Apr 7, 2017 - Hu Yuedong has agreed to sell and Beijing Zhongying has agreed to repurchase 65% ... things, the performan
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 the Cayman Islands with limited liability)
(Stock code: 1803)
DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO TERMINATION OF THE JOINT VENTURE INVOLVING THE DISPOSAL OF JOINT VENTURE COMPANY AND THE JOINT VENTURE SUBSIDIARY THE DISPOSAL Reference is made to the announcement of Beijing Sports and Entertainment Industry Group Limited (the “Company”) dated 29 July 2016 in relation to the formation of the JV Company (the “Announcement”). Capitalized terms used herein shall have the same meanings as those defined in the Announcement unless defined otherwise herein. The Board announced that on 7 April 2017 (after trading hours), Zhong Hu Yuedong, an indirect wholly-owned subsidiary of the Company, Beijing Zhongying and Beijing Zhong Hu Shengjia entered into the Share Transfer Agreement, pursuant to which Zhong Hu Yuedong has agreed to sell and Beijing Zhongying has agreed to repurchase 65% shareholding interest in the JV Company and the JV Subsidiary (collectively, the “Disposed Companies ” ) at the consideration of RMB13,000,000 (equivalent to approximately HK$15,080,000).
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Further, on 7 April 2017 (after trading hours), upon signing of the Share Transfer Agreement, Beijing Zhong Hu Shengjia executed the Share Pledge Agreement in favour of Zhong Hu Yuedong, pursuant to which Beijing Zhong Hu Shengjia shall pledge its 100% shareholding interest in the JV Subsidiary to Zhong Hu Yuedong to guarantee, among other things, the performance of all obligations of Beijing Zhongying under the Share Transfer Agreement. As at the date of this announcement, the Disposed Companies are owned as to 65% by Zhong Hu Yuedong and as to 35% by Beijing Zhongying. As at the date hereof, the JV Company has a registered capital of RMB20,000,000 contributed by Zhong Hu Yuedong and Beijing Zhongying as to RMB13,000,000 in cash (equivalent to approximately HK$15,080,000) and as to RMB7,000,000 in cash (equivalent to approximately HK$8,120,000), respectively and the JV Subsidiary has a registered capital of RMB1,000,000 which will be contributed wholly by Beijing Zhong Hu Shengjia.
LISTING RULES IMPLICATIONS As one or more of the applicable percentage ratios set out in the Listing Rules in respect of the Disposal exceed 5% but all of them are less than 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. As at the date of this announcement, the Disposed Companies are owned as to 65% by the Company and as to 35% by Beijing Zhongying, thus Beijing Zhongying is a substantial shareholder of the subsidiaries of the Company under the Listing Rules and accordingly, a connected person of the Company at the subsidiary level. Accordingly, the Disposal constitutes a connected transaction of the Company. The Board of the Company (including the independent non-executive Directors) has approved the Disposal under the Share Transfer Agreement and the transactions contemplated thereunder and the Directors (including the independent non-executive Directors) have confirmed that the Share Transfer Agreement has been made on normal commercial terms, its terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Pursuant to Rule 14A.101 of the Listing Rules, the Disposal contemplated under the Share Transfer Agreement will constitute a connected transaction only subject to the reporting and announcement requirements, but exempt from the circular, independent financial advice and Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
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None of the Directors has any material interest in the Disposal, the Share Transfer Agreement and the transactions contemplated thereunder, therefore none of the Directors has abstained from voting on the board resolution approving the Share Transfer Agreement and the transactions contemplated thereunder.
THE DISPOSAL Reference is made to the Announcement of the Company dated 29 July 2016 in relation to the formation of the JV Company. Capitalized terms used herein shall have the same meanings as those defined in the Announcement unless defined otherwise herein. The Board announced that on 7 April 2017 (after trading hours), Zhong Hu Yuedong, an indirect wholly-owned subsidiary of the Company, Beijing Zhongying and Beijing Zhong Hu Shengjia entered into the Share Transfer Agreement, pursuant to which Zhong Hu Yuedong has agreed to sell and Beijing Zhongying has agreed to repurchase 65% shareholding interest in the Disposed Companies at the consideration of RMB13,000,000 (equivalent to approximately HK$15,080,000). Further, on 7 April 2017 (after trading hours), upon signing of the Share Transfer Agreement, Beijing Zhong Hu Shengjia executed the Share Pledge Agreement in favour of Zhong Hu Yuedong, pursuant to which Beijing Zhong Hu Shengjia shall pledge its 100% shareholding interest in the JV Subsidiary to Zhong Hu Yuedong to guarantee, among other things, the performance of all obligations of Beijing Zhongying under the Share Transfer Agreement. As at the date of this announcement, the Disposed Companies are owned as to 65% by Zhong Hu Yuedong and as to 35% by Beijing Zhongying. As at the date hereof, the JV Company has a registered capital of RMB20,000,000 contributed by Zhong Hu Yuedong and Beijing Zhongying as to RMB13,000,000 in cash (equivalent to approximately HK$15,080,000) and as to RMB7,000,000 in cash (equivalent to approximately HK$8,120,000), respectively and the JV Subsidiary has a registered capital of RMB1,000,000 which will be contributed wholly by Beijing Zhong Hu Shengjia.
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THE SHARE TRANSFER AGREEMENT Date 7 April 2017 Parties (1)
Zhong Hu Yuedong;
(2)
Beijing Zhongying; and
(3)
Beijing Zhong Hu Shengjia, the JV Company
As at the date of this announcement, the Disposed Companies are owned as to 65% by the Company and as to 35% by Beijing Zhongying, thus Beijing Zhongying is a substantial shareholder of the subsidiaries of the Company under the Listing Rules and accordingly, a connected person of the Company at the subsidiary level. Asset to be disposed The asset to be disposed of under the Disposal is 65% shareholding interest in the Disposed Companies held by Zhong Hu Yuedong, an indirect wholly-owned subsidiary of the Company. Consideration RMB13,000,000 (equivalent to approximately HK$15,080,000) payable by Beijing Zhongying to Zhong Hu Yuedong in cash within one month of the date of execution of the Share Transfer Agreement with interests at the rate of 6% per annum (the “Aggregate Consideration”). If Beijing Zhongying fails to settle the Consideration and complete the share transfer within one year in accordance with the terms as set out in the Share Transfer Agreement, Zhong Hu Yuedong shall have the rights to charge interest on the Aggregate Consideration at the rate of 50% per annum and enforce the pledge under the Share Pledge Agreement.
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The Consideration was arrived at after arm’s length negotiations, with reference to the initial capital contribution by Zhong Hu Yuedong when entering into the JV Agreement. In determining the Consideration for the Disposal, the Company has also taken into account the net asset value of the 100% shareholding interest in the Disposed Companies in the amount of approximately RMB13,722,000 (equivalent to approximately HK$15,918,000) as at 28 February 2017 and the business prospect of the Disposed Companies. Completion Zhong Hu Yuedong and Beijing Zhongying shall use their best endeavours to file the registration of relevant share transfer at the Beijing Administration for Industry and Commerce in the PRC within one month from the date of the Share Transfer Agreement. The share transfer is completed upon the registration of the same. Upon Completion, the Company will cease to have any shareholding interest in each of the JV Company and the JV Subsidiary. The financial results of the JV Company and the JV Subsidiary will no longer be consolidated into the consolidated financial statements of the Group.
THE SHARE PLEDGE AGREEMENT On 7 April 2017, upon signing of the Share Transfer Agreement, Beijing Zhong Hu Shengjia has executed the Share Pledge Agreement in favour of Zhong Hu Yuedong, pursuant to which Beijing Zhong Hu Shengjia shall pledge its 100% shareholding interest in the JV Subsidiary to Zhong Hu Yuedong to guarantee, among other things, the performance of all obligations of Beijing Zhongying under the Share Transfer Agreement.
TERMINATION OF THE JOINT VENTURE Pursuant to the terms of the JV Agreement, Zhong Hu Yuedong and Beijing Zhongying mutually agreed that there would be an observation period for three months after the operation of the first theatre by the JV Company. Before the expiration of the observation period, Zhong Hu Yuedong shall have the right to terminate the JV Agreement, and Beijing Zhongying shall unconditionally repurchase the shareholding interest held by Zhong Hu Yuedong at the consideration of RMB13,000,000 (equivalent to approximately HK$15,080,000), being the actual capital contribution by Zhong Hu Yuedong when entering into of the JV Agreement.
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The Company decides to exercise the rights pursuant to the above term and terminate the JV Agreement accordingly. Please refer to the paragraph below headed “Reasons for and Benefits of the Disposal” for further details on the termination of the joint venture.
REASONS FOR AND BENEFITS OF THE DISPOSAL The Company is an investment holding company and its subsidiaries are principally engaged in the investments in the sports and entertainment related industry in the PRC; and the provision of air freight services in the wholesale market. The Board constantly reviews the Company’s business strategy in maximising the value of the Company and continues to explore attractive business opportunities. As disclosed in the interim report for the period ended 30 June 2016 and the annual report for the year ended 31 December 2016, the Group intended to explore business opportunities by entering the sportsrelated industry in the PRC. As movie theatres business requires a high level of investment on the infrastructure, marketing and high-tech audio and video equipment, the Directors believe that further and substantial investment would be expected for the JV Company to boost the movie theatres business to enhance its competitiveness and operating efficiency, and hence movie theatres business may continue to increase pressure on the Group’s overall profitability in the near future. Based on the above, the Directors are of the view that the Disposal presents a good opportunity for the Group to exit the movie theatres business, thus improve the Group’s financial and liquidity position and its cashflow, and provide further resources to enable the Group to invest in its sport-related businesses. In view of the above, the Directors (including the independent non-executive Directors) consider that the terms of the Share Transfer Agreement (including the Consideration) are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. As at the date of this announcement, other than the Disposal, the Company has not entered into any agreement, or reached any understanding, or is in any negotiation in relation to any disposal of the Company’s remaining assets; and any disposal or termination of the Company’s existing businesses.
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FINANCIAL EFFECTS OF THE DISPOSAL AND USE OF PROCEEDS Set out below is a summary of the key financial data of the unaudited consolidated accounts of the Disposed Companies for the year ended 31 December 2016 and the period ended 28 February 2017:
Revenue Loss for the period/year Total assets Net assets
For the period ended 28 February 2017 (unaudited) RMB’000
For the year ended 31 December 2016 (unaudited) RMB’000
1,856 3,224 20,503 13,722
31 3,054 21,297 16,946
Upon Completion, the Company will cease to have any shareholding interest in each of the JV Company and the JV Subsidiaries. The financial results of the JV Company and the JV Subsidiary will no longer be consolidated into the consolidated financial statements of the Group. Upon Completion, the Group will receive a net proceeds of the Disposal of approximately HK$15,000,000. The net proceeds is estimated based on the Consideration of RMB13,000,000 (equivalent to HK$15,080,000) deducting related expenses (primarily comprising legal and professional charges). It is estimated that the Company will realize an unaudited gain on disposal of approximately RMB4,081,000 (equivalent to approximately HK$4,734,000) calculated based on the sale proceeds from the Disposal less the carrying value of approximately RMB8,919,000 (equivalent to approximately HK$10,346,000) of the Disposed Companies as at 28 February 2017. The Group intends to apply the net proceeds for general working capital of the Group and investment in sports-related business as when the investment opportunities arise. However, Shareholders should note that the actual gain or loss on the Disposal to be recorded by the Group will depend on the net asset value of the Disposed Companies as at the date of Completion.
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LISTING RULES IMPLICATIONS As one or more of the applicable percentage ratios set out in the Listing Rules in respect of the Disposal exceed 5% but all of them are less than 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. As at the date of this announcement, the Disposed Companies are owned as to 65% by the Company and as to 35% by Beijing Zhongying, thus Beijing Zhongying is a substantial shareholder of the subsidiaries of the Company under the Listing Rules and accordingly, a connected person of the Company at the subsidiary level. Accordingly, the Disposal constitutes a connected transaction of the Company. The Board of the Company (including the independent non-executive Directors) has approved the Disposal under the Share Transfer Agreement and the transactions contemplated thereunder and the Directors (including the independent non-executive Directors) have confirmed that the Share Transfer Agreement has been made on normal commercial terms, its terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Pursuant to Rule 14A.101 of the Listing Rules, the Disposal contemplated under the Share Transfer Agreement will constitute a connected transaction only subject to the reporting and announcement requirements, but exempt from the circular, independent financial advice and Shareholders’ approval requirements under Chapter 14A of the Listing Rules. None of the Directors has any material interest in the Disposal, the Share Transfer Agreement and the transactions contemplated thereunder, therefore none of the Directors has abstained from voting on the board resolution approving the Share Transfer Agreement and the transactions contemplated thereunder.
INFORMATION OF THE GROUP AND THE PARTIES TO THE SHARE TRANSFER AGREEMENT The Company is an investment holding company and its subsidiaries are principally engaged in the investments in the sports and entertainment related industry in the PRC; and the provision of air freight services in the wholesale market. Zhong Hu Yuedong is an indirect wholly-owned subsidiary of the Company incorporated in the PRC with limited liability. It is principally engaged in cultural, artistic, entertainment and media businesses in the PRC.
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Beijing Zhongying is a company incorporated in the PRC with limited liability. It is principally engaged in the development, design and management of movie theatres in the PRC. Zhong Hu Shengjia is the JV Company incorporated in the PRC with limited liability which is principally engaged in the operation of movie theatres in the third and fourth tier cities in the PRC.
DEFINITIONS In this announcement, the following expressions have the meanings set out below unless the context requires otherwise: “Beijing Zhongying”
Beijing Zhongying Shengjia Cinema Development Limited* （ 北 京 中 映 晟 嘉 影 院 發 展 有 限 公 司 ）, a c o m p a n y incorporated in the PRC with limited liability
“Board”
the board of Directors
“Completion”
completion of the share transfer in accordance with the terms of the Share Transfer Agreement
“Company”
Beijing Sports and Entertainment Industry Group Limited （ 北 京 體 育 文 化 產 業 集 團 有 限 公 司 ）, a c o m p a n y incorporated in the Cayman Islands, the issued Shares of which are listed on the Stock Exchange
“connected person”
has the meaning ascribed thereto under the Listing Rules
“Consideration”
RMB13,000,000, being the total consideration payable by Beijing Zhongying to Zhong Hu Yuedong in cash under the Share Transfer Agreement
“Director(s)”
the director(s) of the Company
“Disposal”
the disposal of the JV Company and the JV Subsidiary by Zhong Hu Yuedong to Beijing Zhongying in accordance with the terms and conditions of the Share Transfer Agreement
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“Disposed Companies”
the 65% shareholding interest in the JV Company together with the JV Subsidiary, being disposed of by Zhong Hu Yuedong
“Group”
the Company and its subsidiaries
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the People’s Republic of China
“JV Agreement”
the joint venture agreement dated 29 July 2016 entered into between Zhong Hu Yuedong and Beijing Zhongying in relation to the formation of the JV Company
“JV Company”
Beijing Zhong Hu Shengjia Culture Development Limited* （ 北 京 中 互 晟 嘉 文 化 發 展 有 限 公 司）, the joint venture company incorporated in the PRC with limited liability
“JV Subsidiary”
Beijing Zhong Hu Tianjie Cinema Management Limited* （ 北 京 中 互 天 階 影 院 管 理 有 限 公 司）, the joint venture subsidiary incorporated in the PRC with limited liability
“Listing Rules”
The Rules Governing the Listing of Securities on the Stock Exchange
“PRC”
the People’s Republic of China, which excludes Hong Kong for the purpose of this announcement
“RMB”
Renminbi, the lawful currency of the PRC
“Share(s)”
ordinary share(s) in the share capital of the Company
“Shareholder(s)”
the holder(s) of the Shares
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“Share Pledge Agreement”
the share pledge agreement dated 7 April 2017 executed by Beijing Zhong Hu Shengjia in favour of Zhong Hu Yuedong in relation to guarantee, among other things, the performance of all obligations of Beijing Zhongying under the Share Transfer Agreement
“Share Transfer Agreement”
the share transfer agreement dated 7 April 2017 entered into between Zhong Hu Yuedong, Beijing Zhongying and Beijing Zhong Hu Shengjia in relation to the Disposal of the Disposed Companies
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“substantial shareholder”
has the meaning ascribed thereto under the Listing Rules
“Zhong Hu Yuedong”
Zhong Hu Yuedong Culture Media (Beijing) Limited*（ 中互 悅動文化傳媒（ 北京）有限公司）, an indirect wholly-owned subsidiary of the Company incorporated in the PRC with limited liability
“%”
per cent. By order of the Board Beijing Sports and Entertainment Industry Group Limited Liu Xue Heng
Chairman Hong Kong, 7 April 2017
As at the date of this announcement, the executive Directors are Mr. Liu Xue Heng, Mr. Hu Yebi, Mr. Niu Zhongjie, Mr. Zhu Shixing, Mr. Lam Ka Tak and Mr. Zhang Tingzhe, Mr. Tsui Ngai, Eddie and the independent non-executive Directors are Mr. Tse, Man Kit, Keith, Mr. Lok Lawrence Yuen Ming, Mr. Xin Luo Lin and Mr. Pan Lihui. * For identification purpose only * The exchange rate adopted in this announcement for illustration purposes only is RMB1 = HKD 1.16.
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