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. CONNECTED TRANSACTION EQUITY TRANSFER AGREEMENT IN RELATION TO DISPOSAL OF 15% EQUITY INTEREST IN XINBEIJIANG PHARMACEUTICAL EQUITY TRANSFER AGREEMENT The Board announces that on 4 May 2018, the Company entered into the Equity Transfer Agreement with Zhuhai Zhong Hui Yuan, pursuant to which the Company agreed to sell and Zhuhai Zhong Hui Yuan agreed to acquire 15% equity interest in Xinbeijiang Pharmaceutical at a consideration of RMB66,201,050. Upon completion of the Disposal, the Company will hold 77.14% equity interest in Xinbeijiang Pharmaceutical. IMPLICATIONS OF THE LISTING RULES As at the date of this announcement, Zhuhai Zhong Hui Yuan is a connected person of the Company at the subsidiary level by virtue of being an associate of Mr. Tang Yanggang, directors of certain whollyowned or non-wholly-owned subsidiaries of the Company. Accordingly, the Disposal under the Equity Transfer Agreement constitutes connected transaction of the Company under Chapter 14A of the Listing Rules. 1
As the applicable percentage ratios (as defined in the Listing Rules) in respect of the Disposal under the Equity Transfer Agreement exceed 0.1% but are less than 5% and the Consideration for the Disposal exceeds HK$3,000,000, the Disposal under the Equity Transfer Agreement is subject to the reporting and announcement requirements, but is exempt from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. EQUITY TRANSFER AGREEMENT The principal terms of the Equity Transfer Agreement are as follows:- Parties : (i) the Company, as the seller (ii) Zhuhai Zhong Hui Yuan, as the buyer Subject Matter : 15% equity interests in Xinbeijiang Pharmaceutical. Consideration : RMB66,201,050, which was arrived at after arm s length negotiation between the parties with reference to the audited net asset value of RMB441,270,307.90 of Xinbeijiang Pharmaceutical as at 31 August 2017. The Company shall be entitled to receive the earnings arising from the subject equity during the period from the pricing benchmark date of the equity transfer (31 August 2017) to the date of the completion of registration of change with the industry and commerce authorities for the equity transfer. Payment Arrangement : Zhuhai Zhong Hui Yuan shall pay: (i) 50% of the Consideration, being RMB33,100,525 within one month from the Equity Transfer Agreement Effective Date; and (ii) 50% of the Consideration, being RMB33,100,525 (the Remaining Consideration ) in the following schedule: (a) RMB11,000,000 on or before 31 March 2019; (b) RMB11,000,000 on or before 31 March 2020; and 2
(c) RMB11,100,525 on or before 31 March 2021. Pledge : Zhuhai Zhong Hui Yuan shall pledge 7.5% equity interests (the Pledge ) in Xinbeijiang Pharmaceutical, representing the corresponding equity interests for the Remaining Consideration, to the Company. The Pledge shall be discharged in batches pursuant to the payment of the Remaining Consideration. INFORMATION ABOUT THE PARTIES The Company The Company is principally engaged in the research and development, production and sales of Chinese and Western drug preparation products, bulk medicines and intermediates, and diagnostic reagents and equipment through its subsidiaries. Zhuhai Zhong Hui Yuan Zhuhai Zhong Hui Yuan is a limited partnership established in the PRC in 2018 which principally engages in equity investment and project investment. As at the date of this announcement, Zhuhai Zhong Hui Yuan is owned as to 45.5% by Mr. Tang Yanggang, directors of certain wholly-owned or non-wholly-owned subsidiaries of the Company, and 54.5% by other persons (the Other Partners ), some of whom are directors or senior management of certain wholly-owned or non-wholly-owned subsidiaries of the Company. None of the Other Partners for himself/herself or his/her immediate family members and/or the trustees (as defined in the Listing Rules), individually or together, own 30% or more interests in Zhuhai Zhong Hui Yuan. INFORMATION ABOUT XINBEIJIANG PHARMACEUTICAL Xinbeijiang Pharmaceutical is a company established in the PRC with limited liability in 1993 which principally engages in manufacturing of bulk medicines and intermediates. As at the date of this announcement, it is owned as to 92.14% by the Company and 7.86% by third parties. Set out below is the extracted financial information of Xinbeijiang Pharmaceutical for the two financial years ended 31 December 2016 and 31 December 2017: 3
For the year ended 31 December 2016 For the year ended 31 December 2017 RMB (audited) RMB (audited) Net profit before taxation and extraordinary 86,955,484.43 86,789,392.21 items Net profit after taxation and extraordinary items 80,825,618.15 84,922,274.01 The audited total asset value and net asset value of Xinbeijiang Pharmaceutical as at 31 December 2017 were approximately RMB608,823,598.96 and RMB472,011,079.79. REASONS FOR AND BENEFITS OF THE DISPOSAL The Disposal is a measure of the Group to implement multi-level business partnerships. Upon completion of the Disposal, the management team and core personnel of Xinbeijiang Pharmaceutical will indirectly hold equity interests of Xinbeijiang Pharmaceutical. The Directors consider that the Disposal could motivate the management team and core personnel of Xinbeijiang Pharmaceutical by way of sharing of economic benefits and risks, which could contribute to the improvement of the management and business performance of Xinbeijiang Pharmaceutical. The deferred payment arrangement of the Remaining Consideration was agreed to by the Company and Zhuhai Zhong Hui Yuan as a result of arm s length negotiations between the parties after taking into account the following factors: (i) the Pledge to be provided by Zhuhai Zhong Hui Yuan in favour of the Company for securing the outstanding payment of the Remaining Consideration; and (ii) all the terms and conditions of the Disposal (including the amount of the Consideration) as a whole. The Directors (including independent non-executive Directors) are of the view that the terms of the Disposal are on normal commercial terms, which are fair and reasonable and the Disposal is in the interests of the Company and the shareholders as a whole. None of the Directors has a material interest in the Disposal, therefore none of them is required to abstain from voting on the Board resolution for considering and approving the Disposal. FINANCIAL IMPACT OF THE DISPOSAL 4
Upon completion of the Disposal, the Company will hold 77.14% equity interest in Xinbeijiang Pharmaceutical, and the financial results of Xinbeijiang Pharmaceutical will continue to be consolidated into the Company s financial information. The Company expects to record an unaudited gain from the Disposal of approximately RMB48,427,714.46 (without considering tax and deducting expenses payable in respect of the Disposal), which is calculated based on the difference between the Consideration and the original investment cost of the equity interests to be disposed of. The actual gain as a result of the Disposal to be recorded is subject to audit to be performed by the Company s auditors. As Xinbeijiang Pharmaceutical will still be under the control of the Company after the Disposal, the Disposal will not affect the profit and loss of the Group s merger accounting according to the accounting requirements in relation to disposal of certain equity interests in subsidiary without losing control of such subsidiary as set out under the China Accounting Standards for Business Enterprises. USE OF PROCEED FROM THE DISPOSAL The Company intends to utilize all the net proceeds from the Disposal for general working capital purpose. IMPLICATIONS OF THE LISTING RULES As at the date of this announcement, Zhuhai Zhong Hui Yuan is a connected person of the Company at the subsidiary level by virtue of being an associate of Mr. Tang Yanggang, directors of certain wholly-owned or non-wholly-owned subsidiaries of the Company. Accordingly, the Disposal under the Equity Transfer Agreement constitutes connected transaction of the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios (as defined in the Listing Rules) in respect of the Disposal under the Equity Transfer Agreement exceed 0.1% but are less than 5% and the Consideration for the Disposal exceeds HK$3,000,000, the Disposal under the Equity Transfer Agreement is subject to the reporting and announcement requirements, but is exempt from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. DEFINITIONS associate(s) : has the same meaning as ascribed in the Listing Rules Board : the board of Directors of the Company 5
Company : 麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc.*, a joint stock company incorporated in the PRC in accordance with the Company Law on 25 January 1985 with limited liability, its shares are listed on the Hong Kong Stock Exchange and the Shenzhen Stock Exchange connected person(s) : has the same meaning as ascribed in the Listing Rules Consideration : the consideration of RMB66,201,050 under the Equity Transfer Agreement Director(s) : the director(s) of the Company Disposal : the transaction contemplated under the Equity Transfer Agreement Equity Transfer Agreement : the equity transfer agreement dated 4 May 2018 entered into between the Company and Zhuhai Zhong Hui Yuan pursuant to which the Company agreed to sell and Zhuhai Zhong Hui Yuan agreed to acquire 15% equity interests in Xinbeijiang Pharmaceutical Equity Transfer Agreement Effective Date : being the date upon signing and affixing of company seals by the Company and Zhuhai Zhong Hui Yuan Group collectively the Company and its subsidiaries Hong Kong : the Hong Kong Special Administrative Region of the PRC Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited Listing Rules : Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited PRC : the People s Republic of China, but for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region and Taiwan 6
RMB : Renminbi, the lawful currency of the PRC Shenzhen Stock Exchange The Shenzhen Stock Exchange Xinbeijiang Pharmaceutical Livzon Group Xinbeijiang Pharmaceutical Manufacturing Inc.* ( 麗 珠集團新北江製藥股份有限公司 ), a company established in the PRC with limited liability and is held by the Company as to 92.14% by the Company as at the date of this announcement Zhuhai Zhong Hui Yuan Zhuhai Zhong Hui Yuan Investment Partnership (Limited Partnership) * ( 珠海中匯源投資合夥企業 ( 有限合夥 )), a limited partnership established in the PRC % : per cent. By order of the Board 麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc. * Yang Liang Company Secretary Zhuhai, China 4 May 2018 As at the date of this announcement, the Executive Directors of the Company are Mr. Tao Desheng (Vice Chairman and President), Mr. Fu Daotian (Vice President) and Mr. Xu Guoxiang (Vice President); the Non-Executive Directors of the Company are Mr. Zhu Baoguo (Chairman) and Mr. Qiu Qingfeng; and the Independent Non-Executive Directors of the Company are Mr. Xu Yanjun, Mr. Guo Guoqing, Mr. Wang Xiaojun, Mr. Zheng Zhihua and Mr. Xie Yun. * For identification purpose only 7