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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.
Fu Shou Yuan International Group Limited
福壽園國際集團有限公司
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 1448)
DISCLOSEABLE TRANSACTION
ACQUISITION OF 70% EQUITY INTEREST IN LIAONING
GUANLINGSHAN CULTURAL LANDSCAPE CEMETERY CO., LTD.*
(遼寧觀陵山藝術園林公墓有限公司)
The Board is pleased to announce that, on November 13, 2014, the Purchaser and
the Existing Shareholders, on behalf of their ultimate beneficial owner, Mr. Shi,
entered into the Agreement, pursuant to which the Purchaser will acquire a 70%
equity interest in the Target Company for a cash sum of RMB279.3 million.
Following Completion, the Purchaser and the Existing Shareholders will hold 70%
and an aggregate of 30% equity interest in the Target Company, respectively.
As one of the applicable percentage ratios for the Acquisition exceeds 5% but less
than 25%, the Acquisition constitutes a discloseable transaction of the Company
and is subject to the notification and announcement requirements under Chapter 14
of the Listing Rules.
THE AGREEMENT
The Board is pleased to announce that, on November 13, 2014, the Purchaser and the
Existing Shareholders, on behalf of their ultimate beneficial owner, Mr. Shi Junqing
(石俊慶) (“Mr. Shi”), entered into the Agreement, pursuant to which the Purchaser
will acquire a 70% equity interest in the Target Company for a cash sum of
RMB279.3 million (the “Consideration”).
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Principal Terms of the Agreement
Date:
November 13, 2014
Parties:
Purchaser:
Chongqing Fuding Equity Investment Fund Partnership
(Limited Partnership)* (重慶福鼎股權投資基金合夥企
業(有限合夥))
Shareholders of the
Target Company:
Tieling Puyuan Cultural Enterprise Co., Ltd.* (鐵嶺蒲
源文化實業有限公司)
(“Tieling
Puyuan”)
and
Shenyang Rongyuan Investment Co., Ltd.* (瀋陽榮源投
資有限公司) (“Shenyang Rongyuan”, together with
Tieling Puyuan, the “Existing Shareholders”), both of
which are owned and controlled by Mr. Shi
The Company confirms that to the best of the Directors’ knowledge, information and
belief having made all reasonable enquiry, the Existing Shareholders and their
ultimate beneficial owner, Mr. Shi are independent third parties of the Company and
its connected persons as defined in the Listing Rules.
Pursuant to the Agreement, the Purchaser will acquire a 70% equity interest in the
Target Company through subscription for equity interest in the registered capital of
the Target Company. Following Completion, the Purchaser and the Existing
Shareholders will hold 70% and 30% equity interest in the Target Company,
respectively.
Consideration of the Acquisition
The Consideration for the Acquisition amounts to RMB279.3 million, excluding any
applicable taxes payable or borne by the Purchaser. The Consideration was
determined after arm’s length negotiations between the parties to the Agreement,
taking into account the Target Company’s historical financial performance, the
location and the area of the cemetery assets held by it, and the market and earning
potentials and other benefits that the Acquisition may bring to the Purchaser. The
Consideration will be funded by a combination of the proceeds allocated to mergers
and acquisitions purposes from the Company’s initial public offering launched in
December 2013 and the Company’s internal sources of funds.
The Directors believe that the Agreement was entered into on normal commercial
terms and that such terms and the Consideration payable by the Purchaser are fair and
reasonable and in the interests of the Company and its shareholders as a whole.
— 2 —
Profits guarantee and valuation adjustment
Under the Agreement, the Existing Shareholders have provided a guarantee in favor
of the Purchaser that the audited net profits of the Target Company (the “Audited Net
Profits”) for the three financial years ending December 31, 2015, December 31, 2016
and December 31, 2017 shall be no less than RMB24 million, RMB28.5 million and
RMB33 million, respectively (each an “Guaranteed Net Profit”).
In the event that any of the Audited Net Profits reflects a shortfall, the Existing
Shareholders will, under the terms of the Profit Compensation Agreement, make up
such shortfall through a downward adjustment of their respective equity interest in
the Target Company (the “Adjustment”).
The Adjustment of the Existing Shareholders’ and the Purchaser’s interest in the
Target Company’s registered capital, if any, shall be settled between the parties
within three (3) months from the day of the completion of the Target Company’s
audited results for the relevant financial year.
Pledge of equity interest in relation to representations, warranties and
undertakings
In the event that there is a breach by the Existing Shareholders of their
representations, warranties or undertakings as set out in the Agreement, the Purchaser
will be entitled to seek damages by way of arbitration. The Existing Shareholders
shall be obligated to pay damages in cash, failing which the obligation shall be met
by the enforcement of a security interest to be created in favor of the Purchaser,
taking the form of a pledge of 25% equity interest in the Target Company owned by
the Existing Shareholders in accordance with the Share Pledge Agreement.
Completion of the Acquisition
The parties to the Agreement expect that Completion will take place on or around
December 31, 2014. Upon Completion, the Target Company will become an indirect
non wholly-owned subsidiary of the Company and accordingly, the financial results
of the Target Company will be consolidated into the consolidated financial statements
of the Company. Further announcement will be made by the Company in respect of
the Acquisition in accordance with the Listing Rules if and when required.
— 3 —
INFORMATION ON THE TARGET COMPANY
The Target Company is a limited liability company established on December 11, 2012
under the laws of the PRC, which is owned as to 90% and 10% by Shenyang
Rongyuan and Tieling Puyuan, respectively, as at the date of the Agreement. The
principal businesses of the Target Company comprise development and sale of burial
plots and funeral products. Based on its management accounts, as of September 30,
2014, the total assets of the Target Company amounted to approximately RMB318.74
million.
The Target Company holds parcels of land for cemetery development and woodland
purposes measuring approximately 3,494 mu (approximately 2,329,333 sq.m) in
total. Of the 3,494 mu of land held, a parcel measuring 148 mu (approximately
98,667 sq.m) has received granted land certificate. A further parcel measuring 165
mu (approximately 110,000 sq.m) has received in-principle approvals pending
completion of land granting procedures and payment of the applicable government
fees. Taking into account these two parcels of land, based on its current development
plan, the Target Company aims to receive government granting approvals for further
parcels of land within the following three years for up to 500 mu (approximately
333,333 sq.m).
The Target Company is one of the market leaders in terms of market shares for the
sales of burial plots and related funeral products in the cities of Shenyang (瀋陽),
Tieling (鐵嶺) and Fushun (撫順) in Liaoning Province. The Target Company
commenced sales operation in June 2013.
Set out below are the financial information of the Target Company for the financial
year ended December 31, 2013 and the unaudited financial information for the nine
months ended September 30, 2014:
Revenue
Net profit/(loss) before taxation and
extraordinary items
Net profit/(loss) after taxation and
extraordinary items
Total assets
Net assets
As at
December 31,
2013
(RMB’000)
(audited)
As at
September 30,
2014
(RMB’000)
(unaudited)
18,229
41,120
(753)
8,947
(753)
6,710
164,136
358
— 4 —
318,744
7,058
REASONS FOR AND BENEFITS OF THE ACQUISITION
The cemetery owned and operated by the Target Company is conveniently located in
the town of Hengdaohezi (橫道河子鎮) in the Tieling County, that is approximately
40 km from the city of Shenyang, 28 km from the city of Tieling and 18 km from the
city of Fushun, and is readily accessible from these cities by public bus routes and
private cars. The cemetery offers picturesque tourist attractions, filled with natural
green landscapes, mountains and man-made lakes. In addition, the cemetery is
located approximately 7 km from an established funeral parlour, which is one of the
two available in the city of Fushun.
The cities of Shenyang, Tieling and Fushun in Liaoning Province offer promising
prospects to the development of deathcare facilities, considering their respective
levels of disposable income, past and estimated average spending on deathcare
services and the growth in the aging population. In addressing the market demands
in these cities, the Company plans to replicate its business model adopted in its
development of burial sites in other parts of the PRC, with an emphasis on the
mid-end and premium markets. With the Group’s experience in developing the
mid-to-high end deathcare market in the PRC, the Group believes that it will be able
to tap into the potential deathcare market in the cities of Shenyang, Tieling and
Fushun in Liaoning Province.
Leveraging on the success of the Group’s Jinzhou Maoshan Anling in the city of
Jinzhou, the Group intends to expand its investment in the development of funeral
and burial services in Liaoning Province. To that end, the Acquisition represents an
important strategic opportunity for the Group given (i) the significant size of the land
parcels held by the Target Company that are capable of development into burial sites;
(ii) the location of the cemetery, which is readily accessible from the three major
cities of Shenyang, Tieling and Fushun in Liaoning Province; (iii) the cemetery’s
convenient access to a major funeral parlour in the city of Fushun; and (iv) favorable
market potential and prospects offered by the deathcare industry in Shenyang, Tieling
and Fushun, considering their respective aging population, rising disposable income
and past and future spending on burial services. The Acquisition will complement the
Group’s success already achieved in Liaoning Province through its wholly-owned
subsidiary Jinzhou Maoshan Anling, and provide the Company with an important
geographical coverage in northern China.
Upon Completion, the cemetery of the Target Company shall become the largest
burial site owned by the Group within the PRC in terms of area.
— 5 —
Furthermore, through appointment of the chairman and directors to the board of
directors of the Target Company, the Group will bring significant management and
operational expertise to the Target Company, introducing to it a comprehensive
operating model, corporate values and philosophy, quality service assurance
procedures and branding and marketing expertise.
INFORMATION ON THE GROUP AND THE PARTIES OF THE AGREEMENT
The Group is principally engaged in the sale of burial plots, provision of funeral and
cemetery maintenance services.
The Purchaser is an indirect wholly-owned subsidiary of the Company, which is
principally engaged in equity investments.
Each of the Existing Shareholders is an independent third party of the Company,
which is princally engaged in the investment holding of the Target Company.
LISTING RULES IMPLICATIONS
As one of the applicable percentage ratios for the Acquisition exceeds 5% but less
than 25%, the Acquisition constitutes a discloseable transaction of the Company and
is subject to the notification and announcement requirements under Chapter 14 of the
Listing Rules.
DEFINITIONS
In this announcement, the following expressions have the meanings set out below
unless the context requires otherwise:
“Acquisition”
the subscription for a 70% equity interest in the Target
Company Existing Shareholders pursuant to the terms
of the Agreement
“Agreement”
an investment agreement entered into among the
Purchaser and the Existing Shareholders on November
13, 2014 in respect of the Acquisition
“Board”
the board of Directors
“Company”
Fu Shou Yuan International Group Limited (福壽園國際
集團有限公司), a company incorporated in the Cayman
Islands with limited liability whose shares are listed on
the Stock Exchange
— 6 —
“Completion”
completion of the Acquisition, which is expected to take
place on or around December 31, 2014, subject to the
satisfaction of the conditions precedent
“Consideration”
the cash amount of RMB279.3 million payable by the
Purchaser in respect of the Acquisition, excluding any
taxes payable or borne by the Purchaser under the
Agreement
“Directors”
the directors of the Company
“Existing Shareholders”
Tieling Puyuan and Shenyang Rongyuan
“Group”
the Company and its subsidiaries
“Hong Kong”
the Hong Kong Special Administrative Region of the
PRC
“independent third
party(ies)”
individual(s) or company(ies) who or which is/are not
connected (within the meaning of the Listing Rules)
with any directors, chief executive or substantial
shareholders (within the meaning of the Listing Rules)
of the Company, its subsidiaries or any of their
respective associates
“Jinzhou Maoshan
Anling”
Jinzhou City Maoshan Anling Co., Ltd.* (綿州市帽山安
陵有限責任公司), a company established in the PRC, an
indirect wholly-owned subsidiary of the Company
“Listing Rules”
the Rules Governing the Listing of Securities on the
Stock Exchange
“Mr. Shi”
Mr. Shi Junqing (石俊慶), the ultimate beneficial owner
of the Existing Shareholders
“PRC”
the People’s Republic of China, excluding Hong Kong,
the Macau Special Administrative Region of the PRC
and Taiwan
— 7 —
“Profit Compensation
Agreement”
a profit guarantee arrangement to be entered into among
the Purchaser and the Existing Shareholders on or
before Completion, pursuant to which the parties will
adjust their respective percentage interests in the Target
Company if the net profit estimate of the Target
Company for any of the specified financial years is not
met
“Purchaser”
Chongqing Fuding Equity Investment Fund Partnership
(Limited Partnership)* (重慶福鼎股權投資基金合夥企
業(有限合夥)), a limited partnership established in the
PRC and an indirect wholly-owned subsidiary of the
Company
“RMB”
Renminbi, the lawful currency of the PRC
“Share Pledge
Agreement”
a share pledge agreement to be entered into among the
Purchaser and the Existing Shareholders on or before
Completion
“sq.m”
square meters
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Target Company”
Liaoning Guanlingshan Cultural Landscape Cemetery
Co., Ltd.* (遼寧觀陵山藝術園林公墓有限公司) , a
limited company established under the laws of the PRC,
whose registered capital was owned by Tieling Puyuan
and Shenyang Rongyuan as to 10% and 90%,
respectively, prior to the Acquisition
“%”
per cent
By order of the Board
Fu Shou Yuan International Group Limited
BAI Xiaojiang
Chairman and Executive Director
PRC, November 13, 2014
As at the date of this announcement, the executive Directors are Mr. Bai Xiaojiang, Mr. Tan Leon Li-an
and Mr. Wang Jisheng; the non-executive Directors are Mr. Lin Hung Ming (also known as Lin Hon
Min), Mr. Lu Hesheng and Mr. Huang James Chih-Cheng; and the independent non-executive
Directors are Mr. Chen Qunlin, Mr. Luo Zhuping, Mr. Ho Man and Ms. Wu Jianwei.
* Denotes English translation of the name of a Chinese company and is provided for identification
purpose only.
— 8 —