Apr 30, 2018 - the project manager to develop the commercial space of the Harbin Project. On 30 April 2018, ... to assum
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: 1109)
CONNECTED TRANSACTIONS IN RELATION TO (I) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF TNZ; (II) TERMINATION OF MANAGEMENT RIGHTS IN RELATION TO THE SHENZHEN BAY SPORTS CENTER; AND (III) TERMINATION OF COOPERATION AGREEMENT AND PROJECT MANAGEMENT AGREEMENT IN RELATION TO THE HARBIN PROJECT (I) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF TNZ The Board is pleased to announce that on 30 April 2018 (after trading hours), the Company and the Vendors entered into the Sale and Purchase Agreement, subject to which terms and conditions, the Vendors have agreed to sell and the Company has agreed to purchase the entire issued share capital of TNZ. As at the date of this announcement, TNZ is directly owned as to 50% by each of the Vendors. The consideration for the TNZ Acquisition is RMB1,734,000,000 (equivalent to approximately HK$2,167,500,000). Listing Rules Implications As at the date of this announcement, CRH is the controlling Shareholder of the Company, CRH is therefore a connected person of the Company. The Vendors are subsidiaries of CRH. Accordingly, the TNZ Acquisition constitutes a connected transaction of the Company. As all the applicable percentage ratios in respect of the TNZ Acquisition exceed 0.1% but are less than 5%, the TNZ Acquisition is only subject to the reporting and announcement requirements under the Listing Rules, and is exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.
–1–
(II) TERMINATION OF MANAGEMENT RIGHTS IN RELATION TO THE SHENZHEN BAY SPORTS CENTER On 30 April 2018 (after trading hours), CR Shenzhen Bay and CRL Shenzhen entered into the Management Rights Authorization Termination Agreement to terminate the management rights license under the Authorization Letter and transfer the relevant assets and liabilities of the Shenzhen Bay Sports Center to CRL Shenzhen for a consideration of RMB322,000,000 (equivalent to approximately HK$402,500,000). Implications under the Listing Rules As at the date of this announcement, CR Shenzhen Bay is an indirect wholly-owned subsidiary of CRH, and CRH is the controlling Shareholder of the Company. As such, CR Shenzhen Bay is a connected person of the Company within the meaning of the Listing Rules and therefore, the entering into of the Management Rights Authorization Termination Agreement constitutes a connected transaction of the Company. As all the applicable percentage ratios in respect of the Management Rights Authorization Termination exceed 0.1% but are less than 5%, the Management Rights Authorization Termination is only subject to the reporting and announcement requirements under the Listing Rules, and is exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. (III)TERMINATION OF COOPERATION AGREEMENT AND PROJECT MANAGEMENT AGREEMENT IN RELATION TO THE HARBIN PROJECT Reference is made to the Joint Announcement in relation to (i) the Cooperation Agreement between the Company and CRB for the cooperation in the development of the Harbin Project and (ii) the Project Management Agreement between CR Land (Harbin), a wholly-owned subsidiary of the Company, and CR Vanguard (Liaoning), a then wholly-owned subsidiary of CRB, for the appointment of CR Land (Harbin) as the project manager to develop the commercial space of the Harbin Project. On 30 April 2018, the Company entered into a termination agreement with CRE (which has subsequently replaced CRB as party to the Cooperation Agreement when it acquired the non-beer businesses from CRB) to terminate the Cooperation Agreement with effect from 30 April 2018. On 30 April 2018, CR Land (Harbin) entered into a termination agreement with CR Vanguard (Liaoning) to terminate the Project Management Agreement with effect from 30 April 2018. Pursuant to the Harbin Project Termination Agreements, all rights and obligations of each of CRE and CR Vanguard (Liaoning) in the Harbin Project will be terminated and each of the Company and CR Land (Harbin) will become responsible for the development and future operation of the Harbin Project, and to retain all benefits and to assume all costs and risks arising therefrom with effect from 30 April 2018.
–2–
Listing Rules Implications The Company, CRE and CR Vanguard (Liaoning) are indirectly owned as to 61.27%, 100% and 80% by CRH, respectively. CRH is, therefore, the controlling shareholder of the Company, CRE and CR Vanguard (Liaoning). As fellow subsidiaries, CRE and CR Vanguard (Liaoning) are connected persons of the Company under the Listing Rules. Based on the appraised value of the land parcel together with the construction in progress of the commercial portion of the Harbin Project, all the applicable percentage ratios are greater than 0.1% but less than 5%. Accordingly the Harbin Project Termination Agreements constitute connected transactions for the Company, which are subject to reporting and announcement requirements but exempted from independent shareholders’ approval requirements of the Listing Rules. As all the applicable percentage ratio of the aforementioned transactions in sections (I), (II) and (III) above on an aggregate basis exceed 0.1% but are less than 5%, the aforementioned transactions are subject to reporting and announcement requirements but exempted from independent shareholders’ approval requirements of the Listing Rules. (I) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF TNZ Background The Board is pleased to announce that on 30 April 2018 (after trading hours), the Company and the Vendors entered into the Sale and Purchase Agreement, subject to which terms and conditions, the Vendors have agreed to sell and the Company has agreed to purchase the entire issued share capital of TNZ. TNZ Acquisition The major terms of the Sale and Purchase Agreement are set out as follows: Date
:
30 April 2018
Parties
:
(i)
Vendors: Ting Cao and Central New
(ii) Purchaser: the Company As at the date of this announcement, TNZ is directly owned as to 50% by each of the Vendors. Subject of the equity transfer Pursuant to the Sale and Purchase Agreement, for an aggregate consideration of RMB1,734,000,000 (RMB867,000,000 of which is payable to each of Central New and Ting Cao), each of Central New and Ting Cao conditionally agreed to sell as legal and beneficial owner 76,005,372 ordinary shares of TNZ, and the Company agreed to purchase 152,010,744 ordinary shares of TNZ, representing the entire issued share capital of TNZ. –3–
Consideration and Payment Terms The consideration for the TNZ Acquisition is RMB1,734,000,000 (equivalent to approximately HK$2,167,500,000). The consideration was determined after arm’s length negotiations between the Company and the Vendors with reference to the appraised value of the Nanjing Zhongshan Project as set out in the valuation report prepared by an independent and qualified valuer based on the market value using the residual approach as at the Valuation Base Date. The total historical investment costs of TNZ made by the Vendors as at 31 August 2017 was RMB1,360,265,138.36 (equivalent to approximately HK$1,700,331,422.95). The consideration will be satisfied in cash within 7 days of the Completion of the TNZ Acquisition. Vendors Ting Cao is a company incorporated in the Cayman Islands with limited liability and Central New is a company incorporated in the British Virgin Islands with limited liability. Both of Ting Cao and Central New are subsidiaries of and ultimately owned by CRH as to 80% and 100% respectively. As at the date of the Agreement, each of Ting Cao and Central New legally and beneficially owns 76,005,372 shares of TNZ, each representing 50% of the existing issued share capital of TNZ. Completion of the TNZ Acquisition Subject to the terms and conditions of the Sale and Purchase Agreement, completion is expected to take place on the same day as the date of the Sale and Purchase Agreement. Upon Completion of the TNZ Acquisition, TNZ will become a wholly-owned subsidiary of the Company. Immediately after Completion of the TNZ Acquisition, the Company shall arrange for the repayment of the CRC Loan (including interest accrued up to and including the date of such repayment) to CRC, which repayment (together with such interest accrued) shall constitute a shareholder’s loan from the Company to TNZ. Information on TNZ TNZ is an investment holding company incorporated in Hong Kong and its principal assets are its indirect 100% equity interests in the Nanjing Zhongshan Project held through its subsidiary, Nanjing Tesco. Nanjing Zhongshan Project Nanjing Zhongshan Project is located at the central district of Nanjing at Sanshan Street, Qinhuai District, Nanjing. As the superstructure of Line 1 and the planned Line 5 of Nanjing Metro, the project is adjacent to the Confucius Temple business district, a famous attraction in Nanjing, boasting high population density and mature ancillary facilities. The project occupies a total land area of 39,293.10 sq.m. and includes a retained building, Yunzhang Office (雲章會所), of 536.7 sq.m. Its above-ground gross –4–
floor area, underground gross floor area and total gross floor area amount to 70,055.3 sq.m., 70,021.4 sq.m. and 140,076.70 sq.m., respectively, with a plot ratio-based GFA of 93,836.73 sq.m. Nanjing Zhongshan Project will be developed into an integrated shopping mall, with two underground floors, five above-ground floors and two floors on which the cultural heritage Yunzhang Office will be rebuilt. It is expected to be completed in July 2020 and commence operation in September 2020. Deeds of Indemnity Upon Completion of the TNZ Acquisition, the Company and each of the Vendors will each enter into a separate Deed of Indemnity. Subject to the limitations stated in the respective Deed of Indemnity, the relevant Vendor shall indemnify and keep indemnified the Company from and against any tax liabilities in relation to the business activities of the TNZ Group prior to Completion, as well as any PRC Corporate Income Tax (as defined in the Deeds of Indemnity, and including any interest, penalty charge or penalty thereon) in respect of the TNZ Acquisition. Under the Deeds of Indemnity, the preparation and filing of any and all tax returns, and the conduct of all negotiations, correspondence settlement, and full discharge of PRC Corporate Income Tax shall be Central New and Ting Cao’s responsibility. Financial information on the TNZ Group TNZ Group Structure TNZ is an investment holding company and the principal asset of the TNZ Group is Tesco Nanjing, which is a wholly-owned subsidiary of TNZ. Tesco Nanjing is the holding company of the Nanjing Zhongshan Project. Financial Information For the purposes of this announcement, set out below are certain consolidated financial information of the TNZ Group prepared in accordance with the Hong Kong Financial Reporting Standards: For the year ended 31 December 2016, the audited consolidated loss before taxation and after taxation were HK$4.2 million and HK$4.2 million respectively. For the year ended 31 December 2017, the unaudited consolidated loss before taxation and after taxation were HK$14.7 million and HK$14.7 million respectively. As at 31 December 2017, the unaudited net book value of the TNZ Group attributable to the shareholders of TNZ was HK$1,200 million. Reasons for and Benefits of the TNZ Acquisition The principal business activities of the Group are property investment, development and management in the PRC. The Directors consider that the Nanjing Zhongshan Project, with its unparalleled position and location at central business district of Nanjing Central City and Nanjing Fuzimiao, has a promising future prospect. The Nanjing Zhongshan Project is a high–5–
end commercial business zone comprising chiefly of Grade-A office buildings and ancillary commercial properties. With the overall advantages enjoyed in transportation and presence of landmark skyscrapers, the Nanjing Zhongshan Project will strengthen the market share and competitiveness of the Group in the PRC in the long-run. After due and careful consideration, the Board agreed to proceed the TNZ Acquisition with reference to relevant survey findings, valuations of nearby properties and the valuation report compiled for TNZ in order to give continuous support to the development of the Nanjing Zhongshan Project. The Board (including the independent non-executive Directors) is of the view that terms of the TNZ Acquisition are determined after arm’s length negotiations, which are fair and reasonable, and the TNZ Acquisition is on normal commercial terms and in the interest of the Company and the Shareholders as a whole. None of the Directors have any material interests in the TNZ Acquisition. General Information The Group is principally engaged in the development of properties for sale, property investments and management, hotel operations and the provision of construction, decoration services and other property related services in the PRC. Implication under the Listing Rules As at the date of this announcement, CRH is the controlling Shareholder of the Company, CRH is therefore a connected person of the Company. The Vendors are subsidiaries of CRH. Accordingly, the TNZ Acquisition constitutes a connected transaction of the Company. As all the applicable percentage ratios in respect of the TNZ Acquisition exceed 0.1% but are less than 5%, the TNZ Acquisition is only subject to the reporting and announcement requirements under the Listing Rules, and is exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. (II) TERMINATION OF MANAGEMENT RIGHTS IN RELATION TO THE SHENZHEN BAY SPORTS CENTER Background On 26 November 2008, the Nanshan Government entered into the Shenzhen Land Use Right Transfer Contract (深圳市土地使用權出讓合同書) (深地合字(2008)0113號) with Shenzhen Land Resource and Real Estate Management Bureau, pursuant to which the Nanshan Government were granted the right to use the piece of land with lot number T107-0007 (宗地號T107-0007). CR Shenzhen Bay completed the construction of the Shenzhen Bay Sports Center on behalf of the Nanshan Government on 31 May 2013. On 7 March 2013, CRL Shenzhen entered into the Operations and Management Contract with the Nanshan Government. As the owner of the Shenzhen Bay Sports Center Project, the Nanshan Government authorized CRL Shenzhen to manage the Shenzhen Bay Sports Center on an exclusive basis starting from 1 January 2012.
–6–
On 8 March 2013, CRL Shenzhen issued the Authorization Letter to CR Shenzhen Bay, which authorized CR Shenzhen Bay to manage the Shenzhen Bay Sports Center and exercise the rights and duties under the Operations and Management Contract, and to handle any disputes relating to the Operations and Management Contract and other related agreements on behalf of CRL Shenzhen. The authorization period starts from 7 March 2013 until all the rights and duties under the Operations and Management Contract are duly satisfied. On 30 April 2018 (after trading hours), CR Shenzhen Bay and CRL Shenzhen entered into the Management Rights Authorization Termination Agreement to terminate the management rights license under the Authorization Letter and transfer the relevant assets and liabilities of the Shenzhen Bay Sports Center to the Company for a consideration of RMB322,000,000 (equivalent to approximately HK$402,500,000). Management Rights Authorization Termination Agreement On 30 April 2018 (after trading hours), CR Shenzhen Bay and CRL Shenzhen entered into the Management Rights Termination Agreement, pursuant to which CRL Shenzhen has terminated the license of the management rights under the Authorization Letter of the Shenzhen Bay Sports Center. The major terms of the Management Rights Authorization Termination Agreement are set out as follows: Date
:
30 April 2018
Parties
:
(i)
CR Shenzhen Bay; and
(ii) CRL Shenzhen Pursuant to the Management Rights Authorization Termination Agreement, the license of the management rights of the Shenzhen Bay Sports Center granted to CR Shenzhen Bay shall be terminated on the Completion Date of the Management Rights Authorization Termination. During the Transition Period, all profits and losses arising out of the Assets Transfer and the Debts and Liabilities Transfer will be vested in and borne by CR Shenzhen Bay. Pursuant to the Management Rights Authorization Termination Agreement, CR Shenzhen Bay has given certain representations and warranties to CRL Shenzhen and, subject to certain limitations, CR Shenzhen Bay shall make certain payments to CRL Shenzhen in the event of any monetary liabilities arising out of events or matters concerning the management rights before the Completion Date of the Management Rights Authorization Termination or changes in tenure of management rights or limitation being imposed on how the management rights may be exercised. CR Shenzhen Bay is a company incorporated in the PRC and a wholly-owned subsidiary of CRC.
–7–
Assets, Debts and Liabilities Transfer CR Shenzhen Bay will transfer its assets to CRL Shenzhen. The total transfer price of these assets is RMB185,677,899. CRL Shenzhen will assume all debts and liabilities of CR Shenzhen Bay, which include third party loans and relevant operational debts amounting to RMB93,242,928 as of the Reference Date. Consideration and Payment Terms The consideration for the Assets Transfer is RMB185,677,899. In consideration of the capital contribution made by CR Shenzhen Bay to the Shenzhen Bay Sports Center for its construction and operation since 2013, CRL Shenzhen agreed to pay RMB136,322,101 to CR Shenzhen Bay in connection with the termination of the management rights of the Shenzhen Bay Sports Center in addition to the consideration for the Assets Transfer. The above considerations have been arrived at after arm’s length negotiations between CRL Shenzhen and CR Shenzhen Bay and was determined with reference to the appraisal of the fair value of CR Shenzhen Bay as set out in the valuation report prepared by Colliers International based on the discounted future cash flows as at 31 August 2017. The above considerations will be paid by CRL Shenzhen to CR Shenzhen Bay within 7 days of the Completion Date of the Management Rights Authorization Termination. Profit Forecast The valuation method constitutes a profit forecast under Rule 14.61 of the Listing Rules (the ‘‘Profit Forecast’’). For the purpose of complying with Rules 14.60A and 14.62 of the Listing Rules, the principal assumptions upon which the Profit Forecast was based are as follows: General assumptions: .
There will be no major changes in the political, legal, economic or financial conditions and taxation laws in the jurisdiction where the Shenzhen Bay Sports Center currently operates or will operate which will materially affect the revenues attributable to the Shenzhen Bay Sports Center, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;
.
The financial projections in respect of the Shenzhen Bay Sports Center have been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful consideration by the management of CR Shenzhen Bay;
.
The projected financial performance of the Shenzhen Bay Sports Center could be achieved and the Shenzhen Bay Sports Center will have adequate financing for its operation; –8–
.
The Shenzhen Bay Sports Center will successfully carry out all necessary activities for the development of its business;
.
The market trends and conditions where the Shenzhen Bay Sports Center operates will not deviate significantly from the economic forecasts in general;
.
The management accounts of the Shenzhen Bay Sports Center provided by the management of CR Shenzhen Bay have been prepared in a manner which truly and accurately reflect the financial position of the Shenzhen Bay Sports Center as at the respective balance sheet dates;
.
Key management, competent personnel, and technical staff will all be retained to support ongoing operations of the Shenzhen Bay Sports Center;
.
There will be no material changes in the business strategy of the Shenzhen Bay Sports Center and its operating structure;
.
All relevant approvals, business certificates, licenses or other legislative or administrative authority from any local government, or private entity or organization required to operate in the localities where the Shenzhen Bay Sports Center operates or intends to operate will be officially obtained and renewable upon expiry unless otherwise stated.
Specific assumptions: .
The valid period of the management rights of the Shenzhen Bay Sports Center commences from 1 January 2012. As per our discussion with the management of CR Shenzhen Bay, the contractual life of the management rights is assumed to be commenced from 1 January 2012 to 19 October 2038. The revenue growth rate is assumed to be mild, which is around 1–2% for the projection years from 2018 to 2021; and
.
Marginal profit tax rate of 25% has been adopted in the multi-period excess earnings model.
The Board has reviewed the principal assumptions upon which the Profit Forecast was based on and is of the view that the Profit Forecast was made after due care and enquiry. Baker Tilly Hong Kong Limited has been engaged by the Company to review the calculations of the discounted future cash flows upon which the valuation report prepared by Colliers International was based on. A letter from the Board and a report from Baker Tilly Hong Kong Limited are included in the appendices to this announcement for the purpose of Rules 14.60A and 14.62 of the Listing Rules.
–9–
The following are the qualifications of Colliers International and Baker Tilly Hong Kong Limited: Name
Qualification
Colliers International
Professional valuer
Baker Tilly Hong Kong Limited
Certified Public Accountants
To the best knowledge, information and belief of the Board and having made all reasonable enquiries, each of Colliers International and Baker Tilly Hong Kong Limited is a third party independent of the Group and is not a connected person of the Group. As at the date of this announcement, neither of Colliers International and Baker Tilly Hong Kong Limited has any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person(s) to subscribe for securities in any member of the Group. Each of Colliers International and Baker Tilly Hong Kong Limited has given and has not withdrawn its written consent to the publication of this announcement with inclusion of its opinion and advice and all references to its name in the form and context in which it appears in this announcement. Conditions Precedent There are no conditions precedent to completion of the Management Rights Authorization Termination Agreement, which will take place within 10 days of the date of the Management Rights Authorization Termination Agreement. The total historical investment costs of the Shenzhen Bay Sports Center made by the CR Shenzhen Bay as at 31 August 2017 was RMB1,183,658,729.04 (equivalent to approximately HK$1,479,573,411.30). Information on the Shenzhen Bay Sports Center Shenzhen Bay Sports Center Project (with hotel) is well-located at the central district of Houhai, Nanshan, Shenzhen, and lying in the middle of the 15-km coastal leisure belt within Shenzhen Bay in proximity to Shenzhen Bay and Hong Kong. The project has a site area of 30.74 hectare with a total gross floor area of 330,000 sq.m. In 2017, Shenzhen Bay Sports Center Project (with hotel) recorded a full-year revenue of RMB316.70 million with profit from operation amounted to RMB83.82 million. It is principally engaged in five major business segments including hotel operation, public fitness project, provision of venue for performance and non-performance programs, commercial leasing and sports match services. Shenzhen Bay Sports Center has become one of the most representative integrated leisure and culture place in Shenzhen and even across the nation especially for its ‘‘Education with pleasure’’ themed business model, public fitness project covering a wide range of sports like swimming, badminton, tennis, basketball and football, as well as numerous grand show events. Hotel Kapok Shenzhen Bay is situated at the west side of Shenzhen Bay Sports Center and in close proximity to the Mangrove Coastal Park (紅樹林海濱公園). The hotel is also just in about 5 minutes’ driving distance from the Shenzhen Bay Port (深圳灣口岸), Coastal City (海岸 – 10 –
城) (a major shopping mall) and the Poly Theater. The hotel is accommodated with 242 guestrooms, a 400 sq.m. grand ballroom and functional halls, and the Xiao Nanyang Restaurant, meeting the needs for all types of conferences, large and small group gatherings. Financial Information For the purposes of this announcement, set out below are certain unaudited financial information of CR Shenzhen Bay prepared in accordance with the PRC Accounting Standards: For the year ended 31 December 2016, the profit before taxation and after taxation were RMB61.21 million and RMB45.91 million respectively (equivalent to approximately HK$72.23 million and HK$57.39 million respectively). For the year ended 31 December 2017, the profit before taxation and after taxation were RMB85.00 million and RMB63.75 million respectively (equivalent to approximately HK$106.25 million and HK$79.69 million respectively). As at 31 December 2017, the unaudited net book value of CR Shenzhen Bay was RMB103.07 million (equivalent to approximately HK$128.84 million). Reasons for and Benefits of the Management Rights Authorization Termination The principal business activities of the Group are property investment, development and management in the PRC. It has always been the Group’s strategy to develop, operate and manage high quality properties and replenish land bank in the strategically important regions in the PRC. The Shenzhen Bay Sports Center in particular is strategically important to the Group’s long-term development as the Directors believe that the demand for high quality properties in Shenzhen will continue to increase in the future as a result of its continuous economic development. The Management Rights Authorization Termination will enhance the Group’s ability to meet the goal of establishing a platform for sports and culture. The Board (including the independent non-executive Directors) is of the view that terms of the Management Rights Authorization Termination are determined after arm’s length negotiations, which are fair and reasonable, and the Management Rights Authorization Termination is on normal commercial terms and in the interest of the Company and the Shareholders as a whole. None of the directors have any material interests in the Management Rights Authorization Termination Agreement, but Mr. Yu Jian has abstained from voting on the relevant board resolutions approving the Management Rights Authorization Termination Agreement as he is also a director of CRL Shenzhen and CR Shenzhen Bay.
– 11 –
Implication under the Listing Rules As at the date of this announcement, CR Shenzhen Bay is an indirect wholly-owned subsidiary of CRH, and CRH is the controlling Shareholder of the Company. As such, CR Shenzhen Bay is a connected person of the Company within the meaning of the Listing Rules and therefore, the entering into of the Management Rights Authorization Termination Agreement constitutes a connected transaction of the Company. As all the applicable percentage ratios in respect of the Management Rights Authorization Termination exceeds 0.1% but are less than 5%, the Management Rights Authorization Termination is only subject to the reporting and announcement requirements under the Listing Rules, and is exempt from the circular, independent financial advice and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. (III)TERMINATION OF COOPERATION AGREEMENT AND PROJECT MANAGEMENT AGREEMENT IN RELATION TO THE HARBIN PROJECT Background Reference is made to the Joint Announcement in relation to (i) the Cooperation Agreement between the Company and CRB for the cooperation in the development of the Harbin Project and (ii) the Project Management Agreement between CR Land (Harbin), a wholly-owned subsidiary of the Company, and CR Vanguard (Liaoning), a then wholly-owned subsidiary of CRB, for the appointment of CR Land (Harbin) as the project manager to develop the commercial space of the Harbin Project. Pursuant to the Cooperation Agreement and the Project Management Agreement, CR Land (Harbin) would hold the land title of the Harbin Project during the development stage. It was intended that CRB would share the land cost on a pro rata basis and hold after completion of the project most of the commercial space in the development, whilst the Group would retain the ownership to the remaining portion of the property which would comprise primarily residential space. On 19 October 2015, CRB entered into an agreement with CRE to assign and novate its rights and obligations under the Cooperation Agreement to CRE with retrospective effect from 1 September 2015. On 30 April 2018, the Company entered into a termination agreement with CRE (which has subsequently replaced CRB as party to the Cooperation Agreement when it acquired the non-beer businesses from CRB) to terminate the Cooperation Agreement with effect from 30 April 2018. On 30 April 2018, CR Land (Harbin) entered into a termination agreement with CR Vanguard (Liaoning) to terminate the Project Management Agreement with effect from 30 April 2018.
– 12 –
Harbin Project The Harbin Project is a residential-commercial complex to be developed by CR Land (Harbin), which is located at Songbei Region, Harbin City, Heilongjiang Province, the PRC. The Harbin Project has a total site area of approximately 90,110 sq.m. with a permitted gross floor area of 298,250 sq.m. including the gross floor area of 100,000 sq. m. for the basement. The commercial area of the Harbin Project includes a midmarket shopping centre focusing on household customers and comprise supermarkets, shops, game centres, restaurants and a multi-screen cinema. Harbin Project Termination Agreements Pursuant to the Harbin Project Termination Agreements, all rights and obligations of each of CRE and CR Vanguard (Liaoning) in the Harbin Project will be terminated and each of the Company and CR Land (Harbin) will become responsible for the development and future operation of the Harbin Project, and to retain all benefits and to assume all costs and risks arising therefrom. Termination Agreement in respect of the Project Management Agreement Date
:
30 April 2018
Parties
:
(a) CR Land (Harbin); and (b) CR Vanguard (Liaoning)
Effective date of termination of the Project Management Agreement
:
30 April 2018
Pursuant to the Termination Agreement in respect of the Project Management Agreement, CR Land (Harbin) will be entitled to retain the capital injected by CR Vanguard (Liaoning) and its holding company (including but not limited to the contribution to the land costs, construction costs and relevant tax) of RMB327,490,600 for the development of the Harbin Project, which comprises RMB86,041,600 as land cost and RMB241,449,000 as prepaid construction fees. Also, all the land use rights and ownership of properties of the Harbin Project will be vested in CR Land (Harbin) as of the effective date of the Termination Agreement in respect of the Project Management Agreement. Termination Agreement in respect of the Cooperation Agreement Date
:
30 April 2018
Parties
:
(a) the Company; and (b) CRE
Effective date of termination of the Cooperation Agreement
:
– 13 –
30 April 2018
Pursuant to the Termination Agreement in respect of the Cooperation Agreement, the Company will be entitled to retain the capital injected by CRE and its affiliated companies (including but not limited to the contribution to the land costs, construction costs and relevant tax) for the development of the Harbin Project under the Cooperation Agreement and the Project Management Agreement. As the capital injected by CRE and its affiliated companies is already accounted for under the Termination Agreement in respect of the Project Management Agreement, no additional sum will be retained by the Company under the Termination Agreement in respect of the Cooperation Agreement. Reasons for Entering into the Harbin Project Termination Agreements Considering the commercial benefits and enhanced value that a commercial space could bring to the residential portion of the Harbin Project, if the Group takes up full interest and develop the commercial portion of the Harbin Project, it will provide a balance of commercial space to complement the residential development. On the other hand, as a result of the change in business strategy of CR Vanguard Group, CR Vanguard (Liaoning) also expressed it will not be proceeding with the Harbin Project. As of the date of this announcement, the Group has incurred a total cost of approximately RMB449 million in the project, of which the Group received approximately RMB327 million from CRE (which shall be retained by the Company pursuant to the Harbin Project Termination Agreements), and the remainder of approximately RMB122 million was injected by the Group. The Directors (including the independent non-executive Directors) are of the view that the Harbin Project Termination Agreements are on normal commercial terms which have been agreed by the parties after arm’s length negotiation and are fair and reasonable and in the interests of the Company and its shareholders as a whole. On the effective date of termination pursuant to the Harbin Project Termination Agreement, the land use right together with the foundation structure of the commercial portion of the Harbin Project will be recognised as an asset in the statement of financial position of the Company at its appraised value. The arrangement under the Termination Agreements will have no material financial impact on the income statement of the Company on the effective date of termination. None of the directors have any material interests in the Harbin Project Termination Agreements, but Mr. Li Xin and Mr. Yu Jian have abstained from voting on the relevant board resolutions approving the Harbin Project Termination Agreements as they are also a director of CR Land (Harbin). General Information CR Land (Harbin) is a wholly-owned subsidiary of the Company which engaged in development of the Harbin Project. The CR Vanguard Group is principally engaged in retail business mainly in the PRC. Ondereel is a direct wholly-owned subsidiary of CRH and CR Vanguard (Liaoning) is an indirect 80%-owned subsidiary of Ondereel which engaged in supermarket operations.
– 14 –
Listing Rules Implications The Company, CRE and CR Vanguard (Liaoning) are indirectly owned as to 61.27%, 100% and 80% by CRH, respectively. CRH is, therefore, the controlling shareholder of the Company, CRE and CR Vanguard (Liaoning). As fellow subsidiaries, CRE and CR Vanguard (Liaoning) are connected persons of the Company under the Listing Rules. Based on the appraised value of the land parcel together with the construction in progress of the commercial portion of the Harbin Project, all the applicable percentage ratios are greater than 0.1% but less than 5%. Accordingly, the Harbin Project Termination Agreements constitute connected transactions for the Company, which are subject to reporting and announcement requirements but exempted from independent shareholders’ approval requirements of the Listing Rules. As all the applicable percentage ratios of the aforementioned transactions in sections (I), (II) and (III) above on an aggregate basis exceed 0.1% but are less than 5%, the aforementioned transactions are subject to reporting and announcement requirements but exempted from independent shareholders’ approval requirements of the Listing Rules. DEFINITIONS In this announcement, unless the context otherwise requires, the following expressions have the following meanings: ‘‘Assets Transfer’’
the transfer of the relevant assets as listed in valuation report prepared by an independent and qualified valuer from CR Shenzhen Bay to CRL Shenzhen
‘‘Authorization Letter’’
the authorization letter (授權委託書) issued by CRL Shenzhen to CR Shenzhen Bay on 8 March 2013
‘‘Board’’
the board of Directors of the Company
‘‘Central New’’
Central New Investments Limited (正新投資有限公司), a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of CRH
‘‘Colliers International’’
Colliers International (Hong Kong) Limited, an independent and qualified valuer
‘‘Company’’
China Resources Land Limited (華潤置地有限公司), a company incorporated in the Cayman Islands with limited liability whose issued Shares are listed on the main board of the Stock Exchange (stock code: 1109)
‘‘Completion of the TNZ Acquisition’’
the completion of the TNZ Acquisition in accordance with the terms of the Sale and Purchase Agreement
– 15 –
‘‘Completion of the Management Rights Authorization Termination’’
the completion of the termination of the management rights license under the Authorization Letter of the Shenzhen Bay Sports Center in accordance with the terms and conditions of the Management Rights Authorization Termination Agreement
‘‘Completion Date of the Management Rights Authorization Termination’’
the day when completion of the Assets Transfer from CR Shenzhen Bay to CRL Shenzhen takes place
‘‘connected person’’
has the meaning ascribed to it under the Listing Rules
‘‘Cooperation Agreement’’
the agreement dated 25 March 2011 entered into between CRB, as novated to CRE with effect from 1 September 2015, and the Company for cooperation in development of the commercial space of the Harbin Project
‘‘CRB’’
China Resources Beer (Holdings) Company Limited (華潤啤 酒(控股)有限公司) (previously known as China Resources Enterprise, Limited), a company incorporated in Hong Kong with limited liability and the shares of which are listed on the main board of the Stock Exchange (stock code: 291)
‘‘CRC’’
China Resources Co., Limited* (華潤股份有限公司), a limited liability company incorporated in the PRC and the holding company of CRH
‘‘CRC Loan’’
means the loan in the principal amount of RMB97 million extended by CRC as lender to Nanjing Tesco as borrower, under a loan agreement (貸款協議) entered into between such parties
‘‘CRE’’
China Resources Enterprise, Limited (華潤創業有限公司), (previously known as Well Gain Ventures (Hong Kong) Limited (利得創投(香港)有限公司)), a company incorporated in Hong Kong with limited liability
‘‘CRH’’
China Resources (Holdings) Company Limited, a company incorporated in Hong Kong with limited liability
‘‘CR Land (Harbin)’’
China Resources Land (Harbin) Property Limited* (華潤置 地(哈爾濱)房地產有限公司), a limited liability company established in the PRC and a wholly-owned subsidiary of the Company
‘‘CR Shenzhen Bay’’
CR Shenzhen Bay Development Company Limited* (華潤深 圳灣發展有限公司), a company incorporated in the PRC with limited liability
‘‘CR Vanguard Group’’
Ondereel and its subsidiaries – 16 –
‘‘CR Vanguard (Liaoning)’’
China Resources Vanguard (Liaoning) Superstore Co. Ltd.* (遼寧華潤萬家生活超市有限公司), a limited liability company established in the PRC and an indirect 80%-owned subsidiary of CRH
‘‘CRL Shenzhen’’
China Resources Land (Shenzhen) Development Company Limited* (華潤置地(深圳)發展有限公司), a limited liability company established in the PRC and a wholly-owned subsidiary of the Company
‘‘Debts and Liabilities Transfer’’
the transfer of all the debts and liabilities of CR Shenzhen Bay, which include third party loans and relevant operational debts as of the Reference Date to CRL Shenzhen
‘‘Deed’’
the deed entered into between CRB and CRE on 19 October 2015 and pursuant to which CRB transferred all of its rights and obligations under the Cooperation Agreement to CRE with effect from 1 September 2015
‘‘Deed of Indemnity’’
the deed of indemnity to be executed between the Company and each of the Vendors on Completion of the TNZ Acquisition in relation to tax and other liabilities of the TNZ Group
‘‘Director(s)’’
the director(s) of the Company
‘‘Group’’
the Company and its subsidiaries
‘‘Harbin Project’’
a residential-commercial complex being developed by the Group which is located at Songbei Region, Harbin City, Heilongjiang Province, the PRC
‘‘Harbin Project Termination Agreements’’
collectively, the agreement to terminate the Cooperation Agreement and the agreement to terminate the Project Management Agreement, each dated 30 April 2018
‘‘HK$’’
Hong Kong Dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘Joint Announcement’’
the joint announcement published by CRB and the Company on 25 March 2011 regarding a connected transaction for the cooperation of the Harbin Project
‘‘Listing Rules’’
the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Management Rights’’
CRL Shenzhen’s exclusive rights to manage the Shenzhen Bay Sports Center pursuant to the Operations and Management Contract
– 17 –
‘‘Management Rights Authorization Termination’’
the Assets Transfer, the Debts and Liabilities Transfer and the termination of authorization of the management rights relating to the Shenzhen Bay Sports Center
‘‘Management Rights Authorization Termination Agreement’’
the management rights authorization termination agreement entered into between CRL Shenzhen (as transferee) and CR Shenzhen Bay (as transferor) on 30 April 2018
‘‘Nanjing Zhongshan Project’’ a real estate development project as described in the section headed ‘‘TNZ Acquisition — Nanjing Zhongshan Project’’ in this announcement ‘‘Nanjing Tesco’’
Nanjing Zhongshan Tesco Real Estate Development Co. Ltd.* (南京鍾山特易購地產有限公司), a company incorporated in the PRC which is wholly-owned by TNZ
‘‘Nanshan Government’’
the People’s Government of the Nanshan District, Shenzhen City, PRC (深圳市南山區人民政府)
‘‘Ondereel’’
Ondereel Ltd., a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of CRH
‘‘Operations and Management Contract’’
the operations and management contract (深圳灣體育中心委 託運營管理合同) entered into between CRL Shenzhen and the Nanshan Government
‘‘PRC’’ or ‘‘China’’
the People’s Republic of China and for the purpose of this announcement, excluding Hong Kong, the Macau Administrative Region of the PRC and Taiwan
‘‘Project Management Agreement’’
the agreement dated 11 April 2011 entered into between CR Vanguard (Liaoning) and CR Land (Harbin) under which CR Vanguard (Liaoning) appointed CR Land (Harbin) to construct the commercial space of the Harbin Project
‘‘Reference Date’’
31 August 2017
‘‘RMB’’
Renminbi, the lawful currency of the PRC
‘‘Sale and Purchase Agreement’’
the sale and purchase agreement entered into between the Company and the Vendors on 30 April 2018 in relation to the TNZ Acquisition
‘‘Share(s)’’
ordinary share(s) of nominal value of HK$0.10 each in the capital of the Company
‘‘Shareholder(s)’’
person(s) whose name(s) appear on the register of members as registered holder(s) of Share(s)
– 18 –
‘‘Shenzhen Bay Sports Center’’
a multi-use stadium located within the Nanshan District of Shenzhen, built by CR Land Shenzhen on behalf of the Nanshan Government
‘‘Stock Exchange’’
The Stock Exchange of Hong Kong Limited
‘‘Ting Cao’’
Ting Cao (C.I.) Holding Corp., a company incorporated in the Cayman Islands with limited liability and a non-wholly owned subsidiary of CRC
‘‘TNZ’’
Tesco Nanjing Zhongshan (HK) Co. Limited, a company incorporated under the laws of Hong Kong which is owned as to 50% by each of the Vendors
‘‘TNZ Acquisition’’
the acquisition of the entire equity interests in TNZ from the Vendors by the Company
‘‘TNZ Group’’
collectively, TNZ and its subsidiaries as at the date hereof
‘‘Transition Period’’
the period between the Reference Date and the Completion Date of the Management Rights Authorization Termination
‘‘Valuation Base Date’’
31 August 2017
‘‘Vendors’’
Ting Cao and Central New
‘‘%’’
per cent.
For illustration purposes, amounts in RMB have been translated into HK$ at the rate of RMB1 = HK$1.25. *
for identification purposes only
By Order of the Board China Resources Land Limited TANG Yong Vice Chairman PRC, 30 April 2018 At the date of this announcement, the executive directors of the Company are Mr. Wu Xiangdong, Mr. Tang Yong, Mr. Yu Jian, Mr. Zhang Dawei, Mr. Li Xin and Mr. Xie Ji; the non-executive directors of the Company are Mr. Yan Biao, Mr. Chen Ying, Mr. Wang Yan and Mr. Chen Rong; and the independent non-executive directors of the Company are Mr. Andrew Y. Yan, Mr. Ho Hin Ngai, Bosco, Mr. Wan Kam To, Peter, Mr. Zhong Wei and Mr. Sun Zhe.
– 19 –
APPENDIX 1 — LETTER FROM THE BOARD 30 April 2018 Listing Division The Stock Exchange of Hong Kong Limited 11th Floor, One International Finance Centre 11 Harbour View Street Hong Kong Dear Sirs, RE: (1) Acquisition of the entire issued share capital of TNZ; (2) Termination of management rights in relation to the Shenzhen Bay Sports Center; and (3) Termination of the Cooperation Agreement and the Project Management Agreement in relation to the Harbin Project We refer to the announcement of China Resources Land Limited (the ‘‘Company’’) dated 30 April 2018 (the ‘‘Announcement’’) relating to the captioned matters. Capitalised terms used herein shall have the same meanings as those defined in the Announcement unless otherwise defined. We refer to the valuation report dated 30 April 2018 issued by Colliers International (the ‘‘Valuer’’) regarding appraisal of the fair value of CR Shenzhen Bay as at 31 August 2017 based on the discounted future cash flows (the ‘‘Valuation Report’’), which constitutes a profit forecast under Rule 14.61 of the Listing Rules. We have discussed with the Valuer about different aspects including the bases and assumptions based upon which the Valuation Report has been prepared, and reviewed the Valuation Report for which the Valuer is responsible. We have also considered the report from Baker Tilly Hong Kong Limited regarding whether the Profit Forecast, so far as the accounting policies and calculations are concerned, have been properly complied with the bases and assumptions as set out in the Valuation Report. We have noted that the Profit Forecast in the Valuation Report is mathematically accurate and is presented on a basis consistent in all material aspects with the accounting policies currently adopted by the Company. Pursuant to the requirements of Rule 14.62(3) of the Listing Rules, the Board of the Company is of the opinion that the Valuation Report prepared by the Valuer has been made after due and careful enquiry. Yours faithfully, For and on behalf of the Board China Resources Land Limited TANG Yong Vice Chairman
– 20 –
APPENDIX 2 — REPORT OF BAKER TILLY HONG KONG LIMITED 30 April 2018 Our Ref.: C1402/jg/dw/jw/u17 PRIVATE & CONFIDENTIAL The Board of Directors China Resources Land Limited (the ‘‘Company’’) 46th Floor China Resources Building 26 Harbour Road Wan Chai Hong Kong Dear Sirs, Independent Assurance Report on the Calculations of Discounted Future Cash Flows in connection with the Business Valuation of 華潤深圳灣發展有限公司 (translated as ‘‘China Resources Shenzhen Bay Development Company Limited’’ and hereinafter referred to as ‘‘CR Shenzhen Bay’’) We refer to the discounted future cash flows on which the valuation (the ‘‘Valuation’’) included in the valuation report dated 30 April 2018 prepared by Colliers International (Hong Kong) Limited (‘‘Colliers International’’) in respect of the appraisal of the fair value of CR Shenzhen Bay as at 31 August 2017 is based. The Valuation, based on the discounted future cash flows, is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’). Directors’ Responsibilities The directors of the Company (the ‘‘Directors’’) are responsible for the preparation of the discounted future cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuation (the ‘‘Bases and Assumptions’’). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentially and professional behaviour.
– 21 –
Our firm applies Hong Kong Standard on Quality Control 1 ‘‘Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’’ issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Reporting Accountants’ Responsibility Our responsibility is to report, as required by paragraph 14.62(2) of the Listing Rules, on the calculations of the discounted future cash flows on which the Valuation is based. We are not reporting on the appropriateness and validity of the Bases and Assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of CR Shenzhen Bay. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 ‘‘Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness’’ and with reference to Hong Kong Standard on Assurance Engagements 3000 (Revised) ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ issued by the HKICPA. Those standards require that we plan and perform our work to obtain reasonable assurance on whether the discounted future cash flows, so far as the calculations are concerned, has been properly complied in accordance with the Bases and Assumptions adopted by the Directors. We reviewed the arithmetical calculations and the compilation of the discounted future cash flows in accordance with the Bases and Assumptions adopted by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion. The discounted future cash flows do not involve the adoption of accounting policies. The discounted cash flows depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.
– 22 –
Opinion In our opinion, so far as the calculations are concerned, the discounted future cash flows have been properly complied in all material respects in accordance with the Bases and Assumptions adopted by the Directors as set out in the Valuation. Yours faithfully,
Baker Tilly Hong Kong Limited Certified Public Accountants Hong Kong 30 April 2018
– 23 –
