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 KAIFENG THE DISPOSALOn 4 January 2015, Kaifeng Changfeng entered into the Agreement, pursuant to which, Kaifeng Changfeng will surrender the Land to the Purchasers in consideration of the Compensation to facilitate the urban development of Kaifeng District, the PRC. The Land comprises a parcel of land located at the southern side of Song Cheng Road, Kaifeng City, Henan Province, the PRC(''li!•M"'lllMm71
1J!llMil!JJwith an aggregate area of approximately 100,448.76 sq. m. where Kaifeng Changfeng has
erected factories and other structures with an aggregate gross floor area of approximately 31,839.11 sq. m., which was built for the manufacturing and production of axle.
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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Changfeng Axle Holdings Limited which is owned as to 50% by Ms. Wu Ching and Mr. Wong Kwai Mo (who are beneficially interested in 406,128,560 Shares, representing approximately 50.77% 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 23 January 2015 in accordance with the Listing Rules.
4 January 2015
Parties to the Agreement
Vendor: Kaifeng Changfeng
Purchasers: 1. Kaifeng Land Resumption Center* ( lllMm±ill�_f�#§''l. )
2. Kaifeng Urban District Management Committee* ( lllMJT!ffff_f��ir )
To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Purchasers and their 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 the Purchasers (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, Kaifeng Changfeng will surrender the Land to the Purchasers to facilitate the urban development of Kaifeng District, the PRC. The Land comprises a parcel of land located at the southern side of Song Cheng Road, Kaifeng City, Henan Province, the PRC(''li!•M"'lllMm711J!ll Mil!JJwith an aggregate area of approximately 100,448.76 sq. m. where Kaifeng Changfeng has erected factories and other structures with an aggregate gross floor area of approximately 31,839.11 sq. m.,
which was built for the manufacturing and production of axle.
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In consideration of Kaifeng Changfeng surrendering the Land, the Purchasers will pay the Compensation in an aggregate amount of RMB102,690,000 (equivalent to approximately HK$128,362,500), which will be payable in cash by the Purchasers to Kaifeng Changfeng in the following manner:
(1) RMB73,000,000 (equivalent to approximately HK$91,250,000) will be payable to Kaifeng
Changfeng within ten days upon the signing of the Agreement;
(2) RMB10,000,000 (equivalent to approximately HK$12,500,000) will be paid to Kaifeng Changfeng within three business days upon the receipt by the Purchasers of the title certificate of the Land and the structures erected thereon after discharging the Land from pledge; and
(3) RMB19,690,000 (equivalent to approximately HK$24,612,500) will be paid to Kaifeng Changfeng within three business days upon completion of the relocation and delivery of the Land to the Purchasers, which shall take place on or before 30 April 2015.
The Compensation was arrived at after arm's length negotiations between Kaifeng Changfeng and the Purchasers with reference to a preliminary indicative valuation of the Land assessed by Henan Fangdi Asset Valuation Co., Ltd.*(•M1fìJI�ii.li1/flliWJJ, 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 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 Purchasers have implemented an urban redevelopment plan. Under this redevelopment plan, the Purchasers will acquire certain land within a designated areas in Kaifeng District, the PRC from the relevant land owners. As the Land is located in the redevelopment zone, Kaifeng Changfeng has been requested to surrender the Land to the Purchasers.
The Directors are of the view that the surrender of the Land will not materially affect the principal business of the Group, after considering the following factors:
(i) the Disposal represents a good opportunity for the Group to reduce costs with a view to improving the Group's operation efficiency which would in turn improve the Group's cash flow position and financial strength;
(ii) Kaifeng Changfeng is entitled to the Compensation and the Group can reallocate the resources currently occupied by Kaifeng Changfeng to other uses; and
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(iii) the Company has adopted the plan of removing its current manufacturing operation in the Land to the other manufacturing facilities of the Company situated at the eastern side of Erhao Road, Bianxixin District, Kaifeng City, so as to circumvent the possible impact of the surrender of the Land on its current operation.
The Directors thus consider 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 and other structures erected on the Land are owned by Kaifeng
Changfeng.
The net book value of the Land and the factory building erected on the Land as shown in the Company's latest unaudited accounts as at 30 June 2014 was RMB76,382,986 (which is approximately 73.0% of the Compensation), representing approximately 5.3% of the total assets of the Group as at 30 June 2014, being the date up to which the latest interim results of the Group were made. The net profit attributable to the Land for the six months ended 30 June 2014 was approximately RMB6,765,967, and the net loss of the Group for the six months ended 30 June 2014 was approximately RMB48,820,000, comprising the net profit generating from the manufacturing facilities on the Land by Kaifeng Changfeng.
It was estimated that there would be a gain in the amount of approximately RMB24,676,646 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 November 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 Kaifeng Changfeng and the amortization of the Land and depreciation of the factory building erected on the Land for the period from 30 November 2014 to the date of completion of the Disposal, which are yet to be determined as at the date of this announcement.
The net proceeds of the Disposal is currently intended to be used by the Group for repaying the outstanding bank loans in the amount of approximately 70 millions for releasing the charge on the Land to enable the Disposal and general working capital purpose.
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.
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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, the Purchasers and their 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 406,128,560 Shares, representing approximately 50.77% 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 23 January 2015 in accordance with the Listing Rules.
"Agreement" an agreement dated 4 January 2015 entered into between Kaifeng
Changfeng and the Purchasers 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" t h e total compensation to be paid by the Purchasers to Kaifeng
Changfeng for surrender of the Land in the sum of RMB102,690,000; "Completion" completion of the Disposal;
"Director(s)" the director(s) of the Company;
"Disposal" the surrendering of the Land to the Purchasers by Kaifeng Changfeng pursuant to the Agreement;
"Group" the Company and its subsidiaries;
"Hong Kong" the Hong Kong Special Administrative Region of the PRC;
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"Kaifeng Changfeng" Kaifeng Changfeng Axle Co., Ltd.* (lllM�-·ilflliW), a limited liability company established in the PRC on 19 April 2006 and an indirect wholly-owned subsidiary of the Company;
"Land" the parcel of land located at the southern side of Song Cheng Road, Kaifeng City, Henan Province with an aggregate area of approximately
100,448.76 sq. m. where Kaifeng Changfeng has erected factories and other structures with an aggregate gross floor area of approximately
31,839.11 sq. m.;
"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange; "PRC" the People's Republic of China;
"Purchasers" Kaifeng Land Resumption Center* ( lllMm±ill�_f�#§''l. ) and
Kaifeng Urban District Management Committee* ( lllMJT!ffff_f��
ir )
"RMB" Renminbi, the lawful currency of the PRC;
"Share(s)" ordinary share(s) in the Company of US$0.01 each; "Shareholder(s)" the shareholder(s) of the Company;
"sq. m." square metre;
"Stock Exchange" The Stock Exchange of Hong Kong Limited; "%" per cent.
For illustration purposes, amounts in RMB in this announcement have been translated into HK$ at
RMB1.00 = HK$1.25.
By Order of the Board
Changfeng Axle (China) Company Limited Mr. Wong Kwai MoChairman
Hong Kong, 4 January 2015
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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