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 any securities of the Company.
C CHENG HOLDINGS LIMITED 思城控股有限公司 (Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1486)
CONNECTED TRANSACTION IN RELATION TO ISSUE OF NEW SHARES UNDER SPECIFIC MANDATE SUBSCRIPTION OF NEW SHARES UNDER SPECIFIC MANDATE AND PURCHASE OF SALE SHARE On 13 January 2017 (after trading hours of the Stock Exchange), the Company, the Controlling Shareholders and the Investor entered into the Subscription and Share Purchase Agreement, pursuant to which the Company has conditionally agreed to allot and issue, the Controlling Shareholders has conditionally agreed to sell, and the Investor has conditionally agreed to subscribe for and purchase, the Subscription Shares at the Subscription Price of HK$1.99 per Subscription Share and at Sale Price of HK$1.99 per Sale Share. After the Subscription and the Share Sale of the Company, the Investor will hold approximately 28.83% of the issued share capital of the Company immediately upon Completion (assuming there is no change to the issued share capital of the Company from the date of this announcement and prior to Completion) as enlarged by the Subscription. The Subscription Shares will be allotted and issued under the Specific Mandate to be sought at the forthcoming EGM.
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IMPLICATIONS UNDER THE LISTING RULES As the Share Sale involves the Investor’s purchase of the Sale Share from the Controlling Shareholders, therefore the Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. To the best of the Directors’ knowledge, information and belief after having made all reasonable enquires, as at the date of this announcement, the Investor did not hold any Shares. The Investor and his associates, who as at the date of EGM shall hold Shares, are required to abstain from voting in favour of the resolution(s) regarding the Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate for the allotment and issue of the Subscription Shares. GENERAL EGM An EGM will be convened by the Company to consider, and if thought fit, to approve, among other things, the Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate for the allotment and issue of the Subscription Shares. Circular A circular containing, amongst other information, (i) details of the Subscription; (ii) details of the Specific Mandate; (iii) a letter of advice from the Independent Board Committee to the Independent Shareholders; (iv) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (v) a notice of the EGM, will be despatched to the Shareholders on or before 7 February 2017. WARNING Shareholders and potential investors should note that the Subscription and Share Sale is subject to the fulfilment of the conditions precedent under the Agreement and the Subscription and Share Sale may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares. THE SUBSCRIPTION Reference is made to the Company’s announcement dated 14 December 2016 disclosing that the Company had entered into a memorandum of understanding with a potential investor who had expressed an interest in investing in the Company.
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On 13 January 2017 (after trading hours), the Company entered into the Share Subscription and Share Purchase Agreement (the “Agreement”) with (1)
Beijing Design Group Company Limited (北京設計集團有限責任公司), a company incorporated in the British Virgin Islands and indirectly wholly owned by Beijing Enterprises Group Company Limited (北京控股集團有限公司) which is a state-owned enterprise under the People’s Government of Beijing Municipality (北京市人民政府) (the “Investor”);
(2)
The Company; and
(3)
The following controlling shareholders of the Company whose aggregate shareholding percentage is 69.11% as at the date of this announcement (the “Controlling Shareholders”): a.
Mr. Ronald Liang, a director who owns 83,392,000 shares representing 42.50% of the share capital of the Company;
b.
Mr. Fu Chin Shing, a director who owns 36,808,000 shares representing 18.76% of the share capital of the Company; and
c.
Mr. Wang Jun You, a director who together with his spouse owns 15,400,000 shares representing 7.85% of the share capital of the Company.
The principle terms of the Agreement are set out below: (1)
The Company will issue and the Investor will subscribe for 56,598,430 new shares, representing 28.84% of the current share capital of the Company and 22.39% of the enlarged share capital of the Company, at a subscription price of HK$1.99 per share (the “Subscription”);
(2)
The Controlling Shareholders will sell and the Investor will purchase 16,281,040 existing shares, so that the Investor will hold in aggregate after completion of the subscription and such purchase 28.83% of the enlarged share capital of the Company, at a sale price of HK$1.99 per share (the “Share Sale”);
(3)
The Controlling Shareholders will appoint a placing agent and sell to independent third party placees located by the placing agent between 15,168,926 to 20,225,234 existing shares, representing 6.00% to 8.00% of enlarged share capital of the Company, at a placing price of HK$1.99 per share (such that following completion of the sale of existing shares and such placing of existing shares, the Controlling Shareholders will in aggregate retain 39.20% (when placing is at maximum of 8.00%) to 41.22% (when placing is at minimum of 6.00%) of the enlarged share capital of the Company) (the “Placing”);
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(4)
(5)
Upon completion of the Subscription, the Share Sale and the Placing, (a)
three persons nominated by the Investor for election by the shareholders will be appointed to act as substitutes for two incumbent executive directors and one incumbent independent non-executive director, one of the new executive directors to also act as co-chairman of the Company; and
(b)
an investment committee will be established consisting of 5 members, two of whom shall be nominated by the Investor, such that the positive vote of not less than 4 committee members shall be required for important matters such as capital expenditure exceeding HK$5 million in one transaction, overseas investment and fund-raising, and transactions that involve changes in shareholding; and
After completion of the Subscription, the Share Sale and the Placing, (a)
the existing management and staff of the Company will be retained;
(b)
when an appropriate opportunity arises, the Investor will inject related assets of their group into the Company on the basis of independent valuation, such that 10 to 20% discount will be applied to then prevailing share price of the Company in the event that consideration shares are issued;
(c)
the Company will continue to build and promote the existing LWK brand of the Company; and
(d)
the Company will limit its grants of share options to once a year.
CONDITIONS Completion of the Subscription, the Share Sale and the Placing, is conditional on: (1)
the internal approvals of the Investor and the relevant regulatory approvals;
(2)
the approvals of the shareholders of the Company for (a) the Share Sale and (b) the specific mandate for the issue of the relevant new shares of the Company; and
(3)
the transactions under the Agreement not being considered by any relevant regulatory authority to constitute a change in control of the Company.
If the conditions are not fulfilled on or before the long stop date, the Agreement will terminate. COMPLETION Completion of the Subscription, the Share Sale and the Placing will take place at the same time on the Completion Date.
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SUBSCRIPTION PRICE The subscription price of HK$1.99 represents: (a)
a discount of approximately 37.62% to the closing price of the Shares of HK$3.19 per Share as quoted on the Stock Exchange on 12 January 2017, the last trading day prior to the date of the Agreement;
(b)
a discount of approximately 37.62% to the average closing prices of the Shares as quoted on the Stock Exchange for the last 5 trading days up to and including 12 January 2017 of HK$3.19 per Share;
(c)
a discount of approximately 38.58% to the average closing prices of the Shares as quoted on the Stock Exchange for the last 10 trading days up to and including 12 January 2017 of HK$3.24 per Share;
(d)
a discount of approximately 37.81% to the average closing prices of the Shares as quoted on the Stock Exchange for the last 15 trading days up to and including 12 January 2017 of HK$3.20 per Share; and
(e)
a discount of approximately 26.57% to the average closing prices of the Shares as quoted on the Stock Exchange for the last 30 trading days up to and including 12 January 2017 of HK$2.71 per Share.
The issue price was determined after arm’s length negotiations with reference to the prevailing market prices of the Shares. EFFECT ON SHAREHOLDING STRUCTURE OF THE COMPANY Assuming there being no other changes in the share capital of the Company from the date of this announcement up to completion of the Subscription, the Share Sale and the Placing, set out below is the shareholding structure of the Company (i) as at the date of this announcement; and (ii) immediately upon completion of the Subscription, the Share Sale and the Placing at 6% and 8% respectively.
The Controlling Shareholders Connected person The Investor Public shareholders Placees Other public shareholders
As at the date of this announcement Number of Shares
%
135,600,000
69.11
104,150,034
41.20
99,093,726
39.20
4,500,000
2.29
4,500,000
1.78
4,500,000
1.78
–
–
72,879,470
28.83
72,879,470
28.83
– 56,117,000
– 28.60
15,168,926 56,117,000
6.00 22.19
20,225,234 56,117,000
8.00 22.19
196,217,000
100.00
252,815,430
100.00
252,815,430
100.00
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Immediately upon completion of the Subscription, the Share Sale and the Placing Placing at 6% Placing at 8% Number of Number of Shares % Shares
%
INFORMATION OF THE COMPANY The Company was incorporated in the Cayman Islands with limited liability, shares of which have been listed on the Growth Enterprise Market of The Stock Exchange on 20 December 2013 and the listing of the Company’s Shares has been transferred from the Growth Enterprise Market of The Stock Exchange to the Main Board of The Stock Exchange on 3 August 2015. The Company and its subsidiaries are engaged in the provision of comprehensive architectural service. INFORMATION OF THE INVESTOR Beijing Design Group Company Limited is a wholly-owned subsidiary of the Beijing Municipal Engineering Design & Research Institute Co., Ltd. Established in 1955, Beijing Municipal Engineering Design & Research Institute Co., Ltd. is a wholly-owned subsidiary of Beijing Enterprises Group Company Limited, possessing grade A qualifications in engineering design. It is a technological innovative company which provides integrated services for the entire process of engineering construction project, and is a leader in the municipal construction design and research in the PRC. Its overall strength is especially seen in the professional design and research of the following areas: urban roadwork, highway system, mass transit railway system, bus rapid transit (BRT), integrated transportation hubs, fresh water and drainage system, water recycling, solid waste disposal and treatment system, river restoration, urban design and landscape, urban underground space development and usage, integrated underground utilities system, and sponge city. REASONS AND BENEFITS The Investor focuses on the design of municipal infrastructure, including rail transportation, roads and bridges, urban planning and design, underground city pipes and other fields. It ranks among the top in its industry in the PRC. To the best of knowledge of the directors of the Company, it is not a connected person of the Company. The Board of the Company considers that the Agreement will bring positive development conditions to the Company. The Company focuses on architectural design. Both companies can complement each other to create synergy and create feasible opportunities which significantly expand domestic and overseas business, and enhance the revenue and long-term development of the Company as a result of the extended design consulting business chain. This transaction will create a dual strategy of “Technology + Capital” for the Company, enhancing the market competitiveness of the Company in its business areas. The strong technological capability and the solid capital support from the new shareholders and its holding companies will facilitate the Company’s active participation in the general strategic plan of the Belt and Road Initiative of the PRC, including but not limited to, equity investments, Public-Private Partnership project operations, mergers and acquisitions of upstream and downstream industries with similar businesses, benefiting the international development of the Company.
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Furthermore, the investment will support the expansion of the customer base and business coverage of the Company. This cooperation will enable an enrichment and diversification of the customer base, a more comprehensive business development, increasing the exchange and cooperation with outstanding domestic and overseas professionals, enabling a continuous enhancement and upgrading of professionals and technologies of the Company, and enhancing the overall standard of professional technology of the Company. The Company believes that the introduction of the new strategic Investor will greatly strengthen the Company’s competitiveness in terms of resource integration, financial support and other various aspects, providing an active and positive motivation for the development of the Company in the future. The Board of the Company (excluding the Controlling Shareholders and the independent nonexecutive directors) consider that the terms of the Subscription are fair and reasonable and in the interests of the Company and its shareholders as a whole. LISTING RULE IMPLICATIONS Completion of the Subscription, the Share Sale and the Placing is inter-conditional. Each of the Controlling Shareholders is a director of the Company and a connected person. The Subscription will constitute a connected transaction of the Company for the purpose of Chapter 14A of the Listing Rules. EGM An EGM will be convened by the Company to consider, and if thought fit, to approve, among other things, the Agreement and the transactions contemplated thereunder, including the grant of the Specific Mandate for the allotment and issue of the Subscription Shares. Independent Board Committee The Company will establish the Independent Board Committee and will appoint an Independent Financial Adviser in respect of the Agreement and the transactions contemplated thereunder. Circular A circular containing, amongst other information, (i) details of the Subscription; (ii) details of the Specific Mandate; (iii) a letter of advice from the Independent Board Committee to the Independent Shareholders; (iv) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (v) a notice of the EGM, will be despatched to the Shareholders on or before 7 February 2017. WARNING Shareholders and potential investors should note that there is no assurance that the Subscription will be completed, and shareholders and potential investors of the Company are therefore advised to exercise caution when dealing in shares of the Company.
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DEFINITIONS In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise: “Agreement”
the conditional subscription agreement dated 13 January 2017 entered into by the Company, the Controlling Shareholder and the Subscriber
“Board”
the board of directors of the Company
“Business Day”
a day (other than a Saturday or Sunday or public holiday) on which licensed banks in Hong Kong are open for business during their normal business hours
“Company”
C Cheng Holdings Limited, a company incorporated in the Cayman Islands, the shares of which are listed on the main board of the Stock Exchange
“Completion Date”
the day on which the completion of the Subscription, the Share Sale and the Placing takes place, which shall be the third Business Day after the date on which the conditions precedent to the Agreement is fulfilled or such other dates as the Company and the Investor may agree in writing
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Controlling Shareholders”
being Mr. Ronald Liang, Mr. Fu Chin Shing and Mr. Wang Jun You, who together with their associates owns 42.50%, 18.76% and 7.85% of the Share capital of the Company respectively
“Director(s)”
the director(s) of the Company
“EGM”
the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving, among other things, the Agreement and the transactions contemplated thereunder, including the grant of Specific Mandate
“Group”
the Company and its subsidiaries
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
an independent board committee, comprising all the independent non-executive Directors, which will be formed in respect of the Agreement and the transactions contemplated thereunder
“Independent Financial Adviser”
an independent financial adviser appointed by the Company in respect of the Agreement and the transactions contemplated thereunder –8–
“Investor”
has the meaning as defined in the section headed “THE SUBSCRIPTION” in this announcement
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Long stop date”
30 March 2017 (or such later date as the Company and the Subscriber may agree in writing)
“Placing”
has the meaning as defined in the section headed “THE SUBSCRIPTION” in this announcement
“Share Sale”
has the meaning as defined in the section headed “THE SUBSCRIPTION” in this announcement
“Shares”
ordinary shares of the Company
“Shareholders”
holder(s) of the Share(s)
“Specific Mandate”
a specific mandate to allot, issue or otherwise deal in Shares to be sought from the Shareholders to satisfy the allotment and issue of the Subscription Shares to the Subscriber under the Subscription
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Subscription”
has the meaning as defined in the section headed “THE SUBSCRIPTION” in this announcement
“Subscription Price”
the subscription price of HK$1.99 per Share
“Subscription Shares”
56,598,430 new Shares to be subscribed by the Investor under the Subscription
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
“%”
per cent. By order of the Board C CHENG HOLDINGS LIMITED Liang Ronald Chairman and Executive Director
Hong Kong, 13 January 2017 As at the date of this announcement, the executive Directors are Mr. Liang Ronald, Mr. Fu Chin Shing, Mr. Wang Jun You, Mr. Lo Kin Nang, Mr. Ng Kwok Fai and Mr. He Xiao, and the independent non-executive Directors are Mr. Lo Wai Hung, Mr. Wang Julius and Mr. Yu Chi Hang.
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