Hengdeli Holdings to sell two business units to its chairman for CNY 3.5bn
Hengdeli Holdings [HKG: 3389], a Hong Kong-based watch retailer, announced that it has signed an agreement to sell the Xinyu Sale Shares and the Harvest Max Sale Shares at an aggregate cash consideration of approximately CNY 3.5bn (USD 504m) to the company’s chairman Zhang Yuping.
The Xinyu Sale Shares represent the entire issued share capital of Xinyu as at the date of the Agreement. The Harvest Max Sale Shares represent approximately 75.54% of the issued share capital of Harvest Max as at the date of the Agreement.
The Xinyu Group is principally engaged in (i) retail sale of mid to high-end internationally renowned watch brands in the PRC; (ii) wholesale of mid-end internationally renowned watch brands in the PRC; and (iii) provision of after-sale service.
The Harvest Max Group is principally engaged in the retail of jewellery, low-to-mid-end watch brands and general merchandises including but not limited to electronic appliances and cosmetics products in Hong Kong.
INTENDED USE OF PROCEEDS
Having taken into account the unaudited net asset value of the Disposal Group of CNY 5.1bn as at 30 June 2016 and the minimum Dividend Payout of approximately CNY 1.6bn, it is expected that the Consideration will be approximately CNY 3.5bn. Together with the settlement of net amounts due by the Disposal Group to the Remaining Group of approximately CNY 0.9bn, the Company will receive an aggregate net cash inflow of approximately CNY 5.8bn (net of estimated withholding tax of approximately CNY 0.2bn and direct expenses attributable to the Disposal of approximately CNY 7m). The Company intends to apply the net cash inflow of approximately CNY 5.8bn generated from the Disposal as to: (i) approximately 55% or CNY 3.2bn for repayment of the debts of the Remaining Group; (ii) not less than approximately 14% or CNY 0.8bn for distribution of Special Dividend to the Shareholders (representing Special Dividend of not less than HKD 0.20 per Share based on the number of outstanding Shares as at the date of this announcement); and (iii) the remaining balance for general working capital and business development of the Remaining Group, including but not limited to enhancing the market standing and presence of the retail business in Hong Kong and Taiwan and expanding the retail business of the Remaining Group in overseas markets. It should be noted that the actual cash inflow to be generated from the Disposal and received by the Company will depend on the financial position of the Disposal Group as at 31 December 2016 and the exchange rates between Renminbi and Hong Kong dollars at the material time.
After Completion, the Remaining Group will be principally engaged in (i) retail sale of mid to top-end internationally renowned watch brands in Hong Kong and Taiwan; and (ii) manufacturing of watch accessories.
SPECIAL DIVIDEND
Subject to approval of the Shareholders at the EGM and Completion taking place, the Board intends to declare the Special Dividend of not less than HKD 0.20 per Share to the Shareholders whose names appear on the register of members of the Company on a record date to be determined. A further announcement will be made by the Company in this regard as and when appropriate.