major transaction acquisition of affluent grand limited

14 Pages·2017·0.1 MB·English

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.
This announcement appears for information purposes only and does not constitute an invitation or offer
to acquire, purchase or subscribe for the securities.
(incorporated in the Cayman Islands with limited liability)
(Stock code: 8116)
MAJOR TRANSACTION
ACQUISITION OF AFFLUENT GRAND LIMITED
On 28 April 2017 after trading hours, the Company entered into the Agreement with the Vendors
pursuant to which the Company has conditionally agreed to acquire from the Vendors the entire issued
share capital of the Target and the Shareholders Loan at the consideration of HK$380 million, which is
to be satisfied as to HK$120 million in cash, HK$100 million by the issue of the Promissory Note and
HK$160 million by the issue of the Convertible Bonds.
Based on the relevant percentage ratios calculations under the GEM Listing Rules, the Acquisition
constitutes a major acquisition of the Company and is subject to reporting, announcement and
shareholder’s approval requirements under Chapter 19 of the GEM Listing Rules.
A circular containing, among other things, (i) further information on the Agreement and the
transactions contemplated thereunder, (ii) an accountants’ report on the Target Group, (iii) a pro forma
financial information on the Group upon Completion, (iv) a valuation report on the Target Group and
(v) notice of the EGM, will be despatched to the Shareholders on or before 26 May 2017 so as to allow
sufficient time for the preparation of the relevant information for inclusion in the circular.
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THE AGREEMENT
Date: 28 April 2017
Parties:
1. Tai Quan Enterprises Limited and Extreme Rich Corporate Development Limited as Vendors; and
2. the Company as purchaser.
The Vendors are principally engaged in investment holding. The ultimate beneficial owners of the
Vendors are Mr. Zhao Xin and Ms. Ren Wei. To the best of the Directors’ knowledge, information and
belief after having made all reasonable enquiries, the Vendors and their ultimate beneficial owners are
Independent Third Parties.
Assets to be acquired
Two ordinary shares of US$1.00 each in the Target, being the entire issued share capital of the Target,
together with the Shareholders Loan.
Consideration
The consideration is HK$380 million, which is subject to adjustment as set out under the section headed
“Profit guarantee and compensation” below.
The consideration is to be satisfied by the Purchaser in the following manner:
(i) HK$120 million in cash to be paid upon Completion;
(ii) HK$100 million by way of issuing the Promissory Note to the Vendors or their nominees upon
Completion;
(iii) HK$80 million by way of issuing the Convertible Bonds in the equivalent amount to the Vendors or
their nominees upon Completion;
(iv) HK$80 million by way of issuing the Convertible Bonds in the equivalent amount to the Vendors or
their nominees within 7 Business Days after determination of the Actual Profits (as defined below).
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Basis of consideration
The consideration of HK$380 million was determined after arm’s length negotiations between the
Vendors and the Company after taking into consideration of (i) the preliminary indicative market value of
the Target Group as at 31 December 2016 of approximately HK$400 million as advised by Peak Vision
Appraisals Limited, an independent professional valuer, (ii) the financial and operating performance of
OPCO and latest financial position of OPCO as shown in the management accounts of OPCO as at 31
December 2016; and (iii) the profit guarantee provided by the Vendors under the Agreement as set out
under the section headed “Profit guarantee and compensation” below.
The valuation method used for the preliminary indicative value of the Target Group was based on
discounted cash flow using the income-based approach, which is regarded as profit forecast under
Rule 19.61 of the GEM Listing Rules. Details of the valuation report together with the letters from the
Board and the auditors of the Company in respect of the valuation will be set out in the circular to be
despatched to the Shareholders.
Profit guarantee and compensation
The Vendors irrevocably and unconditionally guarantees to the Company that the aggregate audited
consolidated net profit after tax (excluding extraordinary or exceptional items according to the Hong
Kong Financial Reporting Standards of the Target Group) for the first two years immediately after the
Completion Date shall be no less than HK$65 million (“Guaranteed Profit”).
If the aggregate audited consolidated net profit after tax (excluding extraordinary or exceptional items
according to the Hong Kong Financial Reporting Standards of the Target Group) for the first two years
immediately after the Completion Date (“Actual Profit”) shall be less than the Guaranteed Profit, the
Vendors shall pay compensation (“Compensation”) to Company according to the following formula:
Guaranteed Profit – Actual Profit
A = HK$160,000,000 x
Guaranteed Profit
where A is the Compensation payable to the Company. For the avoidance of doubt, if the Actual Profit
shall be negative, it shall be deemed to be zero. The maximum amount of the Compensation shall be
HK$160 million.
The Vendors and the Company shall procure the auditor nominated by the Company to complete the
audited financial statements of the Target Group for the two years immediately after the Completion
Date within 3 months after the end of the relevant period. The Compensation (if any) shall be paid by
the Vendors to the Company in cash within 7 Business Days after determination of the Actual Profit. The
Company shall be entitled to elect to set off the Compensation against all or any part of the principal
amount of the Convertible Bonds to be issued to the Vendors and any balance of the Compensation shall
be paid by the Vendors in cash.
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Conditions precedent
Completion of the Agreement is subject to the following conditions precedent:
(a) the Company being reasonably satisfied with the results of the due diligence review of the assets,
liabilities, operations and affairs of the Target Group including completion of the Reorganization;
(b) all necessary consents and approvals required to be obtained on the part of the Vendors, the Target
and the Company in respect of the Agreement and the transactions contemplated thereunder having
been obtained;
(c) all necessary waiver, consent, approval, licence, authorisation, permission, order and exemption (if
required) from the relevant governmental or regulatory authorities or other third parties which are
necessary in connection with the Agreement and the transactions contemplated thereunder having
been obtained;
(d) the passing by the Shareholders at the EGM of an ordinary resolution to approve the Agreement and
the transactions contemplated thereunder, including but not limited to the issue of the Convertible
Bonds to the Vendors;
(e) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the
Conversion Shares;
(f) the obtaining of a valuation report on the Target Group of not less than HK$400 million from an
independent professional valuer (in form and substance satisfactory to the Company); and
(g) the warranties by the Vendors set out in the Agreement remaining true and accurate in all respects.
If the above conditions are not satisfied (or as the case may be, waived by the Purchaser in respect of (a),
(f) and (g) only) on or before 5:00 p.m. on 31 December 2017, or such later date as the Vendors and the
Company may agree, the Agreement shall cease and determine and thereafter neither party shall have any
obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms
hereof. The Company has no intention to waive any of the above conditions which would adversely affect
the interest of the Company.
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Completion
Completion shall take place on the third Business Day after all the conditions precedent of the Agreement
are satisfied (or waiver the case may be), or such other date as the Vendors and the Company may agree
in writing.
After Completion, the Target will become a wholly owned subsidiary of the Company and the financial
results of the Target Group will be consolidated into the Company.
Promissory Note
The principal terms of the Promissory Note are as follows:
Issuer
The Company
Principal amount
HK$100 million
Interest
6% per annum commencing from the date of issue until full repayment.
Maturity
On the third anniversary of the date of issue of the Promissory Note.
Early repayment
The Company may early repay all or part of the outstanding amount without penalty by giving not less
than 3 days’ notice to the noteholder.
Transferability
The holder of the Promissory Note may freely transfer the Promissory Note.
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Convertible Bonds
The principal terms of the Convertible Bonds are as follows:
Issuer
The Company
Principal amount
HK$160 million
Interest
The Convertible Bonds do not bear any interest.
Maturity
On the fifth anniversary of the date of issue of the Convertible Bonds.
Conversion price
The conversion price is HK$0.165 per Conversion Share, subject to adjustments arising from share
consolidation, share subdivision and capitalisation issue as provided in the terms of the Convertible
Bonds.
The conversion price represents:
(a) a discount of approximately 2.94% to the closing price of HK$0.17 per Share as quoted on the
Stock Exchange on 28 April 2017, being the date of the Agreement; and
(b) a discount of approximately 4.18% to the average closing price of approximately HK$0.1722 per
Share as quoted on the Stock Exchange for the 5 consecutive trading days immediately prior to the
date of the Agreement.
The conversion price was determined after arm’s length negotiations between the Company and the
Vendors with reference to, among other things, the prevailing market price of the Shares.
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Conversion
Provided that any conversion of the Convertible Bonds (i) does not trigger a mandatory offer obligation
under Rule 26 of the Takeovers Code on the part of the holder of the Convertible Bonds and parties
acting in concert with it (as defined under the Takeovers Code); and (ii) does not result in the Company’s
non-compliance with the minimum public shareholding requirement under Rule 11.23 or other similar
provisions of the GEM Listing Rules, each holder of the Convertible Bonds has the right to convert
the whole or part of the outstanding principal amount of the Convertible Bonds (in the amount of
HK$100,000 or integral multiples thereof) on any business day during the period commencing from the
date of issue of the Convertible Bonds up to the maturity date.
Ranking of Conversion Shares
The Conversion Shares will rank pari passu in all respects with the Shares in issue on the date of
allotment and issue of such Shares.
Transferability
The Convertible Bonds are freely transferable in denominations of the principal amount of HK$100,000
subject to prior notification to the Company, provided that any transfer to a connected person of the
Company shall be subject to the consent of the Company and compliance with all requirements of the
GEM Listing Rules and/or the Stock Exchange.
Redemption
The Company may redeem the Convertible Bonds at 105% of the principal outstanding amount at any
time from the date of issue to the maturity date. Any Convertible Bonds outstanding on the maturity date
shall be redeemed by the Company at 105% of the outstanding principal amount.
Listing
No application will be made for the listing of the Convertible Bonds.
Application will be made to the Listing Committee of the Stock Exchange for the listing of and
permission to deal in the Conversion Shares which may fall to be issued upon conversion of the
Convertible Bonds.
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EFFECT ON THE SHAREHOLDING STRUCTURE
The maximum of 969,696,969 Conversion Shares to be issued upon full conversion of the Convertible
Bonds represent approximately:
(a) 40.5% of the existing total number of issued Shares; and
(b) 28.8% of the total number of issued Shares as enlarged by the issue of the Conversion Shares upon
full conversion of the Convertible Bonds.
The shareholding structure of the Company (i) as at the date of this announcement and (ii) upon
conversion in full of the Convertible Bonds into Conversion Shares at the conversion price of HK$0.165
per Conversion Share are as follows:
Immediately after full conversion
As at the date of of the Convertible Bonds at
Shareholders this announcement the conversion price of HK$0.165
No. of Shares % No. of Shares %
Glorywide Group Limited (note) 21,342,857 0.89 21,342,857 0.63
Convertible Bonds holders 0 0.00 969,696,969 28.84
Public shareholders 2,371,663,671 99.11 2,371,663,671 70.53
Total 2,393,006,528 100.00 3,362,703,497 100.00
Note:
Glorywide Group Limited is wholly and beneficially owned by Mr Zhang Jie, executive Director.
INFORMATION ON THE TARGET GROUP
The Target is a limited company incorporated in the British Virgin Islands. The principal activity of the
Target is investment holding.
HK Subsidiary is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of
the Target. The principal activity of HK Subsidiary is investment holding.
WOFE is a limited company incorporated in the PRC and a direct wholly owned subsidiary of HK
Subsidiary. The principal activity of WOFE is investment holding.
OPCO is a limited company incorporated in the PRC and is principally engaged in the operation of a
Peer-to-Peer (“P2P”) online credit platform in the PRC under the brand “口貸網” (“Koudaiwang”),
matching borrowers with private lenders for various financial products and providing other related
services through both online and offline operation.
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OPCO is currently owned by Independent Third Parties who are PRC individuals or entities. Upon
completion of the Reorganization, OPCO will become a direct wholly owned subsidiary of WOFE.
Set out below is the audited financial information of OPCO extracted from its unaudited management
accounts for the year ended 31 December 2015 and 31 December 2016:
Year ended Year ended
31 Dec 2015 31 Dec 2016
RMB’000 RMB’000
Profit before taxation 14,177 31,552
Profit after taxation 10,608 23,009
Net assets 61,001 99,360
Reorganization
OPCO holds a valid internet content provider (“ICP”) license to operate the online platform. Pursuant to
the applicable PRC laws, the value-added telecommunications business of OPCO is subject to restriction
of ownership by foreign investment.
Pursuant to the Reorganization, OPCO will cease to operate the online platform and the relevant value-
added telecommunications business. OPCO will cooperate with one or more outside independent third
parties with ICP license which can run the online platform. According to the arrangement and as advised
by the Company’s PRC legal advisers, OPCO will no longer be subject to foreign investment restriction.
Upon completion of the Reorganization, OPCO will become a direct wholly owned subsidiary of WOFE.
The Vendors shall be responsible for the costs and consideration in connection with the acquisition of
OPCO by the Target Group pursuant to the Reorganization.
REASONS FOR THE ACQUISITION
The Group is principally engaged in retail sales and wholesales of wine products, cigars and tobacco and
retail sales and wholesales of golf products.
Whilst the Group remains focused on developing its existing businesses, it has been the business strategy
of the Group to proactively seek potential investment opportunities to improve the business operation
and financial position of the Group. The Directors consider that it is beneficial for the Group to seek
suitable investment opportunities from time to time to diversify its existing business portfolio into new
line of business with growth potential and to broaden its source of income in order to enhance value of
the Shareholders.
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The Directors consider that the Acquisition is in line with the Group’s business diversification strategy
and represents an attractive investment opportunity of the Group to tap into P2P lending service business
in the PRC with growth potential and to generate diversified income and additional cashflow through the
Target Group.
P2P lending, being a new financing channel, has the potential to provide a more efficient financing
solution than traditional bank financing by making it easier for the majority of borrowers, who have low
net-worth and are borrowing relatively modest amounts, to access finance.
According to data from iResearch, a market research and consulting company, P2P lending recorded over
RMB800 billion in the PRC in 2015, a surge of approximately 248.3% from that of previous year. It is
forecasted that the P2P lending in the PRC will exceed RMB3.7 trillion in 2019. In this connection, the
Directors are optimistic about the prospect of P2P lending service business.
In light of (i) prospect of the P2P lending service business in the PRC; and (ii) OPCO has established
proven profit-making record over the past three years and demonstrated significant growth in profit in
2015 and 2016, the Directors are consider that the Target Group will have a promising prospect and will
provide another income stream to the Group.
The consideration of the Acquisition is partly satisfied through the issue of the Convertible Bonds and
the Promissory Note, therefore immediate cashflow burden of the Company will be largely reduced. In
addition, the existence of the Guaranteed Profit and consideration adjustment mechanism will effectively
reduce the consideration of the Acquisition in the event of shortfall in the Guaranteed Profit. As such,
it provides extra protection to the Group regarding the risk of the Target Group not sustaining its initial
performance and growth.
The Directors are of the view that the terms and conditions of the Acquisition are fair and reasonable and
the Acquisition is in the interests of the Company and the Shareholders as a whole.
GEM LISTING RULES IMPLICATIONS
Based on the relevant percentage ratios calculations under the GEM Listing Rules, the Acquisition
constitutes a major acquisition of the Company and is subject to reporting, announcement and
shareholder’s approval requirements under Chapter 19 of the GEM Listing Rules.
The EGM will be convened and held for the Shareholders to consider and, if thought fit, approve the
relevant resolutions in relation to the Agreement and the transactions contemplated thereunder. To
the best of the Directors’ knowledge, information and belief, as at the date of this announcement, no
Shareholder has a material interest in the Acquisition which is different from the other Shareholders.
Therefore, no Shareholder would be required to abstain from voting on the proposed resolutions in
relation to the Acquisition at the EGM.
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