WH Group Limited - Capital/Financing Update 2018

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This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

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China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 164)

(I) VERY SUBSTANTIAL ACQUISITION AND EXEMPT CONNECTED TRANSACTION; (II) ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (III) RESUMPTION OF TRADING

THE AGREEMENT

On 4 June 2018, 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, 25.1% of the issued share capital of the Target Company, for a consideration of US$60,000,000 (equivalent to HK$471.66 million), which will be satisfied by the allotment and issue of 8,232,850,410 Consideration Shares on the Completion Date at the Issue Price of HK$0.05729 per Share.

The 8,232,850,410 Consideration Shares represent approximately 23.37% of the issued share capital of the Company as at the date of this announcement and approximately 18.94% of the issued share capital of the Company as enlarged by the allotment and issue of such Consideration Shares.

The Consideration Shares will be allotted and issued on the Completion Date under the Specific Mandate proposed to be obtained at the SGM.

The Company will apply to the Listing Committee for the listing of, and permission to deal in, the Consideration Shares to be allotted and issued pursuant to the terms of the Agreement.

IMPLICATIONS UNDER THE LISTING RULES

As one of the applicable percentage ratios in relation to the Acquisition is more than 100%, the Acquisition constitutes a very substantial acquisition for the Company under the Listing Rules and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The Vendor is wholly owned by Mr. Sie, who is a director of certain subsidiaries of the Company. The Vendor is a connected person of the Company at the subsidiary level under the Listing Rules and accordingly, the Acquisition also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Given (i) the Board has approved the Acquisition; and (ii) the independent non-executive Directors have confirmed that the terms of the Agreement are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, the Acquisition is subject to the reporting and announcement requirements only but is exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Rule 14A.101 of the Listing Rules.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor and its associates hold in aggregate 810,775,000 Shares as at the date of this announcement. The Vendor and its associates have material interest in the Acquisition and are required to abstain from voting at the SGM to approve the Agreement and the transactions contemplated thereunder. Save for the foregoing, to the best knowledge, information and belief of the Directors, having made all reasonable enquiries, no Shareholder has any material interest in the Acquisition and no Shareholder is required to abstain from voting at the SGM to approve the Agreement and the transactions contemplated thereunder.

RULING OF THE LISTING DEPARTMENT

The Listing Department informed the Company that based on the information provided, it has made a ruling in its decision letter dated 27 June 2018 that the Acquisition constitutes a reverse takeover and an attempt to achieve a listing of the Target Company and a means to circumvent the new listing requirements under Rule 14.06(6) of the Listing Rules (the “ Ruling ”).

The deadline for the Company’s submission of an application to the Listing Committee for a first review of the Ruling (the “ Review Application ”) is 9 July 2018. The Company intends to exercise its right under Rule 2B.06(1) of the Listing Rules to have the Ruling reviewed by the Listing Committee. The Company may or may not proceed with the Acquisition depending on the results of the Review Application. The Company will publish further announcements to keep the Shareholders informed of the submission of the Review Application, the results of the Review Application and the Company’s decision as to whether the Acquisition will or will not be proceeded.

DESPATCH OF CIRCULAR

Subject to the results of the Review Application, the Company will convene the SGM to seek the approval of the Shareholders on the Agreement and the transactions contemplated thereunder including the grant of the Specific Mandate. The Company will despatch a circular in accordance with requirements under the Listing Rules, which will contain, among other things, (i) further details of the Acquisition; (ii) financial information of the Target Group; and (iii) a notice of the SGM and a form of proxy. The timetable of the Acquisition is subject to the status and results of the Review Application. The despatch date of the circular will be announced in due course.

RESUMPTION OF TRADING

Trading in the Shares on the Stock Exchange has been suspended at the request of the Company with effect from 1:00 p.m. on 4 June 2018 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares with effect from 9:00 a.m. on 6 July 2018.

Completion of the Acquisition is subject to the satisfaction or waiver (as applicable) of a number of conditions, which may or may not be fulfilled. Furthermore, subject to the results of the Review Application, the Acquisition may or may not be proceeded. The Shareholders and potential investors should exercise caution when they deal or contemplate dealing in the Shares or other securities of the Company.

References are made to the announcement of the Company dated 4 June 2018 in relation to the trading halt of the Shares on the Stock Exchange and the holding announcement of the Company dated 19 June 2018.

Details of the Agreement are set out below.

THE AGREEMENT

Date: 4 June 2018

Parties:

The Purchaser: China Baoli Technologies Services Limited, a wholly-owned subsidiary of the Company

The Vendor: Trinity World Management Limited

Subject Matter

The Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the Sale Shares, representing 25.1% of the issued share capital of the Target Company as at the date of this announcement.

Consideration

The Consideration is US$60,000,000 (equivalent to HK$471,660,000). The Consideration will be satisfied by the allotment and issue of 8,232,850,410 Consideration Shares on the Completion Date at the Issue Price of HK$0.05729 per Share.

The Issue Price of HK$0.05729 per Share represents:

(a) a discount of approximately 22.58% to the closing price of HK$0.074 per Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 15.00% to the average of the closing prices of HK$0.0674 per Share as quoted on the Stock Exchange for the last 5 trading days up to and including the Last Trading Day; and
(c) a discount of approximately 18.39% to the average of the closing prices of HK$0.0702 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the Last Trading Day.

The Issue Price and the Consideration were determined after arm’s length negotiations between the Vendor and the Purchaser with reference to:

(i) the estimated current valuation of the Target Group of approximately US$239,000,000;
(ii) the historical commitment to the Target Group by the Group amounting to approximately US$102,286,000 in aggregate including the cost of acquisition by the Group of 40% in aggregate of the issued share capital of the Target Company. Based on such historical commitment, the consideration for 25.1% equity interest in the Target Company should be approximately US$64,185,000;
(iii) the business prospects of the Target Company;
(iv) YOTA is an international brand and is well-known for having the dual-screen mobile devices technologies. The Group successfully launched Yota 3 in China in October 2017 with the help of R&D team of the Target Company. The Company believes that YotaPhone and the business of the Target Company have great prospect; and
(v) the means of settlement of the Consideration in full by the allotment and issue of the Consideration Shares. The payment by way of allotment and issue of Consideration Shares allows the Company to preserve its cash flow.

The Directors consider that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Consideration Shares

The Consideration Shares will rank equally among themselves and pari passu in all respects with the Shares in issue on the date of the allotment and issue of the Consideration Shares.

The Consideration Shares will be allotted and issued on the Completion Date under the Specific Mandate proposed to be obtained at the SGM.

The Company will apply to the Listing Committee for the listing of, and permission to deal in, the Consideration Shares to be allotted and issued pursuant to the terms of the Agreement.

Conditions

The obligation of the Purchaser to proceed to Completion is subject to the satisfaction or, if applicable, waiver of the following conditions:

(a) the Purchaser having been satisfied with the results of such enquiries, investigations and due diligence reviews of the business, affairs, operations and financial position of the Target Group by the Purchaser or any of its officers, employees, agents, professional advisers or other agents as the Purchaser in its discretion deems necessary, desirable or appropriate to undertake;
(b) the Company having obtained approval of the Shareholders of the Agreement and the transactions contemplated under the Agreement in accordance with the applicable requirements under the Listing Rules;
(c) the Listing Committee having granted the listing of, and permission to deal in, the Consideration Shares on the Stock Exchange;
(d) a valuation report of the Target Group having been delivered to the Purchaser and the valuation of the Target Group as at a date no earlier than 31 March 2018 set out in such report being not less than US$239,000,000;

(e) the warranties of the Vendor in the Agreement remaining true and accurate in all respects and not misleading in any respect as of the Completion Date by reference to the facts and circumstances subsisting as at the Completion Date;
(f) no notice, order, judgment, action or proceeding of any court, arbitrator, authority, statutory or regulatory body having been served, issued or made which restrains, prohibits or makes unlawful any transaction contemplated under the Agreement or which is reasonably likely to materially and adversely affect the right of the Purchaser to own the legal and beneficial title to the Sale Shares, free from encumbrances, following the Completion Date; and
(g) all consents of any authority or of any other person that are required to be obtained in connection with the consummation of the transactions contemplated under the Agreement (including but not limited to those related to the transfer of the Sale Shares, and any waivers of notice requirements, rights of first refusal, preemptive rights, put or call rights under the shareholders’ agreement in relation to the Target Company and the articles of association of the Target Company) shall have been duly obtained and effective as of the Completion Date, and evidence thereof shall have been delivered to the Purchaser.

The Vendor shall use its best endeavours to ensure the satisfaction of the Conditions above (other than the Conditions in paragraphs (b), (c) and (d)) as soon as possible after the date of the Agreement but in any event no later than the Long-Stop Date.

The Purchaser may at any time waive in whole or in part and conditionally or unconditionally any of the Conditions above (other than the Conditions in paragraphs (b) and (c)) by notice in writing to the Vendor.

If the Conditions in paragraphs (b) and (c) are not satisfied on or before the Long-Stop Date or any of the other Conditions is not satisfied or waived on or before the Completion Date, the Agreement shall automatically lapse, provided however that (a) certain surviving provisions shall continue in force following the lapse of the Agreement; and (b) the lapse of the Agreement shall be without prejudice to the rights and liabilities of any party to the Agreement accrued prior to such lapse. In all other such circumstances, the Agreement shall lapse without liability to any party.

Completion

Subject to satisfaction of the Conditions on or before the Long-Stop Date, Completion shall take place on the third business day after satisfaction of the Conditions (other than those to be satisfied on the Completion Date, but subject to the satisfaction or waiver thereof on the Completion Date) or such other date as may be designated by the Purchaser and notified to the Vendor in writing.

On the Completion Date, subject to the terms of the Agreement, the Purchaser shall procure the Company to allot and issue the Consideration Shares to the Vendor or its nominee.

Through the Acquisition, the equity stake of the Group in the Target Company will increase from 40% to 65.1% upon Completion.

With effect from Completion, all rights, entitlements and privileges enjoyed by the Vendor as a shareholder of the Target Company will be enjoyed by the Purchaser including without limit the right to appoint a director of the Target Company.

The Group currently has three representatives on the board of directors of the Target Company. After Completion, the Group will have the right to appoint four representatives on the board of directors of the Target Company comprising a total of six directors, the Group will therefore have control over the board of directors of the Target Company.

Upon Completion, the financial statements of the Target Company will be consolidated with the financial statements of the Company and the Target Company will be accounted for as a subsidiary of the Company.

Lock up on the Consideration Shares

Pursuant to the terms of the Agreement, the Vendor covenanted and undertook to the Purchaser that it shall not, during the Lock-in Period, directly or indirectly, sell, transfer or otherwise dispose of, or create any encumbrance over, the Consideration Shares (or any interest in them), or enter into any agreement to do so, save that the Vendor shall be entitled to sell, transfer or otherwise dispose of the Consideration Shares in the following cumulative tranches during the Lock-in Period:

(1) a first tranche of 8 and 1/3rd% of the Consideration Shares immediately after Completion;

(2) a second tranche of 8 and 1/3rd% of the Consideration Shares immediately after 30 days following Completion plus any un-disposed Consideration Shares in the first tranche;
(3) a third tranche of 8 and 1/3rd% of the Consideration Shares immediately after 60 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(4) a fourth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 90 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(5) a fifth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 120 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(6) a sixth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 150 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(7) a seventh tranche of 8 and 1/3rd% of the Consideration Shares immediately after 180 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(8) an eighth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 210 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(9) a ninth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 240 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(10) a tenth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 270 days following Completion plus any un-disposed Consideration Shares in prior tranches;
(11) an eleventh tranche of 8 and 1/3rd% of the Consideration Shares immediately after 300 days following Completion plus any un-disposed Consideration Shares in prior tranches; and
(12) a final tranche of 8 and 1/3rd% of the Consideration Shares immediately after 330 days following Completion plus any un-disposed Consideration Shares in prior tranches.

EFFECT OF THE ACQUISITION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

To the best knowledge, information and belief of the Directors, the shareholding structure of the Company as at the date of this announcement and immediately after the allotment and issue of 8,232,850,410 Consideration Shares (assuming no other change in the issued share capital of the Company) is as follows:

Name of Shareholder Lui Lai Yan (Note 1) Yeung Chun Wai, Anthony (Note 1) Rising Elite Global Limited (Note 1) Nova Investment Group Limited (Note 1) Sub-total One Faith Investments Limited (Note 2) Vendor and its associates Public Shareholders Total	As at the date of this announcement Number of Shares Approximate % 152,000,000 0.43% 871,462,205 2.47% 90,000,000 0.26% 1,521,007,187 4.32% 2,634,469,392 7.48% 2,153,475,000 6.11% 810,775,000 2.30% 29,626,411,249 84.11% 35,225,130,641 100%	Immediately after the allotment and issue of 8,232,850,410 Consideration Shares (assuming no other change in the issued share capital of the Company) Number of Shares Approximate % 152,000,000 0.35% 871,462,205 2.00% 90,000,000 0.21% 1,521,007,187 3.50% 2,634,469,392 6.06% 2,153,475,000 4.96% 9,043,625,410 20.81% 29,626,411,249 68.17% 43,457,981,051 100%	Immediately after the allotment and issue of 8,232,850,410 Consideration Shares (assuming no other change in the issued share capital of the Company) Number of Shares Approximate % 152,000,000 0.35% 871,462,205 2.00% 90,000,000 0.21% 1,521,007,187 3.50% 2,634,469,392 6.06% 2,153,475,000 4.96% 9,043,625,410 20.81% 29,626,411,249 68.17% 43,457,981,051 100%
			100%

Notes:

(1) Mr. Yeung Chun Wai, Anthony is an executive Director. Rising Elite Global Limited and Nova Investment Group Limited are beneficially wholly owned by Mr. Yeung Chun Wai, Anthony. Ms. Lui Lai Yan is the spouse of Mr. Yeung Chun Wai, Anthony.
(2) Mr. Zhang Yi is an executive Director and the Chairman of the Board. One Faith Investments Limited is beneficially wholly owned by Mr. Zhang Yi.

INFORMATION ON THE TARGET COMPANY

The Target Company commenced its operations in 2011 and is principally engaged in the design, research and development, production and marketing and sales of high-tech consumer LTE electronics such as phablets and routers. Its main products are smartphones under the brand “YOTAPHONE” and other connectivity devices such as modems.

Based on the consolidated financial statements of the Target Company, the consolidated financial information of the Target Company for the two years ended 31 December 2017 prepared in accordance with International Financial Reporting Standards is as follows:

	For the year ended	For the year ended
	31 December
	2017	2016
	(Audited)	(Audited)
	(approximately)	(approximately)
Net profit/(loss) before tax	US$1,236,000	(US$27,629,000)
Net profit/(loss) after tax	US$1,236,000	(US$27,631,000)

The audited net liabilities of the Target Group as at 31 December 2017 was approximately US$95,662,000. The Target Group had net liabilities as at 31 December 2017 due to the accounting treatment of the shareholders’ loans as liabilities to the Target Group.

A breakdown of the historical commitment of the Group to the Target Group is as follows:

Commitment Time at which the commitment was or will be made Party who received the commitment Cost of acquisition of 30% issued share capital of the Target Company USD41,625,000 paid in April 2016 USD4,600,000 paid in April 2017 Telconet Capital Limited Partnership Consideration for the assignment of the debts owed by Yota Devices Limited to Telconet Capital Limited Partnership under the Bridge Loan Agreement April 2016 Target Company The loan granted by the Company to Yota Devices IPR Limited under the Yota BVI Loan Agreement USD24,300,000 in July 2016 USD2,700,000 in April 2017 Target Company Cost of acquisition of 10% issued share capital of the Target Company Allotment and issue of first tranche consideration shares in March 2018 Allotment and issue of second tranche consideration shares in September 2018 MTH Limited Total	Approximately USD ’000 46,225 13,561 27,000 15,500
	102,286

Commitment
Time at which
the commitment
was or will be made
Party who received
the commitment
Cost of acquisition of 30%
issued share capital of
the Target Company
USD41,625,000
paid in April 2016
USD4,600,000
paid in April 2017
Telconet Capital
Limited Partnership
Consideration for
the assignment of the debts owed by
Yota Devices Limited to
Telconet Capital Limited Partnership
under the Bridge Loan Agreement
April 2016
Target Company
The loan granted by the Company to
Yota Devices IPR Limited under
the Yota BVI Loan Agreement
USD24,300,000
in July 2016
USD2,700,000
in April 2017
Target Company
Cost of acquisition of 10%
issued share capital of
the Target Company
Allotment and issue of
first tranche
consideration shares
in March 2018
Allotment and issue of
second tranche
consideration shares
in September 2018
MTH Limited
Total

Approximately
USD ’000
46,225
13,561
27,000
15,500

102,286

The outstanding loan amount (including interests) provided by the Group to the Target Group was approximately USD73,852,000 as at 31 March 2018.

To the best knowledge, information and belief of the Directors, as at the date of this announcement, the Target Company is held by the Vendor as to 25.1%, by Telconet Capital Limited Partnership as to 34.9% and by the Group as to 40%.

INFORMATION ON THE PARTIES

The Purchaser is a wholly-owned subsidiary of the Company and is an investment holding company.

The Vendor is a company incorporated in the British Virgin Islands. As at the date of this announcement, the Vendor holds 25.1% of the issued share capital of the Target Company. The Vendor is principally engaged in investment holding. The Vendor is a company wholly-owned by Mr. Sie. Mr. Sie is a director of certain subsidiaries of the Company.

The original acquisition cost of the Sale Shares paid by the Vendor was approximately US$54,000,000.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in mobile technologies business, leisure-related business including tourism and hospitality, gamma ray irradiation service, and securities trading and investment.

As at the date of this announcement, the Group holds 40% of the issued share capital of the Target Company and an exclusive intellectual property licence to market and sell “YOTAPHONE” in the Greater China Region commencing in April 2016.

Yota 3 was successfully launched by the Group in October 2017. The dual-screen feature of Yota 3 is a unique feature for mobile phones and the Company’s management are optimistic and enthusiastic about the business prospects and future growth potential of the Target Company. The Group will continue to expand and strategically focus on its mobile technologies business in the near future with a view to strengthening its foothold in the mobile technologies industry.

The Company has been in discussions with Xinhua News Agency (“ Xinhua ”), the official state-run press agency of the People’s Republic of China to launch a new e-commerce and advertising platform via distributing customized versions of mobile devices for their customers. Xinhua is the biggest and most influential media organization in China, and the largest news agency in the world in terms of correspondents worldwide. Xinhua is a ministrylevel institution subordinate to the Chinese central government, and is the highest ranking state media organization in the country alongside the People’s Daily. In order to consolidate the cooperation with Xinhua, the Company initiated the negotiations with the Vendor for a greater control in the Target Company for the development of the mobile technologies business of the Group. Through the ability to control the Target Company, the Company can have a larger capacity to cooperate with Xinhua which is expected to generate a significant business volume to the Group’s mobile technologies business and bring greater value to the Company and the Shareholders.

Through the Acquisition, the equity stake of the Group in the Target Company will increase from 40% to 65.1% upon Completion. After Completion, the Group will have the right to appoint four representatives on the board of directors of the Target Company comprising a total of six directors, the Group will therefore have control over the board of directors of the Target Company. Upon Completion, the financial statements of the Target Company will be consolidated with the financial statements of the Company and the Target Company will be accounted for as a subsidiary of the Company. The Company can have greater influence over the development of the Target Company and will have, through the Target Company, the full licence with respect to “YOTAPHONE”. The Acquisition is therefore in line with the longterm business strategy and development direction of the Group.

The Directors also believe that the Acquisition will provide an opportunity to enhance the Group’s financial performance and the return to the Shareholders in the long run.

Based on the foregoing, the Directors consider that the terms of the Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors have approved the Agreement and the transactions contemplated thereunder. None of the Directors had a material interest in the Acquisition and hence no Director was required to abstain from voting on the resolutions approving the Agreement or the transactions contemplated thereunder.

As at the date of this announcement, other than the Agreement, the Company has not started any formal negotiation or entered into any agreement or arrangement with any existing or potential shareholder of the Target Company as to acquisition of further equity interest or other investments in the Target Company by the Group. However, the Company remains open to the acquisition of further equity interest in the Target Company as future opportunities arise.

IMPLICATIONS UNDER THE LISTING RULES

The Company entered into the agreement for the acquisition of 30% of YOTA on 23 December 2015 (the “ First Acquisition ”) and the Group entered into the sale and purchase agreement for the acquisition of 10% of Yota on 9 February 2018 (the “ Second Acquisition ”, together with the First Acquisition, the “ Previous Acquisitions ”).

Pursuant to Rule 14.22 of the Listing Rules, the Stock Exchange may require listed issuers to aggregate a series of transactions and treat them as if they were one transaction if they are all completed within a 12-month period or are otherwise related.

The First Acquisition has been completed for more than two years which is longer than the 12-month period mentioned above. The Acquisition and the Previous Acquisitions are different transactions and are not related to each other. The sellers of the three transactions are different. In addition, the business of the Target Company has formed part of the Company’s principal businesses by way of the licensing arrangement between the Group and the Target Company, as shown in the Company’s latest annual and interim reports. Accordingly, the three acquisitions should not be aggregated pursuant to Rules 14.22 and 14.23 of the Listing Rules.

The Company is of the view that the Acquisition should not constitute a reverse takeover under Rule 14.06(6) of the Listing Rules. The Acquisition, even if aggregated with the Previous Acquisitions, should not constitute a reverse takeover under Rule 14.06(6) of the Listing Rules for the following reasons:

(a) The Acquisition (whether aggregated with the Previous Acquisitions or not) falls outside the bright line tests under Rules 14.06(6)(a) and (b) of the Listing Rules.
(b) Except for the revenue ratio, all the applicable ratios are well below 100%, ranging from 5.4% to 76.6%. The revenue ratio of the Acquisition is approximately 128.5%. The revenue of the Target Company for the financial year ended 31 December 2017 was approximately HK$48 million, nearly all of which represents the royalty payment receivable from the Group. Following completion of the Acquisition, there will not be significant change to the assets, profits and revenue of the Group as enlarged by the Target Group.
(c) Following the Group’s acquisition of 30% of the equity interest of the Target Company and obtaining an exclusive intellectual property licence to market and sell “YOTAPHONE” in the Greater China Region in 2016, the Group has been principally engaged in the mobile technologies business. The Group has successfully launched the third generation of dual-screen smartphone, Yota 3, in October 2017 and will continue to invest more resources in improving the brand awareness. Following completion of the Acquisition, the Group will continue to develop its mobile technologies business and the Acquisition will not result in any change of the principal business of the Group.
(d) At present, the Target Company’s sole business is licensing the intellectual property rights of “YOTAPHONE” to the Group and its principal asset is the intangible asset of such intellectual property rights. Through the Acquisition, the equity stake of the Group in the Target Company will increase from 40% to 65.1% and the Group will have greater control in the Target Company for the development of the mobile technologies business of the Group.
(e) Under the Acquisition, the Consideration will be settled by the allotment and issue of the Consideration Shares to the Vendor. The allotment and issue of the Consideration Shares will not result in or cause a change in control (as defined in the Takeovers Code) of the Company upon completion of the Acquisition.
(f) There is no issue of restricted convertible securities to the Vendor under the Acquisition or the sellers under the Acquisition.

RULING OF THE LISTING DEPARTMENT

The Listing Department considers that the Acquisition is a reverse takeover and an attempt to achieve a listing of the Target Company and a means to circumvent the new listing requirements for the reasons extracted below:

“ Decision

Based on the information provided, we consider that the Acquisition (as defined below) is a reverse takeover ( RTO ) and an attempt to achieve a listing of the Target and a means to circumvent the new listing requirements under Rule 14.06(6).

Fact

Principal activities

For the year ended 31 March 2015, the Company was principally engaged in cruise ship management services business, gamma ray irradiation services, and securities trading and investment. The Company commenced the mobile technologies business since 2016 pursuant to the First Acquisition (as defined below).
During the three years ended 31 March 2015, 2016 and 2017, the cruise ship management services business contributed 93%, 94% and 86% of the Group’s revenue. The remaining businesses were very immaterial to the Group. During the year ended 31 March 2018, the Company has temporarily suspended the management services on the cruise ship to perform routine and preventive maintenance. Up to now, the cruise ship management service business is still in suspension. There is no timetable on when the business would resume.

First Acquisition

In October 2015, the Company proposed to acquire 100% interest of Yota (the Target ), which would constitute a very substantial acquisition of the Company. The Target is principally engaged in the design, research and development, marketing and sales of mainly smartphones under the brand “Yota” and other connectivity devices such as modems.
On 12 November 2015, we issued a decision letter to the Company stating that the above proposed transaction was a RTO and an attempt to list the Target and a means to circumvent the new listing requirements.
On 1 December 2015, the Company proposed to (i) downsize the above acquisition to acquire only 30% interest in the Target; and (ii) enter into a licensing agreement or formation of a joint venture with the Target to develop and manufacture smart phones under the brand “Yota” for exclusive distribution in the PRC. The revised transaction constituted a major transaction to the Company (the First Acquisition ).

On 4 December 2015, we issued a letter to the Company (the Letter ) stating that the First Acquisition would not constitute a RTO under Rule 14.06(6) subject to a few conditions including that (i) the transaction will not exceed the size of a major transaction under Chapter 14; and (ii) the Company will disclose that, among others, if it acquires further interest in the Target after the period of 12 months from the date of completion of the First Acquisition, we will aggregate these further acquisition(s) with the First Acquisition and assess whether these further acquisition(s) would constitute a RTO.
The Company announced the First Acquisition on 30 December 2015 and completed it in April 2016. The Company was granted an exclusive intellectual property licence by the Target to market and sell phone under the brand “Yota” in the Greater China Region for seven years since April 2016 pursuant to the First Acquisition.

Second Acquisition

On 11 February 2018, the Company announced a discloseable transaction to acquire an additional 10% interest in the Target (the Second Acquisition ). The Second Acquisition was completed on 29 March 2018. The Target remained an associate of the Company.

The Acquisition

On 4 June 2018, the Company entered into an agreement to acquire an additional 25.1% interest in the Target (the Acquisition ). Upon completion of the Acquisition, the Company’s interest in the Target will increase from 40% to 65.1%, and the Target will become a subsidiary of the Company. The results of the Target will be consolidated in the Group’s financial statements. The Acquisition (both on its own and on aggregation basis when it is aggregated with the First Acquisition and the Second Acquisition) is a very substantial acquisition to the Company.
At present, the Target’s sole business is licensing the intellectual property rights of “YotaPhone” to the Group and its principal asset is the intangible asset of such intellectual property rights.
The Target and its subsidiaries (the Target Group ) recorded a loss of US$39.7 million, US$27.6 million and US$0.4 million in 2015, 2016 and 2017, respectively. As at 31 December 2017, the net liabilities of the Target Group were US$96.0 million.

Relevant Listing Rules and Guidance Letter

Rule 14.06(6) defines a RTO to be an acquisition (or a series of acquisitions) which constitutes, in the opinion of the Exchange, an attempt to achieve a listing of the assets to be acquired and a means to circumvent the new listing requirements.
Our guidance letter HKEx-GL78-14 explains that the RTO Rules are anti-avoidance provisions designed to prevent circumvention of the new listing requirements. In particular, paragraph 23 of the guidance letter states that “where an issuer acquires equity interests in a target in stages, the Exchange may aggregate the acquisitions in considering whether the acquisitions together are material to the issuer and represent an intention to achieve listing of the target”.
Rule 14.22 states that the Exchange may require issuers to aggregate a series of transactions and treat them as if they were one transaction if they are all completed within a 12-month period or are otherwise related.

Reasons for our decision

We consider that the Acquisition is a RTO and an attempt to achieve a listing of the Target and a means to circumvent the new listing requirements because:

Achieve listing of the Target

(i) Both the First Acquisition, the Second Acquisition and the Acquisition involve acquisition of interests in one company (i.e. the Target), and the Target will become a subsidiary of the Company after completion of the Acquisition. We consider that the Company has clear intention to acquire more than 50% interest in the Target since October 2015 despite that the whole acquisition process of the Target has been extended to two years and seven months since October 2015.

(ii) Rule 14.22 contemplates that the transactions that are otherwise related may be aggregated even though they are not all completed within a 12-month period. Taking into account the factors under Rules 14.22 and 14.23, we will aggregate the First Acquisition, the Second Acquisition and the Acquisition for the purpose of assessing whether these acquisitions would together represent an intention to achieve listing of the Target. In particular, we consider that the Company’s principal business has been changed from cruise ship management services business to mobile technologies business through these acquisitions, and that the size of the Acquisition (both on its own and on aggregated basis) is significant to the Group with a revenue ratio of 128.5%.

Circumvent new listing requirements

(iii) The history of the acquisition in October 2015, the acquisitions of interests in the Target in stages and the suspension of the cruise ship management services business, together with the Acquisition, form a series of arrangements to circumvent the RTO Rules.
(iv) The Target Group was loss making in last three years and was in net liabilities position as at 31 December 2017. The Target Group could not meet the profit requirement for a new applicant under Rule 8.05(1). Circumvention of new listing requirements would be a material concern in this case.”

The deadline for the Company’s submission of the Review Application is 9 July 2018. The Company intends to exercise its right under Rule 2B.06(1) of the Listing Rules to have the Ruling reviewed by the Listing Committee. The Company may or may not proceed with the Acquisition depending on the results of the Review Application. The Company will publish further announcements to keep the Shareholders informed of the submission of the Review Application, the results of the Review Application and the Company’s decision as to whether the Acquisition will or will not be proceeded.

DESPATCH OF CIRCULAR

RESUMPTION OF TRADING

Completion of the Acquisition is subject to the satisfaction or waiver (as applicable) of a number of conditions, which may or may not be fulfilled. Furthermore, subject to the results of Review Application, the Acquisition may or may not be proceeded. The Shareholders and potential investors should exercise caution when they deal or contemplate dealing in the Shares or other securities of the Company.

DEFINITIONS

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

“Acquisition” the acquisition of the Sale Shares by the Purchaser pursuant to the terms of the Agreement

“Agreement” the share purchase agreement dated 4 June 2018 and entered into between the Purchaser and the Vendor in respect of the Acquisition

“Board”

the board of Directors

“Company” China Baoli Technologies Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange “Completion” completion of the Acquisition pursuant to the terms of the Agreement “Completion Date” the date of Completion “Conditions” the conditions precedent to Completion set out in the paragraph headed “Conditions” in this announcement “connected person” has the meaning ascribed to it under the Listing Rules “Consideration” the consideration payable by the Purchaser to the Vendor for the Sale Shares “Consideration Shares” the Shares to be allotted and issued to the Vendor or its nominee pursuant to the terms of the Agreement “Directors” the directors of the Company

“Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

“HK$” Hong Kong dollar, the lawful currency of Hong Kong

“Issue Price” the issue price per Share at which the Consideration Shares will be allotted and issued pursuant to the terms of the Agreement “Last Trading Day” 1 June 2018, being the last full trading day for the Shares before the entering into of the Agreement “Listing Committee” has the meaning ascribed to it under the Listing Rules

“Listing Department” the Listing Department of the Stock Exchange “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Lock-in Period” the period of 360 days commencing from the date of allotment and issue of the Consideration Shares by the Company “Long-Stop Date” 30 November 2018 or such other date as may be agreed between the Purchaser and the Vendor in writing “Mr. Sie” Mr. Sie Winston, a director of certain subsidiaries of the Company “Purchaser” China Baoli Technologies Services Limited, a company incorporated in the British Virgin Islands, a wholly-owned subsidiary of the Company “Sale Shares” 251 shares in the share capital of the Target Company “SGM” the special general meeting of the Company to be convened and held for considering and if thought fit, approving, among others, the Agreement and the transactions contemplated thereunder “Shares” ordinary shares of HK$0.01 each in the share capital of the Company (or of such other nominal amount as will result from a sub-division, consolidation, reclassification or reconstruction of the share capital of the Company from time to time) “Shareholders” the holders of the Shares “Specific Mandate” the specific mandate to be granted to the Directors by the Shareholders at the SGM to allot and issue the Consideration Shares to the Vendor or its nominee

“Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Company” YOTA, a company incorporated under the laws of the Cayman Islands

“Target Group” the Target Company and its subsidiaries “US$” or “USD” United States dollar, the lawful currency of the United States of America

“Vendor” Trinity World Management Limited, a company incorporated in the British Virgin Islands

“%”

per cent.

By order of the Board China Baoli Technologies Holdings Limited Zhang Yi Chairman

Hong Kong, 5 July 2018

As at the date of this announcement, the executive Directors are Mr. Zhang Yi (Chairman), Ms. Chu Wei Ning (Chief Executive Officer), Mr. Yeung Chun Wai, Anthony and Mr. Wong King Shiu, Daniel; and the independent non-executive Directors are Mr. Chan Chi Yuen, Mr. Chan Kee Huen, Michael, Mr. Han Chunjian and Mr. Wong Hoi Kuen.

AI assistant

WH Group Limited Capital/Financing Update 2018

49096_rns_2018-07-09_524da029-7f1f-4fb9-8fc5-d397e2598fcb.pdf

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(I) VERY SUBSTANTIAL ACQUISITION AND EXEMPT CONNECTED TRANSACTION; (II) ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (III) RESUMPTION OF TRADING

THE AGREEMENT

IMPLICATIONS UNDER THE LISTING RULES

RULING OF THE LISTING DEPARTMENT

DESPATCH OF CIRCULAR

RESUMPTION OF TRADING

THE AGREEMENT

Parties:

Subject Matter

Consideration

Consideration Shares

Conditions

Completion

Lock up on the Consideration Shares

EFFECT OF THE ACQUISITION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE TARGET COMPANY

INFORMATION ON THE PARTIES

REASONS FOR AND BENEFITS OF THE ACQUISITION

IMPLICATIONS UNDER THE LISTING RULES

RULING OF THE LISTING DEPARTMENT

“ Decision

Fact

Principal activities

First Acquisition

Second Acquisition

The Acquisition

Relevant Listing Rules and Guidance Letter

Reasons for our decision

DESPATCH OF CIRCULAR

RESUMPTION OF TRADING

DEFINITIONS

AI assistant

WH Group Limited — Capital/Financing Update 2018

49096_rns_2018-07-09_524da029-7f1f-4fb9-8fc5-d397e2598fcb.pdf

China Baoli Technologies Holdings Limited 中國寶力科技控股有限公司

(I) VERY SUBSTANTIAL ACQUISITION AND EXEMPT CONNECTED TRANSACTION; (II) ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (III) RESUMPTION OF TRADING

THE AGREEMENT

IMPLICATIONS UNDER THE LISTING RULES

RULING OF THE LISTING DEPARTMENT

DESPATCH OF CIRCULAR

RESUMPTION OF TRADING

THE AGREEMENT

Parties:

Subject Matter

Consideration

Consideration Shares

Conditions

Completion

Lock up on the Consideration Shares

EFFECT OF THE ACQUISITION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE TARGET COMPANY

INFORMATION ON THE PARTIES

REASONS FOR AND BENEFITS OF THE ACQUISITION

IMPLICATIONS UNDER THE LISTING RULES

RULING OF THE LISTING DEPARTMENT

“ Decision

Fact

Principal activities

First Acquisition

Second Acquisition

The Acquisition

Relevant Listing Rules and Guidance Letter

Reasons for our decision

DESPATCH OF CIRCULAR

RESUMPTION OF TRADING

DEFINITIONS

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