ZONQING Environmental Limited — M&A Activity 2022

Feb 18, 2022

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 the Cayman Islands with limited liability)

(Stock Code: 1855)

CONNECTED TRANSACTION ACQUISITION OF 100% EQUITY INTEREST IN JILIN JINGHE DESIGN

THE ACQUISITION

On 18 February 2022, Zonbong Shanshui, a wholly-owned subsidiary of the Company, entered into the Acquisition Agreement with ZIHG and Jilin Jinghe Design, pursuant to which Zonbong Shanshui has conditionally agreed to acquire the Sale Interest.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Jilin Jinghe Design is wholly-owned by ZIHG, which in turn is wholly-owned by the the ultimate controlling shareholders of the Company as to 35% by Ms. Zhao Hongyu, 27% by Mr. Sun Juqing (a non-executive Director), 10% by Ms. Li Ping, 5% by Mr. Hou Baoshan, 5% by Mr. Liu Haitao (an executive Director, the chairman of the Board and the chief executive officer of the Company), 5% by Mr. Shao Zhanguang (a non-executive Director), 5% by Mr. Sun Juzhi, 4% by Mr. Shan Dejiang, 1% by Mr. Li Peng, 1% by Mr. Liu Changli, 1% by Mr. Wei Xiaoguang and 1% by Mr. Weng Hongzhao. Therefore, the Ultimate Controlling Shareholders (as defined below), being the director, chief executive and/or substantial Shareholder are connected persons of the Company, and ZIHG and Jilin Jinghe Design, each being an entity controlled by the Ultimate Controlling Shareholders (as defined below), are associates of the Ultimate Controlling Shareholders (as defined below) and thereby connected persons of the Company.

As one or more of the applicable percentage ratios in respect of the transactions under the Acquisition Agreement are more than 0.1% but all are less than 5%, the entering into of the Acquisition Agreement and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to the reporting and announcement requirements but exempt from the circular and independent shareholders’ approval requirements.

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THE ACQUISITION

The Board announces that on 18 February 2022, Zonbong Shanshui, a wholly-owned subsidiary of the Company, entered into the Acquisition Agreement with ZIHG and Jilin Jinghe Design, pursuant to which Zonbong Shanshui has conditionally agreed to acquire the Sale Interest.

Date : 18 February 2022 Parties : (1) Zonbong Shanshui; (2) ZIHG; and (3) Jilin Jinghe Design. Subject matter : Pursuant to the Acquisition Agreement, Zonbong Shanshui has conditionally agreed to acquire and ZIHG has conditionally agreed to sell the Sale Interest.

Consideration : RMB12,582,000, which shall be payable in full and in cash at completion.

The consideration of the Acquisition was arrived at after arm’s length negotiations with reference to and taking into account the net asset value of Jilin Jinghe Design as at 31 December 2020 and the potential benefits of the Acquisition as set out in the paragraph headed “REASONS FOR AND BENEFITS OF THE ACQUISITION” below.

The consideration shall be financed by internal resources of the Group.

Conditions precedent: Completion is conditional upon the satisfaction or otherwise waiver by Zonbong Shanshui of the following conditions:

• (i) the Acquisition Agreement having been executed by ZIHG and Jilin Jinghe Design;

• (ii) all undertakings and obligations under the Acquisition Agreement having been performed or complied with in all material respects by ZIHG and Jilin Jinghe Design;

• (iii) representations and warranties made by ZIHG and Jilin Jinghe Design in the Acquisition Agreement remaining true, complete and accurate;

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• (iv) registration of the Sale Interest as contemplated under the Acquisition Agreement at the Market Supervision and Regulation Bureau having been completed in accordance with the relevant law and regulations; and

• (v) there having been no material adverse change relating to Jilin Jinghe Design on or prior to the date of completion.

Completion :

Completion shall take place within 10 business days upon the satisfaction or otherwise waiver by Zonbong Shanshui of all the conditions precedent to the Acquisition Agreement or the other day as agreed by both parties in writing.

INFORMATION ABOUT THE PARTIES TO THE ACQUISITION AGREEMENT

The Company and the Group

The Company was incorporated in the Cayman Islands and registered as an exempted company with limited liability under the Companies Act of the Cayman Islands on 8 March 2019. The Company is an investment holding company.

Zonbong Shanshui is a company established in the PRC with limited liability on 3 June 2009. It is principally engaged in engineering surveying and mapping and engineering design.

The Group is an established service provider for landscaping and ecological restoration projects in the Three Northeast Provinces of the PRC and it is principally engaged in landscaping, ecological restoration and other related projects.

ZIHG

ZIHG is a company established under the laws of the PRC with limited liability on 16 May 2014. Together with other members of the ZIHG Group, they are principally engaged in the infrastructure and municipal construction works business and other businesses.

JILIN JINGHE DESIGN

Jilin Jinghe Design is a company established under the laws of the PRC with limited liability on 23 July 2009. It has Grade A qualification in Construction Engineering (建 築行業(建築工程)甲級資質) and Grade C qualification in urban planning (城鄉規劃丙 級資質). It is principally engaged in the consulting, planning, design and management of projects involving urban planning and design, architectural design and renovation.

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Set out below is a summary of the unaudited financial information of Jilin Jinghe Design for the years ended 31 December 2019 and 31 December 2020, prepared in accordance with the generally accepted accounting principles in the PRC:

	For the	For the
	year ended	year ended
	31 December	31 December
	2019	2020
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Net profit before tax	2,935	3,518
Net profit after tax	2,773	3,168

The unaudited net asset value of Jilin Jinghe Design as at 31 December 2020 was approximately RMB12,582,000.

Based on the information provided by ZIHG, the original acquisition cost of its equity interest in Jilin Jinghe Design was approximately RMB11,000,000.

Upon completion of the Acquisition, Jilin Jinghe Design will become a wholly-owned subsidiary of the Company and the financial results of Jilin Jinghe Design will be consolidated into the Company’s financial results.

REASONS FOR AND BENEFITS OF THE ACQUISITION

As disclosed in the 2021 interim report of the Company for the six months ended 30 June 2021, in view of the fact that many local tenders for landscapes and ecological business require the holding of specific licences, the Group has been considering to obtain additional qualification(s) to further expand the Group’s business and maintain its competitiveness.

After considering the staff expertise of Jilin Jinghe Design, Construction Industry (Construction Engineering) Grade A Qualification* (建築行業(建築工程)甲級資質) held by Jilin Jinghe Design, quality of provision of services in architectural and urban design and track record of Jilin Jinghe Design, the Directors believe that the Acquisition will allow the Group to keep pace with the rising number of projects that require comprehensive design capabilities and expertise, including the design of sewage treatment plants and industrial parks and urban renewal and renovation projects, enhance the comprehensive design capabilities and the overall competitiveness of the Group and thereby bringing growth potential to the Group in the PRC.

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With better information and resource sharing, the Directors believe that the Acquisition will complement the existing comprehensive platform and network of the Group and it will enable the Group to further expand its project portfolio. Accordingly, the Directors believe that the Acquisition is an important horizontal expansion of the existing business of the Group, which will assist the Group in becoming one of the pioneers of the industry.

After considering the above factors, the Board (excluding the Directors who have abstained from voting but including all independent non-executive Directors) considers that the Acquisition is conducted on normal commercial terms, and the terms of the Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and its Shareholders as a whole. The Board has approved the Acquisition and the transactions contemplated under the Acquisition Agreement. Mr. Liu Haitao, Mr. Shao Zhanguang and Mr. Sun Juqing, in view of their equity interest in ZIHG, and Ms. Lyu Hongyan, in view of her directorship in Jilin Jinghe Design, have abstained from voting on the board resolution for approving the Acquisition Agreement and the transactions contemplated thereunder to avoid any potential conflict of interests. Save as disclosed above, none of the Directors have a material interest in the Acquisition and hence, no other Directors has abstained from voting on such board resolution.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Jilin Jinghe Design is wholly-owned by ZIHG, which in turn is wholly-owned by the ultimate controlling shareholders of the Company as to 35% by Ms. Zhao Hongyu, 27% by Mr. Sun Juqing (a non-executive Director), 10% by Ms. Li Ping, 5% by Mr. Hou Baoshan, 5% by Mr. Liu Haitao (an executive Director, the chairman of the Board and the chief executive officer of the Company), 5% by Mr. Shao Zhanguang (a non-executive Director), 5% by Mr. Sun Juzhi, 4% by Mr. Shan Dejiang, 1% by Mr. Li Peng, 1% by Mr. Liu Changli, 1% by Mr. Wei Xiaoguang and 1% by Mr. Weng Hongzhao (collectively, the “ Ultimate Controlling Shareholders ”). Therefore, the Ultimate Controlling Shareholders, being the director, chief executive and/or substantial Shareholder are connected persons of the Company, and ZIHG and Jilin Jinghe Design, each being an entity controlled by the Ultimate Controlling Shareholders, are associates of the Ultimate Controlling Shareholders and thereby connected persons of the Company.

As one or more of the applicable percentage ratios in respect of the transactions under the Acquisition Agreement are more than 0.1% but all are less than 5%, the entering into of the Acquisition Agreement and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to the reporting and announcement requirements but exempt from the circular and independent shareholders’ approval requirements.

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DEFINITIONS

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

• “Acquisition” the acquisition of the Sale Interest in Jilin Jinghe Design “Acquisition the acquisition agreement dated 18 February 2022 entered Agreement” into between Zonbong Shanshui and ZIHG in relation to the Acquisition

• “Board” the board of Directors “Company” ZONBONG LANDSCAPE Environmental Limited (中邦园 林環境股份有限公司), an exempted company incorporated in the Cayman Islands with limited liability on 8 March 2019

• “Director(s)” the director(s) 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 “Jilin Jinghe Design” Jilin Province Jinghe Design Engineering Co., Ltd.* (吉林省 境和設計工程有限公司), a company established under the laws of the PRC with limited liability on 23 July 2009

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

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

• “Sale Interest” 100% of the entire equity interest in Jilin Jinghe Design “Share(s)” ordinary share(s) of HK$0.001 each in the issued share capital of the Company

• “Shareholder(s)” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited

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“Three Northeast Jilin Province, Liaoning Province, and Heilongjiang Province Provinces” in the PRC

“ZIHG” Zhongqing Investment Holding Group Limited Liability Company (中慶投資控股(集團)有限責任公司), formerly known as Changchun Mingju Commerce Limited (長春市銘 聚商貿有限責任公司), a company established under the laws of the PRC with limited liability on 16 May 2014

• “ZIHG Group”

ZIHG together with its subsidiaries and associates

• “Zonbong Shanshui”

Zonbong Shanshui Planning and Design Limited (中邦山水 規劃設計有限公司), a company established under the laws of the PRC with limited liability on 3 June 2009 and an indirect wholly-owned subsidiary of our Company, formerly known as Jilin Province Zhongsheng Municipal Construction Design Limited (吉林省中盛市政工程設計有限公司), Jilin Province Zhongsheng Design and Consulting Company Limited (吉林省中盛設計諮詢股份有限公司) and Jilin Province Zhongsheng Design and Consulting Limited (吉林 省中盛設計諮詢有限公司)

“%” per cent

In this announcement, the terms “associate”, “connected person”, “controlling shareholder”, “percentage ratios” and “subsidiary” have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

By order of the Board

ZONBONG LANDSCAPE Environmental Limited Liu Haitao

Chairman and executive Director

Hong Kong, 18 February 2022

The English translation of Chinese names or words in this announcement, where indicated by “*”, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

As at the date of this announcement, the Board of the Company comprises Mr. Liu Haitao as Chairman and executive Director, Mr. Wang Xudong and Ms. Wang Yan as executive Directors, Mr. Sun Juqing, Ms. Lyu Hongyan and Mr. Shao Zhanguang as non-executive Directors, and Mr. Gao Xiangnong, Mr. Yin Jun and Mr. Lee Kwok Tung Louis as independent non-executive Directors.

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