CHANGYOU ALLIANCE GROUP LIMITED 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.
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1039) MAJOR TRANSACTION IN RELATION TO DISPOSAL OF LAND IN JIALING THE DISPOSALThe Board announces that after trading hours on 30 July 2014, Sichuan Changfeng and Jialing Local Government entered into the Agreement, pursuant to which Sichuan Changfeng will surrender the Land to Jialing Local Government for a Compensation in an aggregate amount of RMB71,083,706 (equivalent to approximately HK$88,854,633).
LISTING RULES IMPLICATION
As some of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal exceed 25% but do not exceed 75%, the Disposal constitutes a major transaction for the Company and is therefore subject to the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.
Under Rule 14.44 of the Listing Rules, Shareholders' approval for the Disposal may be obtained by way of written Shareholders' approval in lieu of holding a general meeting if (a) no Shareholder is required to abstain from voting in the event that a general meeting is convened for the approval of the transaction; and (b) written Shareholders' approval has been obtained from a Shareholder or a closely allied group of Shareholders who together hold more than 50% in nominal value of the issued share capital of the Company giving the right to attend and vote at that general meeting to approve the Disposal.
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The Directors confirm that, to the best of their knowledge, information and belief after having made all reasonable enquiries, Jialing Local Government and its ultimate beneficial owner(s) are third parties independent of the Group and its connected persons and no Shareholder has a material interest in the Disposal. As such, no Shareholder is required to abstain from voting for the resolution to approve the Disposal should the Disposal be put forward to the Shareholders for approval at a general meeting. Accordingly, Changfeng Axle Holdings Limited which is owned as to 50% by Ms. Wu Ching and Mr. Wong Kwai Mo (who are beneficially interested in 404,762,592 Shares, representing approximately
50.60% of the issued share capital of the Company as at the date of this announcement), has approved by way of written approval given to the Company to approve the Disposal in lieu of a general meeting pursuant to Rule 14.44 of the Listing Rules. Therefore, no general meeting of the Company for the approval of the Disposal will be held.
A circular containing, among other things, (i) further information of the Disposal; and (ii) valuation report on the Land is expected to be despatched to the Shareholders on or before 20 August 2014 in accordance with the Listing Rules.
30 July 2014 (after trading hours)
Parties to the Agreement
Vendor: Sichuan Changfeng
Purchaser: Jialing Local Government
To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, Jialing Local Government and its ultimate beneficial owner(s) are third parties independent of the Group and its connected persons (as defined in the Listing Rules). To the best of the Directors' knowledge, each of Jialing Local Government and its associates (as defined in the Listing Rules) does not hold any share of the Company as at the date of this announcement.
Pursuant to the Agreement, Sichuan Changfeng will surrender the Land to Jialing Local Government to facilitate the urban development of Jialing District, Nanchong City, Sichuan Province, the PRC. The Land comprises two parcels of land located at Southern Side of Chun Jiang Dong Lu, Jialing District,
Nanchong City, Sichuan Province, the PRC ( 'Pli!1*Jt;fiiJl'f5�>llfìiJI:Jlj1*ill ) with an aggregate area
of approximately 213,436.95 sq. m. where Sichuan Changfeng has erected factories and other structures with an aggregate gross floor area of approximately 36,276.48 sq. m., which used to be built for the
manufacturing and production of axle.
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The factories on the Land has not been in production since the last quarter in 2013 and for the year ended 31 December 2013, the factories of the Land remained at idle capacity. The manufacturing and production that were used to be undergoing in the factories on the Land has moved to the other land owned by the Group located in Fujian province and Henan province since the last quarter in 2013. Accordingly, the Directors, including the independent non-executive Directors, do not expect that the Disposal will have a material adverse effect on the operation and financial results of the Group.
In consideration of Sichuan Changfeng surrendering the Land, Jialing Local Government will pay a Compensation in an aggregate amount of RMB71,083,706 (equivalent to approximately HK$88,854,633), which comprises a fixed amount of approximately RMB68,989,206 (equivalent to approximately HK$86,236,508) as compensation for Sichuan Changfeng surrendering the Land and additional incentive fee of up to approximately RMB2,094,500 (equivalent to approximately HK$2,618,125), which will be payable in cash by the Jialing Local Government to Sichuan Changfeng in the following manner:
(1) RMB36,000,000 (equivalent to approximately HK$45,000,000) will be payable to Sichuan
Changfeng within 30 days upon the signing of the Agreement; and
(2) the remaining balance of the Compensation will be paid to Sichuan Changfeng within 90 days upon signing of the Agreement.
The Compensation was arrived at after arm's length negotiations between Sichuan Changfeng and Jialing
Local Government with reference to a preliminary indicative valuation of the Land assessed by Sichuan
Yizheng Real Estate Valuation and Consultancy Co., Ltd. ( 12 �iEm-tiJi:Wt1tilj:ff�0PJ ), a
professional valuer independent of the Group and its connected person (as defined in the Listing Rules). The Directors consider the terms of the Agreement (including the Compensation) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
The Disposal is subject to the Company having obtained the Shareholders' approval for the transaction as contemplated under the Agreement in accordance with the Listing Rules.
Delivery of the Land
Subject to the fulfillment of the condition precedent, Sichuan Changfeng will:
(1) complete the removal of the factory building and deliver original copies of the land use right certificates and other related title certificates of the Land to Jialing Local Government within 40 days upon signing of the Agreement; and
(2) complete the transfer of title of the Land to the designated entity under the Jialing Local Government within 30 days upon completion of (1) above.
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The Group is an independent axle component provider for China's medium duty truck ("MDT") and heavy duty truck ("HDT") aftermarket, and also an independent axle assembly provider for China's MDT and HDT original equipment manufacturers market. The Group is principally engaged in the manufacture and sales of axle assemblies and axle components in the PRC. Besides, the Group has commenced the delivery of the train bolster and train side frame to the Commonwealth of Independent States.
The Jialing Local Government has recently implemented an urban redevelopment plan. Under this redevelopment plan, the Jialing Local Government will acquire certain land within a designated areas in Jialing, the PRC from the relevant land owners. As the Land is located in the redevelopment zone, Sichuan Changfeng has been offered to surrender the Land to Jialing Local Government.
Since Sichuan Changfeng will receive the Compensation and that the Company can reallocate the resources currently occupied by Sichuan Changfeng to other uses, the Company considers that the Disposal is a good opportunity for the Group to reduce costs with a view to improving the Group's operation efficiency which in turn to improve the Group's cash flow position and financial strength.
The Company thus considers that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.
The Land and the factory building erected on the Land are owned by Sichuan Changfeng.
The net book value of the Land and the factory building erected on the Land as shown in the Company's latest audited accounts as at 31 December 2013 was RMB70,000,000 (which is approximately 98.48% of the Compensation), representing approximately 4.43% of the total assets of the Group as at 31 December
2013, being the Company's last audited financial year end date. The net loss attributable to the Land for the year ended 31 December 2013 was approximately RMB43,964,431, and the net loss of the Group for the year ended 31 December 2013 was approximately RMB228,055,000, comprising the net loss generating from the manufacturing facilities on the Land by Sichuan Changfeng.
It was estimated that there would be a gain in the amount of approximately RMB1,892,264 on the Disposal accrued to the consolidated accounts of the Group which is calculated by reference to the net proceeds from the Disposal less the net book value of the Land and the factory building erected on the Land as at 30 June 2014 and the estimated relocation costs. Such estimated gain has not taken into account of any PRC profits tax to be or may be charged. The actual gain will depend on the net book value of the Land and the factory building erected on the Land attributable to the Group as at the date of completion of the Disposal, the actual costs and expenses to be incurred in connection with the Disposal, relocation of Sichuan Changfeng and the amortization of the Land and depreciation of the factory building erected on the Land for the period from 30 July 2014 to the date of completion of the Disposal, which are yet to be determined as at the date of this announcement.
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The net proceeds of the Disposal is currently intended to be used by the Group for general working capital purpose and/or suitable investment opportunities as may be identified by the Company in the future. As at the date of this announcement, the Company has not identified any suitable investment opportunities and is not in discussions for any investment projects. The Company will make announcement in compliance with the requirements of the Listing Rules as and when appropriate.
LISTING RULES IMPLICATION
As some of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal exceed 25% but do not exceed 75%, the Disposal constitutes a major transaction for the Company and is therefore subject to the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.
Under Rule 14.44 of the Listing Rules, Shareholders' approval for the Disposal may be obtained by way of written Shareholders' approval in lieu of holding a general meeting if (a) no Shareholder is required to abstain from voting in the event that a general meeting is convened for the approval of the transaction; and (b) written Shareholders' approval has been obtained from a Shareholder or a closely allied group of Shareholders who together hold more than 50% in nominal value of the issued share capital of the Company giving the right to attend and vote at that general meeting to approve the Disposal.
The Directors confirm that, to the best of their knowledge, information and belief after having made all reasonable enquiries, Jialing Local Government and its ultimate beneficial owner(s) are third parties independent of the Group and its connected persons and no Shareholder has a material interest in the Disposal. As such, no Shareholder is required to abstain from voting for the resolution to approve the Disposal should the Disposal be put forward to the Shareholders for approval at a general meeting. Accordingly, Changfeng Axle Holdings Limited which is owned as to 50% by Ms. Wu Ching and Mr. Wong Kwai Mo (who are beneficially interested in 404,762,592 Shares, representing approximately
50.60% of the issued share capital of the Company as at the date of this announcement), has approved by way of written approval given to the Company to approve the Disposal in lieu of a general meeting pursuant to Rule 14.44 of the Listing Rules. Therefore, no general meeting of the Company for the approval of the Disposal will be held.
A circular containing, among other things, (i) further information of the Disposal; and (ii) valuation report on the Land is expected to be despatched to the Shareholders on or before 20 August 2014 in accordance with the Listing Rules.
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"Agreement" a n agreement dated 30 July 2014 entered into between Sichuan
Changfeng and Jialing Local Government in relation to the Disposal; "Board" the board of Directors;
"Company" Changfeng Axle (China) Company Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange;
"Compensation" the total compensation to be paid by Jialing Local Government to
Sichuan Changfeng for surrender of the Land; "Completion" completion of the Disposal;
"Director(s)" the director(s) of the Company;
"Disposal" the surrendering of the Land to Jialing Local Government by Sichuan
Changfeng pursuant to the Agreement;
"EGM" t h e extraordinary general meeting of the Company to be held to consider and approve, among others, the Agreement and the transactions contemplated thereunder;
"Group" the Company and its subsidiaries;
"Jialing Local Government" Jialing District People's Government of Nanchong City ( 1*Jt;fiiJl' f5�>lAVfJ!i:& ), the local People's Government for Jialing District,
Nanchong City, Sichuan Province, the PRC;
"Hong Kong" the Hong Kong Special Administrative Region of the PRC;
"Land" two parcels of land located at Southern Side of Chun Jiang Dong Lu, Jialing District, Nanchong City, Sichuan Province, the PRC ( 'Pli!1* Jt;fiiJl'f5�>llfìiJI:Jlj1*ill ) with an aggregate area of approximately
213,436.95 sq. m. where Sichuan Changfeng has erected factories and other structures with an aggregate gross floor area of approximately
36,276.48 sq. m.;
"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange; "PRC" the People's Republic of China;
"RMB" Renminbi, the lawful currency of the PRC;
"Share(s)" ordinary share(s) in the Company of US$0.01 each;
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"Shareholder(s)" the shareholder(s) of the Company;
"Sichuan Changfeng" Sichuan Changfeng Axle Co., Ltd.* (12 9i_!ltfiJJ:ff�0PJ), a limited liability company established in the PRC on 16 July 2009 and an indirect wholly-owned subsidiary of the Company;
"sq. m." square metre;
"Stock Exchange" The Stock Exchange of Hong Kong Limited; "%" per cent.
For illustration purposes, amounts in RMB in this announcement have been translated into HK$ at
RMB1.00 = HK$1.25.
By Order of the Board
Changfeng Axle (China) Company Limited Mr. Wong Kwai MoChairman
Hong Kong, 30 July 2014
As at the date of this announcement, the executive directors of the Company are Mr. Wong Kwai Mo, Ms. Wu Ching and Mr. Lai Fengcai; the non-executive director of the Company is Ms. Dong Ying, Dorothy; and the independent non-executive directors of the Company are Mr. Zhu Weizhou, Dr. Li Xiuqing and Mr. Chong Ching Hei.
* For identification purpose only
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