CTI.L Regulatory News (CTI)

CATHAY INTERNATIONAL HOLDINGS LIMITED

Proposed minority investment in

Zhejiang Starry Pharmaceutical Co., Ltd. ('Starry')

Cathay International Holdings Ltd. (LSE: CTI.L) ('Cathay' or the 'Company'), a company investing primarily in the growing pharmaceutical and healthcare sectors in the People's Republic of China ('PRC'), announces today that:

·; Lansen Pharmaceutical Holdings Limited (HKE: 503.HK) ('Lansen'), the Company's subsidiary listed on the main board of the Hong Kong Exchange, has announced today that it has agreed the terms for the purchase of a 20% equity interest in Starry ('Lansen's Investment') from an independent third party for a cash consideration of approximately US$24 million; and

·; the Company has agreed the terms for the purchase of a 1.5% equity interest in Starry (the 'Company's Investment') from the same independent third party for a cash consideration of approximately US$1.8 million.

Details of the transaction

Lansen's Investment is to be effected pursuant to an equity transfer agreement (the 'Lansen Agreement') under which Lansen Investments (Hong Kong) Limited ('LSI'), an indirect wholly owned subsidiary of Lansen, has agreed to purchase and Mr. Liew Yew Thoong (the 'Vendor'), one of the existing minority shareholders of Starry, has agreed to sell, 20% of the registered capital of Starry for a cash consideration of approximately US$24 million (RMB160 million).

The Company's Investment is to be effected pursuant to a separate equity transfer agreement (the 'Cathay Agreement') under which Full Keen Limited ('FKL') an indirect wholly-owned subsidiary of the Company, has agreed to purchase and the Vendor has agreed to sell, 1.5% of the registered capital of Starry for a cash consideration of approximately US$1.8 million (RMB12 million).

Information on Starry

Starry is a sino-foreign equity joint venture incorporated under the laws of the PRC. It is a company specializing in the production of bulk pharmaceuticals and intermediates. The two core bulk pharmaceutical products of Starry are iohexol for X-CT non-ionic contrast agents and levofloxacin for antibiotics. Starry is the largest iohexol manufacturer in the PRC and is experienced in the production management and quality control of bulk pharmaceuticals.

Set out below is a summary of the audited financial results of Starryfor the two years ended 31 December 2008 and 31 December 2009, which were prepared in accordance with the PRC generally accepted accounting principles:

Consideration

The consideration for Lansen's Investment is RMB160 million (approximately US$24 million), which shall be funded through the existing internal resources of the Lansen group.

The consideration for the Company's Investment isRMB12 million (approximately US$1.8million). The consideration will be satisfied out of the Company's internal resources.

The consideration was agreed after arm's length negotiations between Lansen, the Company and the Vendor, taking into consideration, amongst other things, (i) the net asset value of Starry as at 31 December 2009; (ii) future prospects of the business of Starry; (iii) the prospects of the pharmaceutical industry in the PRC as a whole; and (iv) trading price earnings multiples of Starry's market comparables in the PRC.

The consideration payable for the Company's Investment and Lansen's Investment shall be settled within 10 business days of receipt of the relevant government approval in the PRC for the transfer of the equity interests under the respective agreement.

If the relevant government approval for the transfer of the equity interests is not received within 60 days from the date of the application for approval (or such other date as the Vendor and LSI or FKL, as the case may be, may agree) the Lansen Agreement and the Cathay Agreement shall lapse and be of no further force and effect.

Effect of the transaction on the Cathay group and benefits of the transaction

The reasons for and expected benefits of Lansen's Investment include the following matters:

·; One of Lansen's strategies is to explore opportunities, through business alliances or acquisitions, which would expand its product range of rheumatic specialty drugs, including the upstream bulk pharmaceutical production for rheumatic specialty drugs. The board of Lansen believes that Lansen's Investment provides Lansen with opportunities to participate in the upstream supply business in the pharmaceutical industry value chain. Lansen's Investment is of strategic significance since Lansen's Investment will allow it to develop experience in the production management and control of bulk pharmaceuticals for its drugs in the future.

·; The impact on bulk pharmaceuticals appear to be less substantial than the impact on downstream pharmaceutical products under the recent "Drug Price Control Measures" discussion paper published by the PRC government. Lansen's Investment will achieve a certain degree of diversification of product concentration risk.

·; Lansen's board believes that Lansen's Investment is consistent with Lansen's business objective of establishing and strengthening business alliances with pharmaceutical companies. Lansen will benefit from Starry's experience in areas including raw materials production technology, GMP certification, cost and quality control, and environmental protection. Lansen is not expected to devote significant human and management resources to Starry's operations.

·; Lansen's board considers that the terms and conditions of the Lansen Agreement, including the consideration thereof, are fair and reasonable and that the entering into of the Lansen Agreement is in the interests of Lansen and its shareholders as a whole.

For Cathay, the Company's Investment is in line with the intention stated in the Company's 2010 interim report to specialize in the fast growing pharmaceutical, healthcare and environment protection markets and to widen the investment scope of the Cathay Group to include potential minority investment positions.

The Board of Cathay considers that the terms and conditions of the Cathay Agreement, including the consideration thereof, are fair and reasonable and that the entering into of the Cathay Agreement is in the interests of the Company and its shareholders as a whole.

Details of key individuals important to the business of Starry

Mr. Hu Jinsheng, 56, founder and one of the major shareholders of Starry, has been in the business for thirty years and possesses extensive experience in operational and financial management issues. Mr. Hu Jinsheng is the General Manager of Starry.

Mr. Hu Jian, the son of Mr. Hu Jinsheng, is another major shareholder of Starry. Mr. Hu Jian is the Deputy General Manager of Starry.

Enquiries

Cathay International Holdings Limited + 852 2828 9289

Jinyi Lee / Eric Siu

Brunswick +44 (0)20 7404 5959

Jon Coles

Certain statements in this announcement are forward-looking statements. These statements relate to the Cathay Group's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as "believe", "could", "envisage", "estimate", "intend", "may", "plan", "will" or the negative of those, variations or comparable expressions, including references to assumptions. The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. Given these risks and uncertainties, potential investors should not place any reliance on forward-looking statements. These forward-looking statements speak only as at the date of this announcement. Neither the Directors nor the Company undertake any obligation to update forward-looking statements other than as required by the Listing Rules, Disclosure and Transparency Rules, applicable legislation or by the rules of any other securities regulatory authority, whether as a result of new information, future events or otherwise.