Dah Chong Hong : Acquisition of Li & Fung's Asia Consumer and Healthcare Distribution Business

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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 Hong Kong with limited liability)

(Stock Code: 01828) MAJOR TRANSACTION ACQUISITION OF LI & FUNG'S ASIA CONSUMER AND HEALTHCARE DISTRIBUTION BUSINESS

Financial Adviser to the Company

THE ACQUISITION

On 3 May 2016, the Company, the Buyer (a wholly owned subsidiary of the Company), LF and the Seller (a wholly owned subsidiary of LF) entered into the Sale and Purchase Agreement, pursuant to which the Buyer conditionally agreed to purchase and the Seller conditionally agreed to sell LF's Asia consumer and healthcare distribution business (i.e. the Target Group) for a cash consideration of US$350 million (subject to customary closing adjustments on a cash-free, debt-free basis) as more particularly described below.

The Target Group is principally engaged in distribution of consumer and healthcare products across Asia. Upon Completion, the Target Company will become a wholly owned subsidiary of the Buyer.

LISTING RULES IMPLICATION

As the highest applicable percentage ratio for the Company in respect of the Acquisition is 25% or more but is less than 100%, the Acquisition constitutes a major transaction for the Company and is subject to the reporting, announcement and shareholders' approval requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, a closely allied group of the Shareholders together held 1,027,307,000 Shares, representing approximately 56.072% of the total number of the issued Shares. Such closely allied group of Shareholders comprises 10 investment holdings companies, all of which are wholly owned subsidiaries of CITIC Pacific Limited (a wholly owned subsidiary of CITIC Limited). Pursuant to Rule 14.44 of the Listing Rules, the Company has obtained a written approval of the Acquisition from such closely allied group of Shareholders. As such, the Company is not required to convene a general meeting to consider and approve the Sale and Purchase Agreement and the Acquisition.

A circular containing, among other things, further details of the Acquisition is expected to be despatched to the Shareholders within 15 business days after the publication of this announcement, i.e. on or before 24 May 2016.

Shareholders and potential investors of the Company should note that the Acquisition is subject to a number of Conditions which may or may not be fulfilled. Shareholders and potential investors of the Company are reminded to exercise cautions when dealing in the securities of the Company.

On 3 May 2016, the Company, the Buyer (a wholly owned subsidiary of the Company), LF and the Seller (a wholly owned subsidiary of LF) entered into the Sale and Purchase Agreement, pursuant to which the Buyer conditionally agreed to purchase and the Seller conditionally agreed to sell LF's Asia consumer and healthcare distribution business (i.e. the Target Group) for a cash consideration of US$350 million (subject to customary closing adjustments on a cash-free, debt-free basis) as more particularly described below.

THE SALE AND PURCHASE AGREEMENT Date

3 May 2016

Parties

1. the Company, as guarantor of the Buyer;

2. the Buyer, as buyer of the Target Shares;

3. LF, as guarantor of the Seller; and

4. the Seller, as seller of the Target Shares.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, LF, the Seller and their respective ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

Subject matter

The Target Shares, representing the entire issued share capital of the Target Company.

Upon Completion, the Target Company will become a wholly owned subsidiary of the Buyer.

Consideration

The Consideration under the Sale and Purchase Agreement shall be US$350 million, subject to customary closing adjustments by (a) adding the amount of cash of the Target Group as at the Completion Date, (b) deducting the amount of indebtedness of the Target Group as at the Completion Date, and (c) adjusting for the difference between the amounts of the actual working capital and the target working capital of the Target Group as at the Completion Date.

The Consideration was determined after arm's length negotiations between the Buyer and the Seller with reference to the Target Group's historical performance and future prospect as well as comparable trading and transaction multiples.

The Directors consider that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Payment

The Consideration shall be payable in cash according to the following schedule:

1. Initial Payment: at Completion, the Buyer shall pay to the Seller an amount equal to the sum of (i) US$350 million and (ii) an amount representing the cash-free, debt-free and working capital adjustments as estimated in accordance with the provisions of the Sale and Purchase Agreement (the "Initial Payment"); and

2. Adjustment Payment: within five Business Days after agreement or determination of the Completion Accounts, the Buyer shall pay to the Seller any amount by which the Consideration (as determined according to the Completion Accounts) exceeds the Initial Payment, or the Seller shall pay to the Buyer any amount by which the Consideration (as determined according to the Completion Accounts) is less than the Initial Payment.

Conditions

Completion is subject to the following Conditions being satisfied (or waived) on or before the Longstop Date:

1. the completion of the Restructuring; and

2. the Sale and Purchase Agreement and other transaction documents to be entered into pursuant to or in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder shall have been approved by the Shareholders in accordance with the requirements of the Listing Rules.

As at the date of this announcement, the Company is of the view that Condition (b) above has been satisfied.

Completion

Completion shall take place on the Completion Date.

Guarantee

The Company has agreed to guarantee the performance of the Buyer's obligations under the Sale and Purchase Agreement and LF has agreed to guarantee the performance of the Seller's obligations under the Sale and Purchase Agreement.

Non-compete

The Seller has undertaken with the Buyer (for itself as agent for the Target Group) that it will not, and will procure no other member of LF Group (excluding the Target Group) will, without the written consent of the Buyer, for a period of three years immediately following the Completion Date, engage in the distribution of fast moving consumer products and healthcare products in Brunei, China, Hong Kong, Indonesia, Japan, Macao, Malaysia, Myanmar, the Philippines, Singapore, Taiwan and Thailand, or employ or solicit or endeavour to entice away from the Target Group any of its material employees.

Restructuring

Prior to the entering into of the Sale and Purchase Agreement, the Business has been conducted by certain subsidiaries of LF. Pursuant to the Sale and Purchase Agreement, the Seller has agreed to procure a pre-Completion Restructuring of the Business, which shall involve an internal transfer of assets, liabilities and shares of such subsidiaries to create the Target Group. The Restructuring is expected to complete by Completion. To the extent legal transfers of certain subsidiaries or businesses to the Target Group is not perfected and pending such perfection, Completion will still proceed on the basis that the economics of these subsidiaries or businesses will be retained by Target Group as from Completion.

INFORMATION ON TARGET GROUP

The Target Group is principally engaged in distribution of consumer and healthcare products across Asia. The Target Group has been operating in geographical areas including China, Hong Kong, Macao, Taiwan, Thailand, Malaysia, Singapore, Philippines, Indonesia and Brunei.

The unaudited combined net assets of the Target Group as at 31 December 2015 and as at 31 December 2014 were approximately US$321.4 million and US$287.4 million respectively. The unaudited core operating profit of the Target Group for the years ended 31 December 2015 and 31 December 2014 were approximately US$16.1 million and US$24.8 million. The unaudited combined net profits (before and after taxation) of the Target Group for the year ended 31 December 2015 were approximately US$13.0 million and US$11.2 million respectively, and the unaudited combined net profits (before and after taxation) of the Target Group for the year ended 31 December 2014 were approximately US$23.3 million and US$20.3 million respectively.

INFORMATION ON LF GROUP

LF Group is recognised as the world's leader in consumer goods design, development, sourcing and logistics. It specialises in responsibly managing supply chains of high-volume, time-sensitive goods for leading retailers and brands worldwide. The Seller is an investment holding company and a wholly owned subsidiary of LF.