Coastal Greenland : VERY SUBSTANTIAL DISPOSAL AND RESUMPTION OF TRADING (in PDF)

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COASTAL GREENLAND LIMITED

沿海綠色家園有限公司*

(Incorporated in Bermuda with limited liability)

(Stock Code: 1124) VERY SUBSTANTIAL DISPOSAL AND RESUMPTION OF TRADING THE DISPOSAL

On 16 December 2016 (after trading hours of the Stock Exchange), the Vendor, the Target LLP, the Purchaser, the Company and Yuzhou Properties, entered into the Disposal Agreement, pursuant to which the Vendor conditionally agreed to sell and the Purchaser conditionally agreed to purchase the entire equity interest in the Target LLP at a total consideration of approximately RMB3,589.1 million (equivalent to approximately HK$4,005.7 million). Completion shall be conditional, among other things, upon the approval of the Disposal Agreement and the transactions contemplated thereunder by the Shareholders at the SGM.

The Vendor has also granted a Termination Option to the Purchaser under the Disposal Agreement, pursuant to which the Purchaser is entitled to unilaterally terminate the Disposal Agreement and request the Vendor to acquire all of its equity interests in the Target LLP and to return to the Purchaser the sum of Consideration paid and expense incurred in the development of the land, plus accrued interest at a rate of 15% per annum, upon happening of any of the Termination Events within two years.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios set forth under Rule 14.07 of the Listing Rules in respect of the Disposal is 75% or more, the Disposal constitute a very substantial disposal for the Company under Chapter 14 of the Listing Rules. Given that the exercise of the Termination Option by the Purchaser is not at the Company's discretion, pursuant to Rule 14.74 of the Listing Rules, the grant of the Termination Option under the Disposal Agreement will be classified as if they had been exercised. The exercise of the Termination Option by the Purchaser constitutes a possible very substantial acquisition for the Company. The Disposal and the grant of the Termination Option are therefore subject to the reporting, announcement and shareholders' approval requirements under Chapter 14 of the Listing Rules. The SGM will be convened and held for the Shareholders to consider and, if thought fit, to approve the Disposal and the transactions contemplated thereunder, including the Termination Option under the Disposal Agreement.

GENERAL

A circular containing, among other things, details of the Disposal Agreement, the Target LLP, the financial information of the Group, the financial information of the Target LLP, the notice convening the SGM and other information as required under the Listing Rules is expected to be despatched to the Shareholders on or before Friday, 31 March 2017, so as to allow sufficient time for the preparation of the relevant information for inclusion in the circular.

Completion of the Disposal is conditional upon the satisfaction or, if applicable, waiver of the conditions set out in the section headed "Conditions precedent" in this announcement, including the approval of the Disposal Agreement and the transactions contemplated thereunder by Shareholders at the SGM. Accordingly, the Disposal may or may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the securities of the Company. RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange has been suspended from 9:00 a.m. on Monday, 19 December 2016 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange from 9:00 a.m. on Thursday, 29 December 2016.

INTRODUCTION

On 16 December 2016 (after trading hours of the Stock Exchange), the Vendor, the Target LLP, the Purchaser, the Company and Yuzhou Properties, entered into the Disposal Agreement, pursuant to which the Vendor conditionally agreed to sell and the Purchaser conditionally agreed to purchase the entire equity interest in the Target LLP at a total consideration of approximately RMB3,589.1 million (equivalent to approximately HK$4,005.7 million).

INFORMATION ON THE TARGET LLP AND TARGET COMPANY

The Target LLP was established in the PRC in 2011 and owned as to 98.8% by Beijing Trust, 0.53% by Mr. Wu Qingbing and 0.67% by the Company. Beijing Trust and Mr. Wu Qingbing were both Independent Third Parties. The principal asset of the Target LLP was 97.63% equity interest in the Target Company. The remaining 2.37% equity interest in the Target Company was owned by Lan Kong Construction.

In 2013, the Target LLP, the Vendor, the Target Company, Lan Kong Construction and Beijing Trust entered into a cooperation agreement which consisted of a capital injection commitment (the "Project Agreement"), pursuant to which, among other terms, (i) the Vendor conditionally agreed to acquire 98.8% equity interest in the Target LLP owned by Beijing Trust and cooperate with Lan Kong Construction in the development of the Land Parcels owned by the Target Company; and (ii) Lan Kong Construction agreed to transfer the interest in resettlement buildings amounting to RMB600 million to the Target Company within 3 months upon entering into the Project Agreement. After the completion of the Vendor's acquisition of 98.8% equity interest in the Target LLP from Beijing Trust under the Project Agreement, the Company would own an aggregate of 99.47% equity interest in the Target LLP. The shareholding structure of the Target Company remained unchanged and owned as to 97.63% by the Target LLP and 2.37% by Lan Kong Construction. According to the Project Agreement, the shareholding of Lan Kong Construction in the Target Company would increase from 2.37% to 60% after the capital injection which was one of the steps in the cooperation arrangement stipulated in the Project Agreement.

During the year ended 31 March 2015, the Vendor completed its acquisition of the Target LLP at a total consideration of approximately RMB522 million. Expecting Lan Kong Construction to honour its capital injection commitment followed by the corresponding increase in shareholding of Lan Kong Construction in the Target Company from 2.37% to 60% in accordance with the Project Agreement, the Company accounted for 40% interest in the Target Company accordingly and recognised the Target Company as an associate of the Company.

According to the Project Agreement, the capital injection by Lan Kong Construction amounting to RMB600 million should have been completed within 3 months upon entering into the Project Agreement. Nevertheless, Lan Kong Construction has failed to honour its obligation where the amount of RMB600 million has never been transferred to the Target Company. As such, Lan Kong Construction has breached the capital injection commitment and the aforementioned shareholding adjustment shall no longer be valid. Having considered that the Disposal is in progress, the Group currently reserves its right to take legal action against Lan Kong Construction in respect of its breach of capital injection commitment under the Project Agreement. In the event that Lan Kong Construction proceeds with the WLKC Claim, the Group will consider taking legal action accordingly.

Target LLP is a limited partnership established in the PRC with a partnership capital of RMB416.1 million, of which RMB411.1 million was contributed by the Vendor holding 98.8% of the equity interest, RMB2.8 million was contributed by Shanghai Yaxin holding 0.67% of the equity interest and RMB2.2 million was contributed by Mr. Wu Qingbing holding 0.53% of the equity interest.

Target LLP is principally engaged in equity investment, project investment, industrial investment and investment consulting services. The principal asset of Target LLP is 97.63% equity interest in the Target Company, of which 97% equity interest has been pledged to China Credit Trust for a loan obtained by the Target Company amounting to RMB450 million (equivalent to approximately HK$502.2 million). The remaining 2.37% equity interest in the Target Company is owned by Lan Kong Construction which has been frozen by Wuhan Intermediate People's Court（ 武漢市中級人民法院）due to a litigation involving Lan Kong Construction and Chaojiang Trading.