Forgame : Discloseable Transaction - Acquisition of 69.84% Equity Interest in the Target Compa...

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This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

Forgame Holdings Limited

雲 遊 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00484)

DISCLOSEABLE TRANSACTION

ACQUISITION OF 69.84% EQUITY INTEREST IN THE TARGET COMPANY

AND THE ISSUE OF CONSIDERATION SHARES

UNDER GENERAL MANDATE

THE TRANSACTION

On 24 April 2019 (after trading hours), the Company, the Investor (a direct wholly-owned subsidiary of the Company), KongZhong, the Vendor and the Target Company, among others, entered into the Investment Agreement pursuant to which (i) the Investor has conditionally agreed to, by way of the Subscription, subscribe for 9.30% equity interest in the Target Company in the form of new registered capital for a total consideration of RMB20,000,000; and (ii) the Vendor has conditionally agreed to sell, and the Investor has conditionally agreed to acquire, 60.54% equity interest in the Target Company (corresponding to RMB1,109,890 in the paid-up registered capital of the Target Company) for a total consideration of RMB130,152,857, by way of the Equity Transfer. Pursuant to the Investment Agreement, the consideration for the Equity Transfer will be satisfied by the allotment and issue of 22,268,908 new Shares as the Consideration Shares by the Company under the General Mandate to the entity(ies) designated by the Vendor at the issue price of HK$6.876 per Consideration Share. The Consideration Shares will, upon issue, represent (i) approximately 16.24% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 13.97% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares, subject to Completion and assuming that there will be no change in the issued share capital of the Company save for the allotment and issue of the Consideration Shares.

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IMPLICATIONS UNDER THE LISTING RULES

As the highest of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Transaction is more than 5% but less than 25%, the Transaction constitutes a discloseable transaction for the Company and is subject to the announcement and reporting requirements under Chapter 14 of the Listing Rules.

The Consideration Shares will be allotted and issued pursuant to the General Mandate. 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 in due course.

Completion is subject to the satisfaction of the conditions precedent to the Investment Agreement and there is no assurance that such conditions precedent will be fulfilled. Therefore, the transactions contemplated under the Investment Agreement may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the shares or any securities of the Company.

INTRODUCTION

On 24 April 2019 (after trading hours), the Company, the Investor, KongZhong, the Vendor and the Target Company, among others, entered into the Investment Agreement, the principal terms of which are as follows:

THE TRANSACTION

Date

24 April 2019

Parties

(i)the Company

(ii)the Investor

(iii)KongZhong

(iv)the Vendor

(v)the Target Company

(vi)KongZhong China

(vii)Mr. Wang Leilei

(viii)Shanghai Wangyu

(ix)Mr. Jiang

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(x) Mr. Sheng

As at the date of this announcement, KongZhong holds approximately 7.44% interest in the Company. Save as disclosed in this announcement, 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 parties above and their ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined under the Listing Rules).

Subject matter

The Subscription

Pursuant to the Investment Agreement, the Investor has conditionally agreed to subscribe for 9.30% equity interest in the Target Company in the form of new registered capital (corresponding to RMB170,552 in the registered capital of the Target Company) for a total consideration of RMB20,000,000. Upon completion of the Subscription, the registered capital of the Target Company shall increase from RMB1,662,880 to RMB1,833,432.

The Equity Transfer

Pursuant to the Investment Agreement, the Vendor has conditionally agreed to sell, and the Investor has conditionally agreed to acquire, 60.54% equity interest in the registered capital of the Target Company (corresponding to RMB1,109,890 in the paid-up registered capital of the Target Company) for a total consideration of RMB130,152,857.

Immediately after completion of the Subscription and the Equity Transfer, the Investor shall hold 69.84% equity interest of the Target Company.

Consideration

The Consideration shall be settled (i) as to RMB20,000,000 with respect to the Subscription, in readily available cash; and (ii) as to RMB130,152,857 with respect to the Equity Transfer, by the Company allotting and issuing 22,268,908 new Shares as the Consideration Shares at the issue price of HK$6.876 under the General Mandate, credited as fully paid, to the entity(ies) designated by the Vendor, in accordance with the terms of the Investment Agreement.

The Consideration was determined based on arm's length negotiations between, among others, the Company, the Investor, KongZhong and the Vendor, taking into account a number of factors including but not limited to: (i) the assessment on the prospects of the virtual reality game industry by the Company's management; (ii) the Thresholds (as defined below) as guaranteed profits as set out in the section titled ''Profit Guarantee'' below; (iii) a valuation of the 100% equity value of the Target Company and its subsidiaries, namely 北京 玩氪科技有限責任公司 (Beijing Wan Ke Technology Co., Ltd.*), 蕪湖空見信息科技有限公 司 (Wuhu Kongjian Information Technology Co., Ltd.*) and 天津玩氪科技有限公司 (Tianjin Wan Ke Technology Co., Ltd.*) (the ''Valuation'') prepared by the Independent Valuer adopting market approach; (iv) the future development of the Target Company, in

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particular its potential of being one of the largest VR game brands in the PRC; and (v) the benefits to be derived by the Group from the Transaction as described under the section headed ''Reasons for and benefits of the Transaction'' in this announcement.

Valuation

According to the Valuation performed by the Independent Valuer, the appraised value of the Target Group is RMB251,315,000 as at 31 March 2019 (the ''Valuation Date''), which was prepared using market approach. As the Valuation is regarded as a profit forecast under Rule

14.61of the Listing Rules, the requirements under Rules 14.60A and 14.62 of the Listing Rules are applicable.

The following are the details of the principal assumptions upon which the Valuation was based:

. There will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Group;

. The financial projection of the Target Group (the ''Projection'') has been prepared on a reasonable basis, reflecting estimates (i.e. assumptions and parameters adopted in the Projection) which have been arrived at after due and careful consideration by the management of the Target Group;

. The availability of finance will not be a constraint on the forecast growth of the operation of the Target Group in accordance with the Projection;

. The Target Group will retain and have competent management, key personnel, and technical staff to support their ongoing operation; and

. There are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported values. Further, there is no responsibility for changes in market conditions after the Valuation Date.

The Board has reviewed the bases and assumptions based upon which the Valuation has been prepared by the Valuer. The Board has also considered the letter addressed to the Company from the reporting accountant of the Company, Baker Tilly Hong Kong Limited (''Baker Tilly'') confirming, among other things, that they have reviewed the accounting policies and calculations of the profit forecast on which the Valuation is based. The Board is of the opinion that the Valuation prepared by the Independent Valuer has been made after due and careful enquiry.

A letter from each of Baker Tilly and the Board has been submitted to the Stock Exchange, and is set out in Appendix I and Appendix II respectively to this announcement pursuant to Rule 14.62 of the Listing Rules.

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Experts and Consents

The qualifications of the experts who have given their statements in this announcement are as follows:

Name	Qualification
Baker Tilly Hong Kong Limited	Certified Public Accountants
AVISTA Valuation Advisory Limited	Independent Valuer

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of Baker Tilly and the Independent Valuer is a third party independent of the Group and its connected persons.

As at the date of this announcement, none of Baker Tilly and the Independent Valuer has any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person(s) to subscribe for the securities in any member of the Group.

Each of Baker Tilly and the Independent Valuer has given and has not withdrawn its consent to the publication of this announcement with inclusion of its report or letter and all references to its name in the form and context in which it respectively appears in this announcement.

Consideration Shares

The Consideration with respect to the Equity Transfer in the amount of RMB130,152,857 will be satisfied by the Company allotting and issuing 22,268,908 new Shares as Consideration Shares at the issue price of HK$6.876 under the General Mandate, credited as fully paid, to the entity(ies) designated by the Vendor, in accordance with the terms of the Investment Agreement.

The issue price of HK$6.876 per Consideration Share represents:

(a)a discount of approximately 8.20% to the closing price of HK$7.49 per Share as quoted on the Stock Exchange on 24 April 2019, being the date of the Investment Agreement;

(b)a discount of approximately 9.17% to the average closing price of HK$7.57 per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days immediately prior to the date of the Investment Agreement; and

(c)a premium of approximately 12.89% to the average closing price of HK$6.09 per Share as quoted on the Stock Exchange for the last twenty (20) consecutive trading days immediately prior to the date of the Investment Agreement.

The issue price per Consideration Share was arrived at upon arm's length negotiation between the Company and the Vendor based on the following considerations: (i) the share prices in the past twenty (20) trading days; and (ii) the future development of the Group.

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