STAR PHARMACEUTICAL LIMITED (Incorporated in the Republic of Singapore) (Company registration no.: W)

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1 STAR PHARMACEUTICAL LIMITED (Incorporated in the Republic of Singapore) (Company registration no.: W) (A) THE DISPOSAL OF 14% EQUITY INTEREST IN BEIJING SHIJIA JIU SHENG YUAN PHARMACEUTICAL TECHNOLOGY CO., LTD TO MR. ZHOU YA WEI; AND (B) THE PROPOSED DISPOSAL OF: (I) 80% EQUITY INTEREST IN BEIDA SHIJIA TECHNOLOGY DEVELOPMENT CO. LTD; AND (II) 46% EQUITY INTEREST IN BEIJING SHIJIA JIU SHENG YUAN PHARMACEUTICAL TECHNOLOGY CO., LTD; TO JIN MERCHANTS ALLIANCE HOLDING CO., LTD. AS A MAJOR TRANSACTION (THE PROPOSED DISPOSAL ) (A) THE DISPOSAL OF 14% EQUITY INTEREST IN BEIJING SHIJIA JIU SHENG YUAN PHARMACEUTICAL TECHNOLOGY CO., LTD ( JIU SHENG YUAN ) TO MR. ZHOU YA WEI 1. Introduction The board of directors (the Board ) of Star Pharmaceutical Limited (the Company and together with its subsidiaries, the Group ), wishes to announce that the Company s wholly-owned subsidiary, Hainan Star Pharmaceutical Co., Ltd (PRC) ( Hainan Star ), has on 11 March 2014 entered into a sale and purchase agreement (the Jiu Sheng Yuan SPA ) for the disposal of its 14% equity interest in Jiu Sheng Yuan to Mr. Zhou Yawei ( Zhou ) (the Jiu Sheng Yuan ). 2. Consideration The consideration for the Jiu Sheng Yuan is RMB1 in cash, the sufficiency of which was acknowledged and accepted by Hainan Star and Zhou. This was arrived after arm s length negotiations, and on a willing-buyer, willing-seller basis after taking into account the accumulated losses and net liabilities of Jiu Sheng Yuan as of 31 December 2013, being RMB13,561,000 and RMB3,561,310 respectively. 3. Rationale The Company is of the view that Jiu Sheng Yuan s business no longer fits into the Group s overall strategic business and expansion plans. Further, taking into account the accumulated losses and net liabilities of Jiu Sheng Yuan, the Company has decided that the Jiu Sheng Yuan is more cost effective and in its best interests. 1

2 4. Financial Effects As each of the relative figures computed on the applicable bases as set out in Rule 1006 of the SGX-ST Listing Manual is less than 5%, the Jiu Sheng Yuan is classified as a non-discloseable transaction for the purposes of Chapter 10 of the SGX-ST Listing Manual. The Jiu Sheng Yuan is not expected to have a material impact on the net tangible assets per share and earnings per share for the financial year ending 31 December Interests of Directors and Controlling Shareholders None of the directors or controlling shareholders of the Company has any interest, direct or indirect, in the Jiu Sheng Yuan (other than by reason only of being a director), other than through their respective shareholdings (if any) in the Company. 6. Inspection A copy of the Jiu Sheng Yuan SPA is available for inspection by prior appointment during normal business hours at the registered office of the Company at 158 Cecil Street, #11-01, Singapore for three (3) months from the date of this announcement. (B) THE PROPOSED DISPOSAL OF: (I) 80% EQUITY INTEREST IN BEIDA SHIJIA TECHNOLOGY DEVELOPMENT CO. LTD; AND (II) 46% EQUITY INTEREST IN BEIJING SHIJIA JIU SHENG YUAN PHARMACEUTICAL TECHNOLOGY CO., LTD; TO JIN MERCHANTS ALLIANCE HOLDING CO., LTD. AS A MAJOR TRANSACTION (THE PROPOSED DISPOSAL ) 1. Introduction The Board wishes to announce that the Company s wholly-owned subsidiary, Hainan Star has on 11 March 2014 entered into: (a) a sale and purchase agreement (the Beida Shijia SPA ) with Jin Merchants Alliance Holding Co., Ltd (the Purchaser ), and Beida Shijia Technology Development Co., Ltd. ( Beida Shijia ) for: the sale of 80% of the equity interest in Beida Shijia, being the entire equity interest in Beida Shijia held by Hainan Star; the sale of 46% of the equity interest in Jiu Sheng Yuan, being the entire equity interest in Jiu Sheng Yuan held by Hainan Star after the Jiu Sheng Yuan ; (together, the Sale Shares ); and 2

3 (b) an introducer fee agreement (the Introducer Fee Agreement ) with China Technology Exchange (the Introducer ), whereby Hainan Star will pay the Introducer the sum of RMB15,000,000 (the Introducer Fee ) for introducing the Purchaser in respect of the Proposed. 2. Information on the Purchaser and the Introducer The Purchaser is incorporated in the People s Republic of China ( PRC ) and is mainly engaged in the business of investments and merger and acquisitions in various industries such as steel, real estate and pharmaceuticals. The Introducer is incorporated in the PRC and is mainly engaged in the business of provision of technology transaction services, such as the transfer, licensing, strategic investment and acquisition of intellectual property. None of the directors or shareholders of the Purchaser or Introducer is related to the directors or controlling shareholders of the Company. 3. Information on Beida Shijia and Jiu Sheng Yuan (together, the Sale Companies ) 3.1 Beida Shijia Beida Shijia was incorporated in the PRC on 18 March 1999 and has a registered capital of RMB25,000,000, of which 80% is held by Hainan Star. Beida Shijia is engaged in the business of the development of pharmaceutical products, with a focus on research and development of modern Chinese medicine. Beida Shijia is the owner of the entire registered capital of Tianjin Shijia Weikang Co. Ltd ( Tianjin ). Tianjin was incorporated in the PRC and has a registered capital of RMB1,000,000. Pursuant to the Proposed, the Company will consequently cease to have an effective interest in Tianjin. 3.2 Jiu Sheng Yuan Jiu Sheng Yuan was incorporated in the PRC on 1 August 2001 and has a registered capital of RMB10,000,000. Prior to the Jiu Sheng Yuan, 60% of the registered capital of Jiu Sheng Yuan is held by Hainan Star. Jiu Sheng Yuan is engaged in the business of the development of pharmaceutical products, with a focus on research and development of modern Chinese medicine. 4. Major Transaction under Chapter 10 The Proposed is governed by the rules of Chapter 10 of the SGX-ST Listing Manual. The relative figures computed on the bases set out in Rule 1006 of the SGX-ST Listing Manual are as follows: Rule 1006(a) (1) The net asset value ( NAV ) of the assets to be disposed of, compared with the Group s NAV as at 31 December 2013 (1.7)% Rule The net profits (3) attributable to the assets acquired or 1006(b) (2) disposed of, compared with the Group s net profits for the (64.1)% 3

4 Rule 1006(c) (4) Rule 1006(d) period ended 31 December 2013 The aggregate value of the consideration given or received, compared with the issuer s market capitalisation based on the total number of issued shares excluding treasury shares The number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue 46.9% N.A. Notes: (1) Based on the net liabilities of the Sale Shares of RMB1,678,000 as at 31 December 2013 and the Group s NAV of RMB97,822,000 as at 31 December (2) Based on the net loss of RMB3,022,000 attributable to the Sale Shares and the Group s net profits of RMB4,714,000 derived from the consolidated financial statements of the Group for the financial period ended 31 December (3) Net profits is defined as profit before income tax, minority interest and exceptional items. (4) Based on the net proceeds of RMB25,000,001 (equivalent to S$5,162,943 based on the exchange rate of S$1: RMB4.8422) and the market capitalisation of the Company of S$11,013,240 as at 11 March 2014 (being the market day preceding the date of the Beida Shijia SPA and the Introducer Fee Agreement whereby the Company s shares were traded). On the basis of Rule 1006 as set out above, the Proposed is a major transaction as defined in Rule 1014 of the Listing Manual. Accordingly, the approval of the Shareholders at an extraordinary general meeting ( EGM ) is required for the Proposed. 5. Consideration & Introducer Fee 5.1 The aggregate sale consideration for the Proposed is RMB40,000,001 (the Consideration ). The Consideration is apportioned between the Sale Shares in the following manner: RMB40,000,000 for the sale of 80% of the equity interest in Beida Shijia; and RMB1 for the sale of 46% of the equity interest in Jiu Sheng Yuan. 5.2 The Consideration will be paid by the Purchaser to Hainan Star in the following tranches: a deposit of RMB2,000,000 earlier remitted to Beida Shijia on 27 January 2014; (iii) (iv) RMB10,000,001 to be paid within 10 days upon approval of the Proposed by the Company s shareholders at the EGM (the Second Tranche Consideration ); RMB20,000,000 to be paid upon completion of the business registration in the PRC (the Third Tranche Consideration ); and RMB8,000,000 to be paid within 180 days of the date of execution of the Beida Shijia SPA (the Fourth Tranche Consideration ). 4

5 5.3 Under the Introducer Fee Agreement, Hainan Star will pay the Introducer the sum of RMB15,000,000 for procuring the Purchaser in respect of the Proposed. The Introducer Fee will be paid by Hainan Star to the Introducer in the following tranches: (iii) (iv) RMB750,000 to be paid within 5 days upon approval of the Proposed by the Company s shareholders at the EGM; RMB3,750,000 to be paid upon Hainan Star s receipt of the Second Tranche Consideration; RMB7,500,000 to be paid upon Hainan Star s receipt of the Third Tranche Consideration; and RMB3,000,000 to be paid upon Hainan Star s receipt of the Fourth Tranche Consideration. 6. Salient Terms of the Proposed 6.1 Completion of the Beida Shijia SPA is conditional upon, inter alia, the following: (iii) All warranties provided by Hainan Star and Beida Shijia under the Beida Shijia SPA being complied with, and being true, accurate and correct in all material respects; Provision of documents from Hainan Star and Beida Shijia to the Purchaser evidencing that Peking University Technology Department, the remaining shareholder of Beida Shijia, agrees to the Proposal and that Peking University Technology Department waives all its pre-emption rights in this respect; Approval of the Proposed by the Company s shareholders at the EGM. 6.2 Completion of the Introducer Fee Agreement is conditional upon, inter alia, the approval of the Proposed by the Company s shareholders at the EGM. 7. Rationale for and benefits of the Proposed The rationale for and benefits of the Proposed are, inter alia, as follows: (a) (b) The Sale Companies no longer fit into the Group s overall strategic business and expansion plans. While the prospects of modern Chinese medicines remain, the development of the Sale Companies various projects have been rather slow in the past years due to unfavorable policies implemented by the PRC government. The sustained development of such projects will require further funding and significant capital injection, which may not necessarily translate to future profits for the Company. Moving forward, the Company believes it is more beneficial to focus on its core strengths, which is the development, manufacturing and sales of western medicine products. Furthermore, taking into account that (a) Beida Shijia has an accumulated loss of RMB25,094,000 and net liabilities of RMB50,000; and (b) Jiu Sheng Yuan has an accumulated loss of RMB13,561,000 and net liabilities of 5

6 8. Value of the Sale Shares RMB3,561,319, the Company has decided that the Proposed is more cost effective and in its best interests. Based on the unaudited financial statements of the Sale Companies for the financial year ended 31 December 2013, the net liabilities of Beida Shijia and Jiu Sheng Yuan, attributable to Hainan Star s shareholding proportions of 80% and 46% respectively, were RMB40,000 and RMB1,638,000 respectively. Accordingly, the net liability attributable to the Sale Shares is RMB1,678, Intended Use of Proceeds The Company expects to receive net proceeds of RMB25,000,001 (the Net Proceeds ) from the Proposed after deducting the Introducer s Fee of RMB15,000,000 from the Consideration of RMB40,000,001. The Net Proceeds will be used to strengthen the Company s working capital and fund the expansion of its product portfolio. Prior to such deployment, the Net Proceeds may be placed in deposits with financial institutions as the Board may, in their absolute discretion, deem fit. 10. Financial Effects of the Proposed The pro forma financial effects of the Proposed set out below are purely for illustrative purposes only and do not reflect the future financial position of the Company or the Group after completion of the Proposed. The pro forma financial effects set out below are based on the unaudited consolidated financial statements of the Group for the financial year ended 31 December 2013 ( FY2013 ) Net Tangible Assets ( NTA ) The effect of the Proposed on the NTA (defined as shareholders fund less intangible assets) per share of the Group for FY2013, assuming that the Proposed had been effected at the end of FY2013 is as follows: Before the Proposed After the Proposed NTA 61,760 92,228 Number of Shares 234, ,125 NTA per share Earnings Per Share ( EPS ) The effect of the Proposed on the earnings per share of the Group for FY2013, assuming that the Proposed had been effected at the beginning of FY2013 is as follows: 6

7 Before the Proposed After the Proposed Net (loss) attributable to ordinary shareholders of the Company 3,704 6,673 Number of Shares 234, ,125 Basic EPS The excess of the proceeds over the book value of the Sale Shares is RMB26,677,893. The net loss attributable to the Sale Shares is RMB3,022,000. The gain on the Proposed is RMB28,021, Service Contracts There are no directors to be appointed to the Company in connection with the Proposed. 12. Interests of Directors and Controlling Shareholders None of the directors or controlling shareholders of the Company has any interest, direct or indirect, in the Proposed (other than by reason only of being a director), other than through their respective shareholdings (if any) in the Company. 13. Circular and Documents for Inspection The circular to the Company s shareholders containing, inter alia, further information on the Proposed and enclosing the notice of EGM of the Company will be dispatched by the Company in due course A copy of the Beida Shijia SPA and the Introducer Fee Agreement is available for inspection by prior appointment during normal business hours at the registered office of the Company at 158 Cecil Street, #11-01, Singapore for three (3) months from the date of this announcement. Shareholders and potential investors should note that the Proposed is subject to the fulfillment of, inter alia, the conditions set out above, including the obtaining of the relevant regulatory approvals, and accordingly should exercise caution when trading in the shares of the Company. Persons who are in doubt as to the action they should take should consult their legal, financial, tax or other professional advisers. Further announcements will be made by the Company as and when appropriate. BY ORDER OF THE BOARD Xu Zhi Bin Executive Chairman 7

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