ACHL.L Regulatory News (ACHL)

Asian Citrus Holdings Limited

Major Transaction - Acquisition of 100% of Eagleton Global Investments Limited and their Intended Acquisition of 60% Interest in the Property

Issue of Consideration Shares and Placing of New Shares Under Specific Mandate

And

Potential Continuing Connected / Related Party Transaction

THE SPA

The Board wishes to announce that after trading hours in Hong Kong on 25 August 2016, the Purchaser (being a wholly-owned subsidiary of the Company), the Company and the Vendor entered into the conditional SPA in respect of the Acquisition.

The principal terms of the SPA are set out below:

Date

25 August 2016

Parties

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, each of the Vendor and its ultimate beneficial owner is an Independent Third Party as at the date of this announcement.

Subject Matter

The Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the Sale Shares, representing 100% of the issued share capital of the Target at Completion, free from all encumbrances and together with all rights and benefits attaching thereto at any time on or after the Completion Date.

The Company guarantees to the Vendor the due and punctual performance by the Purchaser of its obligations under the SPA.

Consideration

The Consideration for the Acquisition payable by the Company to the Vendor is HK$600 million (equivalent to approximately GBP58.82 million) (subject to adjustment) and shall be payable by the Company to the Vendor in the following manner on Completion Date:

(1) the Purchaser shall pay HK$300 million (i.e. the Cash Consideration) (equivalent to approximately GBP29.41 million) in cash to the Vendor (or its designated nominee); and

(2) the Purchaser shall procure the allotment and issue of the Consideration Shares to the Vendor (or its designated nominee).

The Consideration was arrived at after arm's length negotiations between the Vendor and the Purchaser on normal commercial terms with reference to (amongst other things) the expected Appraisal Value of the Property at not less than approximately HK$1 billion (equivalent to approximately GBP98.04 million) which will be finally determined by an independent professional valuer, and that the Consideration represents 60% of the Group's interest in the Target Group upon Completion. Pursuant to the SPA, the Target will acquire 60% interest in the PRC Target Subsidiary (being the owner of the Property) prior to Completion. Please refer to the paragraph headed "Information on the Target Group" for details.

The Cash Consideration will be funded by the net proceeds from the Placing.

Consideration Shares

The Consideration Shares will be allotted and at the Issue Price of HK$0.50 per Consideration Share (equivalent to approximately GBP0.049 per Consideration Share), credited as fully paid, in the manner as set out in the sub-section headed "Consideration" of this announcement. The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Consideration Shares.

The 600,000,000 Consideration Shares represent:

(i) approximately 48.01% of the existing issued share capital of the Company as at the date of this announcement; and

(ii) approximately 24.39% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and Placing Shares (assuming no further change in the share capital of the Company from the date of this announcement to the completion of Acquisition and Placing).

The aggregate nominal value of the Consideration Shares is HK$6 million (equivalent to approximately GBP588,235).

Details of the Issue Price are set out in the paragraph headed "Specific Mandate" in this announcement.

Conditions precedent

Completion shall be conditional upon:-

(a) the Purchaser having been satisfied with the results of its legal, business and financial due diligence conducted against the Target, its subsidiaries and the Property;

(b) the Company having obtained the approval from the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares;

(c) the Purchaser having received a valuation report in respect of the Property to be issued by an independent qualified valuer engaged by the Purchaser, according to which the Appraisal Value of the Property is not less than HK$1 billion (equivalent to approximately GBP98.04 million);

(d) the completion of the Target Group Reorganisation and the Vendor having acquired the legal and beneficial ownership of all issued shares of the Target;

(e) the Purchaser having received a legal opinion from its PRC legal adviser addressing to the Purchaser as to PRC laws in relation to the title of the Property and the due completion of the Target Group Reorganisation to the satisfaction of the Purchaser;

(f) (if required) all necessary authorisations, consents, and approvals of any third parties (including the Stock Exchange, any governmental or regulatory body, where applicable) in relation to the transactions contemplated herein having been obtained and remaining in full force and effect;

(g) the Company having obtained the approval of the Shareholders in respect of the transactions contemplated under the SPA at the SGM;

(h) the completion of the Placing;

(i) the warranties given by the Purchaser and the Company under the SPA remaining true and accurate and not misleading as of Completion; and

(j) the warranties given by the Vendor under the SPA remaining true and accurate and not misleading as of Completion.

The Purchaser may at its sole discretion waive the conditions precedent referred to in paragraphs (a), (c), (d), (e) and/or (j) above, and the Vendor may at its sole discretion waive the condition precedent referred to in paragraph (i) above. Save as disclosed above, none of the other conditions precedent above may be waived by any party.

If any of the conditions precedent above has not been fulfilled or waived (where applicable) on or before 31 December 2016 (or such later date as the parties may agree in writing), the SPA shall lapse immediately thereafter and be of no further effect (save for certain provisions relating to confidentiality, costs and expenses and certain miscellaneous matters shall remain in full force and effect), and no party to the SPA shall have any claim against or liability or obligation to any other party under the SPA save for antecedent breaches.

Completion

Subject to the fulfillment or waiver (where applicable) of all of the above conditions precedent, other than the condition precedent referred to in paragraph (h) above which shall only be capable of being fulfilled simultaneously with the Completion, Completion shall take place within ten business days after all of the above conditions precedent have been fulfilled or waived (where applicable) and simultaneously with the Placing, or such other date as the Vendor and the Company may agree in writing.

Immediately after the Completion,

(i) the Company will (through the Purchaser) own the entire equity interest in the Target, which in turn will indirectly own 60% interest of the PRC Target Subsidiary, and the financial results of the Target Group will be consolidated with the results of the Group. The remaining 40% interest of the PRC Target Subsidiary will be beneficially owned by Mr. Kung, who will become a connected person of the Company upon Completion; and

(ii) the Vendor (or its designated nominee) will become a substantial shareholder of the Company holding the Consideration Shares, representing approximately 24.39% of the entire issued share capital of the Company as enlarged by the issue of the Consideration Shares and the Placing Shares (assuming no other changes to the issued share capital of the Company prior to Completion).

Completion Adjustment

After Completion, the Purchaser shall verify the completion accounts of the Target Group as at the Completion Date to be provided by the Vendor and determine the adjusted asset value (the "Adjusted Asset Value") of the Target Group (being the consolidated total current asset less consolidated total liabilities of the Target Group). There will be no adjustment to the Consideration if the Adjusted Asset Value is a positive number. In the event the Adjusted Asset Value is negative, the cash portion of the Consideration will be reduced by an amount equal to the absolute value of 60% of the Adjusted Asset Value and the Vendor shall pay such adjustment in cash to the Purchaser within three business days from the date when the final Adjusted Asset Value is determined.

INFORMATION ON THE TARGET GROUP

The Target is a company incorporated in the BVI with limited liability on 11 March 2016. The principal business of the Target is investment holding and it has not conducted any business since its incorporation. Pursuant to the SPA, the Vendor will acquire the entire issued share capital of the Target (which in turn will indirectly own 60% interest of the PRC Target Subsidiary, being the owner of the Property) prior to Completion. The Property comprises two buildings of 8 storeys each, with a total gross floor area of 28,327.24 sq.m., which are located at Nanshan Avenue, Nanshan District, Shenzhen, the PRC.

The unaudited financial information of the PRC Target Subsidiary (assuming the completion of the Target Group Reorganisation) for the years ended 31 December 2014 and 31 December 2015 is set out below:-

The unaudited total asset of the PRC Target Subsidiary (assuming the completion of the Target Group Reorganisation) as at 31 July 2016 was approximately RMB46.34 million (equivalent to approximately HK$54.22 million and GBP5.32 million).

Reasons for acquiring the Target are set out later in this announcement in the paragraph "Reasons For and Benefits of the Acquisition and the Placing".

THE PLACING AGREEMENT

Date

25 August 2016

Issuer

The Company

Placing Agent

RHB Securities Hong Kong Limited

The Placing Agent has conditionally agreed to procure, on a best-effort basis, as placing agent of the Company, the Placee(s) to subscribe up to 610,000,000 Placing Shares. The Placing Agent will receive a placing commission of 1% of the aggregate Placing Price for the Placing Shares actually placed by or on behalf of the Placing Agent on behalf of the Company in pursuance of its obligations under the Placing Agreement. Such placing commission was arrived at after arm's length negotiations between the Company and the Placing Agent under normal commercial terms and with reference to the prevailing market conditions.

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, as at the date of this announcement, each of the Placing Agent and its ultimate beneficial owners is an Independent Third Party.

Placees

The Placing Shares are to be placed to not less than six Placees, who and whose ultimate beneficial owners, shall be Independent Third Parties. The Placing Agent has undertaken to the Company that except with the consent of the Company, none of the Placees would, immediately upon completion of the Placing, become a substantial shareholder of the Company.

Placing Price

Details of the Placing Price are set out in the paragraph headed "Specific Mandate" in this announcement.

The Directors consider that the terms of the Placing Agreement (including the Placing Price and the Placing commission) are fair and reasonable, based on current market conditions and in the interests of the Company and the Shareholders as a whole.

The gross proceeds from the Placing are expected to be approximately HK$305 million (equivalent to approximately GBP29.90 million) and the net proceeds from the Placing are estimated to be approximately HK$300 million (equivalent to approximately GBP29.41 million). On such basis, the net issue price will be approximately HK$0.492 per Placing Share (equivalent to approximately GBP0.048 Placing Share).

Placing Shares

The maximum number of 610,000,000 Placing Shares represent:-

(i) approximately 48.81% of the existing issued share capital of the Company as at the date of this announcement;

(ii) approximately 24.80% of the issued share capital of the Company as enlarged by the Placing and the issue of Consideration Shares (assuming there will not be any other change in the issued share capital from the date of this announcement to the date of completion of the Placing). The aggregate nominal value of the Placing Shares will be HK$6.1 million (equivalent to approximately GBP598,039).

Ranking

The Placing Shares will rank, upon issue, pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Placing Shares.

Conditions of the Placing

Completion of the Placing is conditional upon:-

(i) the Stock Exchange granting the listing of, and permission to deal in, the Placing Shares to be placed pursuant to the Placing Agreement;

(ii) the grant of Specific Mandate to allot and issue the Placing Shares under the Placing being approved by the Shareholders at the SGM; and

(iii) all of the conditions precedent under the SPA being fulfilled or waived (as the case may be), other than the condition precedent in relation to the completion of the Placing.

None of the conditions above may be waived by any party.

If the above conditions are not satisfied or waived (as the case may be) on or before 31 December 2016, the obligations of the Placing Agent and of the Company under the Placing Agreement shall cease and neither the Placing Agent nor the Company shall have any claim against the other in relation to the Placing Agreement (save in respect of any antecedent breaches of any obligations thereunder, breach of warranties and representations, or obligations in relation to expenses incurred).

Completion

Completion of the Placing shall take place on a date within ten business days after the fulfillment of the above conditions (other than the condition precedent referred to in paragraph (iii) above which shall only be capable of being fulfilled simultaneously with the completion of the Placing) and simultaneously with the Completion, or on such other date as the Company and the Placing Agent may agree in writing.

Termination

The Placing Agent reserves its right to terminate the Placing Agreement by notice in writing to the Company at any time up to 9:30 a.m. on the date of completion of the Placing if, in the reasonable opinion of the Placing Agent, after consultation with the Company:

(A) there develops, occurs or comes into force:

(i) any event, development or change (whether or not local, national or international or forming part of a series of events, developments or changes occurring or continuing before, on and/or after the date hereof) and including an event or change in relation to or a development of an existing state of affairs of a political, military, industrial, financial, economic, fiscal, regulatory or other nature, resulting in a change in, or which may result in a change in, political, economic, fiscal, financial, regulatory or stock market conditions; or

(ii) the imposition of any moratorium, suspension or restriction on trading in securities generally on the Stock Exchange occurring due to exceptional financial circumstances or otherwise; or

(iii) any change in conditions of local, national or international securities markets; or

(iv) any new law or regulation or change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority in Hong Kong or any other jurisdiction relevant to the Group; or

(v) a change or development involving a prospective change of taxation or exchange control (or the implementation of exchange control) in Hong Kong or elsewhere; or

(vi) any litigation or claim being instigated against any member of the Group which would have a material adverse effect on the Group; or

(vii) any suspension in the trading of Shares on the Stock Exchange for a continuous period of fifteen Business Days; or

(B) any material breach of any of the representations and warranties set out in the Placing Agreement comes to the knowledge of the Placing Agent or any event occurs or any matter arises on or after the date hereof and prior to the date of completion of the Placing which if it had occurred or arisen before the date hereof would have rendered any of such representations and warranties untrue or incorrect in any material respect or there has been a material breach by the Company of any other provision of the Placing Agreement; or

(C) there is any material adverse change in the financial or business or trading position of the Group as a whole on or after the date of the Placing Agreement but before completion of the Placing.

The Directors are not aware of the occurrence of any of such events as at the date of this announcement.

Mandate to issue the Placing Shares

The Placing Shares proposed to be issued under the Placing Agreement will be issued pursuant to the Specific Mandate to be obtained from the Shareholders at the SGM.

Use of Proceeds

The maximum net proceeds from the Placing are estimated to be approximately HK$300 million (equivalent to approximately GBP29.41 million). It is expected that the entire net proceeds from the Placing will be applied as the Cash Consideration for the Acquisition under the SPA.

The Placing is subject to termination by the Placing Agent under certain circumstances as set out in the above paragraph headed "The Placing Agreement - Termination". In the event that the Placing Agent exercises its right to terminate the Placing Agreement in accordance with the terms therein, the Placing will not proceed. Should the placing not proceed, the Acquisition will not complete.

Since completion of the Placing is subject to the fulfilment of the condition(s) as set out in the Placing Agreement, the Placing may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares of the Company.

SPECIFIC MANDATE

The total of 1,210,000,000 Consideration Shares and the Placing Shares proposed to be issued under the SPA and the Placing Agreement, respectively, will be issued pursuant to the Specific Mandate to be obtained from the Shareholders at the SGM. An application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Consideration Shares and the Placing Shares.

The Issue Price and Placing Price of HK$0.50 per Share (equivalent to approximately GBP0.049 per Share) represent:

(i) a discount of approximately 19.35% to the latest closing price of HK$0.62 per Share (equivalent to approximately GBP0.061 per Share) as quoted on the Stock Exchange on the date of the SPA and the Placing Agreement; and

(ii) a discount of approximately 21.14% to the average closing price of HK$0.634 per Share (equivalent to approximately GBP0.062 per Share) as quoted on the Stock Exchange for the last five consecutive trading days immediately preceding the date of the SPA and the Placing Agreement.

Both the Issue Price and the Placing Price were determined by the Board after arm's length negotiation between the parties with reference to the prevailing market price of the Shares and the current market conditions. The Directors consider both the Issue Price and the Placing Price are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

POTENTIAL CONTINUING CONNECTED / RELATED PARTY TRANSACTION

Mr. Kung or companies held by him are currently occupying certain parts of the Property and will enter into a lease agreement with the PRC Target Subsidiary in respect of certain part of the Property on or about Completion. Given Mr. Justin Kung will become a substantial shareholder of the Company upon Completion, Mr. Kung (being the father of Mr. Justin Kung) will become a connected person / related party of the Company. Accordingly, the transactions contemplated under such lease agreement (if proceeded with) may become continuing connected transaction(s) of the Company under Chapter 14A of the Listing Rules and related party transactions in accordance with Rule 13 of the AIM Rules.

The Company will comply with applicable requirements under Chapter 14A of the Listing Rules and Rule 13 of the AIM Rules as and when appropriate should any such continuing connected / related party transaction take place.

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE PLACING

The Group is principally engaged in planting, cultivation and sale of agricultural produce, manufacture and sale of fruit juice concentrates, fruit purees and frozen fruit and vegetables. The Group has three plantations in the PRC occupying a total area of approximately 103 square kilometers, namely Hepu Plantation in Guangxi Zhuang Autonomous Region, Xinfeng Plantation in Jiangxi Province and Hunan Plantation in Hunan Province.

As disclosed in the interim report of the Company for the six months ended 31 December 2015 and the market update announcements of the Company dated 18 May 2016 and 11 August 2016, the operating environment of the Group has been difficult in the past few years with adverse weather conditions and the devastating effects of Huanglongbing disease posing significant challenges to the business and financial operations of the Group. The Group suffered significant losses resulting from decreasing production yields and increasing margin pressures in Hepu Plantation and the cessation of operation of Xinfeng Plantation and Hunan Plantation in December 2015 and May 2016 respectively.

In view of the weak business sentiments relating to the Group's fruit business, the Directors have been exploring different business opportunities in other sectors in order to broaden the sources of income and to boost the business performance of the Group. Pursuant to the SPA, the Vendor will acquire the entire issued share capital of the Target (which in turn will indirectly own 60% interest of the PRC Subsidiary, being the owner of the Property) prior to Completion. The Property comprises two buildings of 8 storeys each, which are located at Nanshan Avenue, Nanshan District, Shenzhen, the PRC, and over 90% of the units have been leased out as at the date of this announcement, which generated rental income of approximately RMB41.33 million (equivalent to approximately HK$48.36 million and GBP4.74 million) and RMB44.37 million (equivalent to approximately HK$51.91 million and GBP5.09 million) for the year ended 31 December 2014 and 2015 respectively. The Property is located near Qianhai special economic zone, Shenzhen, the PRC and has been enjoying and is expected to continue to enjoy high occupancy and rental growth for office/commercial space. The Board considers that in light of its strategic location and its close proximity to Qianhai special economic zone, the occupancy rate is expected to remain relatively high with well diversified tenant profile. The Board considers that the Acquisition would enable the Group to generate steady rental income which would strengthen the asset and/or income base of the Group and provide capital appreciation potential to the Group.

In addition, the Directors consider that it is in the interest of the Company and its Shareholders as a whole to retain more cash for general working capital requirements and the future business development of the Group after the completion of the Acquisition. The settlement of the Consideration in full by the issue of Consideration Shares and proceeds of the Placing Shares allows the Group to (i) minimise immediate cash outflow; (ii) avoid increasing its liabilities; (iii) complete the Acquisition without significant cash outlay; and (iv) maintain its liquidity position and financial leverage with readily available and accessible cash resources for its daily operations and future development demands for capital.

The terms of the SPA were determined after arm's length negotiations between the parties thereto and the Directors are of the view that the terms of the SPA and the Placing are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST 12 MONTHS

The Company had not conducted any fund raising activities in the past 12 months immediately preceding the date of this announcement.

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, the existing shareholding structure of the Company and the effect on the shareholding structure of the Company, upon completion of the Placing and the issue of Consideration Shares (assuming there is no other change in the shareholding structure of the Company before the issue of the Placing Shares and the Consideration Shares) are set out as below:

Notes:

1. As at the date of this announcement, Mr. Ng Ong Nee, the Company's Chairman, an executive Director and Chief Executive Officer of the Company, indirectly held 179,252,394 Shares through Changjiang Tyling Management Company Limited, a company owned by him as to 50%.

2. The Vendor is a company wholly-owned by Mr. Justin Kung. Subject to and upon issue of the Consideration Shares to the Vendor at Completion, Mr. Justin Kung and his associates will become connected persons of the Company.

IMPLICATIONS UNDER THE LISTING RULES AND AIM RULES

As certain percentage ratios in respect of the Acquisition are more than 25% but all percentage ratios are less than 100%, the Acquisition constitutes a major transaction for the Company under the Listing Rules and is subject to notification, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules and a "Substantial Transaction" under Rule 12 of the AIM Rules.

The SGM will be convened for the purpose of, among other things, considering, and if thought fit, approving (i) the SPA and the transactions contemplated thereunder; and (ii) the grant of the Specific Mandate to allot and issue the Placing Shares and the Consideration Shares. To the best knowledge of the Directors, no Shareholder has a material interest in the Acquisition and/or the Placing. Accordingly, no Shareholder will be required to abstain from voting at the SGM in respect of the resolutions to be proposed at the SGM.

Applications will be made to the Stock Exchange for the listing of, and permission to deal in, the Placing Shares and the Consideration Shares, respectively.

A circular containing, among other things, (i) details of the Acquisition, the SPA and the transactions contemplated thereunder; (ii) details of the Placing; and (iii) the notice of the SGM are expected to be despatched to the Shareholders on or before 14 October 2016 as more time is required to prepare the information for inclusion in the circular, including but not limited to the audited financial results of the Group for the year ended 30 June 2016.

DEFINITIONS

Unless otherwise specified, the following terms have the following meanings in this announcement:

For the purposes of this announcement, the exchange rates of (i) RMB1.00 = HK$1.17, (ii) US$1 to HK$7.76 and (iii) GBP1 to HK$10.2 have been used, where applicable, for illustration purposes only and do not constitute representations that any amount has been, could have been or may be exchanged at such rates or any other rates or at all on the date or dates in question or any other date.

This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.

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