China Tian Lun Gas : Discloseable Transaction Acquisition of 100% Equity Interest in The Target Companies

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China Tian Lun Gas Holdings Limited

中 國 天 倫 燃 氣 控 股 有 限 公 司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 01600)

DISCLOSEABLE TRANSACTION

ACQUISITION OF 100% EQUITY INTEREST

IN THE TARGET COMPANIES

DISCLOSEABLE TRANSACTION

On 22 October 2020, Henan Tian Lun (an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement I with the Vendor IA and the Vendor IB (as vendors), Chongqing Jindi (as guarantor) and the Target Company I, whereby Henan Tian Lun agreed to acquire 39% and 61% equity interest of the Target Company I from the Vendor IA and the Vendor IB, respectively at the Consideration I of RMB233,300,000.

The Board is pleased to announce that on 25 December 2020, Henan Tian Lun (an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement II with the Vendor IIA and the Vendor IIB (as vendors), Chongqing Jindi (as guarantor) and the Target Companies II, whereby Henan Tian Lun agreed to acquire 60% and 40% equity interest of the Target Company IIA from the Vendor IIA and the Vendor IIB, respectively (and subsequently acquire 100% equity interest in each of the Target Company IIB, the Target Company IIC, the Target Company IID and the Target Company IIE upon completion of the Reorganisation) at the Consideration II of RMB832,760,000.

The net profit after tax of the Target Company I for the year ended 31 December 2019 and the seven months ended 31 July 2020 was approximately RMB7,562,948 and RMB5,045,673, respectively.

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The aggregated net profit after tax of the Target Company IIB, the Target Company IIC, the Target Company IID and the Target Company IIE for the year ended 31 December 2019 and the nine months ended 30 September 2020 was approximately RMB47,743,301 and RMB44,715,803, respectively.

Upon completion of the Acquisitions, the Target Companies will become wholly-owned subsidiaries of the Company and the financial results of the Target Companies will be consolidated into the financial statement of the Group.

LISTING RULES IMPLICATIONS

At the time when the Equity Transfer Agreement I was entered into, as none of the applicable percentage ratios exceeded 5%, the transaction contemplated thereunder did not constitute a discloseable transaction of the Company under Chapter 14 of the Listing Rules. As shown in the section headed "INFORMATION ABOUT THE TARGET COMPANIES", by reason of the intertwined equity interest holdings by the current ultimate beneficial owners of the Target Companies (prior to the completion of the Reorganisation) and the Vendors, the Company consider the Vendors I and the Vendors II are connected or otherwise associated with each other. As the transactions contemplated under the Equity Transfer Agreement I and the Equity Transfer Agreement II are conducted within a 12-month period, the transactions shall be aggregated under Chapter 14 of the Listing Rules. As one or more of the applicable percentage ratio(s) calculated in accordance with Rule 14.07 of the Listing Rules in respect of the Acquisition I under the Equity Transfer Agreement I and the Acquisitions II under the Equity Transfer Agreement II on an aggregated basis is/are more than 5% but less than 25%, the entering into of the Equity Transfer Agreement I and Equity Transfer Agreement II in aggregate constitute a discloseable transaction of the Company and are thus subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

INTRODUCTION

On 22 October 2020, Henan Tian Lun (an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement I with the Vendor IA and the Vendor IB (as vendors), Chongqing Jindi (as guarantor) and the Target Company I, whereby Henan Tian Lun agreed to acquire 39% and 61% equity interest of the Target Company I from the Vendor IA and the Vendor IB, respectively at the Consideration I of RMB233,300,000.

The Board is pleased to announce that on 25 December 2020, Henan Tian Lun (an indirect wholly- owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement

1. with the Vendor IIA and the Vendor IIB (as vendors), Chongqing Jindi (as guarantor) and the Target Companies II, whereby Henan Tian Lun agreed to acquire 60% and 40% equity interest of
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the Target Company IIA from the Vendor IIA and the Vendor IIB, respectively (and subsequently acquire 100% equity interest in each of the Target Company IIB, the Target Company IIC, the Target Company IID and the Target Company IIE upon completion of the Reorganisation) at the Consideration II of RMB832,760,000.

Upon completion of the Acquisitions, the Target Companies will become wholly-owned subsidiaries of the Company and the financial results of the Target Companies will be consolidated into the financial statement of the Group.

THE EQUITY TRANSFER AGREEMENTS

The salient terms of the Equity Transfer Agreements are set out as follows:

The Equity Transfer Agreement I

Date

22 October 2020

Parties

1. Henan Tian Lun (an indirect wholly-owned subsidiary of the Company) (as purchaser);
2. Vendor IA;
3. Vendor IB;
4. Chongqing Jindi (as guarantor); and
5. the Target Company I

Subject of the transaction

1. 100% equity interest in the Target Company I and related rights attached thereto;
2. gas related assets and other assets owned and/or controlled by the Target Company I; and
3. pipeline gas operation franchise in the designated areas in Jingyuan County, Baiyin City,
   Gansu Province.

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Consideration I

The aggregate Consideration I payable by Henan Tian Lun for the Acquisition I is RMB233,300,000 which was determined with reference to, among other things, the financial statements of the Target Company I as at 31 July 2020 (including but not limited to the net asset value), area of operation and customer base for gas business and profitability of the Target Company I as well as the potential operational growth of the Target Company I.

The Consideration I will be payable by Henan Tian Lun in cash as described below:

1. First Instalment of RMB46,660,000 (20% of the Consideration I)
2. 1. The Vendors I and Chongqing Jindi agreed and are responsible for obtaining a written confirmation issued by the People's Government of Jingyuan County after the execution of the Equity Transfer Agreement I, which shall include its consent to the Acquisition I and the change of legal representative of the Target Company I, and the confirmation that the Target Company I shall be entitled to the rights and obligations of Chongqing Jindi under the Jingyuan County Piped Gas Franchise Agreement*(靖遠縣 管道燃氣特許經營協定).
   2. Within 3 business days upon the execution of the Equity Transfer Agreement I, the Vendors I and Henan Tian Lun shall jointly open a bank account (the "Joint Account I") in Zhengzhou City in the name of the Vendor IB. Within 5 business days after the opening of the Joint Account I, Henan Tian Lun shall pay the first instalment of RMB46,660,000 to the Joint Account I.
3. Second Instalment of RMB69,990,000 (30% of the Consideration I)
4. 1. Within 7 business days upon the payment of the first instalment in the manner as described in 1 above, the Vendors I and Henan Tian Lun shall jointly submit to the relevant administration of industry and commerce the application materials for the transfer of equity interest in the Target Company I and the change of legal representatives, directors, supervisors, managers, etc. of the Target Company I, which must comply with the rules/regulations of the state administration of industry and commerce.
   2. Within 5 business days upon completion of all agreed arrangement as set out in 2(1) above, Henan Tian Lun shall pay the second instalment of RMB69,990,000 to the Joint Account I.

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