Man Wah : Announcements and Notices - Voluntary Announcement Acquisitions of Metal Frame Business and Recliner Business

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.

MANWAH

MAN WAH HOLDINGS LIMITED ઽശછٰϞࠢʮ̡

(Incorporated in Bermuda with limited liability)

(Stock Code: 01999)

VOLUNTARY ANNOUNCEMENT

ACQUISITIONS OF METAL FRAME BUSINESS AND RECLINER BUSINESS

INTRODUCTION

The Board is pleased to announce the Company has entered into two agreements in relation to acquisitions of the two Target Companies to boost its production capacity and capability in the metal frame and recliner businesses in the PRC. After the sale, the vendors under the two agreements have agreed not to compete with the Target Companies after completion of the acquisitions.

JIANGSU YULONG AGREEMENT

On 27 December 2017, the Jiangsu Yulong Agreement was signed. Three companies owned or controlled by the vendor and his associates (collectively as "Previous Metal Frame Business") were principally engaged in the production and sales of metal components for furniture business, mainly metal frames.

Pursuant to the Jiangsu Yulong Agreement, Jiangsu Yulong shall acquire all the manufacturing equipment and intellectual properties owned by the Previous Metal Frame Business (the "Target Acquisition").

Subject to the Jiangsu Yulong Agreement becoming effective after satisfaction of the conditions set out therein and completion of the Target Acquisition, completion of the transfer of the controlling stake in Jiangsu Yulong shall take place on 31 December 2017, after which Jiangsu Yulong will become an indirect subsidiary of the Company. Remaco is entitled to purchase the remaining equity interest in Jiangsu Yulong within 3 business days after the end of 2018. Such conditions for the effectiveness of the Jiangsu Yulong Agreement include, among others, the due establishment of Jiangsu Yulong and board and shareholder approvals of certain parties to the Jiangsu Yulong Agreement.

RMB120 million (equivalent to approximately HK$143.0 million) was paid by the Group upon signing of the Jiangsu Yulong Agreement, and the remaining RMB120 million is to be payable after completion of the Target Acquisition. If the Group proceeds with the purchase of the remaining equity interest of Jiangsu Yulong, the price payable is RMB60 million (equivalent to approximately HK$71.5 million). The total consideration payable by the Group for acquisition of the entire equity interest in Jiangsu Yulong is RMB300 million (equivalent to approximately HK$357.4 million).

The above consideration was determined after arm's length negotiations between the parties to the Jiangsu Yulong Agreement and with reference to the estimated valuation of Jiangsu Yulong at RMB300 million (equivalent to approximately HK$357.4 million) by reference to the historical business operation of the Previous Metal Frame Business. The Directors are of the view that the terms of the Jiangsu Yulong Agreement are fair and reasonable, and in the interests of the Company and its shareholders as a whole.

Jiangsu Yulong was newly incorporated on 20 December 2017. According to the information provided by the vendor, the key financial data of the Previous Metal Frame Business for the year 2016 and the period from January to November 2017 are set out below for the purpose of reference only:

For the eleven

It is commercially agreed that Jiangsu Yulong would only acquire certain assets of the Previous Metal Frame Business. Given the agreement for the vendor not to compete with Jiangsu Yulong after completion of the acquisition and that only some of the assets of the Previous Metal Frame Business are to be acquired under the Target Acquisition, the operations of Jiangsu Yulong after the acquisition may or may not bear any correlation to the past performance of the metal frame business operated by the Previous Metal Frame Business. The above financial information is only for historical reference. After completion of the acquisition under the Jiangsu Yulong Agreement, the Group may purchase semi-finished and finished products from the vendor in the ordinary course of business on normal commercial terms or better.

JIANGSU DELANSHI AGREEMENT

On 27 December 2017, the Jiangsu Delanshi Agreement was signed. Two companies owned or controlled by the vendors and their associates (including Delanshi and another trading company, collectively as "Previous Recliner Business") were principally engaged in the production and sales of sofas, mainly recliner sofas and export to oversea market. Jiangsu Delanshi is a limited liability company incorporated under the laws of the PRC. It is principally engaged in the business of manufacturing and sales of sofas, mainly recliner sofas.

Subject to the Jiangsu Delanshi Agreement becoming effective after satisfaction of the conditions set out therein, completion of the transfer of controlling stake in Jiangsu Delanshi shall take place on 31 December 2017, after which Jiangsu Delanshi will become an indirect subsidiary of the Company. MW Huizhou is entitled to purchase the remaining equity interest in Jiangsu Delanshi within 3 business days after the end of 2018. Such conditions for the effectiveness of the Jiangsu Delanshi Agreement include, among others, board and shareholder approvals of certain parties to the Jiangsu Delanshi Agreement.

RMB10 million (equivalent to approximately HK$11.9 million) was paid by the Group upon signing of the Jiangsu Delanshi Agreement, with an amount equal to the audited net asset value of Jiangsu Delanshi as at 31 December 2017 in proportion to the controlling stake to be acquired less RMB10 million to be payable after the audited net asset value has been determined. Based on the management accounts for the eleven months ended 30 November 2017 and the estimated operating profit in December 2017, the net asset value of Jiangsu Delanshi as at 31 December 2017 is estimated to be approximately RMB20 million (equivalent to approximately HK$23.8 million). If the Group proceeds with the purchase of the remaining equity interest of Jiangsu Delanshi, the price payable is the audited net asset value of Jiangsu Delanshi as at 31 December 2017 in proportion to the remaining equity interests to be acquired. The total consideration payable by the Group for acquisition of the entire equity interest in Jiangsu Delanshi is expected to be RMB20 million (equivalent to approximately HK$23.8 million).

The above consideration was determined after arm's length negotiations between the parties to the Jiangsu Delanshi Agreement and with reference to the net asset value of Jiangsu Delanshi as described above. The Directors are of the view that the terms of the Jiangsu Delanshi Agreement are fair and reasonable, and in the interests of the Company and its shareholders as a whole.

According to the financial information provided by the vendors, the key financial data of the Previous Recliner Business for the year 2016 and the period from January to November 2017 are set out below:

For the eleven

It is commercially agreed that MW Huizhou would only acquire Jiangsu Delanshi, not the whole of the Previous Recliner Business. Given the agreement for the vendors not to compete with MW Huizhou after completion of the acquisition and that only Jiangsu Delanshi is to be acquired under the Jiangsu Delanshi Agreement, the operations of Jiangsu Delanshi after the acquisition may or may not bear any correlation to the past performance of the Previous Recliner Business. The above financial information is only for historical reference.

LISTING RULES IMPLICATIONS

Since all parties to the Jiangsu Delanshi Agreement and the Jiangsu Yulong Agreement (other than MW Huizhou and Remaco) are, to the best of the Directors' knowledge, information and belief having made all reasonable enquiries, Independent Third Parties and the relevant percentage ratios of the transactions contemplated therein did not exceed 5%, the transactions contemplated under the Jiangsu Delanshi Agreement and the Jiangsu Yulong Agreement did not constitute to notifiable transactions of the Group under Chapter 14 of the Listing Rules.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meanings when used herein:

By Order of the Board

Man Wah Holdings Limited

Wong Man Li

Chairman

Hong Kong, 27 December 2017

For the purpose of this announcement, the exchange rate at RMB1.00 = HK$1.1914 has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were, may have been or will be exchanged at such rate or any other rates or at all.

As at the date of this announcement, the executive Directors are Mr. Wong Man Li, Ms. Hui Wai Hing, Mr. Wang Guisheng, Mr. Alan Marnie, Mr. Dai Quanfa and Ms. Wong Ying Ying; and the independent non-executive Directors are Mr. Chau Shing Yim, David, Mr. Ong Chor Wei, Mr.Kan Chung Nin, Tony and Mr. Ding Yuan.