Sundart : (1) Major and Connected Transaction in Relation to the Acquisition of 100% Equity Interest in Sundart Beijing and (2) Amendment to the Deed of Non-competition

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SUNDART HOLDINGS LIMITED

承達集團有限公司

(incorporated under the laws of British Virgin Islands with limited liability)

(Stock Code: 1568)

1. MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF 100% EQUITY INTEREST IN SUNDART BEIJING AND
2. AMENDMENT TO THE

DEED OF NON-COMPETITION THE ACQUISITION

On 17 May 2017, the Transferee, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Transferors, pursuant to which the Transferee has agreed to acquire, and the Transferors have agreed to transfer, in aggregate 100% equity interest in the Target Company at the Consideration. Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company.

DELINEATIONS BETWEEN THE ENLARGED GROUP AND JANGHO GROUP

The fitting-out businesses of the Enlarged Group and Jangho Group in the PRC are delineated based on their geographical locations and business positioning. After Completion, the Enlarged Group will conduct its fitting-out business in the PRC only in the Sundart Target Districts and the Overlapping District whereas Jangho Group will conduct its fitting-out business in the Jangho Target Districts and the Overlapping District. The Sundart Target Districts are carefully delineated based on criteria including the business network and expansion plan of the Enlarged Group and Jangho Group, and the economy and growth potentials of the relevant districts. With regard to the Overlapping District where both the Enlarged Group and Jangho Group will conduct fitting-out business, their businesses will be delineated based on their respective business positioning. After Completion, Jangho Group will only undertake projects from the PRC government and projects with an average unit price of less than RMB5,000 per square meter in the Overlapping District. Notwithstanding the above, Jangho Group, through its fitting- out business carried on by Beijing Gangyuan, has developed a long-standing business relationship with the Developer whereby Beijing Gangyuan has undertaken a number of fitting-out projects in the PRC, mainly for residential properties with an average unit price of less than RMB5,000 per square meter, from the Developer. In view of such long- standing business relationship, the Target Group and Jangho Group agreed that projects from the Developer will be undertaken by Jangho Group notwithstanding the geographical locations of such projects in the PRC.

To implement the geographical and business positioning delineations and to minimise future potential competition between the Enlarged Group and Jangho Group, the controlling shareholders of the Company will execute the Amended Deed in favour of the Company (for itself and as trustee for each of its subsidiaries) and the Entrusters, the Entrustee and Beijing Gangyuan will execute the Entrustment Agreement, further details of which are set out in this announcement.

The Directors consider that, based on the geographical and business positioning delineations, the execution of the Amended Deed and the Entrustment Agreement, the businesses of the Enlarged Group and Jangho Group can be sufficiently delineated.

IMPLICATIONS OF THE ACQUISITION, THE AMENDED DEED AND THE ENTRUSTMENT AGREEMENT UNDER THE LISTING RULES

As at the Latest Practicable Date, the Company was owned as to 69.50% by Reach Glory, a wholly-owned subsidiary of Jangho HK which in turn was a wholly-owned subsidiary of Jangho Co.. As such, each of Jangho Co. and Jangho HK is a substantial shareholder of the Company and thus a connected person of the Company under Chapter 14A of the Listing Rules, and accordingly the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios of the Acquisition is above 5%, the Acquisition is subject to the reporting, announcement, circular and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

In addition, as one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Acquisition exceed 25% but are less than 100%, the Acquisition also constitutes a major transaction of the Company and is subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, each of Beijing Jiangheyuan, Jangho Co., Jangho HK, Mr. Liu, Ms. Fu and Reach Glory is a substantial shareholder of the Company and thus are connected persons of the Company as defined under the Listing Rules. The execution of the Amended Deed constitutes a connected transaction under Chapter 14A of the Listing Rules, which is subject to the reporting, announcement, circular and Independent Shareholders' approval requirements under the Listing Rules.

Upon Completion, the Target Company will be an indirect wholly-owned subsidiary of the Company. The execution and implementation of the Entrustment Agreement will amount to a continuing connected transaction under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios for the estimate annual amount payable to the Enlarged Group by the Entrusters in relation to the entrustment arrangements is less than 5% and the total consideration is less than HK$3,000,000, this transaction will constitute de minimis continuing connected transaction exempt from the reporting, announcement, circular, annual review and Independent Shareholders' approval requirements under Rule 14A.76(1)

(c) of the Listing Rules.

The EGM will be held during which ordinary resolutions shall be proposed to the Independent Shareholders to approve the Equity Transfer Agreement, the Amended Deed and the transactions contemplated thereunder. The Independent Board Committee has been formed to make recommendation to the Independent Shareholders on the terms of the Equity Transfer Agreement, the Amended Deed and the transactions contemplated thereunder. An independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders on the same.

The Company expects the notice of EGM and the circular giving further information on the Equity Transfer Agreement, the Amended Deed and the transactions contemplated thereunder and containing, among others, the advice of the Independent Financial Adviser and the recommendations from the Independent Board Committee is expected to be despatched to the Shareholders on or before 8 June 2017.

INTRODUCTION

On 17 May 2017, the Transferee, an indirect wholly-owned subsidiary of the Company, entered into the Equity Transfer Agreement with the Transferors, pursuant to which the Transferee has agreed to acquire, and the Transferors have agreed to transfer, in aggregate 100% equity interest in the Target Company at the Consideration.

THE EQUITY TRANSFER AGREEMENT

A summary of the principal terms of the Equity Transfer Agreement is set out below:

Date

17 May 2017

Parties

1. Jangho Curtain Wall Hongkong Limited (江河幕墻香港有限公司) (as one of the Transferors);

2. 江河創建集團股份有限公司 (Jangho Group Co., Ltd.*) (as one of the Transferors); and

3. Sundart Engineering Investments Limited (承達工程投資有限公司) (as the Transferee)

   Assets to be acquired

   Pursuant to the Equity Transfer Agreement, the Transferee has agreed to acquire from Jangho HK and Jangho Co., and each of Jangho HK and Jangho Co. has agreed to transfer to the Transferee, 75% and 25% equity interests in the Target Company, respectively, representing an aggregate of 100% equity interest of the Target Company, in accordance with the terms and conditions as set out therein. Upon Completion, Sundart Beijing will become an indirect wholly-owned subsidiary of the Company.

   Consideration and payment terms

   The Consideration was determined after arm's length negotiations between the relevant parties based on (a) the preliminary estimation of the fair value of 100% equity interest in the Target Company of HK$520 million as at 28 February 2017 carried out by the Independent Valuer which was determined with reference to (i) equity value to the earnings before interests, taxes, depreciation and amortisation of market players which are listed companies; and (ii) the proposed declaration and distribution of dividend in a sum of HK$100 million by the Target Company prior to the Completion; and (b) the future prospects of the Target Group given the potential growth in the market of fitting-out business in the PRC, details of which are set out in the paragraph headed "Reasons for and benefits of the acquisition" in this announcement.

   In view of the general environment and the particular situation in which the Target Company is operating, some assumptions have been adopted in the appraisal in order to sufficiently support the concluded value of the Target Company made by the Independent Valuer, including but not limited to:

4. the availability of finance will not be a constraint;

5. the Target Company shall have uninterrupted rights to operate its existing business during the unexpired term of its authorised enterprise operating period;

6. the unaudited financial statements of the Target Company as supplied to the Independent Valuer have been prepared in a manner truly and accurately reflected the financial position of the Target Company as at the respective balance sheet dates;

7. the Target Company has obtained all necessary permits and approvals to carry out its business and its ancillary services and shall be entitled to renew those permits and approvals upon their expiry subject to no legal impediment and costs of substantial amount;

8. except those stated in the financial statements, the Target Company is free and clear of any lien, charge, option, pre-emption rights or other encumbrances or rights whatsoever; and

9. the estimated fair value does not include consideration of any extraordinary financing or income guarantees, special tax considerations or any other typical benefits which may influence the ordinary business enterprise value of the Target Company.

Having taken into account of the above, the Directors (excluding the independent non- executive Directors) consider that the Consideration and the terms of the Equity Transfer Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Consideration shall be satisfied in cash and shall be payable by the Transferee to the Transferors within five Business Days upon the Completion Date.

The Consideration will be funded by internal resources of the Group and/or bank borrowings.