Hunan Jiangnan Red Arrow Co., Ltd. (SZSE:000519) agreed to acquire Shandong Beifang Binhai Machinery Co., Ltd. from Shandong Special Industry Group Co.,Ltd. for approximately CNY 860 million in cash and stock on December 12, 2015. Hunan Jiangnan Red Arrow will issue 52.07 million shares at CNY 12.10 per share and CNY 111.17 million shall be paid in cash. 61.9 million shares will be issued. In related transactions, Hunan Jiangnan Red Arrow Co., Ltd. agreed to acquire Henan Beifang Hongyang Industrial Machinery Co., Ltd., Nanyang Beifang Xiangdong Industrial Co., Ltd., Nanyang Beifang Hongyu Electromechanical Manufacturing Co., Ltd. and Zhengzhou Hongyu Special Automobile Co., Ltd. from Yuxi Industrial Group Co., Ltd.; and agreed to acquire Jilin Jiangji Special Industry Co., Ltd. from Jilin Jiangbei Machinery Manufacture Co., Ltd. on December 12, 2015.

Hunan Jiangnan Red Arrow will also raise gross proceeds of maximum CNY 2.05 billion to fund the cash consideration by issuing shares to not more than 10 specific investors. Shandong Beifang Binhai Machinery reported total assets of CNY 710.85 million, shareholders' equity of CNY 495.25 million, operating revenues of CNY 552.66 million, operating profit of CNY 46.69 million and net profit of CNY 37.47 million as of December 31, 2014. The transaction is subject to approval by the State-owned Assets Supervision and Administration Commission of the State Council and China Securities Regulatory Commission and approval by the shareholders of Hunan Jiangnan Red Arrow. The transaction has been approved by China North Industries Group Corporation's internal decision-making bodies and State Administration of Science Technology and Industry for National Defense and received in principle approval of the State-owned Assets Supervision and Administration Commission of the State Council, Ministry of Commerce of the People's Republic of China Anti-Monopoly Bureau and CSRC. The transaction has been approved by the Board of Directors of Hunan Jiangnan Red Arrow. Citic Securities Co., Ltd. acted as independent financial advisor for Hunan Jiangnan Red Arrow Co., Ltd. King & Wood Mallesons acted as legal advisor and Moore Stephens Da Hua Certified Public Accountants acted as accountant for Hunan Jiangnan Red Arrow Co., Ltd.