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China Risun Group Limited
中國旭陽集團有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1907)
DISCLOSEABLE TRANSACTION
IN RELATION TO THE INVESTMENT
IN INNER MONGOLIA ZHONGRAN
The Board is pleased to announce that on 20 August 2019 (after trading hours), Risun Chemicals, Huhehaote Zhongran, Tianjin Baisen and Inner Mongolia Zhongran entered into the Capital Increase Agreement, pursuant to which Risun Chemicals, Tianjin Baisen and Huhehaote Zhongran will subscribe for RMB68.75 million, RMB12.5 million and RMB18.75 million, respectively, to the increased registered capital of Inner Mongolia Zhongran.
In addition, Risun Chemicals and Tianjin Baisen shall provide guarantee for the payment of the Debts and the Preferential Dividend by Inner Mongolia Zhongran based on their corresponding shareholdings in Inner Mongolia Zhongran, i.e. Risun Chemicals and Tianjin Baisen shall provide guarantee for 78.57% and 21.43% of the total amount of the Debts and the Preferential Dividend respectively.
Upon completion of the Transaction, the registered capital of Inner Mongolia Zhongran will increase from RMB25 million to RMB125 million, and Risun Chemicals, Tianjin Baisen and Huhehaote Zhongran will hold 55%, 15% and 30% equity interest of Inner Mongolia Zhongran respectively. Immediately after the Completion, Inner Mongolia Zhongran will not be a subsidiary of the Company. It will become a subsidiary of the Company and its financial results, assets and liabilities will be consolidated into the Group upon fulfillment of the Consolidation Conditions.
As one or more of the applicable percentage ratio(s) exceed 5% but are less than 25%, the Transaction constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules, and is subject to the reporting and announcement requirements.
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The Board is pleased to announce that on 20 August 2019 (after trading hours), Risun Chemicals, Huhehaote Zhongran, Tianjin Baisen and Inner Mongolia Zhongran entered into the Capital Increase Agreement, pursuant to which Risun Chemicals, Tianjin Baisen and Huhehaote Zhongran will contribute RMB68.75 million, RMB12.5 million and RMB18.75 million, respectively, to the registered capital of Inner Mongolia Zhongran. Upon completion of the Transaction, the registered capital of Inner Mongolia Zhongran will increase from RMB25 million to RMB125 million, and Risun Chemicals, Tianjin Baisen and Huhehaote Zhongran will hold 55%, 15% and 30% equity interest of Inner Mongolia Zhongran respectively.
BACKGROUND
Huhehaote Zhongran is currently the sole shareholder of Inner Mongolia Zhongran. Inner Mongolia Zhongran owns the Qingshuihe Project, a coal-to-methanol production project consists of production facilities located in Qingshuihe County, Huhehaote, Inner Mongolia, PRC, with approved annual production quota of 900,000 tonnes dry coke, 100,000 tonnes methanol and 150,000 tonnes coal tar, which was transferred from Huhehaote Zhongran to Inner Mongolia Zhongran in 2018. The Qingshuihe Project commenced its constructions in 2006 and commenced operations in 2009. Since April 2015, the Qingshuihe Project has suspended operations due to previous changes in the macro-economic governmental policies in the PRC and the then operational risks arising in connection with the changes in the relevant policies. The Directors believe that coking industry in the PRC has recovered as the price of hard coking coal has begun to recover since May 2016 and the Group can benefit from new governmental policy implementation such as supply-side reform.
As part of its the operation and management services business, the Group plans to invest in Inner Mongolia Zhongran and re-commence operations of the Qingshuihe Project. As the PRC government has ceased to grant new coking production quota, the Directors are of the view that the Transaction is a valuable opportunity to acquire existing approved coking production quota to expand its production scale.
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DETAILS OF THE CAPITAL INCREASE AGREEMENT
The principal terms of the Capital Increase Agreement are summarized as follows:
Date | 20 August 2019 (after trading hours) | |||||||||||
Parties | (i) | Risun Chemicals; | ||||||||||
(ii) | Huhehaote Zhongran; | |||||||||||
(iii) | Tianjin Baisen; and | |||||||||||
(iv) | Inner Mongolia Zhongran. | |||||||||||
To the best of the Directors' knowledge, information | ||||||||||||
and belief, having made all reasonable enquiries, | ||||||||||||
Huhehaote Zhongran, Tianjin Baisen and Inner | ||||||||||||
Mongolia Zhongran and their respectively ultimate | ||||||||||||
beneficial owners are independent third parties of the | ||||||||||||
Company and its connected person as at the date of this | ||||||||||||
announcement. | ||||||||||||
Subject matter | Inner Mongolia Zhongran will increase its registered | |||||||||||
capital from RMB25 million to RMB125 million, | ||||||||||||
and Risun Chemicals, Tianjin Baisen and Huhehaote | ||||||||||||
Zhongran will subscribe for RMB68.75 million, | ||||||||||||
RMB12.5 million and RMB18.75 million, respectively, | ||||||||||||
to the increased registered capital of Inner Mongolia | ||||||||||||
Zhongran. The shareholding structure of Inner Mongolia | ||||||||||||
Zhongran before and after the Transaction is as follows: | ||||||||||||
Registered | Registered | |||||||||||
capital | Contribution | capital | ||||||||||
contributed | amount | contributed | % of total | |||||||||
before the | in the | Form of | after the | registered | ||||||||
Party | Transaction | Transaction | contribution | Transaction | capital | |||||||
(RMB million) | (RMB million) | (RMB million) | ||||||||||
Risun | ||||||||||||
Chemicals | - | 68.75 | Cash | 68.75 | 55% | |||||||
Huhehaote | In-kind | |||||||||||
Zhongran | 25.00 | 12.50 | contribution | 37.00 | 30% | |||||||
Tianjin Baisen | - | 18.75 | Cash | 18.75 | 15% | |||||||
Total | 25.00 | 100.00 | 125.00 | 100.00 | ||||||||
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Payment of | Within 30 days of the Capital Increase Agreement: | |
contribution | ||
(i) | Huhehaote Zhongran shall complete its registered | |
capital contribution by way of transferring the | ||
corresponding amount of capital reserve of Inner | ||
Mongolia Zhongran to paid-in capital; and | ||
(ii) | Risun Chemicals and Tianjin Baisen shall | |
complete their contributions by way of transfer the | ||
corresponding amount of cash into the designated | ||
bank account of Inner Mongolia Zhongran. | ||
Basis of consideration | The Parties recognized, the total assets, total liabilities | |
and net assets of Inner Mongolia Zhongran as | ||
approximately RMB801.37 million, RMB486 million | ||
and RMB314.37 million, respectively, as at 31 October | ||
2017, as appraised by an independent third party, which | ||
were used as the basis to determine the value of the | ||
equity interests of Inner Mongolia Zhongran, and to | ||
further determine the shareholding of each party after | ||
the Transaction. | ||
The Directors also made references to the audited | ||
financial statements of Inner Mongolia Zhongran for | ||
the year ended 31 December 2018 and believe that the | ||
consideration for the Transaction is fair and reasonable. | ||
Source of fund | The Group's registered capital contribution to Inner | |
Mongolia Zhongran will be funded with internal | ||
resources. | ||
Treatment of Debts | As agreed by the Parties and with reference to the | |
valuation report as at 31 October 2017 prepared by | ||
an independent third party, Inner Mongolia Zhongran | ||
owes RMB486 million to Huhehaote Zhongran. Inner | ||
Mongolia Zhongran shall repay the Debts according to | ||
the schedule below: | ||
(i) | during the 1st year after the Completion: RMB50 | |
million; | ||
(ii) | during the 2nd year after the Completion: RMB100 | |
million; | ||
(iii) | during the 3rd year after the Completion: RMB100 | |
million; |
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(iv) during the 4th year after the Completion: RMB156
million; and | |
(v) within six months after the full payment of the | |
Preferential Dividend: RMB80 million. | |
If the Qingshuihe Project becomes suspended by the | |
government due to change of applicable laws or policies | |
during the first four years after the Completion, the | |
aggregate Debts owed by Inner Mongolia Zhongran | |
to Huhehaote Zhongran shall be reduced to RMB361 | |
million. | |
(collectively, the "Debts") | |
Preferential Dividend | Starting from the fifth year after the Completion, Inner |
Mongolia Zhongran shall pay an aggregate amount | |
of approximately RMB277.87 million by way of | |
Preferential Dividend to Huhehaote Zhongran in four | |
years, amounting to approximately RMB69.47 million | |
per year. | |
If the Qingshuihe Project becomes suspended by the | |
government due to change of applicable laws or policies | |
during the first four years after the Completion, the | |
aggregate amount of Preferential Dividend to be paid to | |
Huhehaote Zhongran will be reduced to RMB50 million, | |
amounting to RMB12.5 million per year. | |
If the Qingshuihe Project becomes suspended by the | |
government due to change of applicable laws or policies | |
during the period starting from the beginning of the | |
fifth year after the Completion and ending the end of | |
the eighth year after the Completion, the amount of | |
Preferential Dividend to be paid to Huhehaote Zhongran | |
for that year shall be reduced on a pro-rata basis based | |
on the actual operational days of the Qingshuihe Project | |
during that year, provided that the accumulated amount | |
of Preferential Dividend paid to Huhehaote Zhongran | |
shall not be less than RMB50 million. | |
(collectively, the "Preferential Dividend") |
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HKEx - Hong Kong Exchanges and Clearing Ltd. published this content on 21 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 August 2019 23:12:07 UTC