TIDMZHEH
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.
ZHEJIANG EXPRESSWAY CO., LTD
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 0576)
CONNECTED TRANSACTION
IN RELATION TO
CAPITAL INCREASE IN ZHEJIANG COMMUNICATIONS
INVESTMENT GROUP FINANCE CO., LTD.
THE CAPITAL CONTRIBUTION AGREEMENT
On 14 October 2016, the Company entered into the Capital Contribution Agreement
with Zhejiang Communications Finance and the Existing Shareholders, pursuant to
which the Company agreed to contribute an amount of RMB350,000,000, by way of
cash, into the equity capital of Zhejiang Communications Finance, an associate
of the Company.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Communications Group holds approximately
67% of the issued share capital of the Company. By virtue of this shareholding
interest, Communications Group is a controlling shareholder of the Company. As
at the date of this announcement, Communications Group also directly and
indirectly, through Ningbo Expressway Co and Taizhou Expressway Co, holds 65%
of the issued share capital of Zhejiang Communications Finance. Therefore,
Zhejiang Communications Finance, being a subsidiary of Communications Group, is
a connected person of the Company and as a result, the transaction under the
Capital Contribution Agreement constitutes a connected transaction for the
Company under Chapter 14A of the Listing Rules.
As the applicable percentage ratios in respect of the transactions contemplated
under the Capital Contribution Agreement are more than 0.1% but less than 5%,
the Capital Contribution Agreement is subject to the reporting, announcement
and annual review requirements but exempt from the independent Shareholders'
approval requirement under Chapter 14A of the Listing Rules.
THE CAPITAL CONTRIBUTION AGREEMENT
On 14 October 2016, the Company entered into the Capital Contribution Agreement
with Zhejiang Communications Finance and the Existing Shareholders, pursuant to
which the Company agreed to contribute an amount of RMB350,000,000, by way of
cash, into the equity capital of Zhejiang Communications Finance, an associate
of the Company.
The principal terms of the Capital Contribution Agreement are set out below:
Date
14 October 2016
Parties
(i) Communications Group
(ii) Ningbo Expressway Co
(iii) Taizhou Expressway Co
(iv) the Company
(v) Zhejiang Communications Finance
Capital Contribution
Pursuant to the Capital Contribution Agreement, the Existing Shareholders and
the Company agreed to contribute capital in cash to Zhejiang Communications
Finance on a pro rata basis in proportion to their existing shareholding in
Zhejiang Communications Finance in the aggregate amount of RMB1 billion, of
which the Company agreed to contribute an amount of RMB350,000,000 based on its
current shareholding in Zhejiang Communications Finance. The Company intends to
satisfy the Capital Contribution by way of its internal resources.
Basis of determination of the Capital Contribution
The amount of capital contributions to be made by the Company and the Existing
Shareholders in the aggregate sum of RMB1 billion was determined after arm's
length negotiations amongst the parties with reference to the future capital
need of Zhejiang Communications Finance.
Timing of the Capital Contribution
Subject to the Capital Contribution Agreement becoming effective, the capital
contribution by the Company is expected to be made on or before 20 October
2016.
Conditions precedent and effective date
Completion of the Capital Contribution Agreement is conditional upon the
approval of CBRC having been obtained in connection with the Capital
Contribution Agreement, and the Capital Contribution Agreement will become
effective on the date on which it is approved by CBRC.
REASONS FOR AND BENEFITS OF THE CAPITAL CONTRIBUTION
The Directors expect that Zhejiang Communications Finance will play a larger
role as a fund management platform for the Communications Group following the
merger of the Communications Group and Zhejiang Railway Investment Group in
August 2016. The operation scale of Zhejiang Communications Finance is,
however, constrained by the size of its capital and the existing capital level
of Zhejiang Communications Finance is no longer sufficient to support its
expansion and satisfy the business needs of the Communications Group (including
the Company).
As a non-bank financial institution, the operations of Zhejiang Communications
Finance are subject to various capital requirements imposed by the People's
Bank of China and CBRC. For instance, the amount of financial debts that
Zhejiang Communications Finance may issue must not exceed its total capital,
the amount of short term securities investments it may hold (including short
term currency funds and fixed income products) must not exceed 40% of its total
capital, the amount of long term investments it may hold must not exceed 30% of
its total capital, and the amount of guarantee it may provide to Communications
Group and its subsidiaries must not exceed its total capital. The Capital
Contribution is therefore necessary for the progressive development of Zhejiang
Communications Finance. The Capital Contribution would also enable Zhejiang
Communications Finance to cope with the enhanced regulatory requirements on
capital sufficiency and capital management by non-bank financial institutions
imposed by regulators such as the People's Bank of China and the CBRC.
It is important for Zhejiang Communications Finance to continue expanding its
business scope in order to serve the subsidiaries of the Communications Group
(including the Company), and the level of capital is an important criteria to
be considered by the regulators when applying for the operation of new
businesses. The Capital Contribution will enable Zhejiang Communications
Finance to expand its business scope, operate new business and maintain its
status in the industry.
Zhejiang Communications Finance has shown a strong growth in income and
profitability since its establishment in December 2012, with an average return
on net assets at approximately 14% in the past three years. The Directors
consider that the Capital Contribution will provide a satisfactory return to
the Company.
Given the above, the Directors (including the independent non-executive
Directors) are of the view that the terms of the Capital Contribution Agreement
are on normal commercial terms, in the ordinary and usual course of business of
the Company and are fair and reasonable and in the interests of the Company and
the Shareholders as a whole.
INFORMATION ON ZHEJIANG COMMUNICATIONS FINANCE
Zhejiang Communications Finance is a limited liability company incorporated in
the PRC on 9 November 2012 and approved by CBRC as a non-banking financial
institution on 17 October 2012 with a registered capital of RMB1 billion as at
the date of this announcement. As at the date of this announcement, Zhejiang
Communications Finance is owned as to 40%, 35%, 15.625% and 9.375% by
Communications Group, the Company, Ningbo Expressway Co and Taizhou Expressway
Co, respectively, and Zhejiang Communications Finance is an associate of the
Company.
Zhejiang Communications Finance is principally engaged in the business of
providing financial services to the subsidiaries of Communications Group,
including but not limited to advising the subsidiaries of Communications Group
in relation to financing, letters of credit and other agency services;
authorised insurance agency businesses; providing guarantees, accepting and
discounting commercial notes, arranging for loans and financial leases, and
receiving deposits of the subsidiaries of Communications Group.
According to the audited financial statements of Zhejiang Communications
Finance, the total assets of Zhejiang Communications Finance as at 31 December
2015 were approximately RMB6,270,342,000. Zhejiang Communications Finance
recorded an operating revenue of approximately RMB270,333,000 and a profit
before tax of approximately RMB186,144,000 for the year ended 31 December 2015.
Upon completion of the Capital Contribution, the registered capital of Zhejiang
Communications Finance will be increased from RMB1 billion to RMB2 billion, and
the shareholding percentage of the Company and the Existing Shareholders in
Zhejiang Communications Finance will remain unchanged.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Communications Group holds approximately
67% of the issued share capital of the Company. By virtue of this shareholding
interest, Communications Group is a controlling shareholder of the Company. As
at the date of this announcement, Communications Group also directly and
indirectly, through Ningbo Expressway Co and Taizhou Expressway Co, holds 65%
of the issued share capital of Zhejiang Communications Finance. Therefore,
Zhejiang Communications Finance, being a subsidiary of Communications Group, is
a connected person of the Company and as a result, the transaction under the
Capital Contribution Agreement constitutes a connected transaction for the
Company under Chapter 14A of the Listing Rules.
As the applicable percentage ratios in respect of the transactions contemplated
under the Capital Contribution Agreement are more than 0.1% but less than 5%,
the Capital Contribution Agreement is subject to the reporting, announcement
and annual review requirements but exempt from the independent Shareholders'
approval requirement under Chapter 14A of the Listing Rules.
Each of Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou
Jianping holds certain senior position in Communications Group, so they have
abstained from voting on the board resolution with respect to the approval of
the Capital Contribution Agreement. Save for Mr. Zhan Xiaozhang, Mr. Wang
Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping, none of the Directors has any
material interest in the Capital Contribution Agreement or is required to
abstain from voting on the relevant Board resolutions to approve the same.
INFORMATION ON THE PARTIES
The Company is a joint stock company established under the laws of the PRC with
limited liability on 1 March 1997, the H Shares of which are listed on the Main
Board of the Stock Exchange. It is principally engaged in investing in,
developing and operating high-grade roads in the PRC. The Group also carries on
certain other businesses such as operation of gas stations, restaurants and
shops in service areas, advertising at expressway interchanges and external
road maintenance, as well as securities related business.
Communications Group is a wholly state-owned enterprise established in the PRC
on 29 December 2001 and is principally engaged in a diverse range of
businesses, including investment, operations, maintenance, toll collection and
ancillary services of expressways, construction and building of transportation
project, ocean and coastal transport, as well as real estate.
Ningbo Expressway Co. is a limited liability company incorporated in the PRC
and a 75% owned subsidiary of Communications Group and is principally engaged
in the operation and management of the Ningbo section of the
Ningbo-Taizhou-Wenzhou expressway.
Taizhou Expressway Co. is a limited liability company incorporated in the PRC
and a 75% owned subsidiary of Communications Group and is principally engaged
in the operation and management of the Taizhou section of the
Ningbo-Taizhou-Wenzhou expressway.
DEFINITIONS
In this announcement, unless the context specifies otherwise, the
following defined expressions have the following meanings:
"associate" has the meaning ascribed to it under the
Listing Rules
"Board" the board of Directors
"Capital the proposed capital contribution by the
Contribution" Company in
the amount of RMB350,000,000, by way of cash,
into
the equity capital of Zhejiang Communications
Finance pursuant to the Capital Contribution
Agreement
"Capital Contribution the agreement dated 14 October 2016 entered
Agreement" into
between the Company, Zhejiang Communications
Finance
and the Existing Shareholders in relation to
the Capital Contribution
"CBRC" China Banking Regulatory Commission of the PRC
"Communications Group" Zhejiang Communications Investment Group Co.,
Ltd.*, a
wholly State-owned enterprise established in
the PRC,
and the controlling shareholder of the Company
"Company" Zhejiang Expressway Co., Ltd., a joint stock
limited company
incorporated in the PRC with limited liability
"connected person" has the meaning ascribed to it under the
Listing Rules
"controlling shareholder" has the meaning ascribed to it under the
Listing Rules
"Director(s)" the directors of the Company
"Existing Shareholders" Communications Group, Ningbo Expressway Co. and
Taizhou Expressway Co., being the existing
shareholders
of Zhejiang Communications Finance other than
the Company
as at the date of this announcement
"Group" the Company and its subsidiaries
"H Shares" overseas listed foreign
shares in the share capital of
the Company with a nominal value of RMB1 per
share, which are listed on the Main Board of
the Stock
Exchange
"Hong Kong" the Hong Kong Special Administrative Region of
the PRC
"Listing Rules" Rules Governing the Listing of Securities
on The Stock
Exchange of Hong Kong Limited
"Ningbo Expressway Co" Zhejiang Ningbo Yongtaiwen Expressway Co., Ltd.
*, a limited
liability company incorporated in the PRC and a
75% owned
subsidiary of Communications Group
"percentage ratio" has the meaning ascribed to it under Rule 14.04
(9) of
the Listing Rules
"PRC" the People's Republic of China (for the purpose
of this
announcement, excludes Hong Kong, Macau and
Taiwan)
"RMB" Renminbi, the lawful currency of the PRC
"Shareholder(s)" holder(s) of the share(s) of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"subsidiary(ies)" has the meaning ascribed to it under the
Listing
Rules
"Taizhou Expressway Co" Zhejiang Taizhou Yongtaiwen Expressway Co.,
Ltd.*, a limited
liability company incorporated in the PRC and a
75% owned
subsidiary of Communications Group
"Zhejiang Communications Zhejiang Communications Investment Group
Finance" Finance Co.,
Ltd.*, a limited liability company incorporated
in the
PRC and owned as to 40%, 35%, 15.625% and
9.375%
by Communications Group, the Company, Ningbo
Expressway Co and Taizhou Expressway Co,
respectively, as at the date of this
announcement
* English names for reference only
On behalf of the Board
ZHEJIANG EXPRESSWAY CO., LTD.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, 14 October 2016
As of the date of this announcement, the executive directors of the Company
are: Mr. ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu; the non-executive
directors of the Company are: Mr. WANG Dongjie, Mr. DAI Benmeng and Mr. ZHOU
Jianping; and the independent non-executive directors of the Company are: Mr.
ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang Rosa.
END
(END) Dow Jones Newswires
October 14, 2016 11:08 ET (15:08 GMT)
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