china baoli technologies holdings limited 中國寶力科技控股 …...2 the consideration shares...
TRANSCRIPT
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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.
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 Bermuda with limited liability)
(Stock Code: 164)
China Baoli Technologies Holdings Limited中國寶力科技控股有限公司
(I) VERY SUBSTANTIAL ACQUISITION AND EXEMPT CONNECTED TRANSACTION;
(II) ISSUE OF CONSIDERATION SHARESUNDER SPECIFIC MANDATE;
AND(III) RESUMPTION OF TRADING
THE AGREEMENT
On 4 June 2018, the Purchaser, a wholly-owned subsidiary of the Company, entered into
the Agreement with the Vendor pursuant to which the Purchaser conditionally agreed to
acquire, and the Vendor conditionally agreed to sell, 25.1% of the issued share capital of the
Target Company, for a consideration of US$60,000,000 (equivalent to HK$471.66 million),
which will be satisfied by the allotment and issue of 8,232,850,410 Consideration Shares on
the Completion Date at the Issue Price of HK$0.05729 per Share.
The 8,232,850,410 Consideration Shares represent approximately 23.37% of the issued
share capital of the Company as at the date of this announcement and approximately
18.94% of the issued share capital of the Company as enlarged by the allotment and issue of
such Consideration Shares.
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The Consideration Shares will be allotted and issued on the Completion Date under the
Specific Mandate proposed to be obtained at the SGM.
The Company will apply to the Listing Committee for the listing of, and permission to
deal in, the Consideration Shares to be allotted and issued pursuant to the terms of the
Agreement.
IMPLICATIONS UNDER THE LISTING RULES
As one of the applicable percentage ratios in relation to the Acquisition is more than 100%,
the Acquisition constitutes a very substantial acquisition for the Company under the Listing
Rules and is therefore subject to the reporting, announcement and shareholders’ approval
requirements under Chapter 14 of the Listing Rules.
The Vendor is wholly owned by Mr. Sie, who is a director of certain subsidiaries of the
Company. The Vendor is a connected person of the Company at the subsidiary level under
the Listing Rules and accordingly, the Acquisition also constitutes a connected transaction
for the Company under Chapter 14A of the Listing Rules. Given (i) the Board has approved
the Acquisition; and (ii) the independent non-executive Directors have confirmed that the
terms of the Agreement are fair and reasonable, on normal commercial terms and in the
interests of the Company and the Shareholders as a whole, the Acquisition is subject to the
reporting and announcement requirements only but is exempt from the circular, independent
financial advice and independent shareholders’ approval requirements under Rule 14A.101
of the Listing Rules.
To the best knowledge, information and belief of the Directors, having made all reasonable
enquiries, the Vendor and its associates hold in aggregate 810,775,000 Shares as at
the date of this announcement. The Vendor and its associates have material interest
in the Acquisition and are required to abstain from voting at the SGM to approve the
Agreement and the transactions contemplated thereunder. Save for the foregoing, to the
best knowledge, information and belief of the Directors, having made all reasonable
enquiries, no Shareholder has any material interest in the Acquisition and no Shareholder is
required to abstain from voting at the SGM to approve the Agreement and the transactions
contemplated thereunder.
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RULING OF THE LISTING DEPARTMENT
The Listing Department informed the Company that based on the information provided, it
has made a ruling in its decision letter dated 27 June 2018 that the Acquisition constitutes
a reverse takeover and an attempt to achieve a listing of the Target Company and a means
to circumvent the new listing requirements under Rule 14.06(6) of the Listing Rules (the
“Ruling”).
The deadline for the Company’s submission of an application to the Listing Committee
for a first review of the Ruling (the “Review Application”) is 9 July 2018. The Company
intends to exercise its right under Rule 2B.06(1) of the Listing Rules to have the Ruling
reviewed by the Listing Committee. The Company may or may not proceed with the
Acquisition depending on the results of the Review Application. The Company will publish
further announcements to keep the Shareholders informed of the submission of the Review
Application, the results of the Review Application and the Company’s decision as to
whether the Acquisition will or will not be proceeded.
DESPATCH OF CIRCULAR
Subject to the results of the Review Application, the Company will convene the SGM to
seek the approval of the Shareholders on the Agreement and the transactions contemplated
thereunder including the grant of the Specific Mandate. The Company will despatch a
circular in accordance with requirements under the Listing Rules, which will contain,
among other things, (i) further details of the Acquisition; (ii) financial information of the
Target Group; and (iii) a notice of the SGM and a form of proxy. The timetable of the
Acquisition is subject to the status and results of the Review Application. The despatch date
of the circular will be announced in due course.
RESUMPTION OF TRADING
Trading in the Shares on the Stock Exchange has been suspended at the request of
the Company with effect from 1:00 p.m. on 4 June 2018 pending the release of this
announcement. An application has been made by the Company to the Stock Exchange for
the resumption of trading in the Shares with effect from 9:00 a.m. on 6 July 2018.
Completion of the Acquisition is subject to the satisfaction or waiver (as applicable)
of a number of conditions, which may or may not be fulfilled. Furthermore, subject to
the results of the Review Application, the Acquisition may or may not be proceeded.
The Shareholders and potential investors should exercise caution when they deal or
contemplate dealing in the Shares or other securities of the Company.
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References are made to the announcement of the Company dated 4 June 2018 in relation to
the trading halt of the Shares on the Stock Exchange and the holding announcement of the
Company dated 19 June 2018.
On 4 June 2018, the Purchaser, a wholly-owned subsidiary of the Company, entered into the
Agreement with the Vendor pursuant to which the Purchaser conditionally agreed to acquire,
and the Vendor conditionally agreed to sell, 25.1% of the issued share capital of the Target
Company, for a consideration of US$60,000,000 (equivalent to HK$471.66 million), which
will be satisfied by the allotment and issue of 8,232,850,410 Consideration Shares at the Issue
Price of HK$0.05729 per Share.
Details of the Agreement are set out below.
THE AGREEMENT
Date: 4 June 2018
Parties:
The Purchaser: China Baoli Technologies Services Limited, a wholly-owned
subsidiary of the Company
The Vendor: Trinity World Management Limited
Subject Matter
The Purchaser conditionally agreed to acquire, and the Vendor conditionally agreed to sell, the
Sale Shares, representing 25.1% of the issued share capital of the Target Company as at the
date of this announcement.
Consideration
The Consideration is US$60,000,000 (equivalent to HK$471,660,000). The Consideration
will be satisfied by the allotment and issue of 8,232,850,410 Consideration Shares on the
Completion Date at the Issue Price of HK$0.05729 per Share.
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The Issue Price of HK$0.05729 per Share represents:
(a) a discount of approximately 22.58% to the closing price of HK$0.074 per Share as
quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 15.00% to the average of the closing prices of HK$0.0674
per Share as quoted on the Stock Exchange for the last 5 trading days up to and
including the Last Trading Day; and
(c) a discount of approximately 18.39% to the average of the closing prices of HK$0.0702
per Share as quoted on the Stock Exchange for the last 10 trading days up to and
including the Last Trading Day.
The Issue Price and the Consideration were determined after arm’s length negotiations
between the Vendor and the Purchaser with reference to:
(i) the estimated current valuation of the Target Group of approximately US$239,000,000;
(ii) the historical commitment to the Target Group by the Group amounting to approximately
US$102,286,000 in aggregate including the cost of acquisition by the Group of 40% in
aggregate of the issued share capital of the Target Company. Based on such historical
commitment, the consideration for 25.1% equity interest in the Target Company should
be approximately US$64,185,000;
(iii) the business prospects of the Target Company;
(iv) YOTA is an international brand and is well-known for having the dual-screen mobile
devices technologies. The Group successfully launched Yota 3 in China in October
2017 with the help of R&D team of the Target Company. The Company believes that
YotaPhone and the business of the Target Company have great prospect; and
(v) the means of settlement of the Consideration in full by the allotment and issue of the
Consideration Shares. The payment by way of allotment and issue of Consideration
Shares allows the Company to preserve its cash flow.
The Directors consider that the Consideration is fair and reasonable and in the interests of the
Company and the Shareholders as a whole.
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Consideration Shares
The 8,232,850,410 Consideration Shares represent approximately 23.37% of the issued
share capital of the Company as at the date of this announcement and approximately 18.94%
of the issued share capital of the Company as enlarged by the allotment and issue of such
Consideration Shares.
The Consideration Shares will rank equally among themselves and pari passu in all respects
with the Shares in issue on the date of the allotment and issue of the Consideration Shares.
The Consideration Shares will be allotted and issued on the Completion Date under the
Specific Mandate proposed to be obtained at the SGM.
The Company will apply to the Listing Committee for the listing of, and permission to deal in,
the Consideration Shares to be allotted and issued pursuant to the terms of the Agreement.
Conditions
The obligation of the Purchaser to proceed to Completion is subject to the satisfaction or, if
applicable, waiver of the following conditions:
(a) the Purchaser having been satisfied with the results of such enquiries, investigations and
due diligence reviews of the business, affairs, operations and financial position of the
Target Group by the Purchaser or any of its officers, employees, agents, professional
advisers or other agents as the Purchaser in its discretion deems necessary, desirable or
appropriate to undertake;
(b) the Company having obtained approval of the Shareholders of the Agreement and the
transactions contemplated under the Agreement in accordance with the applicable
requirements under the Listing Rules;
(c) the Listing Committee having granted the listing of, and permission to deal in, the
Consideration Shares on the Stock Exchange;
(d) a valuation report of the Target Group having been delivered to the Purchaser and the
valuation of the Target Group as at a date no earlier than 31 March 2018 set out in such
report being not less than US$239,000,000;
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(e) the warranties of the Vendor in the Agreement remaining true and accurate in all respects
and not misleading in any respect as of the Completion Date by reference to the facts
and circumstances subsisting as at the Completion Date;
(f) no notice, order, judgment, action or proceeding of any court, arbitrator, authority,
statutory or regulatory body having been served, issued or made which restrains,
prohibits or makes unlawful any transaction contemplated under the Agreement or which
is reasonably likely to materially and adversely affect the right of the Purchaser to own
the legal and beneficial title to the Sale Shares, free from encumbrances, following the
Completion Date; and
(g) all consents of any authority or of any other person that are required to be obtained
in connection with the consummation of the transactions contemplated under the
Agreement (including but not limited to those related to the transfer of the Sale Shares,
and any waivers of notice requirements, rights of first refusal, preemptive rights, put
or call rights under the shareholders’ agreement in relation to the Target Company and
the articles of association of the Target Company) shall have been duly obtained and
effective as of the Completion Date, and evidence thereof shall have been delivered to
the Purchaser.
The Vendor shall use its best endeavours to ensure the satisfaction of the Conditions above
(other than the Conditions in paragraphs (b), (c) and (d)) as soon as possible after the date of
the Agreement but in any event no later than the Long-Stop Date.
The Purchaser may at any time waive in whole or in part and conditionally or unconditionally
any of the Conditions above (other than the Conditions in paragraphs (b) and (c)) by notice in
writing to the Vendor.
If the Conditions in paragraphs (b) and (c) are not satisfied on or before the Long-Stop
Date or any of the other Conditions is not satisfied or waived on or before the Completion
Date, the Agreement shall automatically lapse, provided however that (a) certain surviving
provisions shall continue in force following the lapse of the Agreement; and (b) the lapse
of the Agreement shall be without prejudice to the rights and liabilities of any party to the
Agreement accrued prior to such lapse. In all other such circumstances, the Agreement shall
lapse without liability to any party.
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Completion
Subject to satisfaction of the Conditions on or before the Long-Stop Date, Completion shall
take place on the third business day after satisfaction of the Conditions (other than those to
be satisfied on the Completion Date, but subject to the satisfaction or waiver thereof on the
Completion Date) or such other date as may be designated by the Purchaser and notified to the
Vendor in writing.
On the Completion Date, subject to the terms of the Agreement, the Purchaser shall procure
the Company to allot and issue the Consideration Shares to the Vendor or its nominee.
Through the Acquisition, the equity stake of the Group in the Target Company will increase
from 40% to 65.1% upon Completion.
With effect from Completion, all rights, entitlements and privileges enjoyed by the Vendor as
a shareholder of the Target Company will be enjoyed by the Purchaser including without limit
the right to appoint a director of the Target Company.
The Group currently has three representatives on the board of directors of the Target
Company. After Completion, the Group will have the right to appoint four representatives on
the board of directors of the Target Company comprising a total of six directors, the Group
will therefore have control over the board of directors of the Target Company.
Upon Completion, the financial statements of the Target Company will be consolidated with
the financial statements of the Company and the Target Company will be accounted for as a
subsidiary of the Company.
Lock up on the Consideration Shares
Pursuant to the terms of the Agreement, the Vendor covenanted and undertook to the
Purchaser that it shall not, during the Lock-in Period, directly or indirectly, sell, transfer
or otherwise dispose of, or create any encumbrance over, the Consideration Shares (or any
interest in them), or enter into any agreement to do so, save that the Vendor shall be entitled
to sell, transfer or otherwise dispose of the Consideration Shares in the following cumulative
tranches during the Lock-in Period:
(1) a first tranche of 8 and 1/3rd% of the Consideration Shares immediately after
Completion;
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(2) a second tranche of 8 and 1/3rd% of the Consideration Shares immediately after 30 days
following Completion plus any un-disposed Consideration Shares in the first tranche;
(3) a third tranche of 8 and 1/3rd% of the Consideration Shares immediately after 60 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(4) a fourth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 90 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(5) a fifth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 120 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(6) a sixth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 150 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(7) a seventh tranche of 8 and 1/3rd% of the Consideration Shares immediately after 180
days following Completion plus any un-disposed Consideration Shares in prior tranches;
(8) an eighth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 210
days following Completion plus any un-disposed Consideration Shares in prior tranches;
(9) a ninth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 240 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(10) a tenth tranche of 8 and 1/3rd% of the Consideration Shares immediately after 270 days
following Completion plus any un-disposed Consideration Shares in prior tranches;
(11) an eleventh tranche of 8 and 1/3rd% of the Consideration Shares immediately after 300
days following Completion plus any un-disposed Consideration Shares in prior tranches;
and
(12) a final tranche of 8 and 1/3rd% of the Consideration Shares immediately after 330 days
following Completion plus any un-disposed Consideration Shares in prior tranches.
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EFFECT OF THE ACQUISITION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY
To the best knowledge, information and belief of the Directors, the shareholding structure of
the Company as at the date of this announcement and immediately after the allotment and
issue of 8,232,850,410 Consideration Shares (assuming no other change in the issued share
capital of the Company) is as follows:
Name of Shareholder
As at the date of
this announcement
Immediately after the
allotment and issue of
8,232,850,410 Consideration
Shares (assuming no other
change in the issued share
capital of the Company)
Number of
Shares
Approximate
%
Number of
Shares
Approximate
%
Lui Lai Yan (Note 1) 152,000,000 0.43% 152,000,000 0.35%
Yeung Chun Wai, Anthony (Note 1) 871,462,205 2.47% 871,462,205 2.00%
Rising Elite Global Limited (Note 1) 90,000,000 0.26% 90,000,000 0.21%
Nova Investment Group Limited (Note 1) 1,521,007,187 4.32% 1,521,007,187 3.50%
Sub-total 2,634,469,392 7.48% 2,634,469,392 6.06%
One Faith Investments Limited (Note 2) 2,153,475,000 6.11% 2,153,475,000 4.96%
Vendor and its associates 810,775,000 2.30% 9,043,625,410 20.81%
Public Shareholders 29,626,411,249 84.11% 29,626,411,249 68.17%
Total 35,225,130,641 100% 43,457,981,051 100%
Notes:
(1) Mr. Yeung Chun Wai, Anthony is an executive Director. Rising Elite Global Limited and Nova Investment
Group Limited are beneficially wholly owned by Mr. Yeung Chun Wai, Anthony. Ms. Lui Lai Yan is the
spouse of Mr. Yeung Chun Wai, Anthony.
(2) Mr. Zhang Yi is an executive Director and the Chairman of the Board. One Faith Investments Limited is
beneficially wholly owned by Mr. Zhang Yi.
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INFORMATION ON THE TARGET COMPANY
The Target Company commenced its operations in 2011 and is principally engaged in the
design, research and development, production and marketing and sales of high-tech consumer
LTE electronics such as phablets and routers. Its main products are smartphones under the
brand “YOTAPHONE” and other connectivity devices such as modems.
Based on the consolidated financial statements of the Target Company, the consolidated
financial information of the Target Company for the two years ended 31 December 2017
prepared in accordance with International Financial Reporting Standards is as follows:
For the year ended
31 December
2017 2016
(Audited) (Audited)
(approximately) (approximately)
Net profit/(loss) before tax US$1,236,000 (US$27,629,000)
Net profit/(loss) after tax US$1,236,000 (US$27,631,000)
The audited net liabilities of the Target Group as at 31 December 2017 was approximately
US$95,662,000. The Target Group had net liabilities as at 31 December 2017 due to the
accounting treatment of the shareholders’ loans as liabilities to the Target Group.
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A breakdown of the historical commitment of the Group to the Target Group is as follows:
Commitment
Time at which the commitment was or will be made
Party who received the commitment
ApproximatelyUSD ’000
Cost of acquisition of 30%
issued share capital of
the Target Company
USD41,625,000
paid in April 2016
USD4,600,000
paid in April 2017
Telconet Capital
Limited Partnership
46,225
Consideration for
the assignment of the debts owed by
Yota Devices Limited to
Telconet Capital Limited Partnership
under the Bridge Loan Agreement
April 2016 Target Company 13,561
The loan granted by the Company to
Yota Devices IPR Limited under
the Yota BVI Loan Agreement
USD24,300,000
in July 2016
USD2,700,000
in April 2017
Target Company 27,000
Cost of acquisition of 10%
issued share capital of
the Target Company
Allotment and issue of
first tranche
consideration shares
in March 2018
Allotment and issue of
second tranche
consideration shares
in September 2018
MTH Limited 15,500
Total 102,286
The outstanding loan amount (including interests) provided by the Group to the Target Group
was approximately USD73,852,000 as at 31 March 2018.
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To the best knowledge, information and belief of the Directors, as at the date of this
announcement, the Target Company is held by the Vendor as to 25.1%, by Telconet Capital
Limited Partnership as to 34.9% and by the Group as to 40%.
INFORMATION ON THE PARTIES
The Purchaser is a wholly-owned subsidiary of the Company and is an investment holding
company.
The Vendor is a company incorporated in the British Virgin Islands. As at the date of this
announcement, the Vendor holds 25.1% of the issued share capital of the Target Company. The
Vendor is principally engaged in investment holding. The Vendor is a company wholly-owned
by Mr. Sie. Mr. Sie is a director of certain subsidiaries of the Company.
The original acquisition cost of the Sale Shares paid by the Vendor was approximately
US$54,000,000.
REASONS FOR AND BENEFITS OF THE ACQUISITION
The Group is principally engaged in mobile technologies business, leisure-related business
including tourism and hospitality, gamma ray irradiation service, and securities trading and
investment.
As at the date of this announcement, the Group holds 40% of the issued share capital
of the Target Company and an exclusive intellectual property licence to market and sell
“YOTAPHONE” in the Greater China Region commencing in April 2016.
Yota 3 was successfully launched by the Group in October 2017. The dual-screen feature
of Yota 3 is a unique feature for mobile phones and the Company’s management are
optimistic and enthusiastic about the business prospects and future growth potential of the
Target Company. The Group will continue to expand and strategically focus on its mobile
technologies business in the near future with a view to strengthening its foothold in the mobile
technologies industry.
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The Company has been in discussions with Xinhua News Agency (“Xinhua”), the official
state-run press agency of the People’s Republic of China to launch a new e-commerce
and advertising platform via distributing customized versions of mobile devices for their
customers. Xinhua is the biggest and most influential media organization in China, and the
largest news agency in the world in terms of correspondents worldwide. Xinhua is a ministry-
level institution subordinate to the Chinese central government, and is the highest ranking
state media organization in the country alongside the People’s Daily. In order to consolidate
the cooperation with Xinhua, the Company initiated the negotiations with the Vendor for
a greater control in the Target Company for the development of the mobile technologies
business of the Group. Through the ability to control the Target Company, the Company can
have a larger capacity to cooperate with Xinhua which is expected to generate a significant
business volume to the Group’s mobile technologies business and bring greater value to the
Company and the Shareholders.
Through the Acquisition, the equity stake of the Group in the Target Company will increase
from 40% to 65.1% upon Completion. After Completion, the Group will have the right to
appoint four representatives on the board of directors of the Target Company comprising a
total of six directors, the Group will therefore have control over the board of directors of the
Target Company. Upon Completion, the financial statements of the Target Company will be
consolidated with the financial statements of the Company and the Target Company will be
accounted for as a subsidiary of the Company. The Company can have greater influence over
the development of the Target Company and will have, through the Target Company, the full
licence with respect to “YOTAPHONE”. The Acquisition is therefore in line with the long-
term business strategy and development direction of the Group.
The Directors also believe that the Acquisition will provide an opportunity to enhance the
Group’s financial performance and the return to the Shareholders in the long run.
Based on the foregoing, the Directors consider that the terms of the Agreement are fair
and reasonable and the Acquisition is in the interests of the Company and the Shareholders
as a whole. Accordingly, the Directors have approved the Agreement and the transactions
contemplated thereunder. None of the Directors had a material interest in the Acquisition
and hence no Director was required to abstain from voting on the resolutions approving the
Agreement or the transactions contemplated thereunder.
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As at the date of this announcement, other than the Agreement, the Company has not started
any formal negotiation or entered into any agreement or arrangement with any existing or
potential shareholder of the Target Company as to acquisition of further equity interest or
other investments in the Target Company by the Group. However, the Company remains open
to the acquisition of further equity interest in the Target Company as future opportunities
arise.
IMPLICATIONS UNDER THE LISTING RULES
As one of the applicable percentage ratios in relation to the Acquisition is more than 100%,
the Acquisition constitutes a very substantial acquisition for the Company under the Listing
Rules and is therefore subject to the reporting, announcement and shareholders’ approval
requirements under Chapter 14 of the Listing Rules.
The Company entered into the agreement for the acquisition of 30% of YOTA on 23
December 2015 (the “First Acquisition”) and the Group entered into the sale and purchase
agreement for the acquisition of 10% of Yota on 9 February 2018 (the “Second Acquisition”,
together with the First Acquisition, the “Previous Acquisitions”).
Pursuant to Rule 14.22 of the Listing Rules, the Stock Exchange may require listed issuers to
aggregate a series of transactions and treat them as if they were one transaction if they are all
completed within a 12-month period or are otherwise related.
The First Acquisition has been completed for more than two years which is longer than
the 12-month period mentioned above. The Acquisition and the Previous Acquisitions are
different transactions and are not related to each other. The sellers of the three transactions are
different. In addition, the business of the Target Company has formed part of the Company’s
principal businesses by way of the licensing arrangement between the Group and the Target
Company, as shown in the Company’s latest annual and interim reports. Accordingly, the three
acquisitions should not be aggregated pursuant to Rules 14.22 and 14.23 of the Listing Rules.
The Company is of the view that the Acquisition should not constitute a reverse takeover
under Rule 14.06(6) of the Listing Rules. The Acquisition, even if aggregated with the
Previous Acquisitions, should not constitute a reverse takeover under Rule 14.06(6) of the
Listing Rules for the following reasons:
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(a) The Acquisition (whether aggregated with the Previous Acquisitions or not) falls outside
the bright line tests under Rules 14.06(6)(a) and (b) of the Listing Rules.
(b) Except for the revenue ratio, all the applicable ratios are well below 100%, ranging
from 5.4% to 76.6%. The revenue ratio of the Acquisition is approximately 128.5%.
The revenue of the Target Company for the financial year ended 31 December 2017
was approximately HK$48 million, nearly all of which represents the royalty payment
receivable from the Group. Following completion of the Acquisition, there will not be
significant change to the assets, profits and revenue of the Group as enlarged by the
Target Group.
(c) Following the Group’s acquisition of 30% of the equity interest of the Target
Company and obtaining an exclusive intellectual property licence to market and sell
“YOTAPHONE” in the Greater China Region in 2016, the Group has been principally
engaged in the mobile technologies business. The Group has successfully launched the
third generation of dual-screen smartphone, Yota 3, in October 2017 and will continue
to invest more resources in improving the brand awareness. Following completion of the
Acquisition, the Group will continue to develop its mobile technologies business and the
Acquisition will not result in any change of the principal business of the Group.
(d) At present, the Target Company’s sole business is licensing the intellectual property
rights of “YOTAPHONE” to the Group and its principal asset is the intangible asset of
such intellectual property rights. Through the Acquisition, the equity stake of the Group
in the Target Company will increase from 40% to 65.1% and the Group will have greater
control in the Target Company for the development of the mobile technologies business
of the Group.
(e) Under the Acquisition, the Consideration will be settled by the allotment and issue of the
Consideration Shares to the Vendor. The allotment and issue of the Consideration Shares
will not result in or cause a change in control (as defined in the Takeovers Code) of the
Company upon completion of the Acquisition.
(f) There is no issue of restricted convertible securities to the Vendor under the Acquisition
or the sellers under the Acquisition.
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The Vendor is wholly owned by Mr. Sie, who is a director of certain subsidiaries of the
Company. The Vendor is a connected person of the Company at the subsidiary level under the
Listing Rules and accordingly, the Acquisition also constitutes a connected transaction for
the Company under Chapter 14A of the Listing Rules. Given (i) the Board has approved the
Acquisition; and (ii) the independent non-executive Directors have confirmed that the terms
of the Agreement are fair and reasonable, on normal commercial terms and in the interests of
the Company and the Shareholders as a whole, the Acquisition is subject to the reporting and
announcement requirements only but is exempt from the circular, independent financial advice
and independent shareholders’ approval requirements under Rule 14A.101 of the Listing
Rules.
To the best knowledge, information and belief of the Directors, having made all reasonable
enquiries, the Vendor and its associates hold in aggregate 810,775,000 Shares as at the date of
this announcement. The Vendor and its associates have material interest in the Acquisition and
are required to abstain from voting at the SGM to approve the Agreement and the transactions
contemplated thereunder. Save for the foregoing, to the best knowledge, information and
belief of the Directors, having made all reasonable enquiries, no Shareholder has any material
interest in the Acquisition and no Shareholder is required to abstain from voting at the SGM to
approve the Agreement and the transactions contemplated thereunder.
RULING OF THE LISTING DEPARTMENT
The Listing Department informed the Company that based on the information provided, it
has made a ruling in its decision letter dated 27 June 2018 that the Acquisition constitutes a
reverse takeover and an attempt to achieve a listing of the Target Company and a means to
circumvent the new listing requirements under Rule 14.06(6) of the Listing Rules.
The Listing Department considers that the Acquisition is a reverse takeover and an attempt
to achieve a listing of the Target Company and a means to circumvent the new listing
requirements for the reasons extracted below:
“Decision
Based on the information provided, we consider that the Acquisition (as defined below) is
a reverse takeover (RTO) and an attempt to achieve a listing of the Target and a means to
circumvent the new listing requirements under Rule 14.06(6).
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Fact
Principal activities
1. For the year ended 31 March 2015, the Company was principally engaged in cruise ship
management services business, gamma ray irradiation services, and securities trading
and investment. The Company commenced the mobile technologies business since 2016
pursuant to the First Acquisition (as defined below).
2. During the three years ended 31 March 2015, 2016 and 2017, the cruise ship
management services business contributed 93%, 94% and 86% of the Group’s revenue.
The remaining businesses were very immaterial to the Group. During the year ended 31
March 2018, the Company has temporarily suspended the management services on the
cruise ship to perform routine and preventive maintenance. Up to now, the cruise ship
management service business is still in suspension. There is no timetable on when the
business would resume.
First Acquisition
3. In October 2015, the Company proposed to acquire 100% interest of Yota (the Target),
which would constitute a very substantial acquisition of the Company. The Target is
principally engaged in the design, research and development, marketing and sales of
mainly smartphones under the brand “Yota” and other connectivity devices such as
modems.
4. On 12 November 2015, we issued a decision letter to the Company stating that the
above proposed transaction was a RTO and an attempt to list the Target and a means to
circumvent the new listing requirements.
5. On 1 December 2015, the Company proposed to (i) downsize the above acquisition
to acquire only 30% interest in the Target; and (ii) enter into a licensing agreement or
formation of a joint venture with the Target to develop and manufacture smart phones
under the brand “Yota” for exclusive distribution in the PRC. The revised transaction
constituted a major transaction to the Company (the First Acquisition).
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6. On 4 December 2015, we issued a letter to the Company (the Letter) stating that
the First Acquisition would not constitute a RTO under Rule 14.06(6) subject to a
few conditions including that (i) the transaction will not exceed the size of a major
transaction under Chapter 14; and (ii) the Company will disclose that, among others, if
it acquires further interest in the Target after the period of 12 months from the date of
completion of the First Acquisition, we will aggregate these further acquisition(s) with
the First Acquisition and assess whether these further acquisition(s) would constitute a
RTO.
7. The Company announced the First Acquisition on 30 December 2015 and completed it
in April 2016. The Company was granted an exclusive intellectual property licence by
the Target to market and sell phone under the brand “Yota” in the Greater China Region
for seven years since April 2016 pursuant to the First Acquisition.
Second Acquisition
8. On 11 February 2018, the Company announced a discloseable transaction to acquire an
additional 10% interest in the Target (the Second Acquisition). The Second Acquisition
was completed on 29 March 2018. The Target remained an associate of the Company.
The Acquisition
9. On 4 June 2018, the Company entered into an agreement to acquire an additional
25.1% interest in the Target (the Acquisition). Upon completion of the Acquisition, the
Company’s interest in the Target will increase from 40% to 65.1%, and the Target will
become a subsidiary of the Company. The results of the Target will be consolidated in
the Group’s financial statements. The Acquisition (both on its own and on aggregation
basis when it is aggregated with the First Acquisition and the Second Acquisition) is a
very substantial acquisition to the Company.
10. At present, the Target’s sole business is licensing the intellectual property rights
of “YotaPhone” to the Group and its principal asset is the intangible asset of such
intellectual property rights.
11. The Target and its subsidiaries (the Target Group) recorded a loss of US$39.7 million,
US$27.6 million and US$0.4 million in 2015, 2016 and 2017, respectively. As at 31
December 2017, the net liabilities of the Target Group were US$96.0 million.
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Relevant Listing Rules and Guidance Letter
12. Rule 14.06(6) defines a RTO to be an acquisition (or a series of acquisitions) which
constitutes, in the opinion of the Exchange, an attempt to achieve a listing of the assets
to be acquired and a means to circumvent the new listing requirements.
13. Our guidance letter HKEx-GL78-14 explains that the RTO Rules are anti-avoidance
provisions designed to prevent circumvention of the new listing requirements. In
particular, paragraph 23 of the guidance letter states that “where an issuer acquires
equity interests in a target in stages, the Exchange may aggregate the acquisitions in
considering whether the acquisitions together are material to the issuer and represent an
intention to achieve listing of the target”.
14. Rule 14.22 states that the Exchange may require issuers to aggregate a series of
transactions and treat them as if they were one transaction if they are all completed
within a 12-month period or are otherwise related.
Reasons for our decision
15. We consider that the Acquisition is a RTO and an attempt to achieve a listing of the
Target and a means to circumvent the new listing requirements because:
Achieve listing of the Target
(i) Both the First Acquisition, the Second Acquisition and the Acquisition involve
acquisition of interests in one company (i.e. the Target), and the Target will become
a subsidiary of the Company after completion of the Acquisition. We consider that
the Company has clear intention to acquire more than 50% interest in the Target
since October 2015 despite that the whole acquisition process of the Target has
been extended to two years and seven months since October 2015.
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(ii) Rule 14.22 contemplates that the transactions that are otherwise related may be
aggregated even though they are not all completed within a 12-month period.
Taking into account the factors under Rules 14.22 and 14.23, we will aggregate
the First Acquisition, the Second Acquisition and the Acquisition for the purpose
of assessing whether these acquisitions would together represent an intention
to achieve listing of the Target. In particular, we consider that the Company’s
principal business has been changed from cruise ship management services
business to mobile technologies business through these acquisitions, and that the
size of the Acquisition (both on its own and on aggregated basis) is significant to
the Group with a revenue ratio of 128.5%.
Circumvent new listing requirements
(iii) The history of the acquisition in October 2015, the acquisitions of interests in
the Target in stages and the suspension of the cruise ship management services
business, together with the Acquisition, form a series of arrangements to
circumvent the RTO Rules.
(iv) The Target Group was loss making in last three years and was in net liabilities
position as at 31 December 2017. The Target Group could not meet the profit
requirement for a new applicant under Rule 8.05(1). Circumvention of new listing
requirements would be a material concern in this case.”
The deadline for the Company’s submission of the Review Application is 9 July 2018. The
Company intends to exercise its right under Rule 2B.06(1) of the Listing Rules to have the
Ruling reviewed by the Listing Committee. The Company may or may not proceed with the
Acquisition depending on the results of the Review Application. The Company will publish
further announcements to keep the Shareholders informed of the submission of the Review
Application, the results of the Review Application and the Company’s decision as to whether
the Acquisition will or will not be proceeded.
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DESPATCH OF CIRCULAR
Subject to the results of the Review Application, the Company will convene the SGM to
seek the approval of the Shareholders on the Agreement and the transactions contemplated
thereunder including the grant of the Specific Mandate. The Company will despatch a circular
in accordance with requirements under the Listing Rules, which will contain, among other
things, (i) further details of the Acquisition; (ii) financial information of the Target Group;
and (iii) a notice of the SGM and a form of proxy. The timetable of the Acquisition is subject
to the status and results of the Review Application. The despatch date of the circular will be
announced in due course.
RESUMPTION OF TRADING
Trading in the Shares on the Stock Exchange has been suspended at the request of
the Company with effect from 1:00 p.m. on 4 June 2018 pending the release of this
announcement. An application has been made by the Company to the Stock Exchange for the
resumption of trading in the Shares with effect from 9:00 a.m. on 6 July 2018.
Completion of the Acquisition is subject to the satisfaction or waiver (as applicable)
of a number of conditions, which may or may not be fulfilled. Furthermore, subject
to the results of Review Application, the Acquisition may or may not be proceeded.
The Shareholders and potential investors should exercise caution when they deal or
contemplate dealing in the Shares or other securities of the Company.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions shall
have the following respective meanings:
“Acquisition” the acquisition of the Sale Shares by the Purchaser pursuant
to the terms of the Agreement
“Agreement” the share purchase agreement dated 4 June 2018 and entered
into between the Purchaser and the Vendor in respect of the
Acquisition
“Board” the board of Directors
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“Company” China Baoli Technologies Holdings Limited, a company
incorporated in Bermuda with limited liability, the Shares of
which are listed on the Stock Exchange
“Completion” completion of the Acquisition pursuant to the terms of the
Agreement
“Completion Date” the date of Completion
“Conditions” the conditions precedent to Completion set out in the
paragraph headed “Conditions” in this announcement
“connected person” has the meaning ascribed to it under the Listing Rules
“Consideration” the consideration payable by the Purchaser to the Vendor for
the Sale Shares
“Consideration Shares” the Shares to be allotted and issued to the Vendor or its
nominee pursuant to the terms of the Agreement
“Directors” the directors of the Company
“Group” the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the
People’s Republic of China
“HK$” Hong Kong dollar, the lawful currency of Hong Kong
“Issue Price” the issue price per Share at which the Consideration Shares
will be allotted and issued pursuant to the terms of the
Agreement
“Last Trading Day” 1 June 2018, being the last full trading day for the Shares
before the entering into of the Agreement
“Listing Committee” has the meaning ascribed to it under the Listing Rules
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“Listing Department” the Listing Department of the Stock Exchange
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange
“Lock-in Period” the period of 360 days commencing from the date of
allotment and issue of the Consideration Shares by the
Company
“Long-Stop Date” 30 November 2018 or such other date as may be agreed
between the Purchaser and the Vendor in writing
“Mr. Sie” Mr. Sie Winston, a director of certain subsidiaries of the
Company
“Purchaser” China Baoli Technologies Services Limited, a company
incorporated in the British Virgin Islands, a wholly-owned
subsidiary of the Company
“Sale Shares” 251 shares in the share capital of the Target Company
“SGM” the special general meeting of the Company to be convened
and held for considering and if thought fit, approving, among
others, the Agreement and the transactions contemplated
thereunder
“Shares” ordinary shares of HK$0.01 each in the share capital of
the Company (or of such other nominal amount as will
result from a sub-division, consolidation, reclassification or
reconstruction of the share capital of the Company from time
to time)
“Shareholders” the holders of the Shares
“Specific Mandate” the specific mandate to be granted to the Directors by the
Shareholders at the SGM to allot and issue the Consideration
Shares to the Vendor or its nominee
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“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Target Company” YOTA, a company incorporated under the laws of the
Cayman Islands
“Target Group” the Target Company and its subsidiaries
“US$” or “USD” United States dollar, the lawful currency of the United States
of America
“Vendor” Trinity World Management Limited, a company incorporated
in the British Virgin Islands
“%” per cent.
By order of the Board
China Baoli Technologies Holdings Limited
Zhang Yi
Chairman
Hong Kong, 5 July 2018
As at the date of this announcement, the executive Directors are Mr. Zhang Yi (Chairman),
Ms. Chu Wei Ning (Chief Executive Officer), Mr. Yeung Chun Wai, Anthony and Mr. Wong
King Shiu, Daniel; and the independent non-executive Directors are Mr. Chan Chi Yuen, Mr.
Chan Kee Huen, Michael, Mr. Han Chunjian and Mr. Wong Hoi Kuen.