Stock Codes: 600801, 900933 Stock Abbreviations: Huaxin Cement, Huaxin B Share Ref: Lin 2013-002
Huaxin Cement Co., Ltd.
Announcement on Acquiring 70% Stake in both Hubei Huaxiang Cement Limited Company and Hubei Huaxiang Cement Ezhou Limited Company
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.
Importance Notice:
- Brief Content: The Company acquired 50% and 20% stake of Hubei Huaxiang Cement Co., Ltd. held by Wuhan Huayu Building Materials Group Co., Ltd. and Mr. Liao Binkui respectively with the total price of 420,100.8 k Yuan. Meanwhile, the Company acquired 60% and 10% stake of Hubei Huaxiang Cement Ezhou Co., Ltd. held by Wuhan Huachang Silicate Products Co., Ltd. and Mr. Liao Guoshu respectively with the total price of 99,437 k Yuan. Hubei Huaxiang Cement Co., Ltd. and Hubei Huaxiang Cement Ezhou Co., Ltd. were affiliated companies (hereinafter collectively referred to as the "Huaxiang").
- The above transactions were not related transactions.
- The above transactions were approved by the Tenth Meeting of the Seventh Board of Directors of the Company convened on January 21, 2013.
- There was no major asset restructuring involved in the above transactions.
- There were no material legal obstacles for the implementation of the above transactions.
- After the completion of the transactions, Hubei Huaxiang Cement Co., Ltd. and Hubei Huaxiang Cement Ezhou Co., Ltd. will become controlling subsidiaries of the Company.
- Risk Warning: Despite its Environmental Impact Assessment (EIA) report has been completed, Hubei Huaxiang Cement Co., Ltd. phase II production line project is yet to obtain the administrative approval from the provincial environmental protection authorities.
I. Summary of the Transactions
1. The Company signed "Equity Transfer Agreement", “Supplemental Agreement (I)" and "Supplemental Agreement (II)” with Wuhan Huayu Building Materials Group Co., Ltd., Mr. Liao Binkui and Mr. Liao Guoshu (guarantor) on November 23, 2012, November 30, 2012, and January 21, 2013 respectively. The Company acquired 50% and 20% stake of Hubei Huaxiang Cement Co., Ltd. held by Wuhan Huayu Building Materials Group Co., Ltd. and Mr. Liao Binkui respectively with the total price of 420,100.8 k Yuan. After the completion of the transaction, the rest 30% stake in Hubei Huaxiang Cement Co., Ltd. shall continue to be held by Wuhan Huayu Building Materials Group Co., Ltd.
The Company signed "Equity Transfer Agreement" and “Supplemental Agreement" with Wuhan Huachang Silicate Products Co., Ltd., Mr. Liao Guoshu, Wuhan Huayu Building Materials Group Co., Ltd. (guarantor) and Mr. Liao Binkui (guarantor) on November 23, 2012 and January 21, 2013 respectively. The Company acquired 60% and 10% stake of Hubei Huaxiang Cement Ezhou Co., Ltd. held by Wuhan Huachang Silicate Products Co., Ltd. and Mr. Liao Guoshu respectively with the total price of 99,437 k Yuan. After the completion of the transaction, the rest 30% stake in Hubei Huaxiang Cement Ezhou Co., Ltd. shall continue to be held by Wuhan Huayu Building Materials Group Co., Ltd.
2. These equity acquisitions were not related transactions.
3. On 21 January 3, 2013, the Company convened the Tenth Meeting of the Seventh Board of Directors. "Proposal on Acquiring 70% Stake in both Hubei Huaxiang Cement Limited Company and Hubei Huaxiang Cement Ezhou Limited Company” was reviewed and approved in the Meeting. Voting results: Affirmative: 9; Negative: 0; Abstention: 0. Before this Meeting, the Twenty Third Meeting of the Sixth Board of Directors convened on March 29, 2011 approved in principle that the Company could negotiate with Huaxiang on M&A issues within a certain range of value ??.
4. The transactions were within the range of decision-making authority of the Board of Directors of the Company, thus it was not necessary to submit the transactions to the Shareholders’ General Meeting for approval.
II. Introduction of the Trading Parties
Wuhan Huayu Building Materials Group Co., Ltd., with its main business of manufacturing aerated concrete blocks and rotary kiln high grade cement, is a large private enterprise concurrently supplying auxiliaries for the above building materials and also engaging in catering business. It is a limited liability company established on June 24, 2002 with the legal representative Mr. Liao Binkui and the registered capital of RMB 60 million. Business scope: manufacturing, processing and sales of fly ash blocks and building materials; cement grinding stations. The company has a land area of ??1,000 Mu, the fixed asset investment of 1 billion Yuan and the existing staff of 1,500 people. It had five subsidiaries: Wuhan Huachang Silicate Products Co., Ltd., Wuhan HuaYuxiang New Wall Materials Co., Ltd., Wuhan Huayutai New Wall Materials Co., Ltd., Hubei Huaxiang Cement Co., Ltd. and Huayu Hotel.
Wuhan Huachang silicate Products Co., Ltd. was established on July 16, 2002 as a limited liability company with the legal representative Mr. Liao Binkui and registered capital of 16 million Yuan. Business scope: production and sales of Portland aerated concrete and lime. The company is located in Xingou Town, Dongxihu District, Wuhan City with an area of 120 Mu. Its annual production capacity of aerated concrete block was 240,000 cubic meters.
Mr. Liao Guoshu, Chinese nationality, residence address: White Horse Village 1-1, Wuchang District, Wuhan City, Senior Economist. He once served as Daye Municipal CPPCC member, deputy of Ezhou Municipal People's Congress, CPPCC member of Hongshan District, Wuhan City. He currently was the chairman of Hubei Huaxiang Cement Co., Ltd..
Mr. Liao Binkui, Chinese nationality, residence address: White Horse Village 1-1, Wuchang District, Wuhan City. He was the legal representative of both Wuhan Huayu Building Materials Group Co., Ltd. and Wuhan Huachang Silicate Products Co., Ltd..
The above transactions parties did not have any relation with the Company on property rights, businesses, assets, debts and personnel.
The Board of Directors of the Company had carried out the necessary due diligence on the transaction parties and their trading performance capabilities.
III. Basic Information of the Target Companies
(I) Target Companies
1. Hubei Huaxiang Cement Co., Ltd.
Ownership: limited liability company
Registered address: Huandiqiao Town, Daye City
Main office location: Huandiqiao Town, Daye City
Legal representative: Liao Guoshu
Registered capital: 327 million Yuan
Main Businesses: Production and sales of cement, clinker, lime, cement bags and cement products.
Major shareholders and actual controller: Wuhan Huayu Building Materials Group Co., Ltd. held 80% stake and Mr. Liao Binkui held 20% stake.
Hubei Huaxiang Cement Co., Ltd. is located in Huandiqiao Town, Daye City, Hubei Province, 3 km north to Tieshan railway station of Wuchang - Jiujiang Railway, south to Huangshi 106 National Highway (Tieshan-Huandiqiao section) and 20 km away from Daye City.
Hubei Huaxiang Cement Co., Ltd. had two new dry process clinker cement production lines. The first 2500t/d NSP line was put into operation in November 2004, the second 5000t/d NSP line was put into operation in April 2010. The two NSP lines had a total installed capacity of 15 MW waste heat power generation.
Stake of Hubei Huaxiang Cement Co., Ltd. held by Wuhan Huayu Building Materials Group Co., Ltd. and Mr. Liao Binkui were not mortgaged, pledged, or involved in any other restrictions to the transfer. There were no litigation, arbitration or seizure, freezing or other judicial measures, nor other cases that impeded the transfer of ownership. Shareholders of Hubei Huaxiang Cement Co., Ltd. all gave up the right of first refusal.
Daxin Certified Public Accountants Co. Ltd. Hubei Branch conducted a special audit (Daxin E Zhuan Shen Zi [2012] No. 0279) on the financial situation of Hubei Huaxiang Cement Co., Ltd. As of December 31, 2011, Hubei Huaxiang Cement Co., Ltd. had total assets of 844,439,533.21 Yuan, total liabilities of 480,723,340.12 Yuan and owner's equity of 363,716,193.09 Yuan. Income from major operations for 2011 was 652,886,190.44 Yuan and net profit for 2011 was 56,413,274.89 Yuan. As of November 30, 2012, the total assets of Hubei Huaxiang Cement Co., Ltd. was 851,594,120.78 Yuan, total liabilities was 627,661,964.59 Yuan, owner's equity was 223,932,156.18 Yuan; income from major operations for Jan-Nov 2012 was 440,942,225.60 Yuan, net profit was -149,252,309.96 Yuan.
2. Hubei Huaxiang Cement Ezhou Co., Ltd.
Ownership: limited liability company
Registered address: Sun Peng village, Duandian Town, Huarong District, Ezhou City
Main office location: Sun Peng village, Duandian Town, Huarong District, Ezhou City
Legal representative: Liu Liyuan
Registered capital: 50 million Yuan
Main businesses: production and sales of cement; sales of slag powder.
Major shareholders and actual controller: Wuhan Huachang Silicate Products Co., Ltd. held 60% stake, Mr. Liao Guoshu held 10% stake and Mr. Liao Binkui held 30% stake.
Hubei Huaxiang Cement Ezhou Co., Ltd. was located in Duandian Town, Huarong District, Ezhou City, Hubei Province, 5 km away from Huarong Station of Wuchang - Jiujiang Railway, 26 km away from Miaoling Station of Wuhan – Huangshi Highway, 9 km away from Huanggang Station of the intercity railway, 20 km away from Gedian Development Zone and 3 km away from the Sanjiang pier.
Hubei Huaxiang Cement Ezhou Co., Ltd. had an annual cement grinding capacity of 2 m t/y.
Stake of Huaxiang Ezhou held by Wuhan Huachang Silicate Products Co., Ltd., Mr. Liao Guoshu and Mr. Liao Binkui were not mortgaged, pledged, or involved in any other restrictions to the transfer. There were no litigation, arbitration or seizure, freezing or other judicial measures, nor other cases that impeded the transfer of ownership. Shareholders of Hubei Huaxiang Cement Ezhou Co., Ltd. all gave up the right of first refusal.
Daxin Certified Public Accountants Co. Ltd. Hubei Branch conducted a special audit (Daxin E Zhuan Shen Zi [2012] No. 0280) on the financial situation of Hubei Huaxiang Cement Ezhou Co., Ltd. As of December 31, 2011, Hubei Huaxiang Cement Co., Ltd. had total assets of 303,647,013.16 Yuan, total liabilities of 257,237,831.31 Yuan and owner's equity of 46,409,181.85 Yuan. Income from major operations for 2011 was 517,656,267.66 Yuan and net profit for 2011 was 5,324,521.68 Yuan. As of November 30, 2012, the total assets of Hubei Huaxiang Cement Ezhou Co., Ltd. was 305,186,482.43 Yuan, total liabilities was 255,205,108.89 Yuan, owner's equity was 49,981,373.54 Yuan; Income from major operations for Jan-Nov 2012 was 368,043,068.85 Yuan, net profit was -3,850,749.17 Yuan.
(II) Transfer of Claims and Debts of Equity Acquisition Transaction
1. Transfer of Claims and Debts of Hubei Huaxiang Cement Co., Ltd.
The Company will accept, audited and confirmed claims which incurred from unfulfilled sales Agreements by Hubei Huaxiang Cement Co., Ltd., in principle after confirmation. The original shareholders shall be responsible for the collection of the 143.1874 million Yuan claims which were not accepted by the Company.
All debts will be accepted in principle. The original shareholders of Hubei Huaxiang Cement Co., Ltd. shall be responsible for the debts out of the scope of the transfer of the base date of the Audit Report.
2. Transfer of Claims and Debts of Hubei Huaxiang Cement Ezhou Co., Ltd.
The Company will accept, audited and confirmed claims which incurred from unfulfilled sales Agreements by Hubei Huaxiang Cement Ezhou Co., Ltd., in principle after confirmation. The original shareholders shall be responsible for the collection of the 19.5009 million Yuan claims which were not accepted by the Company.
All debts will be accepted in principle. The original shareholders of Hubei Huaxiang Cement Ezhou Co., Ltd. shall be responsible for the debts out of the scope of the transfer of the base date of the Audit Report.
(III) Analysis on Pricing and Fairness and Rationality of the Transaction Subject
The pricing of the transaction subject:
Formula of the total price of the target equity: total price = (non-current assets value + current assets value + claims to be collected by the original shareholders - the amount of debts) × 70%. According to the survey and analysis conducted by the
