Value Convergence Holdings 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.

This announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of Value Convergence Holdings Limited.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 821)

MEMORANDUM OF UNDERSTANDING IN RESPECT OF A PROPOSED TRANSACTION

This announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions under Part XIVA of the SFO.

MEMORANDUM OF UNDERSTANDING

The Board announces that after trading hours on 26 July 2013, the Company entered into a non-legally binding MOU with the Vendor pursuant to which the Company intends to acquire and the Vendor intends to sell the entire issued share capital of the Target Company. The Target Group is principally engaged in the provision of (i) currency exchange services in the PRC; and (ii) management consultancy services for small loans companies in the PRC. No payment is required to be made upon the signing of the MOU. If the Proposed Transaction materialises, it may constitute a notifiable transaction of the Company under the Listing Rules.

The Company wishes to emphasise that the Proposed Transaction is subject to, among other things, the signing of the Formal Agreement, the terms and conditions of which are yet to be agreed. Shareholders and potential investors of the Company should note that the Proposed Transaction may or may not materialise and the final structure and terms of the Proposed Transaction, which are still subject to further negotiations between the parties, have yet to be finalised and may deviate from those set out in the MOU. The Company shall comply with the relevant disclosure and/or its shareholders’ approval requirements under the Listing Rules where appropriate. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares and other securities of the Company.

This announcement is made by Value Convergence Holdings Limited (the “Company”) pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Listing Rules”) and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”).

The board (the “Board”) of directors (the “Directors”) of the Company announces that after trading hours, on 26 July 2013, the Company entered into a non-legally binding memorandum of understanding (the “MOU”) with Wide Esteem Limited (the “Vendor”) pursuant to which the Company intends to acquire and the Vendor intends to sell the entire issued share capital of Orient Xin Dai Management Co., Ltd. (the “Target Company”) (the “Proposed Transaction”). No payment is required to be made upon the signing of the MOU.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are third parties independent of the Company and its connected persons (as defined in the Listing Rules). None of the Directors or controlling shareholders (as defined in the Listing Rules) of the Company has any interest, directly or indirectly, in the Proposed Transaction. In the event that the Proposed Transaction proceeds, the Company will comply with the relevant disclosure requirements of the Listing Rules as and when appropriate.

MEMORANDUM OF UNDERSTANDING

The non-legally binding MOU contains, inter alia, the following major terms:

Date: 26 July 2013

Parties: (a) the Company, being the purchaser (b) Wide Esteem Limited, being the Vendor

Assets to be acquired

Pursuant to the MOU, the Company intends to acquire and the Vendor intends to sell the entire issued share capital of the Target Company (the “Sale Share”). The Target Company and its subsidiaries and associate companies (altogether the “Target Group”) are principally engaged in the provision of (i) currency exchange services in the People’s Republic of China (the “PRC”); and (ii) management consultancy services for small loans companies in the PRC.

Consideration

The consideration for the Sale Share (the “Consideration”) shall be determined after arm’s length negotiation and set out in a formal definitive agreement to be entered into between the Vendor and the Company (the “Formal Agreement”) and is subject to the valuation of the business of the Target Group by an independent professional valuer, but in any event shall be between approximately HK$300 million and approximately HK$500 million. The Consideration shall be settled by way of cash and issue of new shares (the “Consideration Shares”) and convertible bonds of the Company (the “CB”).

The parties to the MOU agree that the issue price of the Consideration Shares and the conversion price of the shares (the “Conversion Shares”) to be issued upon the exercise of the conversion rights under the CB shall be HK$1.00 per share of the Company (the “Share(s)”) which was determined with reference to the average closing prices of the Shares of HK$1.054 per Share for the last five trading days up to and including the date of the MOU, a discount of approximately 5% and the relevant rounding effect. For the avoidance of doubt, the detailed terms of the Proposed Transaction, including but not limited to the exact settlement timing, method and amount of the Consideration will be negotiated and finalised by the parties to the MOU upon signing of the Formal Agreement.

Profit Guarantee

The Company is also guaranteed by the Vendor that the consolidated/combined net profit of the Target Group shall not be less than the level(s) to be determined upon the entering of the Formal Agreement (the “Profit Guarantee”). In the event that the net profit of the Target Group falls below the guaranteed level(s), the Company is entitled to require the Vendor to pay the Company an amount equivalent to the percentage of the shortfall in the Profit Guarantee by way of returning a proportionate amount of the CB. If the outstanding balance of the CB is insufficient to cover the payment, the Vendor will have to top up with cash.

Consideration Shares

Issue price: HK$1.00 per Consideration Share Rank: The Consideration Shares shall at all times rank pari passu among themselves and with the Shares in issue as at the date of issue of the Consideration Shares CB Conversion price: HK$1.00 per Conversion Share Maturity: 2 years Interest: 0.25% per annum Transferability: If the Target Company cannot meet the Profit Guarantee, the Vendor is restricted from transferring such percentage of the CB equivalent to that of the shortfall to the total guaranteed amount to third parties.

Conversion restriction:

If the Target Company cannot meet the Profit Guarantee, the Company will have the rights not to issue any Conversion Shares upon the exercise of the conversion rights attaching to such percentage of the CB equivalent to that of the shortfall to the total guaranteed amount.

In addition, the conversion of CB into the Conversion Shares shall not (i) result in a public float of the Company less than 25% (or other percentage as required under the Listing Rules); and (ii) trigger any general offer obligations under Rule 26 of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”).

Conditions precedent

Completion of the Formal Agreement (the “Completion”) shall be conditional upon the fulfilment of certain conditions precedent, including, among others:

(a) completion of the due diligence review of the financial, legal, business, operation and other matters of Target Group to the reasonable satisfaction of the Company and the Company is not aware of any material adverse change in the above aspects before the Completion;
(b) completion of the due diligence review of the financial, legal, business, operation and other matters of the Company and its subsidiaries (altogether the “Group”) to the reasonable satisfaction of the Vendor and the Vendor is not aware of any material adverse change in the above aspects before the Completion;
(c) a legal opinion on the PRC companies within the Target Group acceptable to the Company prepared by a PRC lawyer in the form and substance satisfactory to the Company covering the due incorporation, shareholders and scope of business of the Target Group and other matters as reasonably requested by the Company;
(d) the passing by the shareholders of the Company (the “Shareholders”) in a general meeting of all ordinary resolutions approving the Formal Agreement and the transactions contemplated under the Formal Agreement (including the issue of the CB and the Consideration Shares and other matters contemplated thereunder);
(e) the granting of the approval for the listing of, and permission to deal in the Consideration Shares and the Conversion Shares by the Listing Committee of the Stock Exchange and such approval not having been revoked;
(f) the issue of valuation report prepared by an independent professional valuer on the Target Group in respect of the valuation on its business and other assets (if applicable) which is in compliance of the Listing Rules and in form and substance reasonably satisfactory to the Company;

(g) the completion of the Proposed Transaction will not trigger the general offer obligation under Rule 26 of the Takeovers Code;
(h) the issue of audited consolidated/combined financial statements of the Target Group for the three financial years ended 31 December 2012 and the six months ended 30 June 2013 by the reporting accountants accepted by the Company and in the form and substance accepted by the Company; and
(i) the Company and the Vendor shall have obtained all necessary consent, registration and approval in relation to the transfer of the Sale Share granted by the relevant third parties (including but not limited to any government, government organization or regulatory authority) and no statute, regulation, law or decision which are being proposed, enacted or adopted by the aforesaid third parties to prohibit or restrict the transfer of the Sale Share.

If the above conditions precedent are not fulfilled or waived by the Company or the Vendor (as the case may be) (save for conditions (d), (e) and (i) above which cannot be waived) on or before 31 December 2013 or such other date as the parties to the MOU may agree, the Formal Agreement shall terminate and no parties thereto shall have any liability to any other party, save in respect of any antecedent breaches.

Long Stop Date

The MOU shall become effective on the date of the MOU and shall terminate and be of no force and effect on the earlier of (i) the date on which the Formal Agreement is to be executed, or (ii) 30 September 2013 or such later date as the parties to the MOU may otherwise agree in writing.

Under the MOU, save for certain general provisions such as provisions on governing law, confidentiality, notice, severability, validity and costs which are legally binding, other terms of the MOU are not legally binding.

Exclusivity

The Vendor has undertaken that the Company will have an exclusive right to acquire the share(s) of the Target Company since the date of the MOU and up to 30 September 2013. As such, the Vendor is not allowed to transfer all or part of share(s) of the Target Company to any party except the Company unless prior written consent is obtained from the Company. The Vendor has further undertaken that it would not engage in any discussion with any third party in respect of the sales and purchase of the share(s) of the Target Company (either in whole or in part) or any transaction or agreement which will result in the same effect.

REASONS FOR THE PROPOSED TRANSACTION

The Group is an established financial services group committed to delivering premier financial services and products that can fulfill the various investment and wealth management needs of clients in the Greater China region. The Group’s expertise includes securities, futures and options brokering, asset management, as well as corporate finance services in relation to sponsoring and underwriting initial public offerings and mergers and acquisitions.

The Target Company is a limited liability company incorporated in British Virgin Islands. The Target Group is principally engaged in the provision of (i) currency exchange services in the PRC; and (ii) management consultancy services for small loans companies in the PRC.

The Directors consider that the Proposed Transaction, if materialises, represents a good opportunity for the Group to diversify its businesses, to enter the PRC market and develop a new revenue stream. The Directors are of the view that the entering into of the MOU and proceeding with the Proposed Transaction are in the interests of the Company and Shareholders as a whole.

If the Proposed Transaction materialises, it may constitute a notifiable transaction of the Company under the Listing Rules.

GENERAL

Further announcement(s) will be made as and when necessary in accordance with the Listing Rules.

By order of the Board Value Convergence Holdings Limited Tin Ka Pak, Timmy Chief Executive Office & Executive Director

Hong Kong, 26 July 2013

As at the date of this announcement, the Board comprises four Executive Directors, namely, Mr. Tin Ka Pak, Timmy (Chief Executive Officer), Mr. Chau King Fai, Philip, Mr. Cheng Tze Kit, Larry (Chief Investment Officer) and Ms. So Wai Yee, Betty (Chief Financial Officer); and three Independent Non-executive Directors, namely, Mr. Ip Chun Chung, Robert, Mr. Wong Chung Kin, Quentin and Mr. Wong Kam Choi.

AI assistant

Value Convergence Holdings Limited M&A Activity 2013

49488_rns_2013-07-26_92e8dcaf-b957-4c42-a182-47aa38d8dbf2.pdf