金年会 | JINNIAN.COM

 

 

To the best of our knowledge, the Board of Directors of the Company and its members confirm that there is no material false or misleading statement or material omission in this announcement and shall be severally and jointly liable for the truthfulness, accuracy and completeness of its content.

 

I. Major contents

 

1. Contents

 

On March 21, 2012, Huaxin Cement Co., Ltd. (herein referred as the Company) signed an agreement with Yidu Fangde Investment Co., Ltd. (herein referred as Yidu Fangde).  The Company shall acquire 30% equity in Huaxin Cement (Yichang) Ltd. (herein referred as Yichang Company) at a price of RMB 397.7 million from Yidu Fangde. 

 

On March 21, 2012, the Company signed an agreement with Huangshi Yiruida Investment Co., Ltd. (herein referred as Yiruida).  The Company shall acquire 20% equity in Huaxin Cement (Yangxin) Ltd. (herein referred as Yangxin Company) at a price of RMB 210.5 million from Yiruida. 

 

2.      Background

 

Labor union of Huaxin Group (herein referred as Group Labor Union) is the actual controller of Fangde and Yiruida.  As Group Labor Union is the related party of Huaxin Group, the second biggest shareholder of the Company, the conduct that the Company acquires equity from Yiruida is considered as a related transaction.

 

3. Voting

 

This related transaction was reviewed and approved by the Thirty Fifth Meeting of the Six Board of Directors convened on March 20~21, 2012.   Independent Directors also issued their independent opinions on the transaction.  Related Directors Mr. Chen Musen, Mr. Li Yeqing and Mr. Ji Changhua abstained from voting, other Directors voted affirmative on the Proposal.

 

4. Others

 

As at December 31, 2011, the net asset of the Company was RMB 8,583 million.  The transaction price accounts for 7.09% of the latest audited net asset.  Therefore, this transaction shall get the approval of the Shareholders General Meeting after being approved by the Board.  Additionally, the related parties shall avoid voting in the Shareholders General Meeting.

 

This related transaction is not considered as a material assets reorganization transaction according to Measures for Administration of Material Assets Reorganization of Listed Companies.  Therefore, the approval of relevant authorities is not required.

 

II.    Background of Related Parties

 

1. Yidu Fangde Investment Co., Ltd.

 

Yidu Fangde is a limited liability company registered in Yidu on March 12, 2001, registered capital: RMB 10 million, scope of major operations: investment, new technology development technical consulting and domestic trade. Shareholders of Fangde are Wuhan Fangde and three Individuals, separately holding 98%, 2 % equity of Fangde.  Wuhan Fangde is a subsidiary of Group Labor Union, and Group Labor Union holds 97.5% of its shareholding.  Therefore, Group Labor Union is the actual controller of Fangde.

 

2. Huangshi Yiruida Investment Co., Ltd.

 

Yiruida is a limited liability company registered in Huangshi City, Hubei Province on March 11, 2003, registered capital: RMB 5 million, scope of major operations: investment, new technology development, technical consulting and domestic trade. Shareholders of Yiruida are Huaxin Group Co., Ltd. (“Huaxin Group”), Huangshi Huaxin Canfu (Disabled and Welfare) Industries and Trade Ltd., Wuhan Fangde Investment Ltd., (“Wuhan Fangde”) separately holding 49%, 2 % and 49% equity of Yiruida.  Huangshi Huaxin Canfu Industries and Trade Ltd. and Wuhan Fangde are subsidiaries of Labor union of Huaxin Group (“Group Labor Union”).  Therefore Group Labor Union is the actual controller of Yiruida.

 

3. Previous related transactions between the Company and the aforesaid related parties

 

Before this related transaction, there were no related transactions among the Company, Group Labor Union, Yidu Fangde or Yiruida.

 

III. Basic Information

 

1.      30% equity of Huaxin Cement (Yichang) Co., Ltd.

 

Yichang was established in 2002 with registered capital of RMB 150 million, of which the Company invested RMB 105 million, accounting for 70% of registered capital; Yidu Fangde invested RMB 45 million, accounting for 30% of registered capital.  As at December 31, 2011, the total asset of Yichang was RMB 910 million and the net asset was RMB 370 million.  In 2011, the sales income was RMB 690 million and the net profit was RMB 150 million.

 

In compliance with relevant China Laws, policies, regulations of Securities Management, the Company engaged Shanghai Kun Yuan Assets Valuation Limited Company (“Kun Yuan”) as the Local Valuator, the Company also engaged Ernst & Young (China) Advisory Limited (“EY”) to supervise and coordinate the work of the Local Valuator and provide an independent valuation report of Yichang and Yangxin.  The assets valuation companies performed valuation works by Income Approach and reconciled by Market Approach.  The indicative value of 100% equity interest of Yichang as of December 31 was RMB 1,429 million based on continuous operation assumption.

 

2. 20% equity of Huaxin Cement (Yangxin) Co., Ltd.

 

Yangxin was established in 2003 with registered capital of RMB 500 million, of which the Company invested RMB 400 million, accounting for 80% of registered capital, Yiruida invested RMB 100 million, accounting for 20% of registered capital.  As at December 31, 2012, the total asset of Yangxin was RMB 1,430 million and the net asset was RMB 630 million.  In 2011, the sales income was RMB 1,140 million and the net profit was RMB 130 million.

 

The assets valuation companies performed valuation works by Income Approach and reconciled by Market Approach.  The indicative value of 100% equity interest of Yangxin as of December 31 was RMB 1,105 million based on continuous operation assumption.

 

IV. Major Contents of this Related Transaction

 

1. Major Contents

 

(1) Acquiring 30% equity of Yichang Company

 

1) Signing parties: the Company (Party A) and Yidu Fangde Investment Co., Ltd. (Party B)

2) Transaction price: RMB 397.7 million [Assessed value as at December 31, 2011 (RMB 429 million) minus dividend declared by Shareholders’ General Meeting on March 16, 2012 (RMB 31.3 million).]

3) Payment approach: Party A shall do transfer payment via bank transfer or bank acceptance.

4) Alteration Registration of Equity: Party B shall cooperate with Part A to proceed with transfer and registration procedures within 3 working days since the Agreement takes effect.

5) Payment: Party A shall pay Party B 50% of the total transferring fee of equity; the balance shall be paid before December 31, 2012.

6）Breach of Contract: Party A shall pay liquidated damages for delay to Party B at 0.2 ‰ of deferred payment at a daily basis. Party B shall pay liquidated damages for not transferring shares to Party B at 5% of transaction payment.

7）Effect of the Agreement: the Agreement shall take effect as of the date (the latter date shall prevail if two dates differ) when it signed and sealed by and between both Party and approved by both shareholder meetings.

 

2. Acquiring 20% equity of Yangxin Company

1) Signing parties: the Company (Party A) and Huangshi Yiruida Investment Co., Ltd. (Party B)

2) Transaction price: RMB 210.5 million [Assessed value as at December 31, 2011 (RMB 221 million) minus dividend declared by Shareholders’ General Meeting on March 16, 2012 (RMB 10.5 million).]

3) Payment approach: Party A shall do transfer payment via bank transfer or bank acceptance.

4) Alteration Registration of Equity: Party B shall cooperate with Part A to proceed with transfer and registration procedures within 3 working days since the Agreement takes effect.

5) Payment: Party A shall pay Party B 50% of the total transferring fee of equity; the balance shall be paid before December 31, 2012.

6）Breach of Contract: Party A shall pay liquidated damages for delay to Party B at 0.2 ‰ of deferred payment at a daily basis. Party B shall pay liquidated damages for not transferring shares to Party B at 5% of transaction payment.

7）Effect of the Agreement: the Agreement shall take effect as of the date (the latter date shall prevail if two dates differ) when it signed and sealed by and between both Party and approved by both shareholder meetings.

 

V. Purpose of this related transaction and its impacts on the Company

 

The related transaction of the Company, acquiring 30% and 20% equity interest in Yichang and Yangxin, would further optimize corporate governance, enhance central management, standardize operation of subsidiaries, and reduce related party transactions. The transaction is in accordance with the Company’s long-term strategy and would strengthen the Company’s competitive advantages.

 

The cement market of Hubei is the Company’s core market. In recent years, under the encouragement and guidance of national policies, the concentration degree of cement industry has increased, and the structure of the Company has improved. The recognition of rational competition was achieved among the industry players. The acquisition of the minority interest in Yichang and Yangxin would bring return to the Company.

 

After the completion of the transaction, Yichang and Yangxin would become wholly-owned subsidiaries of the Company, and the consolidation scope is unchanged.

 

VI. Opinions from Independent Directors

 

On March 21, 2012, Independent Directors issued the Independent Opinions on this related transaction.  Independent Directors think that, the acquisition of the 30% equity of Yichang Company and 20% of Yangxin Company is beneficial to the structure of corporate governance, and improvement of the management in subsidiaries as well as the standardization of the management.  It is also beneficial in reduction of related transactions, and also in line with the long-term strategic plan of the Company.  Finally, it is helpful to consolidate the competitiveness of the Company.

When reviewing this related transaction, related parties all abided by the principle of abstention and have not vote on the aforesaid proposal.  The decision making procedure of this related transaction is in compliance with the laws and regulations contained in Company Law, Listing Rules of Stocks Listed in SSE, as well as Articles of the Association of the Company.  

The transaction price of this related transaction is based on the assessment report.  The voting procedure of the Board Meeting is in compliance with relevant laws and regulations.  Thus the transaction price is fair, and does not harm the interest of the listed company as well as other shareholders of the Company.

 

VII. Documents for Inspection

1. Resolution of the Thirty Fifth Meeting of the Sixth Board of Directors of the Company

2. Independent Opinions issued by Independent Directors

3. Equity Transfer Agreement

4. Evaluation Report

 

 

Huaxin Cement Co., Ltd.

March 22, 2012