China Automation : Major and Connected Transaction in Relation to Proposed Acquisition of 60% Equity Interest in the Target Company

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase, or subscribe for the securities of the Company.

(Incorporated in the Cayman Islands with limited liability)

THE PROPOSED ACQUISITION

The Board is pleased to announce that on 30 March 2017, the Company and the Vendor entered into the Sale and Purchase Agreement pursuant to which, the Company conditionally agreed to acquire 60% of the total issued share capital of the Target Company from the Vendor for a Consideration of an amount equal to the 2016 Actual Net Profit multiplied by twenty (20) , provided that if the Consideration calculated in accordance with the aforesaid manner is less than RMB620,000,000 or more than RMB760,000,000, either the Vendor or the Company may elect not to proceed with the Completion.

The Consideration shall be settled by way of issue of the Convertible Bond in the principal amount equal to the Consideration by the Company to the Vendor at Completion. Based on the maximum Consideration payable and the initial Conversion Price of RMB1.0640 (subject to adjustments) , it is estimated that a maximum number of 714,285,714 Conversion Shares may fall to be allotted and issued upon exercise of the Conversion Rights in full, which represents (i) approximately 69.60% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 41.04% of the issued share capital of the Company as enlarged by the allotment and issue of the Conversion Shares.

THE TARGET GROUP

The Target Company is an investment holding company with its principal assets being its indirect investment in the 98% equity interest in Hospital Co, which is a privately-owned Class II general hospital in the PRC providing extensive medical services.

* For identification purpose only

As the applicable percentage ratios in respect of the Proposed Acquisition exceed 25% but all are less than 100%, the Proposed Acquisition constitutes a major transaction of the Company under the Listing Rules and is subject to the reporting, announcement and shareholders' approval requirements under Chapter 14 of the Listing Rules.

Furthermore, the Vendor is an associate of AACL by virtue of common control at the ultimate general partner level and common management and advisory arrangements. As AACL is or may be regarded as the substantial shareholder of the Company (as explained hereinbelow) , the Vendor is or may also be regarded as a connected person of the Company and the Proposed Acquisition may constitute a connected transaction of the Company subject to the reporting, announcement, circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

An EGM will be held for the Independent Shareholders to consider, and if thought fit, approve the Proposed Acquisition and the transactions contemplated thereunder.

The Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders as to whether the terms of the Proposed Acquisition and the transactions contemplated thereunder are on normal commercial terms, are fair and reasonable and in the interests of the Company and the Shareholders as a whole. An independent financial adviser will be appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in this regard.

A circular containing, among other things, (i) further details of the Proposed Acquisition and the transactions contemplated thereunder; (ii) a letter from the Independent Board Committee containing its opinion and recommendations to the Independent Shareholders in respect of the Proposed Acquisition; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee in respect of the Proposed Acquisition; (iv) other information required to be disclosed under the Listing Rules; and (v) a notice of the EGM, is expected to be despatched to the Shareholders on or before 19 May 2017 as additional time is required for the preparation of the relevant information to be included in the circular.

INTRODUCTION

The Board is pleased to announce that on 30 March 2017, the Company and the Vendor entered into the Sale and Purchase Agreement in respect of the Proposed Acquisition, the principal terms and conditions of which are set out below.

THE PROPOSED ACQUISITION

The Sale and Purchase Agreement

Date

30 March 2017

Parties

1. the Company as the purchaser; and

2. Ascendent Healthcare (Cayman) Limited as the Vendor

   Interest to be acquired

   Pursuant to the Sale and Purchase Agreement, the Vendor has conditionally agreed to sell, and the Company has conditionally agreed to purchase the Sale Shares representing 60% of the total issued share capital of the Target Company which held 98% of the equity interest in Hospital Co through its wholly-owned subsidiaries.

   Consideration

   The Consideration shall be an amount equal to the 2016 Actual Net Profit multiplied by twenty (20) , provided that if the Consideration calculated in accordance with the aforesaid manner is less than RMB620,000,000 or more than RMB760,000,000, either the Vendor or the Company may elect not to proceed with the Completion.

   The Consideration shall be settled by way of issue of the Convertible Bond in the principal amount equal to the Consideration by the Company to the Vendor at Completion.

   The Consideration was determined after arm's length negotiations between the Company and the Vendor with reference to, among other things, the price-to-earnings ratios of companies listed on the Stock Exchange which are engaging in businesses similar to that of the Target Group.

   Conditions Precedent

   The Proposed Acquisition is conditional upon the satisfaction of the following:-

3. the passing of one or more resolutions of the Shareholders at the EGM in accordance with the requirements of the Listing Rules, the Takeovers Code and the Companies Act of the Cayman Islands:

4. approving the Proposed Acquisition on the terms of the Sale and Purchase Agreement;

5. approving the issue of the Convertible Bond; and

6. authorising the Directors to issue the Convertible Shares.

7. the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares issuable upon the conversion of the Convertible Bond (and such permission not having been revoked) ;

8. the auditor having delivered to each of the Vendor and the Company the audited accounts of the Target Group for the year ended 31 December 2016;

9. the Anti-Monopoly Bureau of the PRC Ministry of Commerce having issued (or being deemed to have issued) all necessary clearances and approvals in respect of the transaction contemplated under the Sale and Purchase Agreement (such decision being either unconditional or on terms acceptable to the Vendor and the Company) and all waiting or other time periods for the above mentioned clearances and approvals (including any extensions thereof) having expired, lapsed or terminated; and

10. any other regulatory or governmental approvals required for the purpose of the transaction contemplated under the Sale and Purchase Agreement having been obtained by the Vendor or the Company to the extent applicable.

If any of the above conditions is not satisfied or (where capable of waiver) waived by the Long Stop Date, then the Sale and Purchase Agreement shall terminate and no party shall have any rights or liabilities under it except for any rights or liabilities that have already accrued under the Sale and Purchase Agreement in relation to a breach of the Sale and Purchase Agreement and certain provisions under the Sale and Purchase Agreement.

Completion

Completion shall take place at 4:00 p.m. on the third Business Day following the day on which all of the conditions precedent set out above have been fulfilled or (where capable of waiver) waived (or such later time and/or date as the parties may agree) .