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.
ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock code: 0576)
MAJOR AND CONNECTED TRANSACTION
IN RELATION TO
DISPOSAL OF 50% EQUITY INTEREST IN PETROLEUM CO
On 12 October 2015, the Company as vendor and Zhejiang Communications Investment as purchaser entered into the Share Purchase Agreement, pursuant to which the Company conditionally agreed to sell and Zhejiang Communications Investment conditionally agreed to purchase 50% of the equity interest held by the Company in Petroleum Co at a cash consideration of RMB135,676,000 (equivalent to approximately HK$165,836,725).
As one or more of the applicable percentage ratios in respect of the Disposal is over 25% but less than 75%, the Disposal constitutes a major transaction for the Company and is subject to the notification, announcement and Shareholders' approval requirements under Rule 14.06 of the Listing Rules.
In addition, as at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a controlling shareholder of the Company. Therefore, Zhejiang Communications Investment, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the Disposal constitutes a connected transaction for the Company pursuant to Chapter 14A of the Listing Rules and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
The Company will put forward an ordinary resolution to approve the Share Purchase Agreement at a general meeting to be convened by the Company for the Independent Shareholders' consideration and approval.
In view of the interest of Communications Group in the Share Purchase Agreement, Communications Group and its associates will abstain from voting at the general meeting to be convened by the Company to consider and approve the resolutions in relation to the Share Purchase Agreement.
An Independent Board Committee has been formed to consider the Share Purchase Agreement and TC Capital Asia Limited has been appointed as the Company's independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Share Purchase Agreement are fair and reasonable and whether the Share Purchase Agreement is in the interests of the Company and the Shareholders as a whole.
A circular containing, among other things (i) details of the Share Purchase Agreement and the relevant transactions contemplated thereunder; (ii) a letter from the Independent Board Committee and a letter from the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Share Purchase Agreement; and (iii) a notice of the general meeting, is expected to be despatched to the Shareholders on or before 3 November 2015.
THE DISPOSAL
On 12 October 2015, the Company as vendor and Zhejiang Communications Investment as purchaser entered into the Share Purchase Agreement, pursuant to which the Company conditionally agreed to sell and Zhejiang Communications Investment conditionally agreed to purchase 50% of the equity interest held by the Company in Petroleum Co at a cash consideration of RMB135,676,000 (equivalent to approximately HK$165,836,725).
Set out below is a summary of the principal terms of the Share Purchase Agreement.
SHARE PURCHASE AGREEMENT
| Date: |
12 October 2015 |
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| Parties: |
(1) the Company as vendor; and
(2) Zhejiang Communications Investment as purchaser |
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| Assets to be disposed: |
50% of the equity interest in Petroleum Co |
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| Consideration: |
RMB135,676,000 (equivalent to approximately HK$165,836,725), which will be settled by cash in the following manner:
(a) RMB100,000,000 (equivalent to approximately HK$122,229,963) to be paid within 15 Business Days after the Share Purchase Agreement becomes effective (i.e. all the conditions precedent have been fulfilled); and
(b) RMB35,676,000 (equivalent to approximately HK$43,606,762) to be paid within 15 Business Days after Completion. |
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|
| Conditions precedent: |
Completion of the Share Purchase Agreement is subject to the fulfilment of the following conditions precedent:
(a) approval of the Share Purchase Agreement by the shareholders of Petroleum Co and the obtaining of a waiver from Sinopec, being the other shareholder of Petroleum Co, in respect of the pre-emptive rights for the acquisition of the 50% equity interest in Petroleum Co to be disposed of by the Company;
(b) approval of the Share Purchase Agreement by the Board;
(c) approval of the Share Purchase Agreement by the Independent Shareholders;
(d) approval of the Share Purchase Agreement by the directors and shareholders (if applicable) of Zhejiang Communications Investment; and
(e) the obtaining of necessary consents and approvals from relevant authorities.
As at the date of this announcement, the conditions under paragraph (b), (d) and (e) above have been satisfied. |
Basis of the Consideration
The above consideration was determined after arm's length negotiations between the Company and Zhejiang Communications Investment. A number of factors were considered by the parties when determining the consideration for the equity interest in Petroleum Co, including, amongst others, the Valuation Report prepared by Jones Lang LaSalle, as well as the PRC Valuation Report prepared by the PRC Domestic Valuer and commissioned by Zhejiang Communications Investment pursuant to the requirements of Zhejiang SASAC and the relevant PRC laws and regulations.
The Company relied on the Valuation Report in determining the consideration, pursuant to which the appraised value of the entire equity interest of Petroleum Co as at 31 May 2015 was RMB260,062,000 (the "JLL Valuation"). Zhejiang Communications Investment relied instead on the PRC Valuation Report in determining the consideration, pursuant to which the appraised value of the entire equity interest of Petroleum Co as at 31 May 2015 was RMB271,352,000 (the "PRC Valuation").
The consideration represents a premium of approximately 4.34% to the 50% equity value of Petroleum Co under the Valuation Report (i.e. RMB130,031,000). Notwithstanding the fact that the consideration appears in par with the appraised equity value under the PRC Valuation, the Directors (other than the independent non-executive Directors) confirmed that the Company has relied on the JLL Valuation instead of the PRC Valuation in assessing the consideration as the Company had no control over the appointment relationship or contractual arrangement with the PRC Domestic Valuer and did not involve in the preparation of the PRC Valuation Report. The Directors (other than the independent non-executive Directors) considered that the PRC Valuation Report was mainly for the use of Communications Group for making the necessary filings to Zhejiang SASAC.
INFORMATION ON PETROLEUM CO
Petroleum Co is a 50:50 joint venture incorporated in the PRC, jointly held by the Company and Sinopec. The business of Petroleum Co primarily consists of (i) storage and sale of petroleum and petroleum products; (ii) wholesale of gasoline, kerosene and diesel; and (iii) investing in, constructing and operating gas stations along the high- grade roads. As at the date of this announcement, Petroleum Co is an associate of the Company and upon Completion, the Company will cease to hold any interest in Petroleum Co and Petroleum Co will cease to be an associate of the Company.
According to the audited financial statements of Petroleum Co prepared in accordance with generally accepted accounting principles in the PRC which was audited by the PRC statutory auditor of Petroleum Co, the net asset value of Petroleum Co as at 31 December 2014 was RMB394,919,532.79. A summary of the financial information of Petroleum Co for the financial years ended 31 December 2013 and 2014 according to the PRC audited financial statements is set out below:
|
For the year ended |
For the year ended |
|
31 December 2014 |
31 December 2013 |
|
(RMB) |
(RMB) |
| Turnover |
6,365,625,698.69 |
6,481,138,266.07 |
| Profit before taxation |
96,976,840.70 |
103,995,189.56 |
| Profit after taxation |
86,993,407.02 |
91,022,497.71 |
| Net profit attributable to owners |
22,380,725.15 |
21,630,881.39 |
Transactions with Petroleum Co after Completion
Since 2003, Petroleum Co has been supplying petrol to Development Co (a wholly- owned subsidiary of the Company), and has been providing management services to the Service Stations. Upon Completion, 50% of the equity interest of Petroleum Co will be held by Zhejiang Communications Investment and Petroleum Co will become an associate of Zhejiang Communications Investment. As Zhejiang Communications Investment is a connected person of the Company, should the Petrol Supply Services and the Management Services continue after Completion, they would constitute continuing connected transactions for the Company upon and following Completion.
The Company plans to enter into discussions with Petroleum Co as to whether or not (and if so, on what terms) the Petrol Supply Services and/or the Management Services will continue after Completion. Further announcement will be made by the Company as and when appropriate in accordance with all applicable requirements of the Listing Rules.
REASONS FOR AND BENEFITS OF THE DISPOSAL
The Board considers that the Disposal will allow the Company to focus on the expressway operation business, and will streamline the Company's existing business segments and operations, and sharpen the Company's strategic focus on its core business. In addition, the Disposal allows the Company to realise its investment and recover its invested capital. Therefore, the Company entered into the Share Purchase Agreement and carry out the Disposal.
Based on the Hong Kong Financial Reporting Standards, it is expected that the Group will make a gain of approximately RMB916,000 from the Disposal.
The Group intends to apply the sale proceeds as its general working capital.
The Directors (excluding the independent non-executive Directors, whose opinion will be set out in the circular taking into account the independent financial adviser's advice which will be set out in the circular) consider that the Share Purchase Agreement is entered into in the ordinary and usual course of business of the Group and on normal commercial terms which were arrived at after arm's length negotiations between the parties and the Disposal is fair and reasonable and in the interests of the Group and the Shareholders as a whole.
INFORMATION ON THE PARTIES TO THE SHARE PURCHASE AGREEMENT
The Company is a joint stock company established under the laws of the PRC with limited liability on 1 March 1997, the H Shares of which are listed on the Main Board of the Stock Exchange. It is principally engaged in investing in, developing and operating high-grade roads in the PRC. The Group also carries on certain other businesses such as operation of gas stations, restaurants and shops in service areas, advertising at expressway interchanges and external road maintenance, as well as securities related business.
Zhejiang Communications Investment is a company incorporated in the PRC on 23 October 2003, which is wholly owned by Communications Group, the controlling shareholder of the Company. Zhejiang Communications Investment is principally engaged in investing in real estate and assets, catering service, automobile repair service, etc.
LISTING RULES IMPLICATIONS
As one or more of the applicable percentage ratios in respect of the Disposal is over 25% but less than 75%, the Disposal constitutes a major transaction for the Company and is subject to the notification, announcement and Shareholders' approval requirements under Rule 14.06 of the Listing Rules.
In addition, as at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a controlling shareholder of the Company. Therefore, Zhejiang Communications Investment, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the Disposal constitutes a connected transaction for the Company pursuant to Chapter 14A of the Listing Rules and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
Each of Mr, Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping holds certain senior position in Communications Group, so they have abstained from voting on the board resolutions with respect to the approval of the Share Purchase Agreement. Save for Mr, Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping, none of the Directors has any material interest in the Share Purchase Agreement or is required to abstain from voting on the relevant Board resolutions to approve the same.
GENERAL
The Company will put forward an ordinary resolution to approve the Share Purchase Agreement at a general meeting to be convened by the Company for the Independent Shareholders' consideration and approval.
In view of the interest of Communications Group in the Share Purchase Agreement, Communications Group and its associates will abstain from voting at the general meeting to be convened by the Company to consider and approve the resolutions in relation to the Share Purchase Agreement.
An Independent Board Committee has been formed to consider the Share Purchase Agreement, and TC Capital Asia Limited has been appointed as the Company's independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Share Purchase Agreement are fair and reasonable and whether the Share Purchase Agreement is in the interests of the Company and the Shareholders as a whole.
A circular containing, among other things (i) details of the Share Purchase Agreement and the relevant transactions contemplated thereunder; (ii) a letter from the Independent Board Committee and a letter from the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Share Purchase Agreement and the relevant transactions contemplated thereunder; and (iii) a notice of the general meeting, is expected to be despatched to the Shareholders on or before 3 November 2015.
DEFINITIONS
In this announcement, unless the context specifies otherwise, the following defined expressions have the following meanings:
| "associate" |
has the meaning ascribed to it under the Listing Rules |
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| "Board" |
the Board of Directors |
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| "Business Day" |
any day other than a Saturday or Sunday or a public holiday in the PRC, on which banks are generally open for business in the PRC |
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| "Communications Group" |
Zhejiang Communications Investment Group Co., Ltd., a wholly State-owned enterprise established in the PRC, and the controlling shareholder of the Company |
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| "Company" |
Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the PRC with limited liability |
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| "Completion" |
completion of the Disposal pursuant to the Share Purchase Agreement |
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| "connected person(s)" |
has the meaning ascribed to it under the Listing Rules |
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| "controlling shareholder" |
has the meaning ascribed to it under the Listing Rules |
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| "Development Co" |
Zhejiang Expressway Investment Development Co., Ltd., a company incorporated in the PRC and a wholly-owned subsidiary of the Company |
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| "Director(s)" |
the director(s) of the Company |
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| "Disposal" |
the disposal of 50% equity interest in Petroleum Co by the Company in accordance with the Share Purchase Agreement |
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| "Group" |
the Company and its subsidiaries |
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| "H Shares" |
overseas listed foreign shares in the share capital of the Company with a nominal value of RMB1 per share, which are listed on the Main Board of the Stock Exchange |
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| "Hong Kong" |
the Hong Kong Special Administrative Region of the PRC |
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| "HK$" |
Hong Kong dollars, the lawful currency of Hong Kong |
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| "Independent Board Committee" |
an independent committee of the Board comprising all independent non-executive Directors, namely, Mr. Zhou Jun, Mr. Pei Ker-Wei and Ms. Lee Wai Tsang Rosa |
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| "Independent Shareholders" |
Shareholders who are independent within the meaning of the relevant provisions of the Listing Rules, and, in relation to the approval of the Share Purchase Agreement and the transactions contemplated thereunder at a general meeting to be convened by the Company for such purpose, means the Shareholders other than Communications Group and its associates |
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| "Jones Lang LaSalle" |
Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent valuer appointed by the Company in respect of Petroleum Co |
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| "Listing Rules" |
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
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| "Management Services" |
the management services currently provided by Petroleum Co to Development Co in respect of the day-to-day management of the Service Stations |
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| "percentage ratio" |
has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules |
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| "Petrol Supply Services" |
the existing supply of petroleum by Petroleum Co to Development Co for purchase and re-sale at the Service Stations |
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| "Petroleum Co" |
Zhejiang Expressway Petroleum Development Co ., Ltd., a company incorporated in the PRC and is owned as to 50% by the Company |
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| "PRC" |
the People's Republic of China (for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan) |
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| "PRC Domestic Valuer" |
the PRC qualified domestic valuer appointed by Zhejiang Communications Investment |
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| "PRC Valuation Report" |
the valuation report prepared by the PRC qualified Domestic Valuer and commissioned by Zhejiang Communications Investment in respect of Petroleum Co |
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| "RMB" |
Renminbi, the lawful currency of the PRC |
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| "Service Stations" |
14 service stations owned by Development Co in the service areas along the Shanghai-Hangzhou-Ningbo and Shangsan Expressway |
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| "Shareholder(s)" |
holder(s) of the share(s) of the Company |
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| "Share Purchase Agreement" |
the agreement dated 12 October 2015 entered into between the Company and Zhejiang Communications Investment, pursuant to which the Company conditionally agreed to dispose of 50% equity interest in Petroleum Co to Zhejiang Communications Investment |
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| "Sinopec" |
Sinopec Sales Co., Ltd., the other shareholder of Petroleum Co |
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| "Stock Exchange" |
The Stock Exchange of Hong Kong Limited |
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| "subsidiary(ies)" |
has the meaning ascribed to it under the Listing Rules |
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| "Valuation Report" |
the valuation report dated 25 September 2015 prepared by Jones Lang LaSalle and commissioned by the Company in respect of Petroleum Co |
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| "Zhejiang Communications Investment" |
Zhejiang Communications Investment Group Industrial Development Co., Ltd., a company incorporated in the PRC and a wholly-owned subsidiary of Communications Group |
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| "Zhejiang SASAC" |
State-owned Assets Supervision and Administration Commission of the People's Government of Zhejiang Province of the PRC |
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| "%" |
per cent. |
English names for reference only.
In this announcement, the translation of RMB into HK$ is based on the exchange of rate of HK$1 to RMB0.81813. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ using such exchange rate or any other exchange rate or at all.
On behalf of the Board
ZHEJIANG EXPRESSWAY CO., LTD.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, 12 October 2015
As of the date of this announcement, the executive directors of the Company are: Mr.ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu; the non-executive directors of the Company are: Mr. WANG Dongjie, Mr. DAI Benmeng and Mr. ZHOU Jianping; and the independent non-executive directors of the Company are: Mr. ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang Rosa.
