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SHANGHAI ELECTRIC GROUP COMPANY LIMITED
上海電氣集團股份有限公司
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 02727)
CONNECTED TRANSACTION
ANNOUNCEMENT ON DISPOSAL OF 86.727% EQUITY INTERESTS IN SMC
INTRODUCTION
The Board is pleased to announce that, on 9 December 2019, the Board considered and approved the Relevant Resolution, pursuant to which the Company was approved to transfer the 86.727% equity interests it held in SMC to the Development Company at a consideration of RMB170,226,610.34. SMC will cease to be a subsidiary of the Company after the completion of this Transaction.
LISTING RULES IMPLICATION
As at the date of this announcement, Development Company is a wholly-owned subsidiary of the SEC, and SEC is the controlling shareholder of the Company, holding approximately 59.18%equity interests in the total issued share capital of the Company. Therefore, Development Company is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
Given that the highest applicable percentage ratio (as defined in the Listing Rules) for this Transaction, aggregated with the applicable ratios for the Previous Transaction according to Rule 14A.81 of the Listing Rules, is more than 0.1%, but all the percentage ratios are less than 5%, this Transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
INTRODUCTION
The Board is pleased to announce that, on 9 December 2019, the Board considered and approved the Relevant Resolution, pursuant to which the Company was approved to transfer the 86.727% equity interests it held in SMC to the Development Company at a consideration of RMB170,226,610.34. SMC will cease to be a subsidiary of the Company after the completion of this Transaction.
AGREEMENT TO BE ENTERED INTO BETWEEN BOTH PARTIES
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The principal terms of the Agreement to be entered into between both parties are summarised as follows:
Parties
The Company (Vendor); and
Development Company (Purchaser).
Subject matter
The Company agrees to transfer its 86.727% equity interests in SMC to the Development Company. As at the date of this announcement, SMC has been an indirect subsidiary of the Company for more than 12 months.
Pursuant to the regulations of relevant PRC laws over state-owned assets, the Equity Transfer shall be conducted and completed through Shanghai United Assets and Equity Exchange Co., Ltd in accordance with the terms as agreed under the Agreement.
The profit and loss of the SMC during the period from the valuation benchmark date (as defined below) to the date of completion of the Equity Transfer will be enjoyed and assumed by the Development Company.
Consideration
The total consideration for the proposed Equity Transfer is RMB170,226,610.34.
The consideration was determined after arm's length negotiations between the parties based on the appraised value of these assets as at 31 May 2019, the valuation benchmark date, as confirmed in the assets valuation report issued by the independent qualified valuer. The valuation result based on the asset-based approach was adopted by the Independent Valuer for the assets to be disposed. The appraised value of SMC is RMB196,278,679.46.
Payment terms
Development Company shall pay the full amount of transfer price in one lump sum into the bank account designated by the Company within 10 days after the Agreement comes into effect.
Conditions precedent
The Agreement will become effective only when all the following conditions have been fulfilled:
- SMC having fully repaid its shareholders' loan of RMB68,000,000.00 due to the Company before the completion of the transfer of equity interests;
- the Agreement having been signed by the parties hereto and their legal representatives, or their authorized representatives; and
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3. The parties to the Agreement and SMC having completed all internal decision-making procedures for approval of this transaction in accordance with the applicable laws, their respective articles of association and other internal documents, and other existing shareholders of SMC having renounced their preemptive rights of purchase in respect of the equity proposed to be transferred.
Completion of the Equity Transfer
The Equity Transfer is completed when all of the following conditions have been fulfilled:
- the Agreement having officially become effective;
- the parties to the Agreement having obtained the Asset Ownership Transaction Certificates issued by the Shanghai United Assets and Equity Exchange;
- SMC having completed the formalities for the change of business registration in relation to this transaction with the competent industry and commerce registration authorities, and obtained new business license issued by the industry and commerce registration authorities.
BASIC SITUATION OF SMC
SMC was established in 2002, with the registered capital of RMB550 million, and the shareholders and the proportion of capital contribution immediately prior to the Transaction are as follows:
Capital | Proportion of | ||
contribution | |||
No. | Contributories | capital | |
(RMB) | contribution | ||
1 | Shanghai Electric Group Company | 477 million | 86.727% |
Limited | |||
Hudong-Zhonghua Shipbuilding | |||
2 | (Group) Co., Ltd. (滬東中華造船 | 30 million | 5.455% |
(集團)有限公司) | |||
China Shipbuilding Industry | |||
3 | Corporation (中國船舶重工集團 | 23 million | 4.182% |
公司) | |||
4 | Shanghai Optical Communications | 20 million | 3.636% |
Co., Ltd. (上海光通信有限公司) | |||
Total | 550 million | 100% | |
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As at the date of this announcement, SMC's legal representative is ZHANG Anpin. SMC's registered address and business address is 177 Yitian Road, Nanhui New Town, Pudong New District, Shanghai. SMC's scope of business is manufacturing and sales of crankshafts for ships, design, manufacturing, installation and maintenance of metallurgical equipment, complete set of construction machinery equipment, electromechanical equipment, etc., machining, processing and assembly of equipment, castings and forgings for ships, provision of after-sales services of products, and import and export of goods and technologies (the operation of the items subject to approval under laws shall be conducted after obtaining the approval from relevant authorities) .
Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. (滬東中華造船(集團)有限公司), China Shipbuilding Industry Corporation (中國船舶重工集團公司) and Shanghai Optical Communications Co., Ltd. (上海光通信有限公司), all being shareholders of SMC, have agreed to waive the right of first refusal for the equity interests in SMC to be transferred.
FINANCIAL INFORMATION AND VALUATION OF SMC
Set out below is the financial information of SMC prepared in accordance with the PRC Generally Accepted Accounting Principles:
As audited by BDO China-SHU LUN PAN Certified Public Accountants LLP (立信會計師事 務所(特殊普通合夥)) which is a certified public accounting firm in the PRC, the main financial indicators of SMC for the most recent year and the most recent period are as follows:
Unit: RMB0'000 | ||
For the year ended | For the five | |
Particulars | months ended | |
31 December 2018 | ||
31 May 2019 | ||
Operating revenue | 12,306.46 | 4,121.79 |
Profit before tax | -3,804.31 | -4,813.69 |
Net profit | -4,503.67 | -4,813.31 |
Particulars | As of 31 December | As of 31 May 2019 |
2018 | ||
Total assets | 41,709.16 | 36,248.66 |
Net assets | 7,146.57 | 2,357.55 |
Net profit before and after tax of SMC prepared in accordance with the PRC Generally Accepted Accounting Principles for the two years ended 31 December 2018 are as follows:
Unit: RMB0'000 | ||
For the year ended | For the year | |
Particulars | ended | |
31 December 2017 | ||
31 December 2018 | ||
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Net profit before tax | -4,321.00 | -3,804.31 |
Net profit after tax | -4,321.00 | -3,804.31 |
Shanghai Shenwei Assets Valuation Co., Ltd. (上海申威資產評估有限公司) was engaged to conduct assets valuation for the disposal of the 86.727% equity interests in SMC using the asset-based approach with 31 May 2019 as the valuation benchmark date. The appraised value of the 100% equity interests in SMC is RMB196,278,679.46. The valuation results are summarized as follows:
Valuation Results | |||||
Valuation Benchmark Date: 31 May 2019 | Unit: RMB0'000 | ||||
Type of assets | Book value | Appraised | Increase in | Appreciation | |
value | value | rate (%) | |||
Current assets | 10,197.41 | 9,416.84 | -780.57 | -7.65 | |
Non-current assets | 26,051.25 | 42,600.48 | 16,549.23 | 63.53 | |
Including: fixed assets | 23,687.43 | 28,884.83 | 5,197.40 | 21.94 | |
Intangible assets | 2,363.82 | 13,715.65 | 11,351.83 | 480.23 | |
Total assets | 36,248.67 | 52,017.32 | 15,768.65 | 43.50 | |
Current liabilities | 32,501.92 | 32,389.45 | -112.47 | -0.35 | |
Non-current liabilities | 1,389.20 | - | -1,389.20 | -100.00 | |
Total Liabilities | 33,891.12 | 32,389.45 | -1,501.67 | -4.43 | |
Total equity | |||||
attributable to | 2,357.55 | 19,627.87 | 17,270.32 | 732.55 | |
shareholders of the | |||||
Company |
FINANCIAL IMPACT OF THE EQUITY TRANSFER
Immediately upon completion of the Equity Transfer, the Company will no longer hold any equity interests in SMC. The Development Company will obtain 86.727% equity interests in SMC, and enjoy or assume the corresponding rights and obligations as the shareholder. SMC will cease to be a subsidiary of the Company.
The Equity Transfer is expected to result in a gain of approximately RMB128.05 million for the Company, which is estimated based on the difference between the consideration received under the Equity Transfer and the net book value of the equity interests disposed. The Equity Transfer will have no material impact on the Company.
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The proceeds received under the Equity Transfer will be used to replenish the Company's working capital.
REASONS FOR AND BENEFITS FROM THE EQUITY TRANSFER
Through the Equity Transfer, the Company can replenish its working capital, and thus provides support to the Company's healthy development.
OPINION FROM THE BOARD
Mr. Zheng Jianhua and Mr. Zhu Bin, both being Directors, hold directorship(s) or act as senior management in the SEC Group and its associates and thus have material interests in this Transaction. They have therefore abstained from voting on the Relevant Resolution. Save as disclosed above, none of the other Directors has material interests in this Transaction.
The Directors (including the independent non-executive Directors) consider that the consideration of the Equity Transfer was determined after arm's length negotiations based on the audited and appraised asset value of SMC and the transactions thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and its shareholders as a whole.
LISTING RULES IMPLICATION
As at the date of this announcement, the Development Company is a wholly-owned subsidiary of the SEC, and SEC is the controlling shareholder of the Company, holding approximately 59.18%equity interests in the total issued share capital of the Company. Therefore, the Development Company is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
Given that the highest applicable percentage ratio (as defined in the Listing Rules) for this Transaction, aggregated with the applicable ratios for the Previous Transaction according to Rule 14A.81 of the Listing Rules, is more than 0.1%, but all the percentage ratios are less than 5%, this Transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
INFORMATION ON BOTH PARTIES
The Group is one of the largest industrial equipment manufacturing conglomerates in China engaged in the following principal activities: (i) design, manufacture and sale of nuclear power nuclear island equipment products, wind power equipment products and heavy machinery including large forging components, and provision of solution package for comprehensive utilisation of solid waste, sewage treatment, power station environmental protection and distributed energy systems; (ii) design, manufacture and sale of thermal power equipment products and auxiliary equipment, nuclear power conventional island equipment products and power transmission and distribution equipment products; (iii) design, manufacture and sale of elevators, electric motors, machine tools, marine crankshafts and other electromechanical equipment products; and (iv) provision of integrated engineering services for power station projects and other industries, financial products and services, and functional services including international trading services, financial lease and related consulting services and insurance
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brokerage services. The ultimate beneficial owner of the Group is Shanghai State-owned Assets Supervision and Administration Commission.
The Development Company is a wholly-owned subsidiary of the SEC engaged in asset management, restructure, disposal, management, entrusted corporate management, industrial investments, corporate management consultation, corporate image planning, technology development, technology transfer, technology consulting, technical services" and property management. The ultimate beneficial owner of Development Company is Shanghai State- owned Assets Supervision and Administration Commission.
DEFINITIONS
Unless the context otherwise requires, the following expressions in this announcement shall have the following meanings:
"Agreement" | the equity transfer agreement entered into between |
the Company and the Development Company in | |
relation to the transfer of the 86.727% equity | |
interests in SMC; | |
"associate(s)" | has the meaning ascribed thereto under the Listing |
Rules; | |
"Board" | the board of Directors of the Company; |
"Company" | Shanghai Electric Group Company Limited, a joint |
stock limited company duly incorporated in the PRC | |
with limited liability, the H shares of which are listed | |
on The Stock Exchange of Hong Kong Limited | |
under stock code 02727 and the A Shares of which | |
are listed on the Shanghai Stock Exchange under | |
stock code 601727; | |
"connected person(s)" | has the meaning ascribed thereto under the Listing |
Rules; | |
"controlling shareholder(s) | has the meaning ascribed thereto under the Listing |
Rules; | |
"Development Company" | Shanghai Electric Development Co., Ltd. (上海電氣 |
企業發展有限公司), a company incorporated in | |
Shanghai, the PRC with limited liability and a | |
wholly-owned subsidiary of the SEC as of the date | |
of this announcement; | |
"Directors" | the directors of the Company; |
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"Equity Transfer" | the transfer of the 86.727% equity interests in SMC |
by the Company to the Development Company for | |
the consideration of RMB170,226,610.34; | |
"Group" | the Company and its subsidiaries from time to time; |
"Hong Kong" | the Hong Kong Special Administrative Region of the |
People's Republic of China; | |
"Independent Valuer" | Shanghai Shenwei Assets Valuation Co., Ltd. (上海 |
申威資產評估有限公司); | |
"Listing Rules" | The Rules Governing the Listing of Securities on |
The Stock Exchange of Hong Kong Limited; | |
"Previous Transaction" | the connected transaction entered into between SEC |
and Shanghai Electric International Economic and | |
Trade Ltd. (上海電氣國際經濟貿易有限公司) on | |
10 December 2018 in relation to the disposal of | |
100% equity interests in SNJ Valve Co., Ltd. (上海 | |
電氣閥門有限公司) (details of which are set out in | |
the announcement of the Company published on 10 | |
December 2018); | |
"PRC" or "China" | the People's Republic of China, but for the purposes |
of this announcement only, excludes Hong Kong | |
Special Administrative Region, Macau Special | |
Administrative Region and Taiwan; | |
"Relevant Resolution" | the Proposal Regarding Transfer of the 86.727% |
Equity Interests in SMC held by the Company to the | |
Development Company, which was submitted to the | |
Board for consideration on 9 December 2019; |
"RMB"
"SEC"
Renminbi, the lawful currency of the PRC;
Shanghai Electric (Group) Corporation (上海電氣 (集 團)總 公 司), the controlling shareholder (as defined in the Listing Rules) of the Company holding 59.18% equity interests in the total issued share capital of the Company as at the date of this announcement;
"SEC Group" | SEC, its subsidiaries and its associates, but |
excluding the Group; | |
"SMC" | Shanghai Marine Crankshaft Co., Ltd. (上海船用曲 |
軸有限公司), a company incorporated in Shanghai, | |
the PRC with limited liability and a subsidiary of the | |
Company before the Transaction is completed; |
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"subsidiary(ies)" | has the meaning ascribed thereto under the Listing |
Rules; | |
"Transaction" | the proposed transaction under the equity transfer |
agreement to be entered into between the Company | |
and the Development Company in relation to the | |
transfer of the 86.727% equity interests in SMC; and | |
"%" | Percentage. |
By order of the Board
Shanghai Electric Group Company Limited
ZHENG Jianhua
Chairman of the Board
Shanghai, the PRC, 9 December 2019
As at the date of this announcement, the executive directors of the Company are Mr. ZHENG Jianhua, Mr. HUANG Ou, Mr. ZHU Zhaokai and Mr. ZHU Bin; the non-executive directors of the Company are Ms. YAO Minfang and Ms. LI An; and the independent non-executive directors of the Company are Dr. CHU Junhao, Dr. XI Juntong and Dr. XU Jianxin.
* For identification purpose only
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Shanghai Electric Group Co. Ltd. published this content on 09 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 December 2019 09:20:11 UTC