Zhong Ao Home : DISCLOSEABLE TRANSACTION

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Zhong Ao Home Group Limited

中 奧 到 家 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1538)

DISCLOSEABLE TRANSACTION

The Board is pleased to announce that on 1 August 2020, Guangdong Zhong Ao and CNHTC entered into the Agreement, pursuant to which Guangdong Zhong Ao agreed to purchase and CNHTC agreed to sell the Sale Interest for a total consideration of RMB39,666,200.

As the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition is more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction on the part of the Company under the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

BACKGROUND

On 30 June 2020, CNHTC made an open tender at the Shandong Property Rights Exchange Center in the PRC to invite purchaser(s) to acquire the entire equity interest in the Target Company at a consideration of not less than RMB39,666,200, which was determined with reference to the valuation made by 山東中新資產評估有限公司 (Shangdong Zhongxin Assets Appraisal Company Limited*) that the net asset value of the Target Company was RMB39,666,200 as at 31 December 2019. Shandong Property Rights Exchange Center in the PRC was responsible for the preparatory works for the tender, including but not limited to inviting potential bidders to participate in the tender and examining the qualification of the potential bidders.

On 27 July 2020, Guangdong Zhong Ao submitted a tender at the bid price of RMB39,666,200 and paid RMB10,000,000 as surety for participation in the tender. On 28 July 2020, Guangdong Zhong Ao was informed by Shandong Property Rights Exchange Center that it was successful in the bidding of the tender.

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The Board is pleased to announce that, upon successful bidding of the tender, on 1 August 2020, Guangdong Zhong Ao and CNHTC entered into the Agreement, pursuant to which Guangdong Zhong Ao agreed to purchase and CNHTC agreed to sell the Sale Interest for a total consideration of RMB39,666,200.

THE AGREEMENT

Date:

1 August 2020

Parties

1. Guangdong Zhong Ao as purchaser; and
2. CNHTC as vendor.

To the best of the Director's knowledge, information and belief and having made all reasonable enquiries, (i) CNHTC is principally engaged in the manufacturing and sale of automobiles in the PRC; (ii) CNHTC is wholly and beneficially owned by 山東重工集團有 限公司 (Shandong Heavy Industry Group Co., Ltd.*), a state owned enterprise in the PRC; and (iii) CNHTC and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

Guangdong Zhong Ao is a wholly owned subsidiary of the Company and is principally engaged in provision of property management services in the PRC.

Asset to be acquired

Pursuant to the Agreement, Guangdong Zhong Ao agreed to purchase, and CNHTC agreed to sell, the Sale Interest, which represents the entire equity interest in the Target Company.

Consideration

The total consideration for the Acquisition is RMB39,666,200, which shall be payable by Guangdong Zhong Ao to CNHTC in the following manner:

1. RMB10,000,000 previously paid as surety for participation in the tender shall be applied as part payment of the consideration for the Acquisition; and
2. the remaining balance of RMB29,666,200 to be paid within 5 business days after the date of the Agreement.

The total consideration for the Acquisition is equivalent to the bid price submitted by Guangdong Zhong Ao in the tender and was determined with reference to (i) the lowest bid price under the tender made by CNHTC at the Shandong Property Rights Exchange Center, which was determined with reference to the valuation made by 山東中新資產評估有限公司 (Shangdong Zhongxin Assets Appraisal Company Limited*) that the net asset value of the Target Company was RMB39,666,200 as at 31 December 2019; and (ii) the business operation and future prospects of the Target Group.

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Taking into account the above factors, the Directors (including the independent non- executive Directors) consider that the entering into of the Agreement and the terms and conditions of the Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Completion

The Agreement is unconditional and Completion will take place within 10 business days after CNHTC having obtained a certificate from Shandong Property Rights Exchange Center confirming that the internal procedures of the tender are completed. Upon Completion, the parties to the Agreement will arrange for the business registration of the transfer of the entire equity interest in the Target Company from CNHTC to Guangdong Zhong Ao and the issuance of the new business license of the Target Company.

Upon Completion, the Target Company will become a wholly owned subsidiary of the Company and its financial results will be consolidated in the Group's financial statements.

After Completion, CNHTC agreed to continue to cooperate with the Target Company for a term of three years and will engage the Target Company to provide various services including indoor cleaning, outdoor cleaning and greening, shuttle bus, catering, security and maintenance services for CNHTC and its subsidiaries in Jinan, the PRC.

INFORMATION OF THE TARGET GROUP

The Target Company is a company established in the PRC with limited liability and is principally engaged in provision of indoor cleaning, outdoor cleaning and greening, shuttle bus, catering, security and maintenance services in the PRC. It has a registered and paid up capital of RMB30,000,000 and 63 staff in total for its business operation as at the date of this announcement.

As at the date of this announcement, (i) the equity interest in the Target Company was wholly and beneficially owned by CNHTC; and (ii) the Target Company owns 100% equity interest in Beijing Wanghu. Beijing Wanghu is a company established in the PRC with limited liability and is principally engaged in accommodations, Chinese food and sales of alcohol and beverage.

Followings are certain key financial figures extracted from the Target Company's audited consolidated financial statements for the two years ended 31 December 2018 and 2019:

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As at 31 December 2019, the net asset value of the Target Company was RMB39,666,200 according to the valuation made by 山東中新資產評估有限公司 (Shangdong Zhongxin Assets Appraisal Company Limited*).

REASONS FOR AND BENEFIT OF THE ACQUISITION

The Company is an investment holding company. The Group is principally engaged in the provision of property management services and property management consulting services in the PRC.

The Board expected that, upon Completion, the Group will be able to provide value adding services to the property projects currently managed by the Group directly and bring synergy effects to the existing property management services of the Group and enhance the Group's profitability. The Group could also diversify its services and markets by acquisition of businesses that are related to the Group's principal business.

Based on the above, the Directors (including the independent non-executive Directors) consider that the entering into of the Agreement and the terms and conditions of the Agreement (including the consideration and payment terms) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition is more than 5% but less than 25%, the Agreement constitutes a discloseable transaction on the part of the Company under the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

DEFINITIONS

In this announcement, the following terms shall have the meanings set out below unless the context requires otherwise:

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As at the date of this announcement, the Board comprises Mr. Liu Jian, Ms. Chen Zhuo, Mr. Liang Bing and Mr. Long Weimin as executive Directors, Mr. Wu Zhihua and Ms. Jin Keli as non-executive Directors, and Mr. Zhang Weilun, Mr. Chan Wai Cheung, Admiral, Mr. Chan Ka Leung, Kevin and Mr. Huang Anxin as independent non-executive Directors.

• for identification purposes only

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