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Newtree : Announcements and Notices - Very Substantial Acquisition In Relation to the Acquisition of the Remaining 80% of the Issued Share Capital Of Alpha Youth Limited

09/27/2019 | 08:13am EDT

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 disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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

Newtree Group Holdings Limited

友 川 集 團 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1323)

VERY SUBSTANTIAL ACQUISITION

IN RELATION TO THE ACQUISITION OF THE REMAINING

80% OF THE ISSUED SHARE CAPITAL OF

ALPHA YOUTH LIMITED

Joint Financial Adviser to the Company

THE ACQUISITION

On 27 September 2019 (after trading hours of the Stock Exchange), the Purchaser, a wholly-owned subsidiary of the Company, issued an Option Notice to the Vendor to exercise the Call Option to acquire the remaining 80% of the issued share capital of the Target. Upon the exercise of the Call Option, the Purchaser and the Vendor entered into the Acquisition Agreement, pursuant to which, among other things, the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to procure South Sunrise to sell, the Sale Shares, which represent 80% of the issued share capital of the Target as at the Completion Date, at the Consideration of RMB368,074,400 (equivalent to HK$408,562,584) (subject to adjustment).

1

The Consideration shall be satisfied as follows: (i) as to HK$20,000,000 shall be payable by the Purchaser (or its designated corporation) to the Vendor (or its nominee(s)) in cash as the Deposit within ten (10) Business Days upon signing of the Acquisition Agreement;

  1. as to HK$50,000,000 shall be payable by the Purchaser (or its designated corporation) to the Vendor (or its nominee(s)) in cash upon Completion; (iii) as to HK$160,000,000 shall be payable by the allotment and issue of 320,000,000 Consideration Shares at the issue price of HK$0.50 per Share by the Company to the Vendor (or its nominee(s)) upon Completion; (iv) as to HK$70,000,000 shall be payable by the issue of the Consideration CB at the Conversion Price of HK$0.53 per Conversion Share by the Company to the Vendor (or its nominee(s)) upon Completion; and (v) as to the remaining balance of HK$108,562,584 (subject to adjustment) shall be payable by the issue of three Promissory Notes in the respective principal amount of HK$36,000,000, HK$36,000,000 and HK$36,562,584 by the Company to the Vendor (or its nominee(s)) upon Completion.

The Target Group is principally engaged in the production and sale of ready-mixed commercial concrete in Hainan Province, the PRC. Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and the financial statements of the Target Group will be consolidated into the financial statements of the Enlarged Group.

LISTING RULES IMPLICATION

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Acquisition exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company and is therefore subject to reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules. The Consideration Shares and the Conversion Shares will be issued under the Specific Mandate.

LISTING COMMITTEE'S DECISION

The Listing Committee has determined that the Acquisition is an extreme very substantial acquisition which is NOT subject to reverse takeover rules. Enhanced disclosure comparable to the standard for listing documents for new listing applicants will be required in the Circular and Messis Capital Limited has been appointed as the financial adviser of the Company to conduct due diligence with reference to Practice Note 21 of the Listing Rules on the Target Group.

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GENERAL

The EGM will be convened and held for the Shareholders to consider and, if thought fit, to approve among other matters, the Acquisition Agreement, the Acquisition and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares and the Conversion Shares. To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in the Acquisition which is different from other Shareholders, and thus no Shareholder is required to abstain from voting at the EGM.

The Circular containing, among other things, (i) details of the Acquisition Agreement and the transactions contemplated thereunder; (ii) the financial information and other information of the Group; (iii) the financial information and other information of the Target Group and the PRC Group; (iv) the unaudited pro forma financial information of the Enlarged Group; (v) the valuation report of the Target Group; and (vi) a notice of the EGM and a form of proxy is expected to be despatched to the Shareholders on or before 31 December 2019 as additional time is required for preparing the information to be included in the Circular.

Completion is subject to fulfillment of the conditions precedent set out in the Acquisition Agreement, and the Acquisition may or may not proceed to Completion. Shareholders and potential investors are reminded to exercise caution when dealing in the securities of the Company.

INTRODUCTION

Reference is made to the circular of the Company dated 25 January 2018 (the "2018 Circular") in relation to the Previous Acquisition. Upon completion of the Previous Acquisition on 15 February 2018, the Purchaser (a wholly-owned subsidiary of the Company) and the Vendor entered into an Option Deed, pursuant to which the Vendor granted the Call Option to the Purchaser.

Pursuant to the sale and purchase agreement in relation to the Previous Acquisition, the Vendor has irrevocably warranted and guaranteed to the Purchaser that:

  1. the audited net profit after tax (excluding items which are one-off,non-operating in nature and not incur in the ordinary and usual courses of business) of the PRC Subsidiary for the year ended 31 December 2017, shall not be less than RMB42,000,000 (equivalent to approximately HK$46,620,000) (the "2017 Guaranteed Profit"); and

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  1. the audited net profit after tax (excluding items which are one-off,non-operating in nature and not incur in the ordinary and usual courses of business) of the PRC Subsidiary for the year ended 31 December 2018 shall not be less than RMB47,000,000 (equivalent to approximately HK$52,170,000) (the "2018 Guaranteed Profit").

As disclosed in the announcement of the Company dated 18 April 2018, it was confirmed that the amount of the audited net profit after tax of the PRC Subsidiary for the year ended 31 December 2017 exceeded the 2017 Guaranteed Profit. It was further disclosed in the announcement of the Company dated 18 April 2019 that the amount of the audited net profit after tax of the PRC Subsidiary for the year ended 31 December 2018 exceeded the 2018 Guaranteed Profit.

As a result of the achievement of the 2017 Guaranteed Profit and the 2018 Guaranteed Profit by the PRC Subsidiary and the factors as stated in the paragraph headed "Reasons for the Acquisition" below, the Board is pleased to announce that, on 27 September 2019 (after trading hours of the Stock Exchange), the Purchaser issued an Option Notice to the Vendor to exercise the Call Option to acquire the remaining 80% of the issued share capital of the Target.

Upon the exercise of the Call Option, the Purchaser and the Vendor entered into the Acquisition Agreement, pursuant to which, among other things, the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to procure South Sunrise to sell, the Sale Shares, which represent 80% of the issued share capital of the Target as at the Completion Date, at the Consideration of RMB368,074,400 (equivalent to HK$408,562,584). The Consideration will be subject to adjustment based on 80% of the final valuation of the Target Group which will be disclosed in the Circular.

Details of the terms and conditions of the Acquisition Agreement are set out below.

THE ACQUISITION AGREEMENT

Date: 27 September 2019 (after trading hours of the Stock Exchange)

Parties:

(i)

the Purchaser:

Bright World Investment Limited (a wholly-owned

subsidiary of the Company); and

(ii)

the Vendor:

Mr. Zhou Feng Tang, who shall procure South

Sunrise (a company wholly owned by the Vendor) to

sell the Sale Shares to the Purchaser at Completion.

4

South Sunrise is an investment holding company and the principal assets of which is the 80% of the issued share capital of the Target.

To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, each of the Vendor and South Sunrise is an Independent Third Party.

Assets to be acquired

Pursuant to the Acquisition Agreement, the Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to procure South Sunrise to sell, the Sale Shares. The Sale Shares shall represent 80% of the issued share capital of the Target as at the Completion Date.

Details of the Target Group are set out in the section headed "Information on the Target Group" below.

Consideration

As disclosed in the 2018 Circular, the exercise price of the Call Option shall be determined with reference to 80% of the valuation of the entire equity interest of the Target Group to be prepared by an independent professional valuer jointly appointed by the Purchaser and the Vendor at the time of the exercise of the Call Option (the "Updated Valuation").

In the event the Updated Valuation is more than 120% of the previous valuation of the entire equity interest of the Target Group as set out in Appendix V to the 2018 Circular (the "Valuation Cap"), being RMB601,332,000 (equivalent to approximately HK$667,479,000), the exercise price of the Call Option should be capped to 80% of the Valuation Cap, being RMB481,065,600 (equivalent to approximately HK$533,983,000).

In the event the Updated Valuation is less than 80% of the previous valuation of the entire equity interest of the Target Group as set out in Appendix V to the 2018 Circular (the "Valuation Floor"), being RMB400,888,000 (equivalent to approximately HK$444,986,000), the Purchaser is entitled to serve the notice to the Vendor that it intends to exercise the Call Option at the exercise price equal to 80% of the Updated Valuation. However, the Vendor has the right to refuse the exercise of the Call Option by the Purchaser within five (5) Business Days after receiving such written notice. In the event the Updated Valuation is equal to the Valuation Floor, the exercise price of the Call Option should be 80% of the Valuation Floor, being RMB320,710,400 (equivalent to approximately HK$355,989,000).

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Newtree Group Holdings Ltd. published this content on 27 September 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 September 2019 12:12:05 UTC


© Publicnow 2019
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