Stock Codes: 600801, 900933 Stock Abbreviation: Huaxin Cement, Huaxin B Share Ref: Lin 2009-018
Huaxin Cement Co., Ltd.
Announcement on Major Event in Respect of Shareholding Transfer
of Huaxin Golden Cat Cement (Suzhou) Co., Ltd.
The Company and members of the Board guarantee that the contents of the announcement is true, accurate and complete and shall be jointly liable for the false or misleading statement or material omission in this announcement.
Importance:
¡ñ Transaction: Huaxin Cement Co., Ltd. (hereinafter referred to as ¡°the Company¡±) shall transfer its 51% shareholding of Huaxin Golden Cat Cement (Suzhou) Co., Ltd. (hereinafter referred to as Golden Cat) in cash of 443,215.5 k yuan to Collective Asset Operating Company of Mudu Town, Wuzhong District of Suzhou City (hereinafter referred to as the Operating Company).
¡ñ The Shareholding Transfer does not constitute related transaction.
¡ñ The Shareholding Transfer shall improve Company's profit performance.
I. Transaction Overview
The registered capital of Golden Cat is US $136 million, of which Huaxin owns 51% of its shareholding, and is one of the share controlling subsidiaries of the Company. Brunei Shareholder First Team International owns 45.1115% of the shareholding; China Cinda Asset Management Corporation owns 3.8885%. As at Oct 30, 2009, total book value of Golden Cat was RMB 1,240,260 k, of which 861,760 was shareholders¡¯ equity.
For the purpose of meeting the city planning and industrial restructuring requirement in Suzhou, Mudu Town Government of Wuzhong District, Suzhou City, (hereinafter referred to as Mudu Government) urges Golden Cat to shut down and relocated, it also plans to take back the land use right according to the relevant laws.
Based on the requirement of the town government¡¯s decision-making, national policy adjustment to the cement industry, current operation status of Golden Cat and market environment it faces, the decision of Mudu Government is understood and supported by the Company. To ensure a smooth and successful relocation, the Company and the other two shareholders of Golden Cat negotiated with Mudu Government, where the decision is to respectively transfer their shareholding to the Operating Company. A preliminary agreement on shareholding transfer has been reached.
II£®Transaction Pricing
The acquisition value is resulted from the work conducted by Hubei Zhonglian Assets Appraisal Co., Ltd. on assessment of loss on assets, while the relocation compensation from Mudu Government is based on assessment of assets; the final acquisition value is RMB 869.05 million. The 51% shareholding transfer of Golden Cat by the Company is agreed at RMB 443.2155 million.
III. Main Content of the Agreement
1. From the date of the signed Agreement, the name of Golden Cat is allowed to be used for two years; if there are losses on goodwill of the Company, the Operating Company must take responsibility on all the relevant compensations. After two years from the date of the agreement, ¡°Huaxin¡± is prohibited to be used if Golden Cat still exists.
2. The shareholding acquisition fund shall be settled in 3 installments as soon as the Agreement takes effect. The initial payment of RMB 51 million shall be paid within 30 days; second payment of RMB 127.5 million shall be paid within 180 days; and the rest of RMB 264.7155 million shall be paid within 540 days.
3. Once there is an effective and appropriate guarantee on the balance payment and the approval of the Company is obtained, the two parties, through the Operating Company, should arrange for the shareholding transfer within 30 days after the Second payment is settled.
Mudu Government already secured approval from both the District Government and City Government for listing the relevant land contained in the Agreement (which includes land of Golden Cat) in order to ensure gains on land is prior to pay for the rest of transfer payment. Once all the valid legal documents are prepared, the Company will regard it as an effective and appropriate guarantee provided by the Operating Company. The relevant legal documents include: 1) Letter of Payment Guarantee from Mudu Government; 2) Letter of Payment Management and Obligation from the relevant banks.
4. The layoff period starts from the date of the agreement signing to the shareholding transfer. After the layoff period and shareholding transfer, all the gains and losses of Golden Cat shall be transferred to the Operating Company without any impact on the price of shareholding acquisition. The Operating Company is fully responsible for the relocation of Golden Cat.
5. In order to ensure the validity of the Contract, the Operating Company shall pay a Deposit of RMB 25.5 million to the Company within 30 days after the Agreement is signed. The amount will be charged against the initial payment.
6. Based on the respective background of this transfer, Mudu Government shall issue a Letter of Commitment in order to ensure the relocation work of Golden Cat is effective and the progress of the operations is in accordance to the contractual agreement.
IV. Transaction Impact
The cost of 51% shareholding, obtained formally in Jan 2004 by the Company, is RMB 235.34 million; after shareholding transfer, the estimated gain on investment is RMB 208 million. More importantly, the Company may receive such considerable amount of cash as self-owned capital to sufficiently supplement its new business or the construction of its new cement production lines.
V. Decision-making Procedure
The proposal was reviewed and approved by full votes by the Ninth Meeting of the Six Board of Directors of the Company convened on Dec 22, 2009.
It is herewith announced.
Huaxin Cement Co., Ltd.
Board of Directors
December 24, 2009
