, non-executive Director and a controlling shareholder of the Company. Also, Mr. Cua Tin Yin Simon, an executive Director and Chief Executive Officer, holds directorships in certain members of United Luminous Group. Therefore, the Vendor is a connected person of the Company under Rule 14A.07 of the Listing Rules.

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Assets to be acquired

Pursuant to the Agreement, the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the entire equity interest in Huizhou Chuangxiang. As at the date of this announcement, the registered capital of Huizhou Chuangxiang is RMB145,250,100. Pursuant to the Agreement, the Vendor will contribute capital to Huizhou Chuangxiang at an amount equivalent to the registered capital of Huizhou Chuangxiang of RMB145,250,100 by way of asset injection before the Completion. As a result of which, Huizhou Chuangxiang will own the entire interest in the Target Property (please refer to the paragraph headed “Information on Huizhou Chuangxiang and the Target Property” below for further details).

Consideration

The consideration for the proposed Acquisition is approximately RMB145,250,100 (equivalent to approximately HK$166,826,000), which was determined after arm’s length negotiation between the Vendor and the Purchaser having taken into consideration (i) the preliminary valuation of the Target Property of approximately RMB146,000,000 as at 31 July 2018 adopting the Depreciated Replacement Cost by an independent professional valuer engaged by the Company; and (ii) the factors set out in the paragraph headed “Reasons for and the benefits of the proposed Acquisition” below.

The consideration for the proposed Acquisition shall be payable by the Purchaser to the Vendor in cash upon Completion.

Conditions precedent

Completion of the proposed Acquisition is subject to satisfaction or waiver (as the case may be) of the following conditions precedent:

• (a) all approvals, consents and waivers for the Acquisition having been obtained from the board of directors and shareholders of the Purchaser;

• (b) all approvals, consents and waivers for the Acquisition having been obtained from the board of directors and shareholders of the Vendor ;

• (c) all necessary approvals, consents and waivers having been obtained from all government bodies (if applicable) and third parties for the Acquisition;

• (d) the Purchaser having been satisfied with and accepted the due diligence results for Huizhou Chuangxiang and the Target Property;

• (e) the Agreement being approved by the Independent Shareholders in the EGM in accordance with the requirements of the Listing Rules;

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• (f) the Purchaser having obtained the valuation report issued by an independent valuer acceptable to the Purchaser with respect to the Target Property;

• (g) the Vendor having completed the capital contribution to Huizhou Changxiang by way of asset injection of the Target Property;

• (h) the Vendor having not materially breached any representations, warranties and undertakings made in the Agreement;

• (i) prior to the Completion, the Vendor and Huizhou Chuangxiang having not violated any material terms and conditions of the Agreement;

• (j) no laws or orders having prohibited any of the transactions contemplated in the Agreement or the ancillary documents; and

• (k) the Vendor not having violated any undertakings, obligations and conditions contained in the Agreement which are required to be performed or complied with by it on or before the date of Completion.

The Purchaser may at its absolute discretion waive any of the above conditions (except for conditions set out in (c) and (e) above which cannot be waived).

If any of the above conditions has not been satisfied or waived (if applicable) on or before 30 November 2018, the Purchaser may extend the deadline for fulfilling the outstanding condition(s) to a later date or determine the Agreement and the transaction contemplated thereunder and the parties to the Agreement shall not have any rights to claim against the other party, save for (1) any negligence and/or mistake by either party causing the failure to satisfy any of the conditions or (2) any antecedent breach.

Completion

Completion shall take place within five Business Days after the fulfillment or waiver (as the case may be) of all the conditions precedent of the Agreement (or such other date as may be agreed in writing between the parties to the Agreement).

Upon Completion, Huizhou Chuangxiang will become an indirect wholly-owned subsidiary of the Company and the financial information of Huizhou Chuangxiang will be consolidated into the consolidated financial statements of the Company.

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INFORMATION ON HUIZHOU CHUANGXIANG AND THE TARGET PROPERTY

Huizhou Chuangxiang is a company established in the PRC with limited liability (legal person sole investment) and wholly-owned by the Vendor. As at the date of this announcement, the registered capital of Huizhou Chuangxiang is RMB145,250,100, and Huizhou Chuangxiang is a newly established company for holding the Target Property before Completion.

Pursuant to the Agreement, the Vendor will contribute capital to Huizhou Chuangxiang at an amount equivalent to the registered capital of Huizhou Chuangxiang of RMB145,250,100 by way of asset injection before the Completion. As a result of which, Huizhou Chuangxiang will own the entire interest in the Target Property.

The Target Property comprises a parcel of industrial land with a total site area of approximately 33,393 square metres and two 5-storey reinforced concrete industrial buildings erected thereon with an aggregate gross floor area of approximately 34,196 square metres.

INFORMATION ON THE PURCHASER

The Purchaser is an indirect wholly-owned subsidiary of the Company which is principally engaged in the manufacturing and sales of cable assembly products.

INFORMATION ON THE VENDOR

The Vendor is a joint stock limited company established in the PRC. As at the date of this announcement, 94% of the equity interests of the Vendor is owned by Light Engine Technologies Limited, a direct wholly-owned subsidiary of United Luminous, which in turn is wholly-owned by Mr. Paul Lo, being the Chairman, non-executive Director and a controlling shareholder of the Company.

The Vendor is principally engaged in the manufacturing of LED related products.

REASONS FOR AND THE BENEFITS OF THE PROPOSED ACQUISITION

The Group currently has one production base located in Huizhou, the Guangdong Province for production of cable assembly products. As disclosed in the Prospectus, the Group’s business growth can be constrained by existing production capacity. For the years ended 31 March 2016, 2017 and 2018, the Group’s production lines have been working towards and reached their full capacity and the utilisation rate of the Group’s existing production facility showed an increasing trend, at 92.8%, 94.9% and 113.7%, respectively. The Group planned to look for more space with production plant imminently to meet with the increasing sales orders placed by the customers. The Directors are also of the view that the demand of cable assembly products will become stronger, especially from the data centre and telecommunication sectors. According to the Prospectus, a factory with a target cost of approximately HK$88.6 million was planned to be acquired.

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After the listing of the Company on 13 February 2018, the Directors have been actively in search for appropriate factory in Huizhou with appropriate access, supply of water and electricity as well as plot ratio and green ratio restrictions. Several factories for sale have been visited by the Directors so far but none of them was to the Directors’ satisfaction that as they either did not have ideal transportation network, convenient location, meet the quality requirements or have the land for future development.

The Directors were then given to know that due to the recent restructuring of production facilities of the Vendor, production lines in the Target Property will be moved out by the Vendor and the Target Property will become vacant production space. The Directors have performed site visit and investigation and noted that the Target Property possesses the following:

• (i) the Target Property is located in the vicinity of the Group’s existing production facility in Huizhou, the local management of the Purchaser will be enabled to efficiently oversee the operations of the two factories, thereby optimising management expenses and time of travelling;

• (ii) the Target Property is relatively new which was completed in 2014 and is equipped with all basic facilities such as air conditioners, lifts, water supply and electrical and mechanical installations;

• (iii) different production equipment, such as precision testing machine and equipment can be installed in the Target Property, which are also readily available to cater to the Group’s standard production line layout, hence the Directors expect that the cost of modification and refurbishment will not be excessive;

• (iv) the Target Property has a piece of undeveloped land and is flexible for future production development in case the Group plans to expand or returns the existing factory to the landlord when the lease expires; and

• (v) the Directors expect that the Target Property can provide sufficient space to at least double the Group’s existing production area, which would add stability to the Group’s sustainable development in medium term.

As disclosed in the Prospectus, it was originally envisaged that a factory with target cost of approximately HK$88.6 million was planned to be acquired to increase the Group’s production capacity by 30%. The Target Property, although costs are nearly double of the original plan, would offer more than 120% of the increased production capacity, i.e. about four times of the original planned increment in capacity. Accordingly, the Directors are of the view that the Target Property is of better value for money in terms of increment of production space per cost.

The Group’s existing factory is leased and the lease is subject to early termination starting from September 2024. The Target Property apart from the factory buildings, has a piece of land for future development. The proposed Acquisition enables the Group to formulate its long term business development plan by offering an option for the Group to combine its production lines in the future and adding stability in the Group’s medium to long term business strategy should the landlord decide to terminate the lease when it allows.

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Having taken into account these factors and also the basis of determining the consideration as set out in the paragraph headed “Consideration” in this announcement, the Directors (other than the independent non-executive Directors whose opinion will be set out in a circular after considering the advice from the independent financial adviser) are of the view that the terms of the proposed Acquisition are fair and reasonable and are on normal commercial terms, and that the transaction contemplated under the Agreement is in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under the Listing Rules) are greater than 5% but less than 25%, the proposed Acquisition constitutes a discloseable transaction for the Company under the Listing Rules. As at the date of this announcement, (i) 94% equity interest of the Vendor is indirectly owned by United Luminous, a company which is wholly owned by Mr. Paul Lo; and (ii) Mr. Cua Tin Yin Simon, an executive Director and Chief Executive Officer, holds directorships in certain members of United Luminous Group, the Vendor is therefore a connected person of the Company and hence the proposed Acquisition constitutes a connected transaction under the Listing Rules. Accordingly, the proposed Acquisition is subject to the reporting, announcement and the Independent Shareholders’ approval requirements under the Listing Rules.

The Independent Board Committee has been formed to consider, and to advise the Independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder. Shang International Finance Limited has been appointed as the Independent Financial Adviser to make recommendations to the Independent Board Committee and the Independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder.

An EGM will be convened for the Independent Shareholders to consider and, if thought fit, to approve the Agreement and the transactions contemplated thereunder. A circular containing, among other things (i) details of the proposed Acquisition; (ii) a letter from the Independent Board Committee containing its recommendation to the Independent Shareholders; (iii) a letter from the independent financial adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders; and (iv) the notice of EGM, is expected to be despatched to the Shareholders no later than 30 August 2018.

DEFINITIONS

In this announcement, the following expressions shall, unless the context requires otherwise, have the following meanings:

“Acquisition” the proposed acquisition of the entire registered capital of Huizhou Chuangxiang by the Purchaser from the Vendor on and subject to the terms and conditions of the Agreement and the performance of the transactions contemplated thereunder

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“Agreement”	the conditional sale and purchase agreement entered into among the
	Vendor and the Purchaser on 3 August 2018 regarding the proposed
	Acquisition
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Business Day”	a day on which banks in Hong Kong are generally open for normal
	banking business to the public and which is not a Saturday, Sunday or
	public holiday in Hong Kong
“Chairman”	chairman of the Board
“Chief Executive Officer”	chief executive officer of the Company
“Company”	Time Interconnect Technology Limited (匯聚科技有限公司), an
	exempted company incorporated in the Cayman Islands with limited
	liability and the Shares of which are listed on the Main Board of the
	Stock Exchange
“Completion”	the completion of the sale and purchase of the entire registered capital
	of Huizhou Chuangxiang in accordance with the Agreement
“connected person(s)”	has the meaning ascribed to it under the Listing Rules
“Consideration”	the sum of RMB145,250,100 payable by the Purchaser to the Vendor
	under the Agreement
“Director(s)”	the director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be convened and
	held to consider and, if thought fit, approve the proposed Acquisition
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Huizhou Chuangxiang”	Huizhou Chuangxiang Technology Limited (惠州創享科技有限公司), a
	company established in the PRC with limited liability (legal person sole
	investment) and is 100% beneficially owned by the Vendor as at the
	date of this announcement
“Huizhou Light Engine” or	Huizhou Light Engine Limited (惠州元暉光電股份有限公司), a WFOE
“Vendor”	established in the PRC with limited liability, which subsequently
	became a joint stock limited company and is a connected person of the
	Company

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• “Independent Board an independent committee of the Board, comprising all the independent Committee” non-executive Directors, established for the purpose of advising the Independent Shareholders on, among other matters, the fairness and reasonableness of the proposed Acquisition

• “Independent Financial Shang International Finance Limited ( 尚融國際金融有限公司 ), Adviser” a licensed corporation permitted to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the proposed Acquisition

• “Independent Shareholders” with respect to the Agreement and the transaction contemplated thereunder, the Shareholders excluding Mr. Paul Lo and his associates

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time

• “Mr. Paul Lo” Mr. Lo Chung Wai Paul ( 羅仲煒 ), the Chairman, non-executive Director and a controlling shareholder of the Company

• “PRC” the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region and Taiwan

• “Prospectus” the prospectus of the Company dated 30 January 2018 “Purchaser” Time Interconnect Technology (Huizhou) Limited (formerly known as Huizhou TIME Wire Products Limited), an indirect wholly-owned subsidiary of the Company

• “Shareholder(s)” holder(s) of the issued Share(s) “Share(s)” ordinary share(s) in the capital of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Property” a parcel of industrial land with two industrial buildings erected thereon located at No.9 Yuan Hui Road, Chenjiang Area, Zhong Kao Hi-tech Zone, Huicheng District, Huizhou City, Guangdong Province, the PRC

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“United Luminous”

United Luminous International (Holdings) Limited ( 為之光電（集團）有 限公司), a company incorporated in Hong Kong which is wholly-owned by Mr. Paul Lo

“United Luminous Group” United Luminous and its subsidiaries

“WFOE” Wholly Foreign Owned Enterprise in the PRC “HK$” Hong Kong Dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent

By order of the Board

Time Interconnect Technology Limited Cua Tin Yin Simon Executive Director and Chief Executive Officer

Hong Kong, 3 August 2018

As at the date of this announcement, the Board comprises two executive Directors, namely Mr. Cua Tin Yin Simon and Mr. Wong Chi Kuen, one non-executive Director, namely Mr. Lo Chung Wai Paul and three independent non-executive Directors, namely Mr. Ho Hin Shun, Mr. Luk Wai Shing and Mr. Chan Chung Shun Eric.

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