Hubei Zhenhua Chemical Co.,Ltd. (SHSE:603067) signed agreement of intent to acquire 51% stake in Xiamen Shouneng Technology Co., Ltd. from Lin Mingzhu for approximately CNY 50 million on December 6, 2021. Hubei Zhenhua Chemical Co.,Ltd. (SHSE:603067) signed the equity acquisition agreement to acquire 51% stake in Xiamen Shouneng Technology Co., Ltd. from Lin Mingzhu for CNY 31.2 million on March 4, 2022. The consideration will be paid in cash and will be around CNY 30 million to CNY 50 million.

Hubei Zhenhua agrees to pay the transferor a sincerity payment to the transferor within five working days from the date of completion of the preliminary due diligence, according to 20% of the initial valuation amount corresponding to the equity held by Lin Mingzhu. As per the equity acquisition agreement, the consideration shall be paid in two installments, including CNY 24.96 million (including the deduction of the deposit for the acquisition of CNY 6 million), equals 80% of the total consideration within 10 working days from the effective date of this agreement and CNY 6.24 million, equal to 20% of the consideration within 7 working days after the completion of industrial and commercial change registration procedures. Prior to transaction, Xiamen Shouneng Technology Co., Ltd. is held by Lin Mingzhu (51% stake), Lin Xudong (29% stake), Wang Azhong (9% stake), Zhang Zhijun (5% stake), Yester (5% stake) and Chen Zhou (1% stake).

Post transaction, Xiamen Shouneng Technology Co., Ltd. is held by Hubei Zhenhua (51% stake), Lin Xudong (29% stake), Wang Azhong (9% stake), Zhang Zhijun (5% stake), Yester (5% stake) and Chen Zhou (1% stake). After the completion of this transaction, the acquirer will decide whether to initiate the acquisition of 49% of the Xiamen Shouneng's equity held by management shareholders based on Xiamen Shouneng's operating conditions. As of September 30, 2021, Xiamen Shouneng Technology Co., Ltd. had total assets of CNY 48.69 million and net assets of CNY 22.75 million.

After the Hubei Zhenhua's board of directors (if necessary) and the general meeting of shareholders (if necessary) have reviewed and approved the agreement, a formal equity transfer agreement will be signed. On December 23, 2021, the 8th session of the Hubei Zhenhua's 4th directorate approved the transaction. The transaction will not have a significant impact on the Hubei Zhenhua's 2021 operating results.