Jiashili : DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF THE ENTIRE EQUITY INTEREST IN GUANGDONG KANGLI FOOD COMPANY 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.

嘉士利集團有限公司

Jiashili Group Limited

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1285)

DISCLOSEABLE AND CONNECTED TRANSACTION

IN RELATION TO

ACQUISITION OF THE ENTIRE EQUITY INTEREST IN GUANGDONG KANGLI FOOD COMPANY LIMITED*

On 10 May 2021 (after trading hours), the Purchaser (an indirect wholly-owned subsidiary of the Company), the Vendor and the Target Company entered into the Equity Transfer Agreement, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire equity interest in the Target Company at the consideration of RMB135,000,000 (equivalent to HK$163,350,000) in cash.

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the Group's consolidated financial statements.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Acquisition exceeds 5% but all of the applicable percentage ratios are less than 25%, the Acquisition constitutes a discloseable transaction of the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

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As at the date of this announcement, the entire issued share capital of the Vendor is owned by Kaiyuan, a controlling shareholder of the Company, which is ultimately beneficially owned as to 80% by Mr. Huang, an executive Director and a controlling shareholder of the Company, and 20% by other members of the Huang's Family. As such, the Vendor is an associate of the controlling shareholder and thus a connected person of the Company under the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules, and is therefore subject to the reporting, announcement, circular and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

By virtue of the interests of Mr. Huang in the Equity Transfer Agreement, he had abstained from voting in respect of the relevant board resolutions relating to the Equity Transfer Agreement and the Acquisition. Save for the aforesaid, no other Directors has a material interest in the Equity Transfer Agreement and was required to abstain from voting on the Board resolution approving the Equity Transfer Agreement and the Acquisition.

In accordance with the Listing Rules, any Shareholder who has a material interest in the Equity Transfer Agreement and the Acquisition shall abstain from voting on the resolutions to approve the Equity Transfer Agreement and the Acquisition at the EGM. As at the date of this announcement, Mr. Huang and his close associates, namely Great Logistics and Kaiyuan, who together are interested in 310,472,000 Shares, representing approximately 74.81% of the total issued share capital of the Company, will be required to abstain from voting on the relevant resolutions at the EGM accordingly. Save as disclosed above, to the best knowledge, information and belief of the Directors, having made all reasonable enquiries, no other Shareholder has a material interest in the Equity Transfer Agreement and the Acquisition and will be required to abstain from voting on the relevant resolutions to approve the Equity Transfer Agreement and the Acquisition at the EGM.

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GENERAL

The Independent Board Committee, comprising all independent non-executive Directors, has been established to advise the Independent Shareholders on whether the Equity Transfer Agreement and the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Lego Corporate Finance Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms and conditions of the Equity Transfer Agreement and the Acquisition are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

The EGM will be convened and held for the Independent Shareholders to consider, and if thought fit, to approve, among others, the Equity Transfer Agreement and the Acquisition.

A circular containing, among other things, (i) further details about the Equity Transfer Agreement and the Acquisition; (ii) a letter of the Independent Board Committee to the Independent Shareholders in relation to the Equity Transfer Agreement and the Acquisition; (iii) a letter from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Equity Transfer Agreement and the Acquisition; (iv) a valuation report on the Lands and other property interests of the Target Company; and (v) a notice convening the EGM, is expected to be despatched to the Shareholders on or before 11 June 2021 in accordance with the Listing Rules , as additional time is required to prepare certain information to be included in the circular in connection with the Acquisition.

The Acquisition is subject to the satisfaction or waiver (as the case may be) of the conditions precedent as set out in the Equity Transfer Agreement and may or may not proceed to Completion. Shareholders and potential investors should exercise caution when dealing in the Shares.

INTRODUCTION

On 10 May 2021 (after trading hours), the Purchaser (an indirect wholly-owned subsidiary of the Company), the Vendor and the Target Company entered into the Equity Transfer Agreement, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire equity interest in the Target Company at the consideration of RMB135,000,000 (equivalent to HK$163,350,000) in cash.

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THE EQUITY TRANSFER AGREEMENT

The principal terms of the Equity Transfer Agreement are summarised below:

Date

10 May 2021

Parties

1. Vendor: Koni (Hong Kong) Food Investment Limited (康力(香港)食品投資有限公 司)
2. Purchaser: Jiashili (Hong Kong) Limited (嘉士利(香港)有限公司)
3. Target Company: Guangdong Kangli Food Company Limited* (廣東康力食品有限公 司)

As at the date of this announcement, the entire issued share capital of the Vendor is owned by Kaiyuan, a controlling shareholder of the Company, which is ultimately beneficially owned as to 80% by Mr. Huang, an executive Director and a controlling shareholder of the Company, and 20% by other members of the Huang's Family. As such, the Vendor is an associate of the controlling shareholder and thus a connected person of the Company under the Listing Rules.

Assets to be acquired

Pursuant to the Equity Transfer Agreement, which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire equity interest in the Target Company.

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Consideration

The consideration for the Acquisition is RMB135,000,000 (equivalent to HK$163,350,000), which shall be settled in cash in the following manner:

1. conditional upon fulfillment of the following conditions, a prepayment in the amount of RMB93,000,000 (the "Prepayment") shall be paid by the Purchaser to the Vendor on or before 20 May 2021, which will automatically settle part of the consideration on the date of Completion:
2. 1. the company stamps, certificates, licenses, books of accounts, passcode devices of bank accounts and keys of the Target Company having delivered to the Purchaser;
   2. in accordance with the Purchaser's request, the Target Company having instructed the banks to change the stamps and signatories of the bank accounts of the Target Company; and
   3. the Target Company having approved the appointment of the directors, legal representative and financial officer nominated by the Purchaser, and the relevant changes in personnel having reported and filed with the administration for market regulation;
   4. Zhongchen and the Target Company having entered into an agreement regarding the transfer of the Lands form Zhongchen to the Target Company; and
   5. Zhongchen has delivered the Lands to the Target Company for its use at nil consideration; and

1. the remaining balance of RMB42,000,000 shall be paid by the Purchaser to the Vendor on the date of Completion.

The Parties agreed that the consideration for the Acquisition can be settled either in RMB or an equivalent amount of HK$, based on the daily reference rate of RMB against HK$ set by the People's Banks of China.

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