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* (incorporated in the Cayman Islands with limited liability) (Stock Code: 2128)
CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF ENTIRE EQUITY INTEREST OF THE WFOE THE ACQUISITIONThe Board is pleased to announce that on 15 January 2013, the Vendor, the Guarantor and the Purchaser, being an indirect wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement to acquire the entire equity interest of the WFOE at the consideration of RMB116,000,000 (equivalent to approximately HK$144,928,000), being the Acquisition.
IMPLICATIONS UNDER THE LISTING RULES
As the Vendor is wholly-owned by Mr. Wong, an executive Director and the ultimate controlling Shareholder, the Vendor and the Guarantor are regarded as connected persons of the Company. Accordingly, the Acquisition constitutes a connected transaction of the Company pursuant to Chapter 14A of the Listing Rules. As each of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in relation to the Acquisition is less than 5%, the Acquisition is only subject to the reporting and announcement requirements but is exempt from the independent Shareholders' approval requirement under Rule 14.32 of the Listing Rules.
The Board is pleased to announce that on 15 January 2013, the Vendor, the Guarantor and the Purchaser, being an indirect wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement to acquire the entire equity interest of the WFOE at the consideration of RMB116,000,000 (equivalent to approximately HK$144,928,000), being the Acquisition.
* for identification purposes only
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THE ACQUISITION The Sale and Purchase AgreementDate
15 January 2013
Parties
Purchaser: Liansu Group Company Limited, an indirect wholly-owned subsidiary of the
Company as at the date of this announcement.
Vendor: Star Excel Investment Limited. It is principally engaged in investment holding. It is a company wholly-owned by Mr. Wong, an executive Director and the ultimate controlling Shareholder, the Vendor is regarded as a connected person of the Company.
Guarantor: M r . Wong, being the director and sole shareholder of the Vendor, as guarantor of the obligation of the Vendor.
Assets to be acquired
The entire equity interest of the WFOE.
Consideration
The consideration for the entire equity interest of the WFOE is RMB116,000,000 (equivalent to approximately HK$144,928,000) (the "Consideration").
The Consideration was agreed between the Vendor and the Purchaser after arm's length negotiations with reference to the fair value of net assets of the WFOE at approximately RMB116,500,000 as at 31 December 2012, as assessed by Savills Valuation and Professional Services Limited, an independent professional valuer, adopting the following approaches:
(a) depreciated replacement cost approach for the valuation of property;
(b) depreciated replacement cost approach and transaction approach for the valuation of plant and equipment;
(c) in relation to the fair value of the inventories,
1. for the finished goods, the selling prices less the sum of (i) the costs of disposal and (ii) a reasonable profit allowance for the selling effort of the acquirer based on profit for similar finished goods and merchandise were used;
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2. | for the work in progress, the selling prices of finished goods less the sum of (i) costs to complete (ii) costs of disposal and (iii) a reasonable profit allowance for the completing and selling effort based on profit for similar finished goods were used; | |
3. | for the raw materials, the current replacement costs were used; and | |
(d) | boo trad | k values adopted for prepayments and other receivables, bank balances and cash, e payables, accruals and other payables and tax payable. |
The Consideration will be financed by the internal resources of the Group.
Payment
The Consideration is to be paid in two instalments:
(a) as RMB50,000,000 (being the Deposit) payable by the Purchaser within three business days after the signing of the Sale and Purchase Agreement; and
(b) as to the balance of RMB66,000,000 payable by the Purchaser within three business days upon the issuance of a written confirmation by the Purchaser notifying the Vendor that the Purchaser is satisfied with certain completion documents provided by the Vendor in accordance with the Sale and Purchase Agreement.
As at the date of this announcement, the Deposit has not yet been paid.
In the event the conditions precedent as set out below are not satisfied or waived (as the case may be) or Completion does not take place in accordance with the terms of the Sale and Purchase Agreement, the Vendor shall refund the Deposit to the Purchaser (without interest).
Effectiveness
The Sale and Purchase Agreement shall become effective upon signing by the authorised representatives of the Vendor and the Purchaser and approval of the Relevant Bureau.
Conditions precedent
Completion of the transactions contemplated under the Sale and Purchase Agreement is conditional upon:
1. the obtaining of a PRC legal opinion (in form and substance satisfactory to the Purchaser) issued by legal advisers qualified to practise PRC law in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder including but not limited to (a) the WFOE was legally incorporated and is in valid existence under the laws of the PRC; (b) the power and authority of the WFOE to carry out its current business; (c) the Vendor lawfully owns the equity interest of the WFOE; and (d) any other matter as may be required by the Purchaser;
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2. the making of such enquiries, investigations and due diligence reviews of the business, affairs, operations and financial position of the WFOE by the Purchaser and any of its officers, employees, agents, professional advisers or other persons authorised by the Purchaser which the Purchaser in its reasonable discretion deems necessary, desirable or appropriate and the Purchaser, acting reasonably, being satisfied with the results of such due diligence reviews;
3. the approval of the Acquisition and the amendment of the memorandum of association of the WFOE by relevant authority of the WFOE;
4. the issue of documents approving the Acquisition by the Relevant Bureau;
5. the issue of the notice approving the change of registration by the Relevant
Administration (or documents with similar effects);
6. the Vendor having obtained all relevant consents, authority, permits and approvals in relation to the Sale and Purchase Agreement and the transaction contemplated thereunder;
7. the Purchaser having paid the Deposit; and
8. the representations, warranties and undertakings given by the Vendor and the Guarantor under the Sale and Purchase Agreement being true and correct and not misleading and remaining so from the date of the Sale and Purchase Agreement until Completion.
The Purchaser can waive any of the above conditions (save for conditions set out in item 6, which cannot be waived) by notice in writing to the Vendor. In the event the above conditions are not satisfied (or waived) on or before the expiry of 90 days after the date of the Sale and Purchase Agreement or in the event the conditions precedent are not satisfied or waived (as the case may be) on or prior to the aforesaid date, the Sale and Purchase Agreement will lapse and be of no further effect.
Completion
Completion will take place after the fulfilment of the conditions precedent as set out in items 1-8 in the paragraph headed "Conditions precedent" upon delivery of the completion documents by the Vendor and payment of the balance of the Consideration by the Purchaser.
Termination
The Sale and Purchase Agreement shall terminate upon the parties to the Sale and Purchase Agreement unanimously agreeing in writing or in accordance with other provisions in the Sales and Purchase Agreement.
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The WFOE is a company established in the PRC in 2006 with a registered capital of HK$100,000,000 and an investment amount of HK$100,000,000. The WFOE produces more than 300 types of main valve products including flange soft, hard seal gate valves coated with epoxy, flange, opposite joint valves, signal butterfly valves, flange silencing valves, rubber check valves, various couplings, PVC and PE socket type soft seal gate valves and flange strainers.
Located in Yunan County, Yunfu in the pan-Pearl River Delta and spanning approximately
134,000 square metres the WFOE owns a factory with a floor area of more than approximately
15,000 square metres and has over 100 employees. The factory, with an annual production capacity of 800,000 sets of valve products is equipped with 100 sets of large professional processing equipments, automatic epoxy coating production lines, electric sandblasting machines and hydraulic testing systems. The WFOE's products are in compliance with various national and international standards such as GB, ISO and QEO, as well as are used in a number of national main projects in the PRC.
The WFOE has obtained the ISO9001 quality management system certification and the
ISO14001 environmental management system certification. Having been named the Yunfu's Outstanding Private Enterprise (
