Zhejiang Expressway The Proposed Spin-off and Separate Listing of Spinco
13 June 2017 - 10:34PM
UK Regulatory
TIDMZHEH
Hong Kong Stock 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)
PROPOSED DISCLOSEABLE TRANSACTION IN RELATION TO
THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF SPINCO
ON THE SHANGHAI STOCK EXCHANGE
THE PROPOSED SPIN-OFF
Reference is made to the announcements of the Company dated 16 November 2012, 7
May 2013, 2 May 2017 and 23 May 2017 in relation to the Proposed Spin-off (the
" Announcements "). Terms defined in the Announcements shall have the same
meanings therein, unless the context otherwise requires.
The Hong Kong Stock Exchange has confirmed that the Company may proceed with
the Proposed Spin-off. By the Approval for the Initial Public Offering of
Shares of Zheshang Securities Co., Ltd. issued by the CSRC on 12 May 2017, the
CSRC has formally approved SpinCo's application for the A Share Listing.
According to the latest listing timetable, SpinCo has launched its initial
public offering in the PRC on 13 June 2017 and the dealings in the A shares of
the SpinCo on the Shanghai Stock Exchange are expected to commence on 26 June
2017.
The Proposed Spin-off is conditional upon, among other things, the approval of
the Shanghai Stock Exchange and completion of the Offering. Further
announcement(s) will be made by the Company in relation to any material
development with respect to the Proposed Spin-off and the A Share Listing as
and when appropriate.
PROPOSED DISCLOSEABLE TRANSACTION
As at the date of this announcement, the Company has an indirect interest of
approximately 52.15% in SpinCo. It is expected that if the Offering proceeds,
the total number of shares to be offered under the Offering will be 333,333,400
shares and the offer price is RMB8.45 per share.
It is contemplated that immediately following the completion of the Proposed
Spin-off, the indirect interest of the Company in SpinCo will be reduced to
approximately 46.93% and SpinCo will continue to be an indirect subsidiary of
the Company.
The Proposed Spin-off will result in a reduction of the indirect shareholding
of the Company in SpinCo, so it will constitute a deemed disposal on the part
of the Company under Rule 14.29 of the Listing Rules. Since it is contemplated
that one or more of the relevant percentage ratios of the Proposed Spin-off
exceeds 5% but is less than 25%, the Proposed Spin-off will constitute a
discloseable transaction of the Company subject only to reporting and
announcement requirements but exempt from shareholders' approval requirement.
NO ASSURED ENTITLEMENT TO SHAREHOLDERS
Due to the legal and regulatory impediments to the Company's provision of the
Assured Entitlement to the Shareholders in respect of the Proposed Spin-off,
the Company applied to the Hong Kong Stock Exchange for the Waiver and the
Waiver was granted to the Company on 22 March 2013. Accordingly, the
Shareholders will not be entitled to any distribution in specie of, or
preferred application, for the A shares of SpinCo in connection with the
Proposed Spin-off even if it materializes.
Having considered the benefits that the Proposed Spin-off may bring to the
Group as set out in the section headed "Reasons for and benefits of the
Proposed Spin-off" below, the Board considers that the Proposed Spin-off in the
absence of the Assured Entitlement is fair and reasonable and in the interests
of the Company and the Shareholders as a whole.
GENERAL
Shareholders and potential investors should note that the Proposed Spin-off is
subject to, among other things, the approval of the Shanghai Stock Exchange and
the completion of the offering. There is no assurance that the Proposed
Spin-off will take place. Accordingly, Shareholders and potential investors are
reminded to exercise caution when dealing in the securities of the Company.
THE PROPOSED SPIN-OFF
Reference is made to the announcements of the Company dated 16 November 2012, 7
May 2013, 2 May 2017 and 23 May 2017 in relation to the Proposed Spin-off.
The Hong Kong Stock Exchange has confirmed that the Company may proceed with
the Proposed Spin-off. By the Approval for the Initial Public Offering of
Shares of Zheshang Securities Co., Ltd. issued by the CSRC on 12 May 2017, the
CSRC has formally approved SpinCo's application for the A Share Listing.
According to the latest listing timetable, SpinCo has launched its initial
public offering in the PRC on 13 June 2017 and the dealings in the A shares of
the SpinCo on the Shanghai Stock Exchange are expected to commence on 26 June
2017.
Change of the shareholding structure of SpinCo
As at the date of this announcement, the Company has an indirect interest of
approximately 52.15% in SpinCo. It is expected that if the Offering proceeds,
the total number of shares to be offered under the Offering will be 333,333,400
shares and the offer price is RMB8.45 per share.
It is contemplated that immediately following the completion of the Proposed
Spin-off, the indirect interest of the Company in SpinCo will be reduced to
approximately 46.93% and SpinCo will continue to be an indirect subsidiary of
the Company.
The shareholding structure of SpinCo as at the date of this announcement is set
out below:
https://photos.prnasia.com/prnk/20170613/1874744-1
The shareholding structure of SpinCo immediately following completion of the
Proposed Spin-off is set out below:
https://photos.prnasia.com/prnh/20170613/1874744-1-b
Conditions
The Proposed Spin-off is conditional upon, among other things, the approval of
the Shanghai Stock Exchange to the A Share Listing and completion of the
Offering. Further announcement(s) will be made by the Company in relation to
any material developments with respect to the Proposed Spin-off and the A Share
Listing as and when appropriate.
Intended use of proceeds
SpinCo is estimated to receive net proceeds of approximately RMB2.76 billion
from the Offering (after the deduction of the underwriting fees and other
expenses in relation to the A Share Listing). SpinCo intends to use the
proceeds from the Offering to increase the net capital and expand the business
of SpinCo (including but not limited to expanding its investment banking
business and enhancing its research team).
INFORMATION ON THE COMPANY, THE GROUP AND SPINCO
The Company is an infrastructure company principally engaged in investing in,
developing and operating high-grade roads. The Group also engages in securities
related business carried on by SpinCo.
SpinCo is a joint stock limited company restructured in the PRC on 12 September
2012 and is an indirectly-owned subsidiary of the Company. As at the date of
this announcement, it is engaged in securities related business (including but
not limited to securities brokerage, investment banking, proprietary trading
and asset management).
Set out below is certain financial information in relation to SpinCo Group for
the two years ended 31 December 2016, respectively, as extracted from the PRC
audited consolidated financial statements of SpinCo for the relevant years:
For the year ended For the year ended
31 December 2015 31 December 2016
(Audited) (Audited)
RMB RMB
Net Profit before tax 2,525,081,495.76 1,643,219,655.04
Net Profit after tax 1,834,338,303.77 1,240,999,462.08
Net assets 8,449,116,259.83 9,565,498,901.73
REASONS FOR AND BENEFITS OF THE PROPOSED SPIN-OFF
The Board believes that the Proposed Spin-off would be in the interests of the
Group as it would enable the market to appraise and assess the value of the
Group more effectively and provide a separate fund raising platform for SpinCo,
which will allow SpinCo to develop new businesses and become more competitive
and will in turn benefit the Group.
The Proposed Spin-off is designed to facilitate the future growth of both the
SpinCo Group and the Remaining Group. As the SpinCo will remain as a subsidiary
of the Company, the Company's shareholders will continue to enjoy the benefits
from the development of the securities related businesses.
As the Proposed Spin-off will not result in the Company's loss of control over
SpinCo, the Proposed Spin-off will be accounted for as an equity transaction
and will not result in the recognition of any gain or loss in the Company's
consolidated statement of profit or loss and other comprehensive income.
Having considered the benefits that the Proposed Spin-off may bring to the
Group as set out above, the Board considers that the Proposed Spin-off is fair
and reasonable and in the interests of the Company and the Shareholders as a
whole.
NO ASSURED ENTITLEMENT
Under the Listing Rules, a listed issuer is required to have due regard to the
interests of its existing shareholders by providing them with an assured
entitlement to the shares in the entity which is proposed to be spun-off for
separate listing. After due and careful consideration of the Proposed Spin-off
and having taken into account the advice from the Company's PRC legal counsel,
the Board has resolved not to provide the Shareholders with the Assured
Entitlement under the Proposed Spin-off for the following reasons:
* The shares proposed to be offered by SpinCo and listed on the Shanghai
Stock Exchange are A shares which, under the relevant PRC laws, are only
available for subscription by investors within the PRC (excluding Hong
Kong, Macau and Taiwan regions).
* Individual investors who are foreign natural persons cannot invest in the A
share market of the PRC, except for those from Hong Kong, Macau Special
Administrative Region and Taiwan who work and live in the PRC or those
foreign natural persons who have obtained the permanent resident permit in
the PRC. As to institutional investors, those who are foreign legal persons
are not permitted to invest in the A share market of the PRC other than as
explicitly provided under the relevant PRC laws and regulations (that is,
in the capacity of qualified foreign institutional investor in accordance
with Measures for the Administration of Securities Investment within the
Borders of China by Qualified Foreign Institutional Investors, Measures for
the Pilot Programme of Domestic Securities Investment by RMB Qualified
Foreign Institutional Investors or in accordance with the provisions of the
Administrative Measures for Foreign Investors' Strategic Investment in
Listed Companies). Accordingly, there are legal impediments and it is not
feasible to make available an assured entitlement to the shares in SpinCo
to all the existing shareholders of the Company under the relevant PRC laws
and regulations.
Due to the legal and regulatory impediments to the Company's provision of the
Assured Entitlement to the Shareholders in respect of the Proposed Spin-off as
mentioned above, the Company applied to the Hong Kong Stock Exchange for the
Waiver and the Waiver was granted to the Company on 22 March 2013. Accordingly,
the Shareholders will not be entitled to any distribution in specie of or
preferred application for the A shares of SpinCo in connection with the
Proposed Spin-off even if it materializes.
Having considered the benefits that the Proposed Spin-off may bring to the
Group as set out in the section headed "Reasons for and benefits of the
Proposed Spin-off" above, the Board considers that the Proposed Spin-off in the
absence of the Assured Entitlement is fair and reasonable and in the interests
of the Company and the Shareholders as a whole.
OVERLAPPING OF DIRECTORSHIPS
As the Company is an indirect controlling shareholder of SpinCo, there is an
overlapping of directorships between the Company and SpinCo. There are nine
directors on the board of SpinCo, comprising six directors and three
independent directors. Mr. Zhan Xiaozhang and Ms. Luo Jianhu, two executive
Directors, are also members of the board of directors of SpinCo.
Mr. Zhan Xiaozhang and Ms. Luo Jianhu were appointed to the board of SpinCo to
represent the interests of the Company. Neither of them takes part in the daily
operation of SpinCo.
Mr. Wu Chenggen is a director and the chief executive officer of SpinCo. The
daily operations of SpinCo are principally managed by Mr. Wu Chenggen and other
non-director senior management of SpinCo. Mr. Wu Chenggen is responsible for
overseeing SpinCo's day-to-day operations and management, and implementing
decisions and plans approved by the board of directors of SpinCo. Except for
Mr. Wu Chenggen, all other directors of SpinCo (including Mr. Zhan Xiaozhang
and Ms. Luo Jianhu) do not take part in the daily operations of SpinCo.
If any situation of conflict of interest arises, Mr. Zhan Xiaozhang and Ms. Luo
Jianhu will, if required, abstain from voting on the relevant resolutions in
the meetings of the boards of the respective companies in accordance with the
respective articles of association and PRC laws. Under the Company's articles
of association, each Director has one vote at the meetings of the Board
regardless of whether he/she is an executive or non-executive Director. If in
any circumstances where Mr. Zhan Xiaozhang and Ms. Luo Jianhu were required to
abstain from voting on relevant resolutions in any board meeting of the Company
due to their directorship in SpinCo, there will remain four out of six
Directors (excluding the INEDs), or seven out of nine Directors (including the
INEDs) who would be entitled to vote. Similarly, at SpinCo's level, there will
be four out of six directors (excluding the INEDs), or seven out of nine
directors (including the INEDs) who will be entitled to vote if Mr. Zhan
Xiaozhang and Ms. Luo Jianhu were required to abstain from voting. Therefore,
there will be sufficient non-common members of the Board to function
independently and properly.
LISTING RULES IMPLICATIONS
The Proposed Spin-off will result in a reduction of the indirect shareholding
of the Company in SpinCo, so it will constitute a deemed disposal on the part
of the Company under Rule 14.29 of the Listing Rules. Since it is contemplated
that one or more of the relevant percentage ratios of the Proposed Spin-off
exceeds 5% but is less than 25%, the Proposed Spin-off will constitute a
discloseable transaction of the Company subject only to reporting and
announcement requirements but exempt from shareholders' approval requirement.
Since no Shareholders' approval is required for the Proposed Spin-off, the
Company will not form an independent board committee to advise the Shareholders
on the implications of not providing the Assured Entitlement. Please refer to
the section headed "No Assured Entitlement" for (i) the reasons why the Board
has decided not to provide the Shareholders with the Assured Entitlement under
the Proposed Spin-off and (ii) the view of the Board on the implications of not
providing the Assured Entitlement.
GENERAL
Shareholders and potential investors should note that the Proposed Spin-off is
subject to, among other things, the approval of the Shanghai Stock Exchange and
completion of the Offering. There is no assurance that the Proposed Spin-off
will take place. Accordingly, Shareholders and potential investors are reminded
to exercise caution when dealing in the securities of the Company.
DEFINITIONS
In this announcement, unless the context specifies otherwise, the following
defined expressions have the following meanings:
"A shares" the shares of an issuer which are listed on the A-share market
of a stock exchange on the PRC
"A the holders of A shares of SpinCo
Shareholders"
"A Share the proposed listing of the A shares of SpinCo on the Main Board
Listing" of the Shanghai Stock Exchange
"Assured in relation to the Proposed Spin-off, means the assured
Entitlement" entitlement to the A shares of SpinCo either by way of a
distribution in specie of the A shares of SpinCo held by the
Group or by way of preferred application in any offering of
existing or new shares in SpinCo under the Offering
"Board" the board of Directors
"Company" Zhejiang Expressway Co., Ltd., a joint stock limited company
incorporated in the PRC with limited liability
"CSRC" the China Securities Regulatory Commission
"Director(s)" director(s) of the Company
"Group" the Company and its subsidiaries
"H shares" overseas listed foreign shares in the ordinary share capital of
the Company, with a par value of RMB1.00 each, which are listed
on the Hong Kong Stock Exchange
"H the holders of H shares
Shareholders"
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"Hong Kong The Stock Exchange of Hong Kong Limited
Stock
Exchange"
"INED" the independent non-executive director
"Listing the Rules Governing the Listing of Securities on the Hong Kong
Rules" Stock Exchange
"Offering" the proposed initial public offering of the A shares of SpinCo
in connection with the A Share Listing
"PRC" the People's Republic of China, for the purpose of this
announcement, excludes Hong Kong, Macau Special Administrative
Region and Taiwan
"Proposed the proposed spin-off and separate listing of SpinCo on the
Spin-off" Shanghai Stock Exchange
"Remaining the Group excluding the SpinCo Group
Group"
"SpinCo" Zheshang Securities Co., Ltd, a joint stock limited company
restructured in the PRC on 12 September 2012 and is an
indirectly-owned subsidiary of the Company
"SpinCo Group" SpinCo and its subsidiaries
"Shanghai the Shanghai Stock Exchange
Stock
Exchange"
"Shareholders" shareholders of the Company
"Waiver" a waiver from strict compliance with the requirements of
offering the Assured Entitlement to the Shareholders under
paragraph 3(f) of Practice Note 15 of the Listing Rules
On behalf of the Board
ZHEJIANG EXPRESSWAY CO., LTD.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, 13 June 2017
As at 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
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June 13, 2017 08:34 ET (12:34 GMT)
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