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 is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares.

華 誼 騰 訊 娛 樂 有 限 公 司

Huayi Tencent Entertainment Company Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 419)

DISCLOSEABLE TRANSACTION

CAPITAL INCREASE TO AND

ACQUISITION OF EQUITY INTEREST IN A COMPANY ENGAGED IN

NEW RETAIL PLATFORM FOR PRESCRIPTION DRUGS

BY WAY OF

CASH CONSIDERATION AND ISSUE OF CONSIDERATION SHARES

THE CAPITAL INCREASE AND ACQUISITION AGREEMENT

The Board is pleased to announce that, on 7 April 2021, the Company and PIL (a wholly- owned subsidiary of the Company) entered into the Capital Increase and Acquisition Agreement with the Target Company, YZN and the Founding Shareholders, pursuant to which PIL has conditionally agreed to (i) acquire the equity interest corresponding to the registered capital of RMB1,000,000 in the Target Company from BDT, and subscribe for new registered capital of RMB19,863,635.80 in the Target Company (which will together comprise 51% of the total equity interest in the Target Company as enlarged by the Capital Increase), at the consideration of up to RMB204,000,000 (the full payment of which is subject to the fulfilment of the First Performance Target (being primarily the Target Group's aggregate revenue reaching RMB150,000,000 in the first year following the Completion Date) and the Second Performance Target (being primarily the Target Group's aggregate revenue reaching RMB600,000,000 and the Target Group's profits after taxation reaching RMB40,000,000 in the year following the satisfaction of the First Performance Target) by the Target Group); and (ii) subject to the Target Group's achievement of the First Performance Target and the Second Performance Target and there being no nominee

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holding arrangement in relation to equity interest in the Target Company, acquire the remaining 49% of the total equity interest in the Target Company from the Founding Shareholders at the consideration of up to RMB196,000,000 (subject to adjustments depending on the extent of fulfilment of the Guaranteed Profits of not less than RMB50,000,000 by the Target Company in each of the two years after the completion of the Further Acquisition). The aforesaid consideration of up to a total amount of RMB400,000,000 for the acquisition of 100% equity interest in the Target Company as enlarged by the Capital Increase, will be satisfied by the Investor partly in cash of up to a total amount of RMB100,000,000 and partly by the issue of Consideration Shares (which will be subject to certain lock-up undertakings) by the Company for up to a total amount of RMB300,000,000.

Completion of the Acquisition from BDT and the Capital Increase is subject to fulfilment of various conditions precedent, which (among others) include, the execution of the Equity Transfer Agreement for the Acquisition from BDT, and the Shareholders' Agreement which sets out the terms for management and administration of the Target Company as well as the preference rights of PIL in respect of the equity interest that it will hold in the Target Company. Completion of the Further Acquisition is subject to the fulfilment of the First Performance Target and the Second Performance Target by the Target Group and there being no nominee holding arrangement in relation to equity interest in the Target Company.

The Consideration Shares are expected to be issued by the Company under the General Mandate. The performance of the obligations of the Company to issue the Consideration Shares shall be subject to the compliance by the Company with applicable requirements under the Listing Rules (if any), as well as the Stock Exchange granting the listing of and permission to deal in the relevant Consideration Shares.

INFORMATION ON THE TARGET GROUP

The Target Group has developed a new retail platform for prescription drugs which can connect doctors, patients and physical pharmacies and establish a closed loop starting from doctors issuing electronic prescriptions, patients ordering prescription drugs at pharmacies, online payment to final delivery of the drugs prescribed. The Target Group will receive platform service fees from the pharmacies based on a certain percentage of the Gross Merchandise Value of the prescription drugs ordered by the patients from the pharmacies through the new retail platform.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisitions and the Capital Increase is more than 5% but all the applicable percentage ratios are below 25%, the entering into of the Equity Transfer Agreement and the Capital Increase and Acquisition Agreement constitutes a discloseable transaction for the Company and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

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INTRODUCTION

The Board is pleased to announce that, on 7 April 2021, the Company and PIL (a wholly-owned subsidiary of the Company) entered into the Capital Increase and Acquisition Agreement with the Target Company, YZN and the Founding Shareholders. Pursuant to the Capital Increase and Acquisition Agreement, PIL has conditionally agreed to:

  1. acquire the equity interest corresponding to the registered capital of RMB1,000,000 in the Target Company from BDT, and subscribe for new registered capital of RMB19,863,635.80 in the Target Company (which will together comprise 51% of the total equity interest in the Target Company as enlarged by the Capital Increase) at the consideration of up to RMB204,000,000 (the full payment of which is subject to the Target Company's achievement of the First Performance Target and the Second Performance Target); and
  2. subject to the Target Company's achievement of the First Performance Target and the Second Performance Target and there being no nominee holding arrangement in relation to equity interest in the Target Company, acquire the remaining 49% of the total equity interest corresponding to the registered capital of RMB20,045,454.00 in the Target Company from the Founding Shareholders at the consideration of up to RMB196,000,000 (subject to adjustments depending on the extent of fulfilment of the Guaranteed Profits by the Target Company in each of the two years after the completion of the Further Acquisition).

The aforesaid consideration will be satisfied by the Investor partly in cash and partly by issue of Consideration Shares by the Company. Payment of part of the aforesaid consideration is subject to the fulfilment by the Target Company of the First Performance Target (being primarily the Target Group's aggregate revenue reaching RMB150,000,000 in the first year following the Completion Date), the Second Performance Target (being primarily the Target Group's aggregate revenue reaching RMB600,000,000 and the Target Group's profits after taxation reaching RMB40,000,000 in the year following the satisfaction of the First Performance Target) and the Guaranteed Profits as further detailed below.

The principal terms of the Capital Increase and Acquisition Agreement are set out below:

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THE CAPITAL INCREASE AND ACQUISITION AGREEMENT

Date

:

7 April 2021

Parties

:

(i)

the Company;

(ii)

PIL, a wholly-owned subsidiary of the Company;

(iii)

the Target Company;

(iv)

YZN; and

(v)

the Founding Shareholders.

To the best of the Directors' knowledge, information and

belief having made all reasonable enquiries, as at the date

of this announcement, each of the Target Company, YZN,

HNDX, the Employees Shareholding Platform and BDT (and

their respective ultimate beneficial owner) and the other

Founding Shareholders being individuals, are third parties

independent of the Company and connected persons of the

Company.

Subject matter

:

PIL

has conditionally agreed to (i) acquire equity interest

in the Target Company corresponding to the registered

capital of RMB1,000,000 in the Target Company from

BDT and subscribe for the new registered capital of

RMB19,863,635.80 in the Target Company (together

comprising 51% of the total equity interest in the Target

Company as enlarged by such increase of registered capital) and (ii) subject to fulfilment of the First Performance Target and the Second Performance Target and there being no nominee holding arrangement in relation to equity interest in the Target Company, acquire the remaining 49% of the equity interest corresponding to the registered capital of RMB20,045,454.00 in total in the Target Company from the Founding Shareholders.

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Being part of the Conditions (as defined below), PIL shall

enter into the Equity Transfer Agreement with BDT, an

outgoing shareholder of the Target Company, to acquire

from BDT equity interest corresponding to the registered

capital of RMB1,000,000 in the Target Company for the

consideration of RMB2,520,000.

Preference Shares

:

The equity interest in the Target Company that PIL will

acquire pursuant to the Capital Increase and Acquisition

Agreement will be in the nature of preference shares

which shall entitle PIL to right of first refusal and right of

co-sale in relation to disposal of equity interest by other

shareholders of the Target Company, pre-emption right in

relation to further fund raising by the Target Company,

dividends preference, liquidation preference and other rights

as stipulated in the Shareholders' Agreement.

Consideration and Terms of

:

The Acquisition from BDT and the Capital Increase

Payment

The aggregate consideration of the Acquisition from

BDT and the Capital Increase, together comprising

acquisition of 51% of the equity interest in the Target

Company (as enlarged by the Capital Increase), is up to

RMB204,000,000 (which, for the avoidance of doubt,

includes the consideration for the Acquisition from BDT of

RMB2,520,000).

Subject to the fulfilment of the Conditions (as defined

below), the consideration of the Acquisition from BDT

and the Capital Increase shall be settled in the following

manner:

(i) within 5 Working Days after the Investor receives

the Completion Notice, the amount in HKD or USD

equivalent of RMB2,520,000 shall be paid by PIL to

BDT in cash;

(ii) within 5 Working Days after the Investor receives

the Completion Notice, the amount in HKD or USD

equivalent of RMB37,480,000 (the "First Cash

Investment") shall be paid by PIL to the Target

Company in cash, among which;

- 5 -

    1. the equivalent of RMB19,863,635.80 will be accounted for as new registered capital of the Target Company in the amount of RMB19,863,635.80;
    2. the equivalent of RMB600,000 will be accounted for payment of the unpaid registered capital of RMB600,000 in the Target Company in respect of the 4.75% equity interest in the Target Company (as enlarged by the Capital Increase) acquired by PIL from BDT pursuant to the Equity Transfer Agreement; and
    3. the equivalent of RMB17,016,364.20 will be accounted for as additional paid-in capital of the Target Company;
  2. within 10 Working Days after the satisfaction of the First Performance Target, (a) RMB11,000,000 shall be paid and settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price of HKD0.529 per Share, being the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the Capital Increase and Acquisition Agreement (the "First Consideration Shares"), in proportion to the Founding Shareholders' shareholding in the Target Company after the completion of the Restructuring; and (b) an amount in the HKD or USD equivalent of RMB50,000,000 shall be paid by PIL to the Target Company in cash, which will be accounted for as additional paid-in capital of the Target Company (the "Second Cash Investment");

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  1. within 10 Working days after the satisfaction of the Second Performance Target, (a) RMB50,000,000 shall be paid and settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price per Share equal to the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the satisfaction of the First Performance Target (the "Second Consideration Shares") in proportion to the Founding Shareholders' shareholding in the Target Company after the completion of the Restructuring;
    1. RMB43,000,000 shall be paid and settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price per Share equal to the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the satisfaction of the Second Performance Target (the "Third Consideration Shares") in proportion to the Founding Shareholders' shareholding in the Target Company after the completion of the Restructuring; and (c) an amount in the HKD or USD equivalent of RMB10,000,000 (the "Third Cash Investment") shall be paid by PIL to the Target Company in cash, which will be accounted for as additional paid-in capital of the Target Company.

- 7 -

The Further Acquisition

Subject to the First Performance Target and the Second Performance Target having been satisfied and there being no nominee holding arrangement in relation to equity interest in the Target Company, PIL (or another affiliate of the Company) shall be obliged to acquire the remaining 49% of the total equity interest in the Target Company (as enlarged by the Capital Increase) from the Founding Shareholders within 30 Working Days from the date of satisfaction of the Second Performance Target at the consideration of up to RMB196,000,000. Of such consideration, up to RMB176,400,000 will be payable to the Founding Shareholders if the Target Group fulfils the Guaranteed Profits of not less than RMB50,000,000 in each of the two years after the completion of the Further Acquisition. The consideration for the Further Acquisition will be satisfied by the issue of Consideration Shares by the Company to the Founding Shareholders in the following manner:

  1. within 10 Working Days after the Further Acquisition Completion Date, RMB19,600,000 shall be settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price per Share equal to the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the satisfaction of the Second Performance Target ("Fourth Consideration Shares") in proportion to the Founding Shareholders' shareholding in the Target Company immediately before the Further Acquisition Completion Date;
  2. after the satisfaction of the Guaranteed Profits in the first 12 months following the completion of the Further Acquisition and within 60 days after the expiry of the 12-month period following the completion of the Further Acquisition, RMB88,200,000 shall be settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price per Share equal to the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the satisfaction of the Second Performance Target ("Fifth Consideration Shares") in proportion to the Founding Shareholders' shareholding in the Target Company immediately before the Further Acquisition Completion Date; and
    • 8 -
  1. after the satisfaction of the Guaranteed Profits during the 13th to the 24th month following the completion of the Further Acquisition and within 60 days after the expiry of the 24-month period following the completion of the Further Acquisition, RMB88,200,000 shall be settled by the allotment and issue of Consideration Shares to the Founding Shareholders at the price per Share equal to the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days before the date of the satisfaction of the Second Performance Target ("Sixth Consideration Shares") in proportion to the Founding Shareholders' shareholding in the Target Company immediately before the Further Acquisition Completion Date.

In case of dispute as to whether the Target Group fulfils the First Performance Target, the Second Performance Target or the Guaranteed Profits, the relevant figures shall be confirmed by way of audit by a firm of reputable auditors designated by the Company.

Adjustments to the Consideration : If the actual performance of the Target Group fails to

for the Further Acquisition meet the Guaranteed Profits in the first and/or second year following the completion of the Further Acquisition, the number of Fifth Consideration Shares and/or the Sixth Consideration Shares (as the case may be) to be issued to the Founding Shareholders shall be adjusted down according to the following formular:

The actual net profits after taxation of the Target Group as reported in accordance with the Hong Kong Financial Reporting Standards for the relevant period

The Guaranteed Profits of RMB50,000,000

The original number of Fifth Consideration Shares or the Sixth Consideration Shares (as the case may be) to be issued as additional consideration for the Further Acquisition

  1. upon the satisfaction of the Guaranteed Profits for the relevant period

- 9 -

Conditions Precedent

:

Completion of the Capital Increase and the Acquisition

from BDT shall be conditional upon satisfaction (or waiver

by the Investor at its absolute discretion) of the following

conditions precedent, among others (the "Conditions"):

(1) due diligence on the Target Group being conducted

to the reasonable satisfaction of the Investor, and the

Investors having obtained the internal approvals for

the Acquisitions and the Capital Increase;

(2) all transactions documents referred to in the Capital

Increase and Acquisition Agreement (including the

Shareholders' Agreement) being duly executed;

(3) the Restructuring having been completed;

(4) the Equity Transfer Agreement being executed by PIL

and BDT, and the registration of transfer in relation to

the Acquisition from BDT at the relevant regulatory

authority being completed;

(5) apart from the identified nominee shareholding

arrangements as at the date of the Capital Increase and

Acquisition Agreement, all other shares of the Target

Company held by the Founding Shareholders are legal

and beneficially owned by the Founding Shareholders,

free from encumbrances and with all rights, title and

interests attached to them;

(6) the internal approval (by, including but not limited

to, the shareholders, the board, the partners, where

applicable) of the Target Company, YZN and the

Employees Shareholding Platform approving the

transactions as contemplated under the Capital Increase

and Acquisition Agreement having been passed;

(7) the Target Company, YZN and the Employees

Shareholding Platform having obtained the permission,

consent, approval and authorization from any third

parties or government authorities necessary for the

completion of the transactions as contemplated under

the Capital Increase and Acquisition Agreement (if

any) and having provided the Investor with relevant

documents;

- 10 -

  1. the Target Company having opened foreign exchange capital account;
  2. Mr. WANG Jian and Ms. SHANG Jing (being two of the Founding Shareholders) having given written undertakings to the Investor in relation to exclusivity on working for the Target Group and non-competition with the Target Group;
  3. certain personnel including Mr. WANG Jian and Ms. SHANG Jing having signed a designated form of employment contract and non-compete agreement with the Target Company or YZN as appropriate;
  4. the representations and warranties given by the Target Group and the Founding Shareholders in the Capital Increase and Acquisition Agreement remaining correct in all material respects;
  5. save as disclosed in the Capital Increase and Acquisition Agreement, there being no material adverse change in relation to the business, operation, assets, liabilities, tax and other financial conditions of the Target Group;
  6. there being no rulings of any laws, regulations, courts or government authorities restricting or prohibiting the investment in the Target Group, or any pending or potential litigation or rulings that may adversely affect the interest in the Target Group;
  7. there being no events or circumstances that may have a material adverse effect on the Target Group up to the Completion Date; and
  8. the Investor having received the Completion Notice issued by the Target Company, YZN and the Founding Shareholders.

- 11 -

The Founding Shareholders, the Target Company and YZN undertake to use their best endeavours to fulfil all the above Conditions (apart from item (1)) within 30 days from the date of the Capital Increase and Acquisition Agreement. If the Conditions are not fulfilled or otherwise waived by the Investors by that date, the Investors may by written notice to the other parties terminate the Capital Increase and Acquisition Agreement.

THE CONSIDERATION SHARES

The First Consideration Shares (being 24,732,032 Shares at the issue price of HK$0.529 per Share) represent: (i) approximately 0.18% of the number of issued Shares as at the date of this announcement, and (ii) approximately 0.18% of the number of issued Shares as enlarged by the allotment and issue of the First Consideration Shares. The First Consideration Shares will be allotted and issued in accordance with the terms and conditions of the Capital Increase and Acquisition Agreement under the General Mandate.

The issue price of the First Consideration Shares represents:

  1. a discount of approximately 2.04% to the closing price of HK$0.54 per Share as quoted on the Stock Exchange on the date of the Capital Increase and Acquisition Agreement;
  2. the average closing price of approximately HK$0.529 per Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to the date of the Capital Increase and Acquisition Agreement; and
  3. a premium of approximately 4.44% to the average closing price of approximately HK$0.5065 per Share as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to the date of the Capital Increase and Acquisition Agreement.

The number of the Second Consideration Shares, the Third Consideration Shares, the Fourth Consideration Shares, the Fifth Consideration Shares and the Sixth Consideration Shares are based on issue prices per Share to be subsequently determined and cannot be ascertained yet as at the date of this announcement. It is expected that the Second Consideration Shares, the Third Consideration Shares, the Fourth Consideration Shares, the Fifth Consideration Shares and the Sixth Consideration Shares will be allotted and issued by the Company under the General Mandate. The performance of the obligations of the Company to issue the Consideration Shares under the Capital Increase and Acquisition Agreement shall be subject to the compliance by the Company with applicable requirements under the Listing Rules (if any) including the obtaining of approval by the shareholders of the Company, as well as the Stock Exchange granting the listing of and permission to deal in the relevant Consideration Shares.

- 12 -

As at the date of this announcement, no Shares have been issued under the General Mandate.

If the issue of any portion of the Consideration Shares will result in the percentage shareholding in the Company held by the Founding Shareholders (or any of them) reaching or exceeding the percentage shareholding of the then largest shareholder of the Company or reaching 30% or more, or if the Company is not able to issue a particular portion of the Consideration Shares under the General Mandate, under the Capital Increase and Acquisition Agreement the Company may choose to pay cash to the Founding Shareholders in lieu of the issue of all or part of that portion of the Consideration Shares.

Effect on Shareholding Structure of the Company

For illustrative purpose only, set out below is the shareholding structure of the Company (i) as at the date of this announcement and (ii) immediately upon the allotment and issue of the First Consideration Shares, assuming that there are no other changes in the share capital of the Company from the date of this announcement to the date of allotment and issue of the First Consideration Shares:

Immediately upon the

allotment and issue of the

As at the date of this announcement

First Consideration Shares

Number of

Number of

Shares

Approx.

Shares

Approx.

Tencent Holdings Limited (Note 1)

2,116,251,467

15.68%

2,116,251,467

15.65%

YUEN Hoi Po (Note 2)

2,397,340,107

17.76%

2,397,340,107

17.73%

Public Shareholders

The Founding Shareholders

-

-

24,732,032

0.18%

Other shareholders of the Company

8,984,515,003

66.56%

8,984,515,003

66.44%

Total

13,498,106,577

100.00%

13,522,838,609

100.00%

Notes:

  1. These Shares are held by Mount Qinling Investment Limited. Since Mount Qinling Investment Limited is a wholly-owned subsidiary of Tencent Holdings Limited, Tencent Holdings Limited is deemed to be interested in these Shares.
  2. YUEN Hoi Po is an executive Director and is beneficially interested in 459,310,000 Shares. He is also deemed to be interested in 1,938,030,017 Shares held by his wholly-owned corporation, namely Smart Concept Enterprise Limited.

- 13 -

If and when the Company becomes obliged to allot and issue any portions of the Consideration Shares, the Company will publish further announcements to disclose details of such Consideration Shares and other particulars relating to the completion of the Capital Increase and Acquisition Agreement, including the prospective change in the shareholdings of the Company as a result of the issue of the relevant portions of the Consideration Shares.

Lock-up Undertakings

Under the Capital Increase and Acquisition Agreement, the Founding Shareholders agree to comply with the following restrictions on disposal of the Consideration Shares:-

  1. For each of Mr. WANG Jian, Ms. SHANG Jing and Mr. LIN Jincong: (a) 100% of their respective holding in the First Consideration Shares within 12 months after the issue of such Shares; (b) 50% of their respective holding in the Second Consideration Shares within 6 months after the issue of such Shares and the remaining 50% of their respective holding in the Second Consideration Shares within 12 months after the issue of such Shares; and (c) 100% of their respective holding in the Third Consideration Shares within 18 months after the issue of such Shares.
  2. For the Employees Shareholding Platform: (a) 50% of its holding in the First Consideration Shares within 12 months after the issue of such Shares; (b) 25% of its holding in the Second Consideration Shares within 6 months after the issue of such Shares and the remaining 25% of its holding in the Second Consideration Shares within 12 months after the issue of such Shares; and (c) 50% of its holding in the Third Consideration Shares within 18 months after the issue of such Shares.
  3. For each of the Founding Shareholders: (a) 100% of their respective holding in the Fourth Consideration Shares within 24 months after the issue of such Shares; and (b) 100% of their respective holding in the Fifth Consideration Shares and the Sixth Consideration Shares within 12 months after the issue of such Shares.

The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares in issue on the respective date of allotment and issue of the Consideration Shares including the right to all dividends, distributions and other payments made or to be made, on the record date which falls on or after the date of such allotment and issue.

An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

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Basis for Determination of the Consideration

The maximum consideration for the Acquisition from BDT, the Capital Increase and the Further Acquisition (i.e. the acquisition of 100% equity interest in the Target Group as enlarged by the Capital Increase), on the basis of the assumption that the First Performance Target, the Second Performance Target and the Guaranteed Profits can be fulfilled, is RMB400,000,000, which was agreed upon among the parties to the Capital Increase and Acquisition Agreement on an arm's length basis. The Company considers such consideration to be fair and reasonable taking into account the following:

  1. the Target Group owns a physical clinic and possesses comprehensive permits, including the "Practicing License for a Medical Institution", the "Qualification Certificate for Drug Information Services over the Internet" and the "Certificate of Grade III Protection of Information System Security", etc;
  2. the payment of 90% of the maximum consideration for the Acquisition from BDT, the Capital Increase and the Further Acquisition, being RMB360,000,000, is subject to the Target Group's achievement of the First Performance Target, the Second Performance Target and the Guaranteed Profits at different stages;
  3. 90% of the consideration for the Further Acquisition, being RMB176,400,000, will be proportionately downward adjusted if the Guaranteed Profits are not fulfilled to its fullest extent;
  4. the fulfilment of First Performance Target represents revenue of the Target Group of no less than RMB150,000,000 within one year from the Completion Date; the fulfilment of Second Performance Target represents revenue and net profits of the Target Group of no less than RMB600,000,000 and RMB40,000,000 respectively in the year thereafter; and the fulfilment of Guaranteed Profits to its fullest extent represent net profits of the Target Group of at least RMB50,000,000 for the each of the two 12-month periods after the Further Acquisition; and
  5. the reasons for and benefits of the Acquisitions and the Capital Increase as set out in the section headed "REASONS FOR AND BENEFITS OF THE ACQUISITIONS AND THE CAPITAL INCREASE" of this announcement.

THE SHAREHOLDERS' AGREEMENT

Pursuant to the Capital Increase and Acquisition Agreement, the Investor, the Target Company and the Founding Shareholders have agreed to make provisions for the management and administration of the Target Company's affair, and set out their respective obligations and rights on the terms and conditions set in the proposed Shareholders' Agreement. The Shareholders' Agreement shall be executed before the Completion Date. The principal terms of the proposed Shareholders' Agreement, which shall take effect from the Completion Date, are set out below:

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Board composition

The board of directors of the Target Company shall comprise 5 directors, of which 3 directors shall be appointed by PIL (including the chairman of the board of directors) and 1 director shall be appointed by each of Mr. WANG Jian and Ms. SHANG Jing respectively.

The quorum of a meeting of the board of directors of the Target Company shall be three with the presence of at least one director appointed by PIL.

The provisions relating to the composition, appointment, rule of discussion, voting mechanisms and other matters, with respect to the board of directors of the Target Company under the Shareholders' Agreement shall also apply, mutatis mutandis, to the subsidiaries of the Target Company and their boards of directors.

Dividend

PIL shall be entitled to receive in priority to payment of dividend to other shareholders of the Target Company, amounting to annualized returns of 10% on the total amount invested by PIL in the Target Company.

Liquidation preference

In the event of liquidation of the Target Company, before any payment or distribution of the Target Company's property or assets will be made or set apart for the Founding Shareholders, PIL will be paid out of the assets of the Target Company legally available for distribution to its members a liquidation preference in an amount equal to the sum of (i) its equity interest corresponding to the registered capital of RMB20,863,635.80 plus an interest of simple interest of 10% per annum and (ii) the amount of all dividends declared but not paid which PIL is entitled to.

Restrictions on transfer of shares, rights of first refusal and co-sale, and pre-emption rights

The sale, assignment and transfer of equity interest in the Target Company shall be made in accordance with the Shareholders' Agreement.

The Founding Shareholders shall not, without the prior written consent of PIL, dispose of and pledge any of its equity interest in the Target Company, within five years after the Completion Date.

- 16 -

PIL shall have (i) rights of first refusal and co-sale on disposal of equity interest by other shareholders of the Target Company, (ii) pre-emption rights with respect to any future issue or sale by the Target Company of any shares or share equivalents of the Target Company, and (iii) rights to compulsorily demand the Target Company and/or the Founding Shareholders to buy-back and/or purchase the shares of the Target Company held by PIL in the event of serious breach of the obligations under the Shareholders' Agreement and other transaction documents on the part of the Target Company and/or the Founding Shareholders without rectification within reasonable time.

Non-compete Undertaking

The Founding Shareholders undertake that, from the Completion Date up to the later of (i) two years after the Founding Shareholders cease to directly or indirectly hold any interest in the Target Company; and (ii) two years after the Founding Shareholders crease to hold any office in the Target Company, the Founding Shareholders shall not directly or indirectly hold any interest in any entity that is engaged in any business that competes with the Target Group.

INFORMATION ON THE TARGET GROUP

According to the business license of the Target Company, its business scopes include the provision of clinic services, Internet diagnosis and treatment and sale of Chinese and Western medicines in relation to internal medicine, surgery, obstetrics and gynecology, pediatrics, emergency medicine, medical imaging, ultrasound diagnosis, medical laboratory. The Target Company also possesses the "Practicing License for a Medical Institution"《醫療機構執業許可證》. As at the date of the announcement, the Target Company's clinic at Fujian province has not yet commenced business.

At present, the equity interest in the Target Company is held among the Founding Shareholders and BDT; YZN is majority-owned by Ms. SHANG Jing and the remainder of its equity interest by other individuals and entities; and HNDX is majority-owned by YZN as to 60% and the remainder of its equity interest by other individuals. As one of the conditions precedent to the completion of the Capital Increase and Acquisitions Agreement, the Target Company, YZN and HNDX will undergo the Restructuring, upon the completion of which the Target Company will wholly-own YZN which will in turn wholly-own HNDX.

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The shareholding of the Target Company (i) as at the date of this announcement; (ii) immediately after the completion of Restructuring; (iii) immediately after the completion of the Acquisition from BDT and the Capital Increase; and (iv) immediately after the completion of the Further Acquisition is as follows:

Shareholder

Approximate percentage of shareholding in the Target Company

Immediately

after the

completion of

Immediately

the Acquisition

Immediately

after the

from BDT

after the

As at the

completion

and the

completion

date of this

of the

Capital

of the Further

announcement

Restructuring

Increase

Acquisition

Mr. WANG Jian

58%

42.57%

21.90%

-

Ms. SHANG Jing

-

40.82%

21.00%

-

Mr. LIN Jincong

32%

0.19%

0.10%

-

Employees Shareholding Platform

-

11.66%

6.00%

-

BDT

10%

4.75%

-

-

The Company (directly or

indirectly through PIL or

other company)

-

-

51%

100%

100%

100%

100%

100%

YZN, possessing the "Qualification Certificate for Drug Information Services over the Internet"《互 聯網藥品信息服務資格證書》and the "Certificate of Grade III Protection of Information System Security"《資訊系統安全三級等級保護備案證明》, is principally engaged in the development and service management of medical information consulting services, Internet information services, electronic payment and e-commerce technology platforms, and is the developer and operator of the medical platform system and the mobile application called "Lingyi Future" under the domain name echartnow.com.

HNDX has not commenced operation since its incorporation.

- 18 -

Combining the expertise, qualifications and permits owned by the Target Company and YZN, the Target Group has developed a new retail platform for prescription drugs which can connect doctors, patients and physical pharmacies and establish a closed loop starting from doctors issuing electronic prescriptions, patients ordering prescription drugs at pharmacies, online payment to final delivery of the drugs prescribed. The Target Group will receive platform service fees from the pharmacies based on a certain percentage of the Gross Merchandise Value ("GMV") of the prescription drugs ordered by the patients from the pharmacies through the new retail platform. Based on the existing agreements signed between the Target Group and the pharmacies, the average platform service fee is expected to be approximately 5% of the GMV of the total prescription drugs orders.

Set out below is a summary of the financial figures of the Target Company, YZN and HNDX extracted from their respective latest management accounts or financial statements:

The Target

Company

YZN

HNDX

For the

For the

period from

period from

20 May

For the

For the

27 September

For the

2020 to

year ended

year ended

2019 to

year ended

31 December

31 December

31 December

31 December

31 December

2020

2019

2020

2019

2020

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Approx.

Approx.

Approx.

Approx.

Approx.

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue

-

3,067

543

-

-

Profit/(Loss) before

taxation

(178)

6

(847)

-

(5)

Profit/(Loss) after

taxation

(178)

6

(847)

-

(5)

- 19 -

As at

As at

As at

As at

As at

31 December

31 December

31 December

31 December

31 December

2020

2019

2020

2019

2020

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Approx.

Approx.

Approx.

Approx.

Approx.

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Total assets

222

12,327

6,712

-

-

Net assets

222

9,843

2,090

-

-

Upon the completion of the Restructuring, the Target Company will own the entire equity interest in YZN directly and HNDX indirectly through YZN.

Upon completion of the Acquisition from BDT and the Capital Increase, PIL will own 51% equity interest in the Target Company. Accordingly, members of the Target Group will become non-wholly owned subsidiaries of the Company and the operating results of the Target Group will be consolidated in the Group's financial statements. The Target Company (and thus members of the Target Group) will become wholly-owned by the Group upon completion of the Further Acquisition.

REASONS FOR AND BENEFITS OF THE ACQUISITIONS AND THE CAPITAL INCREASE

As disclosed in the Company's results announcement for the year ended 31 December 2020 announced on 25 March 2021, with a view to devise a steady and sturdy business landscape, the Group pledges continued effort to strengthen and expand its collaboration with strategic partners, as well as to actively identify other opportunities with good potentials while keeping up the momentum of development of the Group's entertainment and media businesses.

The Group is strenuously developing its strategic layout in the realms of pharmaceutical and medical care services in the PRC. Already the world's most promising market for pharmaceutical and medical care services, the PRC is now full steam ahead with regard to industry digitization in the wake of the implementation of a series of medical and pharmaceutical reforms put forth by the PRC government.

The Target Group, combining the Target Company and YZN, covers business scopes including "Internet diagnosis and treatment", owns a physical clinic and possesses comprehensive permits, including the "Practicing License for a Medical Institution", the "Qualification Certificate for Drug Information Services over the Internet" and the "Certificate of Grade III Protection of Information System Security", etc. The new retail platform for prescription drugs developed by the Target Group connects doctors, patients and physical pharmacies and establishes a closed loop starting from doctors issuing electronic prescriptions, patients ordering prescription drugs at pharmacies, online payment to finally delivery of the drugs prescribed. The Target Group will earn platform service fees from the pharmacies based on a certain percentage of the GMV of the prescription drugs ordered by the patients from the pharmacies through the new retail platform.

- 20 -

According to the "PRC Prescription Drug Market Operational Risk and Developmental Trend Analysis Report, 2020-2026" published by the Intelligence Research Group, the scale of prescription drug outflow from medical institutions (i.e. the right to purchase prescription drugs being handed to patients) in 2020 was approximately RMB400 billion to RMB500 billion, and such scale shows signs of a gradual expansion with the National Healthcare Security Administration carrying out volume-based purchase. The aforementioned new retail platform for prescription drugs currently operates mainly in Shaanxi and Guangxi areas, and will rapidly replicate this new platform nation-wide by positively seizing the business opportunity offered by the reformation of the healthcare system of the PRC.

The payment of 90% of the maximum aggregate consideration for the Acquisition from BDT, the Capital Increase and the Further Acquisition is subject to the Target Company's achievement of certain performance targets. If the First Performance Target is fulfilled, the aggregate amount of the revenue of the Target Group at a point of time within one year from the Completion Date would reach RMB150,000,000 (equivalent to GMV of approximately RMB3 billion). If the Second Performance Target is fulfilled, the aggregate amount of the revenue of the Target Group at a point of time within one year from the satisfaction of the First Performance Target would reach RMB600,000,000 (equivalent to GMV of approximately RMB12 billion), and the net profits after taxation of the Target Group calculated from the day after the satisfaction of the First Performance Target would reach RMB40,000,000. If the Guaranteed Profits are fulfilled to its fullest extent, the consolidated net profits after taxation of the Target Group in the first 12 months following the completion of the Further Acquisition and during the 13th to the 24th month following the completion of the Further Acquisition would respectively be at least RMB50,000,000.

The Group believes that, in view of the above, the business of the Target Group has great potential and can generate remarkable revenue growth as well as investment returns for the Shareholders in the long run upon achievement of the aforesaid performance targets.

Considering the above, the Directors believe that the terms of the Acquisitions and the Capital Increase are fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION ON THE GROUP

The Group is principally engaged in (i) entertainment and media business; and (ii) provision of healthcare and wellness services.

PIL is principally engaged in investment holding.

- 21 -

INFORMATION ON BDT AND THE EMPLOYEES SHAREHOLDING PLATFORM

BDT is principally engaged in sale of medical equipment. The following table sets out the identity of each of the ultimate beneficial owners of BDT and their respective shareholding in BDT:

Shareholders

Shareholding

WANG Jian

59.86%

Shanghai Yixian Enterprise Management

Partnership (Limited Partnership) (in

which 39% partnership interest is held by

Mr. WANG Jian and 35.2% partnership

interest is held by Mr. HU Chao)

22.50%

HU Chao

8.05%

SHAO Lijun

6.59%

ZHANG Shuonan

3.00%

100%

The Employees Shareholding Platform is principally engaged in holding of the shares of YZN on behalf of the key management of YZN. The following table sets out the identity of each of the ultimate beneficial owners of the Employees Shareholding Platform (each being core management of YZN) and their respective holding of partnership interest in the Employees Shareholding Platform:

Partners

Holding of interest

LIU Ying

14.90%

ZHOU Jinping

12.12%

NIU Yafeng

12.12%

Li Ming

21.43%

ZHANG Wei

18.00%

Su Maofeng

21.43%

100%

- 22 -

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisitions and the Capital Increase is more than 5% but all the applicable percentage ratios are below 25%, the entering into of the Equity Transfer Agreement and the Capital Increase and Acquisition Agreement constitutes a discloseable transaction of the Company and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

DEFINITIONS

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

"Acquisitions"

collectively, the Acquisition from BDT and the Further

Acquisition

"Acquisition from BDT"

the proposed acquisition by PIL of the equity interest

corresponding to the registered capital of RMB1,000,000 in the

Target Company from BDT in accordance with the terms and

conditions of the Equity Transfer Agreement and the Capital

Increase and Acquisition Agreement

"BDT"

北京夢想樹醫療科技有限公司 (Beijing Dream Tree Medical

Technology Company Limited*), a limited liability company

established under the laws of the PRC, a shareholder of the

Target Company

"Board"

the board of Directors

"Capital Increase"

subscription for RMB19,863,635.80 new registered capital of the

Target Company by PIL pursuant to the Capital Increase and

Acquisition Agreement

"Capital Increase and

the capital increase and acquisition agreement entered into

Acquisition Agreement"

among the Company, PIL, the Target Company, YZN and the

Founding Shareholders on 7 April 2021, pursuant to which

PIL has conditionally agreed to (i) the Capital Increase and

the Acquisition from BDT to acquire a 51% of the total equity

interest in the Target Company; and (ii) subject to the Target

Company's achievement of certain performance targets and there

being no nominee holding arrangement in relation to equity

interest in the Target Company, the Further Acquisition to acquire

the remaining 49% equity interest in the Target Company from

the Founding Shareholders

- 23 -

"Company"

Huayi Tencent Entertainment Company Limited, a company

incorporated in the Cayman Islands with limited liability, the

issued shares of which are listed on the main board of the Stock

Exchange (Stock Code: 419)

"Completion Date"

the date on which the First Cash Investment is paid by PIL to

the Company

"Completion Notice"

a written notice in a designed form to be jointly issued by the

Company, YZN, BDT and the Founding Shareholders to the

Investor confirming that all of the Conditions have been fulfilled

or waived by the Investor

"connected persons"

shall have the meaning as ascribed to it under the Listing Rules

"Consideration Shares"

the new Shares to be allotted and issued by the Company as part

of the consideration of and in accordance with the terms and

conditions of the Capital Increase and Acquisition Agreement,

which includes the First Consideration Shares, the Second

Consideration Shares, the Third Consideration Shares, the Fourth

Consideration Shares, the Fifth Consideration Shares and the

Sixth Consideration Shares

"Director(s)"

the director(s) of the Company

"Employees Shareholding

西安醫智諾企業管理合夥企業（有限合夥）(Xi'an Yizhinuo

Platform"

Enterprise Management Partnership (Limited Partnership)*), a

limited partnership established under the laws of the PRC

"Equity Transfer Agreement"

the equity transfer agreement to be entered into between PIL and

BDT pursuant to which PIL shall acquire from BDT the equity

interest corresponding to the registered capital of RMB1,000,000

in the Target Company

"First Cash Investment"

as defined in sub-paragraph (ii) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

"Fifth Consideration Shares"

as defined in sub-paragraph (b) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Further Acquisition") of

this announcement

- 24 -

"First Consideration Shares"

as defined in sub-paragraph (iii) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

"First Performance Target"

at any time within one year from the Completion Date, (i) the

aggregate amount of the revenue of the Target Group reaches

RMB150,000,000 as shown in the Target Group's consolidated

management accounts reported in accordance with Hong Kong

Financial Reporting Standards, (ii) there exists no circumstances

which would render any members of the Target Group unable to

continue its operation, and (iii) the aforesaid (i) and (ii) being

confirmed by the Investor in writing

"Founding Shareholders"

collectively, Mr. WANG Jian, Ms. SHANG Jing, Mr. LIN Jincong

and the Employees Shareholding Platform, being the shareholders

of the Target Company after the completion of Restructuring

"Fourth Consideration Shares"

as defined in sub-paragraph (a) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Further Acquisition") of

this announcement

"Further Acquisition"

the proposed acquisition by PIL of the equity interest

corresponding to the registered capital of RMB20,045,454.00

in total in the Target Company (representing 49% of the total

equity interest in the Target Company as enlarged by the Capital

Increase) from the Founding Shareholders in accordance with

the terms and conditions of the Capital Increase and Acquisition

Agreement after the First Performance Target and the Second

Performance Target have been fulfilled and there being no

nominee holding arrangement in relation to equity interest in the

Target Company

"Further Acquisition

the day on which the registration of the transfer in relation to

Completion Date"

the Further Acquisition at the relevant regulatory authority is

completed

- 25 -

"General Mandate"

the general unconditional mandate granted or proposed to be

granted (as the case may be) by the shareholders of the Company

to the Board at the annual general meeting of the Company held

on 15 May 2020 or any subsequent annual general meetings of

the Company (as the case may be) to allot, issue and deal with

up to a number of new Shares representing not exceeding 20%

of the number of issued Shares of the Company as at the date

of passing of the relevant resolution which may be allotted and

issued by the Company

"Guaranteed Profits"

the consolidated net profits after taxation of the Target Group

for the relevant period as reported in accordance with the

Hong Kong Financial Reporting Standards being not less than

RMB50,000,000

"Group"

the Company and its subsidiaries

"HKD"

Hong Kong dollars, the lawful currency of Hong Kong

"HNDX"

海南德鑫科技有限公司 (Hainan Dexin Technology Company

Limited*), a limited company established under the laws of the

PRC

"Hong Kong"

the Hong Kong Special Administrative Region of the PRC

"Investor"

the Company and/or PIL (as the case may be)

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock

Exchange

"PIL"

Prowess Investment Limited 柏 海 投 資 有 限 公 司, a company

incorporated in Hong Kong with limited liability and a wholly-

owned subsidiary of the Company

"PRC"

the People's Republic of China, for the purpose of this

announcement, excluding Hong Kong, Macau Special

Administrative Region of the People's Republic of China and

Taiwan

- 26 -

"Restructuring"

the restructuring which involves:

(i)

the transfer of all shares of YZN from the existing

shareholders of YZN to the Target Company at the

consideration of RMB5,000,000, resulting in YZN becoming

a wholly-owned subsidiary of the Target Company;

(ii)

the transfers of shares of the Target Company to Mr.

WANG Jian from Mr. LIN Jincong and subscription of

RMB11,045,454 new registered capital of the Target

Company by Ms. SHANG Jing and the Employees

Shareholding Platform, resulting in the Target Company

being owned as to 42.57% by Mr. WANG Jian, 40.82% by

Ms. SHANG Jing, 0.19% by Mr. LIN Jincong, 4.75% by

BDT and 11.66% by the Employees Shareholding Platform;

(iii)

the transfer of 40% equity interest in HNDX from two of

the existing shareholders of HNDX to YZN, resulting in

HNDX becoming a wholly-owned subsidiary of YZN; and

(iv)

YZN being the only company wholly or non-wholly owned

by the Target Company, and HNDX being the only company

wholly or non-wholly owned by YZN.

"RMB"

Renminbi, the lawful currency of the PRC

"Second Cash Investment"

as defined in sub-paragraph (iii) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

"Second Consideration Shares"

as defined in sub-paragraph (iv) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

- 27 -

"Second Performance Target"

at any time within one year from the satisfaction of the First

Performance Target, (i) the aggregate amount of the revenue of

the Target Group calculated from the day after the satisfaction of

the First Performance Target reaches RMB600,000,000 as shown

in the Target Group's consolidated management accounts reported

in accordance with Hong Kong Financial Reporting Standards,

(ii) the net profits after taxation of the Target Group calculated

from the day after the satisfaction of the First Performance

Target reaches RMB40,000,000 as shown in the Target Group's

consolidated management accounts reported in accordance with

Hong Kong Financial Reporting Standards, (iii) there exists no

circumstances which would render any members of the Target

Group unable to continue its operation, and (iv) the aforesaid (i), (ii)

and (iii) being confirmed by the Investor in writing

"Shares"

ordinary shares of par value of HK$0.02 per share in the capital

of the Company

"Shareholders' Agreement"

the shareholders' agreement for the Target Company to be

executed by PIL, the Target Company and the Founding

Shareholders before the Completion Date

"Sixth Consideration Shares"

as defined in sub-paragraph (c) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Further Acquisition") of

this announcement

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

"Target Company"

平 潭 心 伴 門 診 部 有 限 公 司 (Pingtan Xinban Clinic Company

Limited*), a limited company established under the laws of the

PRC

"Target Group"

collectively, the Target Company, YZN and HNDX

"Third Cash Investment"

as defined in sub-paragraph (iv) of the sub-section headed

"Consideration and Terms of Payment" under the section

headed "THE CAPITAL INCREASE AND ACQUISITION

AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

- 28 -

"Third Consideration Shares" as defined in sub-paragraph (iv) of the sub-section headed "Consideration and Terms of Payment" under the section headed "THE CAPITAL INCREASE AND ACQUISITION AGREEMENT" (under the sub-title "The Acquisition from BDT

and the Capital Increase") of this announcement

"USD"

United States dollars, the lawful currency of the United States of

America

"Working Day(s)"

any day other than a Saturday, Sunday, of public holidays of the

PRC and/or Hong Kong

"YZN"

陝西醫智諾信息科技有限公司 (Shaanxi Yizhinuo Information

Technology Company Limited*), a limited company established

under the laws of the PRC

"%"

per cent

By Order of the Board

Huayi Tencent Entertainment Company Limited

Raymond Hau

Company Secretary

Hong Kong, 7 April 2021

As at the date of this announcement, the Board comprises:

Executive directors: Mr. CHENG Wu (Vice Chairman), Mr. YUEN Hoi Po (Chief Executive Officer)

Independent non-executive directors: Dr. WONG Yau Kar David, GBS, JP, Mr. YUEN Kin, Mr. CHU Yuguo

  • For identification purpose only

- 29 -

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Huayi Tencent Entertainment Corporation Limited published this content on 07 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 April 2021 11:47:04 UTC.