China Rongsheng Heavy : Announcements and Notices - Memorandum of understanding in Relation to the Potential Transaction and Resumption of Trading

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.

中國熔盛重工集團控股有限公司

(Incorporated in the Cayman Islands with limited liability) (stock code: 01101)

This announcement is made pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

On 10 March 2015 (after trading hours), the Company and the Potential Purchaser have entered into a memorandum of understanding, pursuant to which the Company and the Potential Purchaser have agreed that the Company intends to sell to the Potential Purchaser, and the Potential Purchaser intends to purchase from the Company, the related core assets and liabilities of the onshore shipbuilding and offshore engineering business of the Group in the PRC. Both parties shall further negotiate the scope and list of related assets and liabilities and terms and arrangements of the Potential Transaction.

This announcement is made by China Rongsheng Heavy Industries Group Holdings Limited (the
"Company", together with its subsidiaries, the "Group") pursuant to Rule 13.09 of the Rules
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Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
Reference is made to the announcements of the Company dated 29 August 2014, 5 September
2014, 15 September 2014, 22 September 2014, 29 September 2014 and 29 October 2014 and the circular of the Company dated 17 February 2015 (the "Circular") relating to, amongst other things, the Potential Restructuring involving Jiangsu Rongsheng Heavy Industries (a subsidiary of the Company). Capitalised terms used in this announcement shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 10 March 2015 (after trading hours), the Company and an independent third party (the "Potential Purchaser") have entered into a memorandum of understanding (the "MOU"), pursuant to which the Company and the Potential Purchaser have agreed that the Company intends to sell to the Potential Purchaser, and the Potential Purchaser intends to purchase from the Company, the related core assets and liabilities of the onshore shipbuilding and offshore engineering business of the Group in the PRC (the "Potential Transaction"). Both parties shall further negotiate the scope and list of related assets and liabilities and terms and arrangements of the Potential Transaction.
The principal terms, amongst others, of the MOU are set out below:

Both parties have agreed to upon agreeing on the scope of assets and liabilities in the Potential Transaction, engage audit firm(s) and valuation firm(s) to conduct an audit on and valuation of relevant assets and liabilities, and consider comprehensively the specific conditions of the relevant assets and liabilities and the results of the audit and valuation in the further negotiation of the consideration for the transaction.

Upon the fulfillment of the conditions precedent set out below, both parties will enter into a formal sale and purchase agreement which will be subject to certain conditions being fulfilled, including the approval of the Potential Transaction by the shareholders of both parties at their respective shareholders' meetings and the approvals by securities regulatory authorities and other governmental authorities regarding the Potential Transaction (if necessary).
The conditions precedent for the signing of a formal sale and purchase agreement are:
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(i) the consideration and approval of the Potential Transaction by the respective boards of directors of the Company and the Potential Purchaser, including the target of the Potential Transaction, audit and valuation reports of the target of the Potential Transaction, the consideration and the consideration payment method, etc; and
(ii) the consent of the creditors involved with the target of the Potential Transaction and/or the major creditors of the Company to the Potential Transaction (if necessary).

Both parties agree that the representatives and advisors (including legal advisors, financial advisors and other representatives) of the Potential Purchaser shall be entitled to conduct due diligence relating to the target assets and liabilities commencing from the date of the signing of the MOU. The Company agrees to provide all possible reasonable assistance to the relevant due diligence.

The Company agrees not to negotiate or reach any agreement with any individual (except the Potential Purchaser and its related parties) during the effective period of the MOU in relation to the assets and liabilities involved in the Potential Transaction.

The MOU shall remain in effect until 30 June 2015. If the related parties have not entered into a related formal transaction agreement by that date, they shall further negotiate and confirm whether they should sign an extension of the MOU.

In light of the depressed shipbuilding market, the shipbuilding business of the Group has encountered operational difficulties. The management of the Company is committed to improving the operational status by industry value-chain upgrade and business transformation, and also steadily developing its energy service business including oil and gas exploitation. However, the high gearing of Jiangsu Rongsheng Heavy Industries has adversely affected the Group in developing its energy service business. The Potential Transaction shall adjust and optimize the assets and business of the Group, and divest the relevant assets and liabilities of the shipbuilding business and offshore engineering business, which shall help to ease the debt burden of the Group, enhance the flexibility of fund utilization, better implement the strategy of business transformation and transformation into an energy service provider focusing in the oil and natural gas market.

The Group is a leading diversified large heavy industries group in the PRC and is principally engaged in shipbuilding, offshore engineering, marine engine building, engineering machinery and energy exploration and development.
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The Potential Purchaser is a company incorporated in the PRC. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Potential Purchaser and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons (as defined under the Listing Rules).
Save for the clauses on exclusivity and confidentiality, the MOU is not legally binding on the parties thereto and does not constitute the parties' legally binding commitment in respect of entering into a formal transaction agreement or proceeding with the Potential Transaction. If materialised, the Potential Transaction should constitute a very substantial disposal of the Company pursuant to the Listing Rules. In the event a formal sale and purchase agreement for the transaction is entered into, the Company will make further announcement(s) in respect of the Potential Transaction, seek shareholders' approval and comply with other applicable requirements of the Listing Rules.

Trading in the shares of the Company (the "Shares") on the Stock Exchange was halted at the request of the Company with effect from 9:00 a.m. on 11 March 2015 pending the release by the Company of this announcement. The Company has applied for a resumption of trading in the Shares with effect from 9:00 a.m. on 17 March 2015.

By Order of the Board

China Rongsheng Heavy Industries

Group Holdings Limited LEE Man Yee Company Secretary

Hong Kong, 16 March 2015

As at the date of this announcement, the directors of the Company are:- Executive directors:

Mr. CHEN Qiang (Chairman), Mr. WU Zhen Guo, Mr. HONG Liang, Mr. Sean S J WANG, Mr. WANG Tao, Mr. WEI A Ning and Ms. ZHU Wen Hua;

Independent non-executive directors:

Mr. XIA Da Wei, Mr. HU Wei Ping, Mr. WANG Jin Lian and Ms. ZHOU Zhan.

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