PROPOSED ACQUISITION OF PHARMACEUTICAL BUSINESS ( ACQUISITION )

Transcription

1 ASIAPHARM GROUP LTD PROPOSED ACQUISITION OF PHARMACEUTICAL BUSINESS ( ACQUISITION ) Introduction The Board of Directors (the Board ) of Asiapharm Group Ltd ( Asiapharm or the Company ) wishes to announce that it has entered into a Share Transfer Agreement (the Agreement ) with Hui Tin Cho ( Hui ) on 3 January 2007 for the acquisition of all the issued and paid-up capital of Solid Success Holdings Limited ( Solid Success ) comprising 100 ordinary shares of US$1.00 each. The Acquisition has been completed on 3 January 2007 (the Completion Date ). Oversea-Chinese Banking Corporation Ltd ( OCBC ) has been appointed by the Company as the financial adviser on the Acquisition. Rule 1006 of the SGX-ST Listing Manual The relative figures pursuant to Rule 1006, using the audited accounts of the Company and its subsidiaries (the Group ) as at 31 December 2005, are:- (a) net asset value of the assets to be disposed of compared to group s net asset value. This is not applicable to an acquisition of assets Not applicable. (b) net profits (1) attributable to the assets acquired or disposed of, 61.39% (2) compared with the group s net profits (1) (c) (d) aggregate value of the consideration given or received, compared with the issuer s market capitalisation number of equity securities issued by the issuer as consideration for an acquisition, compared with the number of equity securities previously in issue 19.45% (3) 1.03% Based on the bases (b) and (c) above, the Acquisition will constitute a major transaction under Rule 1013 of the Listing Manual and would require the approval of the shareholders of Asiapharm in a general meeting pursuant to Rule NOTES: (1) Under Rule 1002(3)(b), net profits means profit or loss before income tax, minority interests and extraordinary items. (2) Determined by dividing the unaudited consolidated net profit of the Solid Success Group (as defined below) of approximately RMB55.35 million by the Group s latest announced consolidated net profit of RMB90.16 million for the financial year ended 31 December (3) Based on the aggregate value of the Consideration of RMB345 million and the market capitalisation of Asiapharm as at 29 December 2006 (being the market day preceding the date of the Agreement). Under Rule 1002(5), the market capitalisation of Asiapharm is determined by multiplying the number of shares in issue and the closing market price of $0.715 per share on 29 December 2006.

2 Confirmation sought from SGX-ST OCBC had, on behalf of the Company, on 23 June 2006 written to the Singapore Exchange Securities Trading Limited (the SGX-ST ) pursuant to Practice Note 10.1, Sub-rule 3.2 for confirmation that shareholders approval in respect of the Acquisition is not required, on the following grounds: (1) the Group is principally in the business of research, development, production and sale of pharmaceutical drugs for various fields including oncology. The core business of Solid Success through its two subsidiaries (the PRC Subsidiaries ) in the People s Republic of China (the PRC ), each held by a Hong Kong incorporated company, is in the research, manufacture and sale of natural drugs for the field of oncology. The Company is of the view that the Acquisition will result in an expansion of the Group s existing core business as it is acquiring a similar business and no shareholders approval is required; (2) the Acquisition is expected to be a major transaction but will not increase the scale of operations significantly; (3) the Acquisition will not result in a change in control of the Company as it will be mainly paid for in cash. Issue of new shares in the Company in satisfaction of the Consideration for the Acquisition only constitutes approximately 1.03% and 1.01% of the Company s existing share capital of 487,764,900 ordinary shares of US$0.02 each (the Shares ) and the enlarged share capital of 492,764,900 Shares respectively; (4) the audited consolidated net profit for the Solid Success Group (as defined below) for 31 December 2005 was RMB55.35 million. Hence, the Acquisition is expected to be earnings accretive and will not have an adverse impact on the Company s earnings, working capital and gearing; and (5) the drugs of the PRC Subsidiaries are sold in the PRC with similar distribution networks to hospitals as those of the Company and will not result in an expansion of the Company s business into a new geographical market. The SGX-ST had on 4 July 2006 confirmed that Shareholders approval is not required for the Acquisition based on the above. An up-date letter was submitted on 1 December 2006 after finalization of the terms and conditions of the Acquisition seeking reconfirmation of the same from the SGX-ST. The reconfirmation was received on 15 December Information to be announced under Rules 1010 and 1013 (1) Particulars of the assets acquired The Company has acquired 100 ordinary shares of US$1.00 each in the capital of Solid Success, which are legally and beneficially owned by Hui. Hui is an independent third party and is not related to the Directors or substantial shareholders of the Company. Solid Success is the legal and beneficial owner of the entire issued and fully paid up capital of Apex Group Holdings Limited ( Apex ) and Kang Hai Pharmaceutical Technology Development Limited ( Kang Hai ). Apex is a private company limited by shares incorporated in Hong Kong under the Companies Ordinance (Cap. 32) and has at the date of this Announcement an authorised share capital of HK$10,000 consisting of 10,000 ordinary shares of HK$1.00 each, of which 10,000 ordinary shares of HK$1.00 each have been issued and are fully paid up. Apex wholly-owns a subsidiary in the PRC, Nanjing Si Ke Pharmaceutical Co. Ltd ( 南京思科药业有限公司 ).

3 Kang Hai is a private company limited by shares incorporated in Hong Kong under the Companies Ordinance (Cap. 32) and has at the date of this Announcement an authorised share capital of HK$10,000 consisting of 10,000 ordinary shares of HK$1.00 each, of which 100 ordinary shares of HK$1.00 each have been issued and are fully paid up. Kang Hai wholly-owns a subsidiary in the PRC, Nanjing Kang Hai Pharmaceutical Co. Ltd ( 南京康海药业有限公司 ). (Solid Success, Apex, Kang Hai and the PRC Subsidiaries shall collectively be known as the Solid Success Group.) (2) A description of the trade carried on The PRC Subsidiaries are principally engaged in the business of research, manufacture and the sale of natural drugs for the field of oncology. The core products manufactured are Lentian for injection, Amifostine for injection, Paclitaxel liposome for injection and Selegilne Hydrochloride tablets. The products are applied to patients suffering from various forms of cancers including cancer of the liver, breasts, esophagus, nose and stomach. Currently, all of the PRC Subsidiaries drugs are sold within the PRC to about 1,000 hospitals in Jiangsu, Shandong, Guangdong, Shanghai, Beijing, Fujian and Tianjin Provinces. The PRC Subsidiaries have over 200 sales personnel and exclusive sales offices in about 30 provinces and municipals in the PRC. (3) The aggregate value of the consideration, including factors taken into consideration in arriving at the value of the consideration The total consideration for the Acquisition is RMB345 million, of which RMB330 million shall be paid in cash and RMB15 million by way of issue of 5,000,000 new Shares (the Consideration Shares ) as follows: (a) (b) (c) (d) RMB270 million on the date of execution of the Agreement (being the balance of RMB320 million offset against a loan of RMB50 million); the issue of 1,500,000 Consideration Shares (valued at RMB4,500,000) within 14 business days of the Completion Date; the issue of 3,500,000 Consideration Shares (valued at approximately RMB10,5000,000) on or before 8 May 2007; and RMB10 million on the date falling 180 days of the Completion Date. The number of Consideration Shares was determined based on an issue price of $0.60 per Consideration Share, determined on a willing buyer willing seller basis with reference to the recent market price of the Shares. The cash consideration will be funded from the proceeds of the private placement of 80,000,000 Shares by the Company in May 2006 and internal resources. (4) Any material conditions, including put and call options The issue and allotment of the Consideration Shares is conditional upon the approvalin-principle for the listing and quotation of the Consideration Shares on the SGX-ST being obtained (the AIP ), and where such approval is given subject to any conditions, that such conditions are acceptable to Asiapharm, and where any conditions are required to be fulfilled on or prior to issue and allotment, that such conditions are so fulfilled.

4 If the AIP is not obtained, the value of the Consideration Shares shall be paid to Hui by way of cash in accordance with paragraph 3 above. In addition, in the event that the closing price of the Shares traded on the SGX-ST on the relevant payment date is higher than $0.60, an amount equivalent to the difference between such closing price and $0.60 shall be paid to Hui. (5) The value of the assets being acquired See paragraph 3 above. (6) The amount of gain or loss from disposal Not applicable. (7) The net profits attributable to the assets being acquired The net profits attributable to the Acquisition is RMB55.35 million, based on the unaudited consolidated net profit of the Solid Success Group for the financial year ended 31 December 2005, which constitutes approximately 61.39% of the Group s latest announced consolidated net profit of RMB90.16 million. (8) The effect of the transaction on the net tangible assets per share of the issuer for the most recently completed financial year, assuming that the transaction had been effected at the end of that financial year The net tangible assets per share of the Group as at 31 December 2005 is as follows: Group > FY2005 After the Acquisition NTA per share cents) (RMB (9) The effect of the transaction on the earnings per share of the issuer for the most recently completed financial year, assuming that the transaction had been effected at the beginning of that financial year The financial effect of the Acquisition on the earnings per share of the Group for FY2005 is as follows: Group > FY2005 After the Acquisition Earnings per share (RMB cents)

5 NOTES: i) Earnings per share is computed based on the weighted average number of shares of the Company in issue. ii) The above impacts are computed under the assumption that the Acquisition was done in the last day of FY2005. iii) NTA is computed based on unaudited consolidated balance sheets of the Solid Success Group (10) The rationale for the transaction including the benefits which are expected to accrue to the issuer as a result of the transaction The Company is of the view that the Acquisition will be in the best interests of the Company for the following reasons:- (i) (ii) (iii) both the Group and the Solid Success Group are in similar businesses, focusing on research, development, production and sale of natural drugs to improve the immunity of and for the treatment of patients suffering from cancers. The Acquisition will further enable the Company to stay at the forefront of specialty pharmaceutical developments and increase its range of products that it sells under the field of oncology; both the Group and the Solid Success Group have a strong presence in the PRC. The Group expects to derive synergies by integrating all or part of its operations such as distribution operations with those of the Solid Success Group upon completion of the Acquisition; and the Acquisition is expected to be earnings accretive. (11) Whether any director or controlling shareholder has any interest, direct or indirect, in the transaction and the nature of such interests None of the Directors or controlling shareholders has any interest, direct or indirect, in the transaction. (12) Details of any service contracts of the directors proposed to be appointed to the issuer in connection with the transaction Nil. Documents for Inspection The Share Transfer Agreement dated 3 January 2007 is available for inspection during normal business hours at 133 Cecil Street, #12-02 Keck Seng Tower, Singapore for three (3) months from the date hereof.