Huayu Expressway : (1) MAJOR ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF 60% EQUITY INTERESTS IN THE TARGET COMPANY AND (2) DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE LOAN TO VENDOR

April 07, 2021 at 06:06 pm

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.

HUAYU EXPRESSWAY GROUP LIMITED

華昱高速集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1823)

MAJOR ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF 60% EQUITY INTERESTS

IN THE TARGET COMPANY

AND

DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE LOAN TO VENDOR

Independent Financial Adviser to the Independent Board Committee and

the Independent Shareholders

THE ACQUISITION

The Board is pleased to announce that on 7 April 2021 (after trading hours), the Purchaser (being a wholly-owned subsidiary of the Company) entered into the Equity Transfer Agreement with the Vendor, a company wholly-owned by Mr. Chan, the Target Company and Mr. Chan, pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Interests (representing 60% of and the entire equity interest held by the Vendor in the Target Company) at a Consideration of RMB127.2 million (approximately HK$151.2 million).

Within 30 business days after the fulfilment or waiver (if applicable) of all the Conditions Precedent, the Purchaser and the Vendor shall assist the Target Company to carry out the Completion whereupon the Sale Interests will be transferred from the Vendor to the Purchaser and the Purchaser shall have all the shareholders' rights attached to the Sale Interests.

After Completion, the Target Company will become a non-wholly owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

The Purchaser shall pay the Consideration to the Vendor by way of bank transfer within 30 business days after the fulfilment or waiver (if applicable) of certain payment conditions, including the Completion.

The Target Company granted the Loan to Vendor to the Vendor. As at the date of the Equity Transfer Agreement, approximately RMB29.7 million (approximately HK$35.3 million) of the Loan to Vendor is due and owing from the Vendor to the Target Company. The Vendor would settle part of the Loan to Vendor with the Dividend to which it will be entitled, namely approximately RMB14.8 million. The outstanding amount of the Loan to Vendor after such settlement is expected to be approximately RMB14.9 million (approximately HK$17.7 million).

LISTING RULES IMPLICATIONS

As at the date of this announcement, Mr. Chan, an executive Director and a controlling Shareholder, owns the entire issued share capital of Velocity International Limited which is interested in approximately 72.71% of the issued share capital of the Company. The Vendor is wholly-owned by Mr. Chan. Therefore, the Vendor is an associate of Mr. Chan and a connected person of the Company. Accordingly, the Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio in respect of the Acquisition exceeds 25% but all of the percentage ratios are less than 100%, the Acquisition also constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. The Acquisition is therefore subject to the reporting, announcement, circular and the Independent Shareholders' approval requirements under Chapters 14 and 14A of the Listing Rules.

The Loan to Vendor will constitute a financial assistance received by the Vendor from the Target Company upon the Completion and accordingly, a connected transaction for the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the financial assistance contemplated under the Loan to Vendor exceeds 5% (but is less than 25%) and the value of such financial assistance plus any monetary advantage are more than HK$10,000,000, such financial assistance is therefore subject to the reporting, announcement, circular and the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules and also constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

The EGM will be convened for the Independent Shareholders to consider and, if thought fit, to approve (i) the Acquisition and the Equity Transfer Agreement and (ii) the Loan to Vendor and the Loan Agreement.

DESPATCH OF CIRCULAR

A circular containing, among other things, (i) further details of the Acquisition and the Equity Transfer Agreement; (ii) the Loan Agreement, (iii) the financial information of the Group; (iv) the unaudited pro forma financial information of the enlarged Group; (v) the recommendation of the Independent Board Committee; (vi) the advice of the IFA; (vii) the notice of the EGM; and

other information as required under the Listing Rules is expected to be despatched to the Shareholders on or before 22 April 2021.

THE ACQUISITION

The Board is pleased to announce that on 7 April 2021 (after trading hours), the Purchaser (being a wholly-owned subsidiary of the Company) entered into the Equity Transfer Agreement with the Vendor, the Target Company and Mr. Chan, pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Interests (representing 60% of the entire equity interest held by the Vendor in the Target Company) at the Consideration of RMB127.2 million (approximately HK$151.2 million).

As at the date of this announcement, the Vendor is wholly-owned by Mr. Chan, an executive Director and a controlling Shareholder, and is therefore an associate of Mr. Chan and a connected person of the Company.

THE EQUITY TRANSFER AGREEMENT

The principal terms of the Equity Transfer Agreement are set out below:

Date

7 April 2021

Parties

the Purchaser;
the Vendor;
the Target Company; and
Mr. Chan (as a guarantor offering the Refund Guarantee (as defined below)).

Subject matter

The Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Interests subject to the terms and conditions of the Equity Transfer Agreement.

Consideration

The Company commissioned the Valuer to assess the fair market value of the Sale Interests as at 19 March 2021 for the purpose of assisting the Board in its evaluation of the Acquisition.

The Consideration shall be RMB127.2 million (approximately HK$151.2 million) and was determined based on arm's length negotiations between the Vendor and the Purchaser with reference to the range of fair market value of the Sale Interests between RMB125.8 million (approximately HK$149.6 million) and RMB128.6 million (approximately HK$152.9 million) as at 19 March 2021 as appraised by the Valuer using the discounted cash flow approach as a primary methodology.

Further details of the Valuation are set out in the section headed "Principal assumptions of the Valuation" below.

In view of the above, the Directors (other than the independent non-executive Directors whose views will be given after taking the advice from the IFA) consider the Consideration to be fair and reasonable.

Payment terms

The Purchaser shall pay the Consideration to the Vendor by way of bank transfer within 30 business days after the fulfilment or waiver (if applicable) the following payment conditions:

the Completion having taken place;
the Vendor not having committed any material breach to the terms and conditions and the representation, warranties, guarantees and undertakings made by it under the Equity Transfer Agreement; and
the Vendor having set up a bank account for the Consideration and advised the Purchaser the same.

If any of the conditions set out above have not been satisfied on or before 30 September 2021, or such later date as the parties may agree in writing, then the Purchaser has the right to terminate the Equity Transfer Agreement whereupon the Target Company and the Vendor shall have no right or claim against the Purchaser.

Conditions Precedent

The Completion shall be conditional upon the fulfilment or waiver (if applicable) of the following Conditions Precedent:

the approvals to the Equity Transfer Agreement and the transactions contemplated thereunder from:
1. the Vendor's board of directors and shareholders having been obtained;
2. the Purchaser's board of directors and shareholders having been obtained;
3. the Board and the Independent Shareholders at the EGM to be convened having been obtained;
4. the shareholders of the Target Company having been obtained;
Shenzhen Expressway, another shareholder of the Target Company, agreeing in writing to give up its pre-emptive right to purchase the Sale Interests;
the PRC legal opinion having been issued by the PRC legal adviser of the Purchaser with the contents of which being acceptable to the parties to the Equity Transfer Agreement;
the Purchaser having been satisfied with the results of due diligence review on the Target Company;
having entered into the agreements between the Vendor and the Bank to release the Equity Pledge within 60 business days from the date of the Equity Transfer Agreement and the relevant registration and filing procedures under the applicable PRC regulations for such release having been completed;
the representation, warranties, guarantees and undertakings stipulated in the Equity Transfer Agreement made by the Vendor remain true, accurate, complete and not misleading;
the Vendor not having committed any material breach of the terms and conditions and the representation, warranties, guarantees and undertakings made by it under the Equity Transfer Agreement;
the Vendor and the Target Company having entered into the Lease Agreement (as defined below) in form and substance satisfactory to the parties to the Equity Transfer Agreement;
the Vendor and the Target Company having entered into the Loan Agreement (as defined below) in respect of the Loan to Vendor (as defined below) in form and substance satisfactory to the parties to the Equity Transfer Agreement;

the approvals to the Loan Agreement and the transactions contemplated thereunder from the Independent Shareholders at the EGM to be convened having been obtained; and
the approvals to the declaration and payment of the Dividend from the board of directors of the Target Company having been obtained.

Completion

After the Completion, the Target Company will become a non-wholly owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

Refund of the Consideration

If:

there is any fact or event developed, happened or occurred before the Completion which would (i) make the Target Company unable to continue to enjoy its rights contemplated under the Concession Agreement before its expiry; or (ii) cause material adverse impact to the Target Company by the exercise of its rights contemplated under the Concession Agreement; or
the Vendor causes any material adverse impact to the Target Company before the Completion and such impact cannot be resolved or settled,

then the Purchaser has the right to request the Vendor to refund the Consideration to the Purchaser even after the Completion.

Pursuant to the Equity Transfer Agreement, Mr. Chan has agreed to guarantee the refund of the Consideration if the Vendor is obliged to refund the Consideration (the "Refund Guarantee").

VALUATION

Principal Assumptions of the Valuation

According to the Valuation Report, the fair market value of the Sale Interests as at 19 March 2021 as appraised by the Valuer using the discounted cash flow approach as a primary methodology is in a range of between approximately RMB125.8 million (approximately HK$149.6 million) and RMB128.6 million (approximately HK$152.9 million). The Valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules.

The Valuation was prepared based on numerous assumptions, including the following principles and assumptions used by management of the Group for the preparation of the financial forecast of the Target Company:

General principles:
- the ownership claims of the Target Company to its assets are assumed to be valid. Management of the Group has also assumed that:
- 1. title is good and transferable;
  2. there exists no liens or encumbrances;
  3. there is full compliance with all applicable government regulations and laws (including, without limitation, zoning regulations); and
  4. all required licenses, certificates of occupancy, consents, or legislative or administrative authority from any government, private entity or organisation have been or can be obtained or renewed for any use to which the Valuer services relate,
- certain historical financial data used for the preparation of the financial forecast were derived from unaudited financial statements. Management of the Group has assumed the accuracy or completeness of the data provided; and
- management of the Group has assumed the solvency of the Target Company under any foreign, state/provincial or federal laws relating to bankruptcy, insolvency or similar interest. The financial forecast of the Target Company has been prepared assuming its business is a going concern.
Specific assumptions:
- on 6 May 2020, the Chinese government adjusted the toll rates of the Target Expressway and new toll rates were used for the financial forecast;
- competition from the neighbouring expressways would affect the traffic flows of the Target Expressway and had been reflected in the financial forecast. In this regard, except for the known competition from Banyin Channel, which became operational on 28 April 2020, and Eastern Transit Expressway, which is planned to be operational in early 2024, management of the Group is not aware of any other major neighbouring expressways which could materially affect the traffic flows of the Target Expressway in the forecast period;
- there would be no changes to the structure of cost of services assumed in the financial forecast. However, certain cost items were expected to be subject to an inflation adjustment of 2.6% per annum;

no new financing activities had been assumed in the forecast period. The existing bank loans were assumed to be repaid in accordance to the agreed terms and interests would be charged based on the mechanisms stipulated in the banking facility documents;
no capital expenditure had been assumed in the forecast period, except for the outstanding costs related to the implementation of the ETC system of approximately RMB5.5 million; and
the earnings of the Target Company had been assumed to be taxed at the statutory income tax rate of 25%.

Review by Reporting Accountants and IFA

Lego Corporate Finance Limited, the IFA, has discussed with the management of the Company and the Valuer the bases and assumptions upon which the forecast was based and has reviewed the report issued by KPMG dated 7 April 2021 containing its opinion on whether the discounted future cash flows, so far as the calculations are concerned, have been properly compiled in all material respects in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation.

On the basis of the foregoing and opinion of KPMG, Lego Corporate Finance Limited is of the view that the forecast upon which the Valuation has been made, for which the Directors are solely responsible, has been made after due and careful enquiry.

KPMG, the Company's reporting accountants, has reviewed the discounted future cash flows and is of the opinion that so far as the calculations are concerned, the discounted future cash flows have been properly compiled in accordance with the bases and assumptions made by the Directors as set out in the Valuation.

A letter from Lego Corporate Finance Limited and a report from KPMG, the Company's reporting accountants, in respect of the discounted future cash flows and setting out their views above are included in the appendices to this announcement in accordance with the requirements under the Listing Rules.

The following are the qualifications of the experts whose opinions and advice are included in this announcement:

Name	Qualification
Ernst & Young	Ultimately owned by Ernst & Young (EY), which provides
Transactions Limited	assurance, consulting, strategy and transactions, and tax
	services
KPMG	Certified Public Accountants
Lego Corporate Finance	A corporation licensed under the SFO to carry out type 6
Limited	(advising on corporate finance) regulated activities as defined
	under the SFO

As at the date of this announcement, as far as the Directors are aware, none of the relevant team members of the above experts has any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of the above experts has given and has not withdrawn its written consent to the publication of this announcement with its opinions and advice and all references to its name included in the form and context in which they are included.

LOAN TO VENDOR

The Target Company granted a loan (the "Loan to Vendor") to the Vendor in or around 2019. As at the date of the Equity Transfer Agreement, approximately RMB29.7 million (approximately HK$35.3 million) of the Loan to Vendor is due and outstanding by the Vendor to the Target Company. The Vendor would settle part of the Loan to Vendor with the Dividend to which it will be entitled, namely approximately RMB14.8 million. The outstanding amount of the Loan to Vendor after such settlement is expected to be approximately RMB14.9 million (approximately HK$17.7 million).

The Vendor and the Target Company will enter into a loan agreement (the "Loan Agreement") to formalise the then outstanding Loan to Vendor on or before the Completion.

The principal terms and conditions of the Loan Agreement are as follow:

Parties

the Vendor (as borrower); and
the Target Company (as lender)

Principal amount

The outstanding amount of the Loan to Vendor as at the date of the Loan Agreement, which shall not in any event be more than RMB29.7 million (approximately HK$35.3 million)

Repayment date

3 months from the date of the Loan Agreement

Interest rate

12% per annum

Early Repayment

The Vendor may early repay the Loan to Vendor in full after giving one business day's prior written notice to the Target Company.

Security

Nil

Since the Vendor will cease to have any interest in the Target Company, the Vendor intends to repay the Loan to Vendor after the Acquisition. Pursuant to the Equity Transfer Agreement, the parties have agreed that the Vendor shall early repay the then outstanding Loan to Vendor in full to the Target Company within 5 business days after the payment of the Consideration.

LEASE

The Target Company has been using certain office properties of the Vendor at nil consideration for its business operation since 2012. To avoid any possible interruption to the business operation of the Target Company after Completion, the Vendor and the Target Company have agreed to enter into a written lease agreement (the "Lease Agreement") to formalise such lease arrangement for a term of 3 years (the "Lease") on or before the Completion.

INFORAMTION OF THE PARTIES

The Company and the Purchaser

The Company is an investment holding company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange. The Group is principally engaged in the construction, operation and management of an expressway and the trading of liquor and spirits in the PRC.

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

The Vendor

The Vendor is a company established in the PRC and is wholly-owned by Mr. Chan. It is principally engaged in the construction and operation of expressways and construction of municipal highways in the PRC.

INFORAMTION OF THE TARGET COMPANY

Business of the Target Company

The Target Company is a company incorporated in the PRC owned as to 60% by the Vendor and as to 40% by Shenzhen Expressway as at the date of the Equity Transfer Agreement. The Target Company has a total paid up capital of RMB150 million, of which RMB90 million was contributed by the Vendor. It possessses an exclusive right to, among others, operate the Target Expressway until 8 February 2027 under the Concession Agreement and approvals from the competent authorities.

Information about the Target Expressway

The Target Expressway is a six-lane expressway (three lanes in each direction) with a tollable distance of 5.28km. The Target Expressway connects Shenzhen Qingshuihe Checkpoint and Bulong Interchange on Shuiguan Expressway. Shuiguan Expressway is a major expressway linking the central business district of Shenzhen with Longgang District and Pingshan New Zone. Toll fees are collected at toll stations (typically using electronic payment system) and by the electronic toll collection system (through an electronic device attached to the vehicle).

Financial information of the Target Company

Based on the unaudited management accounts of the Target Company, the historical financial information of the Target Company prepared in accordance with Hong Kong Financial Reporting Standards for the two financial years ended 31 December 2018 and 2019 and ten months ended 31 October 2020 are set out below.

			For the ten
	For the financial year ended	months ended
	31 December		31 October
	2018	2019	2020
	HK$'000	HK$'000	HK$'000
Revenue	143,452	148,349	56,220
profit before taxation	33,663	31,249	3,893
profit after taxation	25,233	23,419	2,920

The unaudited net assets value of the Target Company as at 31 October 2020 was approximately HK$186 million.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Target Company is an infrastructure project company and principally engages in the construction, operation and management of the Target Expressway, which has already been in operation and revenue generating since 2002. It is expected that the Acquisition will enable the Company to derive immediate earnings and cash flow contribution from it.

In addition, operation and management of an expressway is one of the core businesses of the Group. The Directors are of the view that the Acquisition is in line with the business strategy of the Company to expand the core business either by way of acquisition or capitalise on new opportunities.

The Ministry of Transport of the PRC issued a notice in February 2020 that the State Council of the PRC had permitted a nationwide toll-free policy for all vehicles using tolled highways (the "Policy") due to COVID-19 outbreak. Pursuant to the Policy, the Target Company has to waive the toll fees of vehicles using the Target Expressway. Subsequently, the Ministry of Transport of the PRC issued a notice that the State Council of the PRC had permitted resumption of collection of toll fees on tolled highways (the "Resumption Notice") from 00:00 on 6 May 2020. As a result, the Target Company did not record revenue for most of time during the period from 17 February 2020 to 5 May 2020 yet continued to incur management and operating costs. This resulted in the decrease in revenue and net profit of the Target Company during the ten months ended 31 October 2020 in comparison to the same period in 2019.

Although the Target Company recorded a decrease in revenue and net profit for the ten months ended 31 October 2020, the Directors (other than the independent non-executive Directors whose views will be given after taking the advice from the IFA) (a) remain confident on its prospects because the Target Expressway is located in Shenzhen, one of major cities in the PRC, and the Target Company has resumed to receive toll fees to generate revenue income pursuant to the Resumption Notice; and (b) consider the development potential of the Target Company to be promising and believe that the Acquisition can enhance the Group's competitiveness, further strengthen the Group's reputation within the industry and improve its the earning base of the Group.

Having considered the above reasons and benefits of the Acquisition and the Loan to Vendor together with the current financial position of the Group, the Directors (other than the independent non-executive Directors whose views will be given after taking the advice from the IFA) are of the view that the Acquisition and the Loan to Vendor and on normal commercial terms or better and the terms of the Acquisition and the Loan to Vendor and are fair and reasonable and that the Acquisition and the Loan to Vendor and in the interests of the Company and the Shareholders as a whole.

THE LISTING RULES IMPLICATIONS

The Acquisition

The Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the Acquisition exceeds 25% but all of the percentage ratios are less than 100%, the Acquisition also constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. Accordingly, the Acquisition is subject to the reporting, announcement, circular and the Independent Shareholders' approval requirements under Chapters 14 and 14A of the Listing Rules.

The Loan to Vendor

The Lease

Upon the Completion, the Lease will constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As the Lease Agreement is entered into on normal commercial terms or better and is at nil consideration, such connected transaction falls within the de minimis threshold as stipulated under Rule 14A.76(1) of the Listing Rules and is fully exempt from shareholders' approval, annual review and all disclosure requirements under Chapter 14A of the Listing Rules.

The Refund Guarantee

The Refund Guarantee will, when it is materialised, constitute a financial assistance received by the Purchaser from the Vendor and accordingly, a connected transaction for the Company under Chapter 14A of the Listing Rules. As the Refund Guarantee will be conducted on normal commercial terms or better and is not secured by the assets of the Group, the Refund Guarantee will be fully exempt from shareholders' approval, annual review and all disclosure requirements under Chapter 14A of the Listing Rules pursuant to Rule 14A.90 of the Listing Rules.

Mr. Chan, being an executive Director, has abstained from voting on the relevant resolutions proposed in the meeting of the Board. Mr. Chan and his associates (including Velocity International Limited), and any Shareholder with a material interest in the Acquisition and the Loan to Vendor

are required to abstain from voting on the relevant ordinary resolution(s) approving the Acquisition and the Loan to Vendor and the transactions contemplated under the Equity Transfer Agreement and the Loan Agreement proposed to be passed at the EGM.

GENERAL

To the best of the knowledge and belief of the Directors having made all reasonable enquiries, save and except for Mr. Chan and his associates, no other Shareholder has a material interest in the Acquisition and the Loan to Vendor. Velocity International Limited, Mr. Chan and his associates shall abstain from voting at the EGM on the resolution to approve the same.

An Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders in respect of the Acquisition, the Equity Transfer Agreement, the Loan to Vendor and the Loan Agreement. Lego Corporate Finance Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

other information as required under the Listing Rules is expected to be despatched to the Shareholders on or before 22 April 2021.

As the Completion is subject to the fulfilment of the Conditions Precedent, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares.

DEFINITIONS

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

"Acquisition"

"associate(s)"

"Bank"

"Board"

"business day"

"Company"

the proposed acquisition of the Sale Interests by the Purchaser from the Vendor

has the meaning given to it under the Listing Rules

the Shenzhen Branch of 廣東華興銀行股份有限公司 (Guangdong Huaxing Bank Co., Ltd.*)

board of the Directors

a day other than a Saturday, a Sunday and the statutory holidays of the PRC

Huayu Expressway Group Limited, a company incorporated under the laws of Cayman Islands with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange (stock code: 1823)

"Completion"the completion of the registration, reporting and filing procedures under the Administration for Market Regulation and the applicable foreign investment regulations of the PRC for the transfer of Sale Interests

"Completion Date"

"Conditions Precedent"

date of the Completion

conditions precedent to the Completion, details of which are set out in the paragraph headed "Conditions Precedent" in this announcement

"connected person(s)"

"connected transaction(s)"

"Concession Agreement"

"Consideration"

has the meaning given to it under the Listing Rules

concession agreement dated December 2001 entered into between the Vendor and the People's Government of Shenzhen, Longgang District, in relation to the rights and obligations regarding the construction, operation, management and maintenance of the Target Expressway and its associated toll facilities in the PRC with a term from 24 December 2001 to

8 February 2027, Vendor's rights and obligation under which had been transferred to the Target Company in July 2002

purchase consideration of the Acquisition

"controlling shareholder(s)" "Director(s)" "Dividend"

"EGM"

"Equity Pledge"

"Equity Transfer

Agreement"

"Group" "HK$" "Hong Kong" "IFA"

"Independent Board Committee"

"Independent Shareholders"

"Independent Third Party(ies)"

has the meaning given to it under the Listing Rules

director(s) of the Company

the dividend of RMB24.6 million to be declared and distributed to its shareholders, namely the Vendor and Shenzhen Expressway, before the Completion, according to the proportions of their shareholdings in the Target Company

the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving, among other things, the Acquisition and the Loan to Vendor

the pledge over the Sale Interests granted by the Vendor to the Bank

the conditional equity transfer agreement dated 7 April 2021 entered into among the Vendor, the Purchaser, the Target Company and Mr. Chan in relation to the Acquisition

the Company and its subsidiaries

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

Lego Corporate Finance Limited, the independent financial adviser appointed by the Company for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the Loan to Vendor

an independent committee of the Board, comprising all the three independent non-executive Directors, established to advise the Independent Shareholders in respect of the Acquisition and the Loan to Vendor

Shareholders other than Mr. Chan and his associates

an individual(s) or a company(ies) who or which is/are independent of and not connected with (within the meaning of the Listing Rules) any Director, chief executive or substantial Shareholder (within the meaning of the Listing Rules) of the Company, its subsidiaries or any of their respective associates

"Listing Rules"

"Mr. Chan"

"percentage ratio(s)" "PRC"

"Purchaser"

"RMB"

"Sale Interests" "SFO"

"Share(s)"

"Shareholder(s)"

"Shenzhen Expressway"

"Stock Exchange"

"substantial shareholder(s)" "Target Company"

The Rules Governing the Listing of Securities on the Stock Exchange

Mr. Chan Yeung Nam, the chairman of the Board, an executive Director and a controlling Shareholder

has the meaning given to it under the Listing Rules

the People's Republic of China and, for the purpose of this announcement, excluding Hong Kong, Macao Special Administrative Region of the People's Republic of China and Taiwan

好兆有限公司 (Good Sign Limited), a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

Renminbi, the lawful currency of the PRC

60% of the equity interests in the Target Company

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

ordinary share(s) of HK$0.01 each in the share capital of the Company

holder(s) of the Share(s)

深圳高速公路股份有限公司 (Shenzhen Expressway Co., Ltd.), a joint stock limited company incorporated in the PRC with limited liability, the H shares of which are listed on the Stock Exchange (stock code: 548) and the A shares of which are listed on the Shanghai Stock Exchange (stock code: 600548), an Independent Third Party

The Stock Exchange of Hong Kong Limited

has the meaning given to it under the Listing Rules

深圳市華昱高速公路投資有限公司 (Shenzhen Huayu Expressway Investment Co., Ltd.*), a company established in the PRC which is owned as to 60% by the Vendor and 40% by Shenzhen Expressway as at the date of the Equity Transfer Agreement

"Target Expressway"

"Valuation"

"Valuation Report"

"Valuer"

"Vendor"

"%"

Hong Kong, 7 April 2021

清平高速公路一期工程 ( F i r s t P h a s e o f Q i n g p i n g Expressway*) (S209) located in Shenzhen City, Guangdong province of the PRC, which is owned and operated by the Target Company

the appraisal of the value of the Sale Interests as at 19 March 2021 primarily using the discounted cash flow method by the Valuer

the report on the Valuation prepared by the Valuer dated 7 April 2021

Ernst & Young Transactions Limited, ultimately owned by Ernst

Young (EY), which provides consulting, assurance, tax and transaction services, engaged by the Company for the purpose of appraisal of the value of Sale Interests

深圳華昱投資開發（集團）有限公司 (Shenzhen Huayu Investment & Development Group Co., Ltd.*), a wholly foreign-ownedenterprise established in the PRC which is wholly-ownedby Mr. Chan

per cent.

By Order of the Board

Huayu Expressway Group Limited

Chan Yeung Nam

Chairman and Executive Director

As at the date of this announcement, the executive Directors are Mr. Chan Yeung Nam, Mr. Mai Qing Quan and Mr. Fu Jie Pin and the independent non-executive Directors are Mr. Sun Xiao Nian, Mr. Chu Kin Wang, Peleus and Mr. Hu Lie Ge.

For the purpose of this announcement, unless otherwise indicated, conversion of RMB into HK$ is calculated at the approximate exchange rate of RMB1.00 = HK$1.189. This exchange rate is for the purpose of illustration only and do not constitute a representation that any amounts in RMB and HK$ have been, could have been or may be converted at such rate or any other exchange rate.

English translation of the Chinese name is for information purposes only, and should not be regarded as the official English translation of such name.

APPENDIX I - LETTER FROM LEGO CORPORATE FINANCE LIMITED

7 April 2021

The Board of Directors

Huayu Expressway Group Limited

Dear Sirs,

We refer to the valuation prepared by Ernst & Young Transactions Limited on the fair market value of 60% of the equity interest in 深圳市華昱高速公路投資有限公司 (Shenzhen Huayu

Expressway Investment Co., Ltd.*) as at 19 March 2021, which is set out in the valuation report dated 7 April 2021 referred to in the announcement of Huayu Expressway Group Limited dated 7 April 2021 (the "Announcement"). Unless the context otherwise requires, terms defined in the Announcement shall have the same meanings when used herein.

The Valuation has been arrived at using the discounted cash flow method and constitutes a profit forecast (the "Forecast") as defined under rule 14.61 of the Listing Rules. We have reviewed the Forecast upon which the Valuation has been made, for which you as the Directors are solely responsible, and have discussed with the management of the Company and the Valuer the bases and assumptions upon which the Forecast has been prepared. We have also considered the report from KPMG, the Company's reporting accountants, dated 7 April 2021 addressed to you as set out in Appendix II to the Announcement regarding the calculations of the discounted future cash flows in connection with the Valuation, according to which, among others, the discounted future cash flows do not involve the adoption of accounting policies. The Forecast has been prepared using a set of assumptions that include hypothetical assumptions about future events and other assumptions that may or may not necessarily be expected to occur and, as such, the Forecast may not be appropriate for purposes other than for deriving the Valuation. Even if the events anticipated under the hypothetical assumptions occur, actual results are still likely to differ from the Forecast since such anticipated events frequently may or may not occur as expected and the variation may be material.

On the basis of the foregoing and without giving any opinion on the reasonableness of the valuation methods, bases and assumptions adopted on the Valuation, for which the Valuer and the Company are responsible, we are of the opinion that the Forecast upon which the Valuation has been made, for which you as the Directors are solely responsible, have been made after due and careful enquiries.

Yours faithfully,

for and on behalf of

Lego Corporate Finance Limited

Billy Tang

Managing Director

APPENDIX II - LETTER FROM THE REPORTING ACCOUNTANTS

The following is the text of a report received from the Company's reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for inclusion in this announcement.

REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE BUSINESS VALUATION OF SHENZHEN HUAYU EXPRESSWAY INVESTMENT CO., LTD

TO THE BOARD OF DIRECTORS OF HUAYU EXPRESSWAY GROUP LIMITED

We refer to the discounted future cash flows on which the business valuation ("the Valuation") dated 19 March 2021 prepared by Ernst & Young Transactions Limited in respect of the appraisal of the fair value of Shenzhen Huayu Expressway Investment Co., Ltd (the "Target Company") as at 31 October 2020 is based. The Valuation is prepared based on the discounted future cash flows and is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

Directors' Responsibilities

The directors of Huayu Expressway Group Limited (the "Directors") are responsible for the preparation of the discounted future cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuation. This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

The firm applies Hong Kong Standard on Quality Control 1 "Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements" issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants' Responsibilities

Our responsibility is to report, as required by paragraph 14.62(2) of the Listing Rules, on the calculations of the discounted future cash flows used in the Valuation. The discounted future cash flows do not involve the adoption of accounting policies.

Basis of Opinion

We conducted our engagement in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the calculations are concerned, the Directors have properly compiled the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation. We performed procedures on the arithmetical calculations and the compilations of the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the calculations are concerned, the discounted future cash flows have been properly compiled in all material respects in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation.

Other matters

Without qualifying our opinion, we draw to your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of the Target Company or an expression of an audit or review opinion on the Valuation.

The discounted future cash flows depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Further, since the discounted future cash flows relates to the future, actual results are likely to be different from the discounted future cash flows because events and circumstances frequently do not occur as expected, and the differences may be material. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

KPMG

Certified Public Accountants

Hong Kong

7 April 2021

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Huayu Expressway Group Limited published this content on 08 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 April 2021 22:05:05 UTC.

Delayed Hong Kong S.E. Other stock markets 22:16:14 2024-05-16 EDT			5-day change	1st Jan Change
0.84 ^HKD	-5.62%		0.00%	-23.64%

03-28	Huayu Expressway Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI
2023	Huayu Expressway Group Limited Reports Earnings Results for the Half Year Ended June 30, 2023	CI

Huayu Expressway Group Limited Reports Earnings Results for the Full Year Ended December 31, 2023	03-28	CI
Huayu Expressway Group Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-30	CI
Huayu Expressway's Unit Takes Controlling Stake in Renhuai Huayu Wine	23-06-19	MT
Huayu Expressway Sells 60% Stake in Construction Company	23-04-26	MT
Huayu Expressway Postpones Payment of Special Dividend	23-04-21	MT
Huayu Expressway Clarifies Payment Date of Special Interim Dividend	23-04-05	MT
Huayu Expressway Group Limited Announces Changes to Its Board	23-04-03	CI
Huayu Expressway Group Limited Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-30	CI
Huayu Expressway Group Limited Announces Special Interim Dividend for the Financial Year Ending 31 December 2023, Payable on May 18, 2023	23-03-02	CI
Huayu Expressway to Vote Feb. 14 on Disposal of Stake in Construction Firm	23-01-20	MT
Huayu Expressway Divests 60% Stake in Expressway Construction Company	22-12-09	MT
NWS Holdings Unit to Acquire Remaining 60% Stake in Expressway Operator for 556 Million Yuan	22-12-01	MT
Huayu Expressway's H1 Profit Falls	22-09-08	MT
Huayu Expressway Group Limited Reports Earnings Results for the Half Year Ended June 30, 2022	22-08-26	CI
Huayu Expressway Expects H1 Profit to Halve on COVID Hit	22-07-22	MT
Huayu Expressway Warns of 'Substantial' Decline in H1 Profit	22-07-14	MT
Huayu Expressway Group Limited Provides Group Earnings Guidance for the Six Months Ended 30 June 2022	22-07-13	CI
Huayu Expressway Group Limited Announces Executive Changes	22-04-01	CI
Huayu Expressway Group Limited Announces Executive Changes	22-04-01	CI
Huayu Expressway Group Limited Reports Earnings Results for the Full Year Ended December 31, 2021	22-03-25	CI
Huayu Expressway to Grant 40 Million Share Options to Certain Employees, Directors; Shares Slump 8%	21-12-30	MT
Huayu Expressway Group Limited Reports Earnings Results for the Half Year Ended June 30, 2021	21-08-20	CI
Huayu Expressway : Unit Sells Stake in Chinese Subsidiary to Guizhou Renhuai	21-07-07	MT
Huayu Expressway : Closes Nearly $20 Million Acquisition of 60% Stake in Freeway Operator; Shares Fall 5%	21-06-30	MT
Huayu Expressway Group Limited Announces Special Interim Dividend, Payable on or About 9 July 2021	21-05-31	CI

	1st Jan change	Capi.
HUAYU EXPRESSWAY GROUP LIMITED	-23.64%	47.06M
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VIVA WINE GROUP AB	+3.54%	340M
YAMAYA CORPORATION	+1.15%	214M
TONGHUA GRAPE WINE CO.,LTD	-19.41%	177M
KAKUYASU GROUP CO., LTD.	+20.74%	130M
CEYLON BEVERAGE HOLDINGS PLC	+9.89%	102M
PT JOBUBU JARUM MINAHASA TBK	-16.45%	63.82M

Huayu Expressway Group Limited

Equities

1823

KYG464101099

Food Retail & Distribution

Huayu Expressway : (1) MAJOR ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF 60% EQUITY INTERESTS IN THE TARGET COMPANY AND (2) DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE LOAN TO VENDOR

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