SHENGUAN HOLDINGS (GROUP) LIMITED 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.
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 00829) CONNECTED TRANSACTIONS
The Company is pleased to announce that on 6 August 2015, the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Acquisition Agreement with the Vendor for the acquisition of 15% equity interest in the Target Company at the Consideration payable by the Purchaser to the Vendor in cash.
As at the date of this announcement, the Target Company is owned by the Vendor and Gobitech Limited as to 15% and 85% respectively. On the same day of the Acquisition Agreement, Gobitech Limited entered into two separate equity transfer agreements with Guangxi Guan Yu and Guangxi Shenguan to transfer as to 20% and 45% of its equity interest to Guangxi Guan Yu and Guangxi Shenguan respectively (the "Transfer").
After the Transfer and upon completion of the Acquisition, the Target Company will be owned by the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited as to
15%, 20%, 45% and 20% respectively. Guangxi Guan Yu is owed by Zhou Yaxian (J!J.s:tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl), Mo Yunxi (�W%) and Cai Yueqing (�!1
�) as to 88%, 3%, 3%, 3% and 3% respectively, and Guangxi Shenguan is owned by Zhou
Yaxian (J!J.s:tlJ) and Sha Junqi (tt'��) as to 95% and 5% respectively.
As Zhou Yaxian (J!J.s:tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl) and Mo Yunxi (� W%) are all executive Directors and are therefore connected persons of the Company (as defined under Chapter 14A of the Listing Rules), the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Zhou Yaxian (J!J.s: tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl) and Mo Yunxi (�W%) have abstained from voting in respect of the resolution approving the Acquisition and the transaction contemplated under the Acquisition Agreement.
As the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition are more than 0.1% but less than 5%, the Acquisition is subject to the reporting and announcement requirements, but is exempt from the approval by the independent shareholders of the Company under Chapter 14A of the Listing Rules.
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After the completion of the Acquisition, the shareholders of the Target Company, namely the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited, unanimously agreed to enter into a capital increase agreement (the "Capital Increase Agreement"), pursuant to which, the parties proposed to make an additional capital contribution of RMB40,000,000 (the "Capital Increase Amount") to the existing registered capital of RMB44,170,000 of the Target Company (the "Capital Increase").
The capital contribution by Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited are RMB6,000,000, RMB8,000,000, RMB18,000,000 and RMB8,000,000 respectively, which will be in proportion to their equity interest in the Target Company (i.e.
15%, 20%, 45% and 20% respectively), and upon completion of the Capital Increase, their respective equity interest proportion in the Target Company shall remain the same.
As the capital contribution will be provided in proportion to the equity interest of the shareholders, namely the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited in the Target Company and on normal commercial terms, this connected transaction is fully exempted from the reporting, announcement and shareholders' approval requirements under Rule 14A.89 of the Listing Rules
6 August 2015
Parties to the Acquisition Agreement
(i) the Purchaser, as the purchaser; and
(ii) the Vendor, as the vendor.
The Vendor has agreed to sell and the Purchaser has agreed to acquire the 15% of the equity interest in the Target Company. As at the date of this announcement, the Target Company is owned by the Vendor and Gobitech Limited as to 15% and 85% respectively. On the same day of the Acquisition Agreement, Gobitech Limited entered into two separate equity transfer agreements with Guangxi Guan Yu and Guangxi Shenguan to transfer as to 20% and 45% of its equity interest to Guangxi Guan Yu and Guangxi Shenguan respectively (the "Transfer").
After the Transfer and upon completion of the Acquisition, the Target Company will be owned by the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited as to 15%,
20%, 45% and 20% respectively.
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The Target Company is a company established in the PRC with limited liability at the Wuhan Economic and Technological Zone (U1JW'$ìWl��) in the PRC in 2002, specialising in products in professional health care, nutrition research and development, production and sales services for pregnancy, early childhood and population with special needs. The Target Company is principally engaged in the sales of the its products under its own "@-tr�" and "FERGUSON" brand name and owns eight invention patents.
The Consideration shall be payable by the Purchaser to the Vendor in cash in the following manner:
(i) an aggregate of RMB9,330,000 (being approximately 30% of the total consideration) payable within 10 business days of the execution of the Acquisition Agreement, excluding any business days where all necessary approvals or consents has not yet been obtained by the relevant authorities;
(ii) an aggregate of RMB15,550,000 (being approximately 50% of the total consideration) payable within 1 month of the completion by both the Purchaser and the Vendor of the registration with the relevant bureau for industry and commerce in the PRC for the change of equity interest of the Target Company; and
(iii) the remaining of RMB6,220,000 (being approximately 20% of the total consideration) payable within 3 months of the completion by both the Purchaser and the Vendor of the registration with the relevant bureau for industry and commerce in the PRC for the change of equity interest of the Target Company.
The Consideration was arrived at after arm's length negotiations between the parties and was determined with reference to the audited financial information of the Target Company and the Valuation Report. The audited consolidated net assets of the Target Company was approximately RMB56.31 million as at 31 May 2015 and approximately RMB55.87 million as at 31 December 2014. For the year ended 31 December 2014, the Target Company recorded audited consolidated profit before and after taxation of approximately RMB11.98 million and RMB10.57 million, respectively. The valuation of the total net assets of the Target Company based on the Valuation Report was approximately RMB155.5 million as at 31 May 2015.
Having considered the approximation between the Consideration and 15% of the valuation of the total net assets of the Target Company based on the Valuation Report, the Board (including the independent non-executive Directors) is of the view that the terms of the Acquisition Agreement (including the Consideration) are fair and reasonable, the Acquisition is on normal commercial terms and the entering into of the Acquisition Agreement is in the interest of the Company and the Shareholders as a whole.
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Conditions Precedent:
The Acquisition Agreement is conditional upon the parties hereto obtained the necessary consents and approval with the relevant exchange and regulatory body in respect of any applicable laws and regulations requirements and the due execution of the Acquisition Agreement by the Vendor and the Purchaser.
Undertakings by the Vendor:
i. the registered capital of its part in the Target Company has been fully paid up;
ii. it has the full right to dispose and its equity interest in the Target Company is not subject to any mortgage, pledge or guarantee; and
iii. save as already disclosed by the Target Company in its latest audited report as at 31
May 2015, the Target Company does not have any debts or liabilities or any payables, including but not limited to any tax, sewage charges, employee social insurance expenses, employee wages and benefits, that exceeds RMB10,000.
Following completion of the Acquisition Agreement, the Target Company will be held as to
15% by the Purchaser.
The Group is principally engaged in the manufacture and sale of edible collagen sausage casing products and pharmaceutical products in the PRC. It has been the strategy of the Group to seek suitable investment opportunities with a view to increase the Group's shareholders value and broaden its income source alongside with developing its existing businesses.
In light of the social development and general improvement in people's living standard in the PRC, coupled with their lifestyle change, the Group saw a strong growth in overall demand for healthcare products. Healthcare industry in the PRC has been growing rapidly with increasing market capacity, and it is playing an increasingly important role in the national economy, particularly in the case of the healthcare product segment, which has become a new thrust to the progress of economic development in the PRC. The Target Company is a company established in the PRC with limited liability at the Wuhan Economic and Technological Zone (U1JW'$ìWl��) in 2002, specialising in products in, nutrition research and development, production and sales services for pregnancy, early childhood and population with special needs. It has sound financial position and established client base. Upon completion of the Acquisition, the Group will be able to further extend the coverage of its pharmaceutical products and healthcare products as well as to expand its client network.
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The Directors (including the independent non-executive Directors) are of the view that the terms of the Acquisition Agreement and transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.
The Group is principally engaged in the manufacture and sale of edible collagen sausage casing products and pharmaceutical products in the PRC.
As at the date of this announcement, the Purchaser is an indirect wholly-owned subsidiary of the Company.
The Vendor is a company established in the PRC with limited liability and is principally engaged in the wholesale and retail of packaged food, sale of local and special agricultural by- products (except cooking oil), forage, hardware (except motorised bicycle), daily necessities, knitting textile, paper, pulp, chemical products (except hazardous chemicals), office equipment and provision of advice in agricultural technology. The Vendor held 15% equity interest in the Target Company immediately before the Acquisition.
To the best of the knowledge, information and belief of the Directors, after having made all reasonable enquiries, the Vendor and its ultimate beneficial owner(s) are Independent Third Parties.
As at the date of this announcement, the Target Company is owned by the Vendor and Gobitech Limited as to 15% and 85% respectively. On the same day of the Acquisition Agreement, Gobitech Limited entered into two separate equity transfer agreements with Guangxi Guan Yu and Guangxi Shenguan to transfer as to 20% and 45% of its equity interest to Guangxi Guan Yu and Guangxi Shenguan respectively.
After the Transfer and upon completion of the Acquisition, the Target Company will be owned by the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited as to
15%, 20%, 45% and 20% respectively. Guangxi Guan Yu is owed by Zhou Yaxian (J!J.s:tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl), Mo Yunxi (�W%) and Cai Yueqing (�!1�) as to 88%, 3%, 3%, 3% and 3% respectively, and Guangxi Shenguan is owned by Zhou Yaxian (J!J
.s:tlJ) and Sha Junqi (tt'��) as to 95% and 5% respectively.
As Zhou Yaxian (J!J.s:tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl) and Mo Yunxi (� W%) are all executive Directors and are therefore connected persons of the Company (as defined under Chapter 14A of the Listing Rules), the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Zhou Yaxian (J!J.s:tlJ), Ru Xiquan (lìiii;-i:), Shi Guicheng (filjl:nl) and Mo Yunxi (�W%) have abstained from voting in respect of the resolution approving the Acquisition and the transaction contemplated under the Acquisition Agreement.
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As the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition are more than 0.1% but less than 5%, the Acquisition is subject to the reporting and announcement requirements, but is exempt from the approval by the independent shareholders of the Company under Chapter 14A of the Hong Kong Listing Rules.
After the completion of the Acquisition, the shareholders of the Target Company, namely the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited, unanimously agreed to enter into a capital increase agreement (the "Capital Increase Agreement"), pursuant to which, the parties proposed to make an additional capital contribution of RMB40,000,000 (the "Capital Increase Amount") to the existing registered capital of RMB44,170,000 of the Target Company (the "Capital Increase").
Contribution and Basis of Determination
The Capital Increase Amount was determined with reference to the expected increase in the working capital and the capital expenditure to cope with the business development of the Target Company. The capital contribution by Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited are RMB6,000,000, RMB8,000,000, RMB18,000,000 and RMB8,000,000 respectively, which will be in proportion to their equity interest in the Target Company (i.e. 15%, 20%, 45% and 20% respectively), and upon completion of the Capital Increase, their respective equity interest proportion in the Target Company shall remain the same.
The shareholders of the Target Company shall pay their respective contribution of the Capital Increase within 60 days of the execution of the Capital Increase Agreement and the Capital Increase Agreement shall become effective upon due execution by the authorized representative of each of the Target Company.
The capital contribution will be applied as general working capital and capital expenditure for future business development of the Target Company. After the Capital Increase, the Target Company will be able to further expand its production capacity and customer network.
The Directors (including the independent non-executive Directors) are of the view that the transaction contemplated under the Capital Increase Agreement is made on normal commercial terms and the terms contained therein are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole.
As the capital contribution will be provided in proportion to the equity interest of the shareholders, namely the Purchaser, Guangxi Guan Yu, Guangxi Shenguan and Gobitech Limited in the Target Company and on normal commercial terms, this connected transaction is fully exempted from the reporting, announcement and shareholders' approval requirements under Rule 14A.89 of the Listing Rules.
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Unless the context otherwise requires, the following terms used in this announcement shall have the following meanings:
"Acquisition" the acquisition of 15% equity interest of the Target Company held by the Vendor pursuant to the terms and conditions of the Acquisition Agreement
"Acquisition Agreement" the sale and purchase agreement dated 6 August 2015 entered into between the Purchaser and the Vendor relating to the acquisition of 15% equity interest of the Target Company
"Board" the board of Directors
"Business Day(s)" a day other than a Saturday or Sunday, on which banks in Hong
Kong are open for business generally
"Company" Shenguan Holdings (Group) Limited, a company incorporated in the Cayman Islands with limited liability whose issued Shares are listed on the Stock Exchange
"connected person" has the meaning ascribed to it under the Listing Rules
"Consideration" t h e consideration of RMB31.10 million payable by the Purchaser as purchaser to the Vendor as vendor for the Acquisition pursuant to the Acquisition Agreement
"Directors" directors of the Company
"Group" the Company and its subsidiaries
"Guangxi Guan Yu" Jl!ffJa�:li��r!%� (Guangxi Guan Yu Zhiye Limited*), a company established in the PRC with limited liability
"Guangxi Shenguan" Jl!ff JaJ��r!%� (Guangxi Shenguan Investment Limited*), a company established in the PRC with limited liability
"Listing Rules" the Rules Governing the Listing of Securities on the Stock
Exchange
"PRC" t h e People's Republic of China (for the purpose of this announcement, excluding The Hong Kong Special Administrative Region, The Macau Special Administrative Region and Taiwan)
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"Purchaser" !H Ja:IfaM::&�r!%� (Wuzhou Shenguan Protein Casing Co., Ltd.*), a company established in the PRC with limited liability, being an indirect wholly-owned subsidiary of the Company
"Shareholders" holder(s) of the shares of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Target Company" @-tr � U1J ì �r!%� (Ferguson (Wuhan) Biotech Company Limited*), a company established in the PRC with limited liability at the Wuhan Economic and Technological Zone in 2002
"Valuation Report" the valuation report prepared by :l"*r=iP.�1fti5�r!
%� (China Alliance Appraisal Co, Ltd), an independent
professional asset valuer appointed for the Acquisition and
dated 29 June 2015
"Vendor" W�ff.J]���r!%� (Nanning Zhe Yuan Tang Business Limited*), a company established in the PRC with limited liability
"%" percent.
In this announcement, if there is any inconsistency between the Chinese names of the entities or enterprises established in the PRC and their English translations, the Chinese names shall prevail. The English translation of names or any descriptions in Chinese which are marked with "*" is for identification purpose only.
By Order of the Board
Shenguan Holdings (Group) Limited Zhou YaxianChairman
Hong Kong, 6 August 2015
As at the date of this announcement, the executive Directors are Ms. Zhou Yaxian, Mr. Shi Guicheng, Mr. Ru Xiquan and Mr. Mo Yunxi; the non-executive Director is Mr. Low Jee Keong; and the independent non-executive Directors are Mr. Tsui Yung Kwok, Mr. Meng Qinguo and Mr. Yang Xiaohu.
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