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22 Mar 2012 10:18
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.
ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the People's Republic of China
with limited liability) (Stock code: 0576) CONNECTED TRANSACTION MEMORANDUM OF UNDERSTANDING IN RELATION TO ACQUISITION OF PROPERTY
MEMORANDUM OF UNDERSTANDING
On 22 December 2011, Zheshang Securities, an indirectly owned subsidiary of the Company, entered into the Memorandum of Understanding with the Vendor in respect of the Proposed Acquisition.
LISTING RULES IMPLICATIONS
As at the date of this announcement, the Communications Group beneficially owns 2,909,260,000 Domestic Shares, representing approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial Shareholder (as defined under the Listing Rules) and the Vendor, which is a wholly-owned subsidiary of Communications Group, is accordingly a connected person of the Company. Zheshang Securities is a 70.8275% owned subsidiary of Zhejiang Shangsan Expressway Co., Ltd., which in turn is a 73.625% owned subsidiary of the Company. The transaction contemplated under the Memorandum of Understanding therefore constitutes a connected transaction for the Company under the Listing Rules. As each of the applicable percentage ratios in respect of the Proposed Acquisition is less than 5%, the Proposed Acquisition is subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
THE MEMORANDUM OF UNDERSTANDING MAY OR MAY NOT LEAD TO THE ENTERING INTO OF THE SALE AND PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREUNDER MAY OR MAY NOT BE CONSUMMATED. IN THE EVENT THAT THE SALE AND PURCHASE AGREEMENT MATERIALISES, FURTHER ANNOUNCEMENT(S) WILL BE MADE AS AND WHEN REQUIRED BY AND IN COMPLIANCE WITH THE LISTING RULES. SHAREHOLDERS AND POTENTIAL INVESTORS ARE ADVISED TO EXERCISE CAUTION IN DEALING IN THE COMPANY'S SECURITIES.
MEMORANDUM OF UNDERSTANDING
On 22 December 2011, Zheshang Securities, an indirectly owned subsidiary of the Company, entered into the Memorandum of Understanding with the Vendor in respect of the Proposed Acquisition. The principal terms of the Memorandum of Understanding are as follows:
Date22 December 2011Parties(i) The Vendor; and(ii) Zheshang Securities.
Condition precedent to entering into of the Sale and Purchase Agreement
Pursuant to the Memorandum of Understanding, the entering into of the Sale and Purchase Agreement by the Vendor and Zheshang Securities is conditional upon the Vendor obtaining the Pre-sale Permit before the Long Stop Date. Upon fulfillment of this condition precedent, the Vendor and Zheshang Securities shall enter into the Sale and Purchase Agreement within 15 days.
Earnest Deposit
Pursuant to the Memorandum of Understanding, Zheshang Securities paid the Earnest Deposit in the amount of RMB323.8 million (equivalent to approximately HK$398.3 million) to the Vendor on 26 December 2011.
If the Vendor fails to obtain the Pre-sale Permit before the Long Stop Date, the Vendor shall pay to Zheshang Securities interest on the Earnest Deposit which shall accrue from the Long Stop Date to the date that the Pre-sale Permit is obtained (both days inclusive) at the prevailing lending interest rate promulgated by the People's Bank of China for the same period.
If the Vendor fails to obtain the Pre-sale Permit within 6 months after the signing of the Memorandum of Understanding, the Vendor shall refund the Earnest Deposit to Zheshang Securities together with interest on the Earnest Deposit which shall accrue from the date of the Memorandum of Understanding to the date which is 6 months after the date of the Memorandum of Understanding (both days inclusive) at the prevailing lending interest rate promulgated by the People's Bank of China for the same period.
Asset to be acquired
Subject to the entering into of the Sale and Purchase Agreement in accordance with the terms of the Memorandum of Understanding, the Vendor and Zheshang Securities have agreed in principle in relation to the sale and purchase of the Property, which comprised of levels 2 to 17 and 266 car parking spaces at the basement of an office building located at Jianggan District, Hangzhou City, Zhejiang Province of the PRC.
The Property is under development by the Vendor and is expected to have a gross floor area of 25,699 square metres when completed (including shared public area but excluding the 266 car parking spaces).
Consideration
The aggregate consideration for the Property, which is to be satisfied by Zheshang Securities in cash, is RMB809.5 million (equivalent to approximately HK$995.7 million). Subject to the signing of the Sale and Purchase Agreement in accordance with the terms of the Memorandum of Understanding, the Earnest Deposit in the amount of RMB323.8 million (equivalent to approximately HK$398.3 million), representing 40% of the aggregate consideration for the Property, shall form part of the consideration for the Property and the balance of the consideration in the amount of RMB485.7 million (equivalent to approximately HK$597.4 million), representing 60% of the aggregate consideration for the Property, shall be paid by Zheshang Securities to the Vendor upon signing of the Sale and Purchase Agreement.
The consideration for the Property will be financed by the internal resources of the Group.
The consideration for the Property was determined after arm's length negotiation between the parties to the Memorandum of Understanding based on normal commercial terms and by reference to the Valuation Report prepared by DTZ, an independent property valuer, in respect of the Property with market value of RMB778.7 million (equivalent to approximately HK$957.8 million) as if completed as at 31 July 2011.
INFORMATION OF THE GROUP AND ZHESHANG SECURITIES
The Company was established on 1 March 1997 in the PRC as a joint stock limited company, the H Shares of which are listed on the Main Board of the Stock Exchange. The Group is principally engaged in (i) investments in, development, operation, management and collection of tolls of the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway, both of which are in the Zhejiang Province of the PRC, (ii) businesses ancillary to the operation of the expressways, such as billboard advertising and operation of service areas on the expressways and (iii) securities brokerage, investment banking, asset management, futures and fixed income.
Zheshang Securities was established on 9 May 2002 in the PRC as a limited liability company. Zheshang Securities is an indirectly owned subsidiary of the Company and principally engaged in securities brokerage, investment banking, asset management, futures and fixed income.
INFORMATION OF THE VENDOR
The Vendor is a limited liability company incorporated in the PRC on 18 October 2004 with a registered capital of RMB50 million (equivalent to approximately HK$61.5 million). The Vendor is a wholly-owned subsidiary of Communications Group and principally engaged in the development of commercial and residential properties in Zhejiang Province, the PRC.
REASONS FOR ENTERING INTO THE MEMORANDUM OF UNDERSTANDING
Due to expansion of the business of Zheshang Securities, the existing head office of Zheshang Securities has reached its maximum capacity and Zheshang Securities has been seeking opportunities to relocate and expand its head office in Hangzhou City. Upon completion of the Proposed Acquisition, Zheshang Securities intends to occupy the Property as its head office to support its current operations and expansion plans.
The Directors, including all of the independent non-executive Directors, consider that the transactions contemplated under the Memorandum of Understanding are fair and reasonable, and are in the best interests of the Group and the Shareholders as a whole.
LISTING RULES IMPLICATIONS
As at the date of this announcement, the Communications Group beneficially owns 2,909,260,000 Domestic Shares, representing approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial Shareholder (as defined under the Listing Rules) and the Vendor, which is a wholly-owned subsidiary of Communications Group, is accordingly a connected person of the Company. Zheshang Securities is a 70.8275% owned subsidiary of Zhejiang Shangsan Expressway Co., Ltd., which in turn is a 73.625% owned subsidiary of the Company. The transaction contemplated under the Memorandum of Understanding therefore constitutes a connected transaction for the Company under the Listing Rules. As each of the applicable percentage ratios in respect of the Proposed Acquisition is less than 5%, the Proposed Acquisition is subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
Other than Mr. Chen and Ms. Zhang, each of whom is both a director of the Company and a director of Communications Group, none of the Directors has any material interest in the transactions contemplated under the Memorandum of Understanding or is required to abstain from voting on the relevant board resolution approving the Memorandum of Understanding and the transactions contemplated thereunder.
THE MEMORANDUM OF UNDERSTANDING MAY OR MAY NOT LEAD TO THE ENTERING INTO OF THE SALE AND PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREUNDER MAY OR MAY NOT BE CONSUMMATED. IN THE EVENT THAT THE SALE AND PURCHASE AGREEMENT MATERIALISES, FURTHER ANNOUNCEMENT(S) WILL BE MADE AS AND WHEN REQUIRED BY AND IN COMPLIANCE WITH THE LISTING RULES. SHAREHOLDERS AND POTENTIAL INVESTORS ARE ADVISED TO EXERCISE CAUTION IN DEALING IN THE COMPANY'S SECURITIES.
DEFINITIONS
"Communications Group" Zhejiang Communications Investment Group Co.,
Ltd., a wholly State-owned enterprise established on 29 December 2001;"Company" Zhejiang Expressway Co., Ltd.;"connected persons" shall have the same meaning as ascribed thereto in the Listing Rules;"Directors" directors of the Company;"Domestic Shares" the domestic invested shares of RMB1.00 each in the share capital of the Company;"DTZ" DTZ Debenham Tie Leung Limited, an independent property valuer; "Earnest Deposit" the earnest money deposit in the amount of RMB323.8 million (equivalent to approximately HK$398.3 million) paid by Zheshang Securities to the Vendor pursuant to the Memorandum of Understanding;"Group" the Company and its subsidiaries;"HK$" Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of the PRC;"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange;"Long Stop Date" 90 business days after the date of the Memorandum of Understanding;"Memorandum of the memorandum of understanding dated 22 DecemberUnderstanding" 2011 between the Vendor and Zheshang Securities in respect of the Proposed Acquisition;"Mr. Chen" Mr. Jisong Chen, an executive Director;"Ms. Zhang" Ms. Luyun Zhang, a non-executive Director;"PRC" the People's Republic of China;"Pre-sale Permit" the pre-sale permit in respect of the Property;"Property" levels 2 to 17 and 266 car parking spaces at the basement of the office building B4 o f Mingzhu International Business Center located at Qianjiang New Town Lot (2004) 43 A-C49, Jianggan District, Hangzhou City, Zhejiang Province, the PRC;
"Proposed Acquisition" the proposed acquisition of the Property by Zheshang
Securities from the Vendor pursuant to the terms and conditions of the Sale and Purchase Agreement;"RMB" Renminbi, the lawful currency of the PRC;"Sale and Purchase the formal commercial property sale and purchaseAgreement" agreement in respect of the Property to be entered into between the Vendor and Zheshang Securities pursuant to the terms of the Memorandum of Understanding;"Shareholders" shareholders of the Company;"Stock Exchange" The Stock Exchange of Hong Kong Limited;"Valuation Report" the valuation report dated 31 July 2011 in respect of the Property issued by DTZ;"Vendor" Hangzhou Jinji Real Estate Co., Ltd., a wholly-owned subsidiary of the Communications Group; and
"Zheshang Securities" Zheshang Securities Co., Ltd., a 70.8275% owned
subsidiary of Zhejiang Shangsan Expressway Co., Ltd., which is a 73.625% owned subsidiary of the Company.
In this announcement, translation of assets from RMB to HK$ are based on an exchange rate of RMB1 to HK$1.23 which is used for illustration purpose only.
By order of the Board Zhejiang Expressway Co., Ltd. Jisong Chen ChairmanHangzhou, PRC, 20 March 2012
As at the date of this announcement, the executive Directors are: Messrs. Jisong Chen, Xiaozhang Zhan, Wenyao Jiang, Jingzhong Zhang and Huikang Ding; the non-executive Director is Ms. Luyun Zhang; and the independent non-executive Directors are: Messrs. Chee Chen Tung, Junsheng Zhang and Liping Zhang.
Statement : A full electronic version of the Company's Connected Transaction Announcement is available at www.zjec.com.cn.
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