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.
(a joint stock company with limited liability incorporated in the People’s Republic of China)
（H Shares Stock Code: 00317）
PROPOSED DISPOSAL AND POSSIBLE CONNECTED TRANSACTIONS
Proposal DisposalReference is made to the announcements of the resolutions of the Board dated14 August 2015. By a written resolution dated14 August 2015, the Board approved, among other things, the proposed disposal of entire equity interest in GS Shipping. As the GS Shipping Interest constitutes State-owned assets, the disposal of whichis required to go through theprocess of open tender through an approved equity exchange in accordance with the relevantPRC laws and regulations governing the disposal of State-owned assets.The Proposed Disposal willbe carried out through SUAEE.
There will be a minimum consideration, i.e. the initial bidding price, set for theGS Shipping Interest. Shareholders shouldnote that the final consideration will depend on the final bid price offered by the successfulbidder, but will in any event be no less than the minimum considerationset for the GS Shipping Interest.
Listing Rules implications
As the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of Proposed Disposal exceed 5% but less than 25%, the Proposed Disposals, if proceeded, will constitute a discloseable transaction of the Company and is subject to the announcement requirement under Chapter14A of the Listing Rules.
In addition, CSSC, the controlling shareholder of the Company, has indicated that it or its associates intends to participate in the open bid of the GS Shipping Interest. As the applicable percentage ratios of the Proposed Disposal exceed 5% and should CSSC or its associates finally become the successful bidder of the GS Shipping Interest, the transaction withCSSC or its associatescontemplated thereunder will constitute a connected transaction of the Company and is subject to the reporting, issue of circular and Independent Shareholders’ approval requirements under Chapter14A of the Listing Rules.
The EGM
The Company will convene the EGM to approve, among other things, the Proposed Disposal and the Possible Connected Transaction. Given that CSSC or its associates will participate in the open tender for the GS Shipping Interest, CSSC and its associates will abstain from voting on the approval of the Proposed Disposal and Possible Connected Transaction at the EGM.
The Company will despatch a circular containing, among other things, details of the Proposed Disposaland the Possible Connected Transaction, a letter from the Independent Board Committee and a letter of advice from the independent financial adviser together with the notice of EGM to the H Shareholders andposted on the website of the Stock Exchange the website of the ShanghaiStock Exchange and the website of the Company comec.cssc.net.cn as soon as practicable..
As there may not be any successful bidder for theGS Shipping Interest, the Proposed Disposal may or may not proceed, thus Shareholders and potential investors should exercise caution when dealing in the Shares of the Company.
1.Background of and procedures for the Proposed Disposal
Reference is made to the announcements of the resolutions of the Board dated14August 2015. By a written resolution dated 14 August 2014, the Board approved, among other things, the proposed disposal of the GS Shipping Interest. As the GS Shipping Interest constitutes State-owned assets, the disposal of whichis required to go through theprocess of open tender through an approved equity exchange in accordance with the relevantPRC laws and regulations governing the disposal of State-owned assets.The Proposed Disposal willbe carried out through SUAEE.
To commence the process of open tender of the GS Shipping Interest, the Company will have to submit the tender notice setting out, inter alia, (i) the minimum consideration, i.e. the initial bidding price, of the GS Shipping Interest; (ii) the principle terms of the bidding; and (iii) descriptions of and qualificationsof potential bidders, to SUAEE for the Proposed Disposal after obtaining Independent Shareholders’ approval at the EGM.
Once the tender notice is published, the publication period will commence andopen for 20 BusinessDays. During the publication period, qualified biddersmay indicate their interest in purchasing the GS Shipping Interest and register themselves as interested bidders.
Upon expiry of the publication period, SUAEE will notify the Company the identity of the successful bidder of the open tender.The Company will then enter into a sale andpurchase agreement in relation to the GS Shipping Interest with the successful bidder and to complete the Proposed Disposal accordingly.
2.The ProposedDisposal
I.GS Shipping Interest
GS Shippingwas established in the PRC on 18 November 2014. It isa wholly-owned subsidiary of the Company. GS Shipping is established solely for the purpose to disposal of certain interests in lands and properties. It has not engaged in any operation since its establishment.
The major assets of GS Shipping include a land parcel of approximately 393,793 sq.m. located at 10 South Fangcun Main Road, Liwan District, Guangzhou with the buildings erected on the land parcel (the “GS Properties”).
The valuation of the GS Shipping Interest as at 30 November 2014 was RMB1,316,283,100, which was appraised by independent valuer, Beijing branchcompany of China Enterprise Appraisals Co., Ltd. (北京中企華資產評估有限責任公司). The book value ofthe total assets of the GS Shipping(unaudited) as at 30 June 2015 was approximately RMB1.211 billion.
After completion of the Proposed Disposal, GS Shipping will no longer be a subsidiary of the Company.
II.Major Terms of the ProposedDisposal
AMinimum consideration for theProposed Disposal
The minimum considerations for the Proposed Disposal shall be RMB3.526 billion, which consists of (i)the minimum bidding price for the GS Interest of RMB1.316 billion (equivalent to the valuation of the GS Shipping Interest); (ii) the compensation of RMB1.076 billion for the loss of profitsand (iii) the compensation of RMB1.134 billion for the relocation cost of production base.
Shareholders should note that the final consideration will depend on the final bid price offered by the successful bidder for the GS Shipping Interest, but will in any event be no less than the relevant minimum consideration.
The minimum consideration is determined after taking into account a number of factors, including, among others, the valuation result of the GS Shipping Interest. Directors (excluding independent non-executive Directors who express their opinions after they have received the opinion of independent financial adviser) consider that the minimum considerations are fair and reasonable.
B.Open tender process of theProposedDisposal
It is proposed to submit the tender notice to the SUAEE for the Proposed Disposal after the obtaining Independent Shareholders’ approval at the EGM. The publication period of the tender notice will commence upon submission and open for 20 BusinessDays.
Upon expiry of the publication period, SUAEE will notify the Company the identity of the successful bidder of the GS Shipping Interest. The Company will enter into a sale andpurchase agreement in respectof the GS Shipping Interestwith the successful bidder and to complete the transaction accordingly.
C.Conditions precedent to the entering into and completion of theProposed Disposal
The entering into and completion of the Proposed Disposal shall be conditional upon the execution of an effective sale and purchase agreement in respect of the GS Shipping Interest between the Company and the successful bidder.
Once there is a successful bidder for the GS Shipping Interest, the Company will have unconditional obligation to enter into sale and purchase agreement with suchsuccessful bidder and to complete the transactions contemplated thereunder. As CSSC has indicated that it or its associates intends to participate in the open bid of the GS Shipping Interest, the Board would like to seek approval from Independent Shareholders in advance in the EGM in respect of the Possible Connected Transaction in case that CSSC or its associates does succeed in the open bid.
II.Reasons for and benefits of the ProposedDisposal
The GS Properties are located within theapplicable zone of the Guangzhou City’sLand DisposalMethods of Guangdong on Withdrawing Secondary Industry Enterprises from Downtown Areasand Encouraging the Development of Tertiary Industry Enterprises. To comply with the town planning policy of Guangzhou City and to facilitate the future development needs of the Group, the Company has planned to retreat from the GS Properties.
The Proposed Disposal is also conducive to optimizing the Group's assets structure. The minimum considerations for the GS Shipping Interestalso represent a reasonable gain over the cost of the Group's investment.
The Directors (excluding independent non-executive Directors who express their opinions after they have received the opinion of the independent financial adviser) are of the view that the Proposed Disposal will be carried out upon normal commercial terms which are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
III.Financial Impact of the ProposedDisposal
The Company expects that the total income from the Proposed Disposal to amount to approximately RMB2.02 billion (after deducting tax and other expenses payable by the Company in connection with the Proposed Disposal) (i.e. the difference between the minimum considerations forthe GS Shipping Interestand the carrying amount of the investment costs to be paid by the Company for the GS Shipping Interest). The Company intends to use all of the net proceeds from the Proposed Disposal as working capital.
3.Information about the Company and CSSC
A.Information about the Company
CSSC Offshore & Marine Engineering (Group) Company Limited, is a core subsidiary of China State Shipbuilding Corporation (a large-scale state-owned enterprise) in South China. Upon the completion of acquisition of CSSC Huangpu Wenchong Shipbuilding Company Limited (which owns core military assets) by the Company in March 2015, our position as the largest manufacturer of handy-size tankers and military auxiliary ships has been further enhanced by enabling us to build military ships and marine engineering equipment. This allows the overall optimization and comprehensive development of the Company’s business such as military ships, military auxiliary ships, civil ships and off-shore engineering, and thus improves the overall strength and competitiveness of the Company.Currently, the Company has three wholly-owned subsidiaries, namely Guangzhou Shipyard International Company Limited, CSSC Huangpu Wenchong Shipbuilding Company Limited and Guangzhou Shipyard International (Yangzhou) Company Limited with principal businesses involving: asset management; investment management; design, develop, manufacture, repair, modify, lease and sale of ship and ship accessories, marine engineering and equipment, energy equipment, transportation equipment, environmental protection equipment, electrical and electronic equipment, and metal structures and components; import and export business.
B. Information about CSSC
CSSC is a State-authorizedinvestment institution directly supervised and administered by State-owned Assets Supervision and Administration Commissionwhose core businessincludes shipbuilding, ship-repairing, processing, export/import of marine equipment, diversifiedbusinesses such as other steel structure manufacturing and international cooperation, joint venture operations,financing, technology trading and workforce exportation.
As at the date of this announcement, CSSC, the controlling shareholder of the Company, held 847,685,990 Shares of the Company, representing 59.97% of the issued Shares of the Company.
4.Implication of the Listing Rules
A.Discloseable Transactions
As the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of Proposed Disposal exceed 5% but less than 25%, the Proposed Disposals, if proceeded, will constitute a discloseable transaction of the Company and is subject to the announcement requirement under Chapter14A of the Listing Rules.
B.Possible Connected Transactions
In addition, CSSC, the controlling shareholder of the Company, has indicated that it or its associates intends to participate in the open bid of the GS Shipping Interest. As the applicable percentage ratios of the GS Shipping Interest exceed 5% and should CSSC or its associates finally become the successful bidder of the GS Shipping Interest, theProposed Disposal will constitute connected transaction of the Company and is subject to the reporting, issue of circular and Independent Shareholders’ approval requirements under Chapter14A of the Listing Rules.As such, CSSC has stated that CSSC and its associates will abstain from voting in respect of the resolution relating to the Proposed Disposal and the Possible Connected Transaction at the forthcoming EGM.
Given the identity of the successful bidder of the GS Shipping Interest can only be confirmed after completion of the publication period. If CSSC or its associates become the successful bidder of the GS Shipping Interest, by that time, the Company will have unconditional obligation to enter into sale and purchase agreement with the bidder and to complete the transactions contemplated thereunder. As such, the Board is now seeking approval from Independent Shareholders in advance in the EGM in respect of the Possible Connected Transaction.
To thebest knowledge, information and belief of the Directors, no Director is required to abstain from voting for approving the Board resolution in relation to the Proposed Disposal and the Possible Connected Transaction.
5.Other Matters
In order to enable the smooth retreat from the current production baseand to minimise the disturbance to the Group’s business, it isproposed that Guangzhou Shipyard International Company Limited, a wholly owned subsidiary of the Company, to enter into a lease with GS Shipping in respect of the GS Shipping Properties for office and factory usesexpiring on31 December 2017 (the “ProposedLease”)prior to the Proposed Disposal. The Proposed Lease shall be attached to the Proposed Disposalas one of the conditions. The rental of the Proposed Lease shall be determined by making reference to the prevailing market rate of the adjacent lands and the Company has engaged an independent valuer to determine the fair rental of the GS Properties. The Company expects the rental shall be not more than RMB360 million in aggregate for the entire term of the Proposed Lease.
In the event that CSSC or its associates becomes the successful bidder of the GS Shipping interest, the Proposed Lease will constitute a continuing connected transaction of the Company. TheProposed Lease shall fall into the scope of the 2014-2016 Framework Agreementand the Supplemental Agreement (if so approved by the Independent Shareholders at the EGM). The Company will closely monitor the Proposed Lease in order to comply with the 2014-2016 Framework Agreementand the Supplemental Agreement (if so approved by the Independent Shareholders at the EGM).
6.CIRCULAR AND EGM
As stated in the Company’s announcement dated 29 July 2015 regarding the non-exempt continuing connected transactions and major transaction of the Company (the “CCT Announcement”), the Company will convene the EGM to approve, among other things, the non-exempt continuing connected transactions and major transaction described in the CCT Announcement.The Company intends to put forward resolutions in relation to the Proposed Disposal and the Possible Connected Transaction for the Independent Shareholders’ approval at the same EGM. Given that CSSC or its associates will participate in the open tender for the GS Shipping Interest, CSSC and its associates will abstain from voting on the approval of the Proposed Disposal and Possible Connected Transactions at the forthcoming EGM.
The Company will form an Independent Board Committee comprising of all the independent non-executive Directors to advise the Independent Shareholders whether, among other things, the Possible Connected Transactionis fair and reasonable and are in the interests of the Company and its Shareholdersas a whole. The Company has appointed Shenwan Hongyuan Capital (H.K.) Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Shareholders on, among other things, the Possible Connected Transaction.
The Company will despatch a circular containing, among other things, details of theProposed Disposal and the Possible Connected Transaction, a letter from the Independent Board Committee and a letter of advice from the independent financial adviser together with the notice of EGM to the H Shareholders andposted on the website of the Stock Exchange the website of the ShanghaiStock Exchange and the website of the Company comec.cssc.net.cn as soon as practicable.
As there may not be any successful bidder for the GS Shipping Interest, the ProposedDisposal may or may not proceed, thus Shareholders and potential investors should exercise caution when dealing in the Shares of the Company.
7.DEFINITIONS
“associate(s)” / has the meaning ascribed to it in the Listing Rules;“Board” or “Board of Directors” / the board of Directors of the Company;
“Business Day” / a day on which banks are open for business in the PRC, other than Saturdays, Sundays or public holidays inthe PRC;
“Company” / Guangzhou Shipyard International Company Limited, a jointstock company established in the PRC with limited liability, the H Shares of whichare listed on the Stock Exchange and the A Sharesof which are listed on the Shanghai Stock Exchange;
“connected person(s)” / has the meaning ascribed to it under the ListingRules;
“controlling shareholder(s)” / has the meaning ascribed to it under the ListingRules;
“CSSC” / China State Shipbuilding Corporation (中國船舶工業集團公司), a state-owned enterpriseand a state-authorized investment institution directly supervisedand administered by the SASAC. As at the date of this announcement, CSSC holds 847,685,990 Shares of the Company, representing59.97% of the issued Shares of the Company, and is a controlling shareholder of the Company;
“Director(s)” / the director(s) of the Company;
“EGM” / the extraordinary general meeting to be convened by the Company;
“Group” / the Company and its subsidiaries;
“GS Shipping” / Guangzhou Shipyard Shipping Co., Ltd. (廣州廣船船業有限公司), a wholly-owned subsidiary of the Company established on 18 November 2014 in the PRC;
“GS Shipping Interest” / 100% interest in the registered capital of GS Shipping;
“H Shares” / overseas listed foreign shares of the Company listed on the Stock Exchange;
“Hong Kong” / the Hong Kong Special Administrative Region of the PRC;
“Independent Board Committee” / an independent committee of the Board comprising all theindependent non-executive Directors, established for the purposeof advising the Independent Shareholders in connection with the Possible Connected Transactions;
“Independent Shareholders” / Shareholders other than CSSC and its associates, none of them will be required to abstain from voting at the EGM so convened for approval of the relevant transactions;
“Listing Rules” / the Rules Governing the Listing of Securities on the Stock Exchange;
“Possible Connected Transaction” / assuming that CSSC became the successful bidder of part of the Disposal, the Disposal will constitute the connected transaction(s) between the Company and its controlling shareholder;
“PRC” / the People’s Republic of China and, for the sole purposes of this announcement, excludes Taiwan, Hong Kong and Macau Special Administrative Regionof the PRC;
“Proposed Disposal” / the proposed disposal of the GS Shipping Interest;
“RMB” / Renminbi, the lawful currency of the PRC;
“Shareholder(s)” / holder(s) of Shares;
“Shares” / shares of RMB1.00 each in the share capital of the Company;
“Stock Exchange” / The Stock Exchange of Hong Kong Limited;
“SUAEE” / Shanghai United Assets and Equity Exchange (上海聯合產權交易所), a comprehensive equity exchange service institution with enterprise legal person qualification approved by the Shanghai People’s Government as well as an institution designated by the State-owned Assets Supervision and Administration Commission of The State Council to engage in the transfer of state-owned equities of central enterprises;
“%” / percent; and
“sq. m.” / square meter.
By order of the Board