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.
SANY HEAVY EQUIPMENT INTERNATIONAL
HOLDINGS COMPANY LIMITED 三 一 重 裝 國 際 控 股 有 限 公 司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 631)
CONTINUING CONNECTED TRANSACTIONS
SUPPLEMENTAL MASTER PURCHASE AGREEMENT (2020-2022),
SUPPLEMENTAL MASTER SALES AGREEMENT (2020-2022),
SUPPLEMENTAL MASTER TRANSPORTATION AGREEMENT (2020-2022),
SUPPLEMENTAL PRODUCTS SALES AGREEMENT (2020-2022),
MASTER LEASE AGREEMENT (2020-2022),
AUTOMATED MACHINERY SALES AGREEMENT (2020-2022),
AND
MASTER SALES AGENCY AGREEMENT (2020-2022)
CONTINUING CONNECTED TRANSACTIONS
Supplemental Master Purchase Agreement (2020-2022)
As disclosed in the announcement of the Company dated 16 March 2017, the Company and Sany Group entered into the Supplemental Master Purchase Agreement (2017-2019) to renew the transactions under the Master Purchase Agreement. The Supplemental Master Purchase Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Master Purchase Agreement (2020-2022) on 18 December 2019 to further renew the transactions thereof with a fixed term of three years ending 31 December 2022.
1
Supplemental Master Sales Agreement (2020-2022)
As disclosed in the announcement of the Company 16 March 2017, the Company and Sany Group entered into the Supplemental Master Sales Agreement (2017-2019) to renew the transactions under the Master Sales Agreement. The Supplemental Master Sales Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Master Sales Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Supplemental Master Transportation Agreement (2020-2022)
As disclosed in the announcements of the Company dated 16 March 2017, 29 August 2018, and 27 September 2019, the Company and Sany Logistics entered into the Supplemental Master Transportation Agreement (2017-2019) to renew the transactions under the Master Transportation Agreement and increased the annual caps thereafter. The Supplemental Master Transportation Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Logistics entered into the Supplemental Master Transportation Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Supplemental Products Sales Agreement (2020-2022)
As disclosed in the announcements of the Company dated 16 March 2017 and 20 March 2017, the Company and Sany Group entered into the Supplemental Products Sales Agreement (2017-2019) to renew the transactions under the Sales Agreement. The Supplemental Products Sales Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Products Sales Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Master Lease Agreement (2020-2022)
On 18 December 2019, the Company and Sany Group entered into the Master Lease Agreement (2020-2022), pursuant to which the Group agreed to lease certain premises from Sany Group or its subsidiaries with a fixed term of three years ending 31 December 2022.
Automated Machinery Sales Agreement (2020-2022)
On 18 December 2019, the Company and Sany Group entered into the Automated Machinery Sales Agreement (2020-2022), pursuant to which the Group agreed to sell automated machinery and robot machinery and relevant ancillary parts to Sany Group with a fixed term of three years ending 31 December 2022.
2
Master Sales Agency Agreement (2020-2022)
On 18 December 2019, the Company and Sany Group entered into the Master Sales Agency Agreement (2020-2022), pursuant to which Sany Group agreed to procure certain overseas end-customers for the Group with a fixed term of three years ending 31 December 2022.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Sany Logistics, being a wholly-owned subsidiary of Sany Group, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under each of the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Sales Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020-2022), the Supplemental Products Sales Agreement (2020-2022), the Master Lease Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Master Sales Agency Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
Pursuant to Rule 14A.76(2) of the Listing Rules, as each of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of each of (1) the Supplemental Master Sales Agreement (2020- 2022), (2) the Master Lease Agreement (2020-2022), and (3) the Master Sales Agency Agreement (2020-2022) is more than 0.1% but less than 5%, the transactions contemplated under each of (1) the Supplemental Master Sales Agreement (2020-2022), (2) the Master Lease Agreement (2020- 2022) and (3) the Master Sales Agency Agreement (2020-2022) are subject to the reporting and announcement requirements, and exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
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As one or more of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of each of (1) the Supplemental Master Purchase Agreement (2020-2022), (2) the Supplemental Master Transportation Agreement (2020-2022), (3) the Automated Machinery Sales Agreement (2020- 2022) and (4) the Supplemental Products Sales Agreement (2020-2022) are expected to exceed 5%, each of (1) the Supplemental Master Purchase Agreement (2020-2022), (2) the Supplemental Master Transportation Agreement (2020-2022), (3) the Automated Machinery Sales Agreement (2020-2022) and (4) the Supplemental Products Sales Agreement (2020-2022) would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
EGM
The Company will hold the EGM to approve the Supplemental Master Purchase Agreement (2020- 2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022), and the proposed annual caps for the continuing connected transactions contemplated thereunder.
Vinco Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020- 2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022).
CIRCULAR
A circular containing, inter alia, (i) further information on the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022); (ii) the notice of the EGM; (iii) the letter from Vinco Capital Limited to both the Independent Board Committee and the Independent Shareholders regarding the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020- 2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022) and the transactions thereunder; and (iv) the recommendation of the Independent Board Committee to the Independent Shareholders in connection thereto, will be despatched to the Shareholders as soon as possible. It is currently expected that the circular will be despatched to the Shareholders on or before 13 January 2020.
4
- SUPPLEMENTAL MASTER PURCHASE AGREEMENT (2020-2022) Background
As disclosed in the announcement of the Company dated 16 March 2017, the Company and Sany Group entered into the Supplemental Master Purchase Agreement (2017-2019) to renew the transactions under the Master Purchase Agreement. The Supplemental Master Purchase Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Master Purchase Agreement (2020-2012) on 18 December 2019 to further renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Supplemental Master Purchase Agreement (2020-2022)
The particulars of the Supplemental Master Purchase Agreement (2020-2022) are as follows:
Parties: | (1) | the Company, and |
(2) | Sany Group | |
Transaction: | The Company agreed to purchase or procure its subsidiaries to purchase | |
from Sany Group or its subsidiaries (1) certain parts and components | ||
produced by Sany Group or its subsidiaries and (2) certain second-hand | ||
manufacturing equipment, for the manufacturing of products of the | ||
Group. | ||
Term: | The Supplemental Master Purchase Agreement (2020-2022) has a fixed | |
term of three years ending 31 December 2022. |
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Price: | Parts and Components |
For those tailor-made parts and components for the Group manufactured | |
by Sany Group, the basis of determining prices of the parts and | |
components produced by Sany Group and its subsidiaries will be | |
determined on arm's length negotiation and with reference to the | |
manufacturing costs involved in the relevant parts and components | |
plus a gross margin ranging from approximately 10% to 30%, with | |
reference to the usual gross margin of the Group's procurement of other | |
similar parts and components from Independent Third Parties, which | |
should be in any event no less favorable to the Group than is available | |
to Independent Third Parties. Due to confidentiality concern of certain | |
technical information, the Group only procures tailor-made parts and | |
components from Sany Group rather than other third-party suppliers. | |
However, the Group is able to operate independently from Sany Group. | |
The Group's procurement of tailor-made parts and components from | |
Sany Group only accounted for approximately 3% of the Group's total | |
procurement for each of the two years ended 31 December 2018 and the | |
eleven months ended 30 November 2019 and it is expected that such | |
procurement will remain to the same extent for the three years ending | |
31 December 2022. Even under the remote possibility that Sany Group | |
ceases to supply tailor-made parts and complements to the Group, | |
the Group can still engage other third-party suppliers to manufacture | |
tailor-made parts and components imposing confidentiality obligations | |
on them. However, under such arrangement, the Group will need to | |
disclose the confidential technical information to third parties, which is | |
not in the best interest of the Company. | |
For those common parts and components which can be easily accessible | |
in the market, the Group will follow the pricing as determined during | |
the Group's commercial procurement tender process. | |
Second-hand Manufacturing Equipment | |
The basis of determining prices of the second-hand manufacturing | |
equipment will be determined on arm's length negotiation and with | |
reference to the below formula, which is a default formula set by the | |
Group's SAP financial software following the Group's accounting | |
policy for depreciation and valuation on equipment and also applicable | |
to the valuation of all equipments of the Group, no matter whether they | |
are procured from Independent Third Parties or Sany Group, and should | |
be in any event no less favorable to the Group than is available to | |
Independent Third Parties. |
6
Price = Original Purchase Price - Original Purchase Price (1-3%) x (number of years since the equipment was purchased by Sany Group/10 years)
"3%" represents the minimum residual value of equipment and "10 years" represents the maximum durable years of equipment and both of them are set according to the Group's accounting policy.
Payment:In respect of each purchase of parts and components or secondhand manufacturing equipment by the Group from Sany Group or its subsidiaries, Sany Group or its subsidiaries and the Company or its subsidiaries will enter into separate purchase agreements to specify the exact types and number of products to be purchased, the relevant delivery arrangements and the selling prices of such products.
Payment will be settled by way of telegraphic transfer at credit terms to be agreed by the parties in accordance with the Group's normal term of supplies from Independent Third Parties.
Historical figures:Below sets forth the historical caps and actual transaction amounts for the transactions contemplated for the two financial years ended 31 December 2018 and the eleven months ended 30 November 2019:
Financial | Historical | |||
Year/Period Ended | Historical Caps | Transaction Amount | ||
31 | December 2017 | RMB215,954,000 | RMB181,067,915 | |
31 | December 2018 | RMB303,504,000 | RMB232,073,890 | |
30 | November 2019 | RMB401,578,000 | RMB196,865,338 | |
Proposed annual cap: | It is proposed that the annual cap amounts for the transactions | |||
contemplated under the Supplemental Master Purchase Agreement | ||||
(2020-2022) for the | three years ending 31 | December 2022 will be | ||
s e t a t R M B408,694,687, R M B560,746,774 a n d R M B721,460,178, | ||||
respectively. | ||||
Basis of the proposed | The annual caps of | the Supplemental Master Purchase Agreement | ||
annual cap: | (2020-2022) are calculated and determined after taking into account (i) | |||
the | historical transaction amount, and (ii) the estimated procurement |
plan of the Group for the three years ending 31 December 2022 in line with the sales plan.
7
Reason For and Benefits of the Supplemental Master Purchase Agreement (2020-2022)
The Directors consider that it is crucial for the Group to maintain the stability in supply and quality of the parts and components for its existing and future production needs. SG Group is familiar with the Group's specifications, standards and requirements and the Group is confident on the quality of the parts and components supplied by SG Group. In view of the Group's past purchasing experience with certain members of SG Group, the Directors are of the view that SG Group can effectively fulfill the Group's high requirement in supply stability as well as product quality. In addition, SG Group has provided the Group with more favourable terms such as flexible and timely delivery schedule of the parts and components purchased by the Group.
The Directors (excluding the independent non-executive Directors, whose views will be set out in the circular to be sent to the Shareholders) are of the view that the Supplemental Master Purchase Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Supplemental Master Purchase Agreement (2020-2022), is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Supplemental Master Purchase Agreement (2020- 2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Supplemental Master Purchase Agreement (2020-2022) or has abstained from voting on the relevant board resolution approving the Supplemental Master Purchase Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Supplemental Master Purchase Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
As one or more of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Supplemental Master Purchase Agreement (2020-2022) are expected to exceed 5%, the Supplemental Master Purchase Agreement (2020-2022) would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
8
-
SUPPLEMENTAL MASTER SALES AGREEMENT (2020-2022)
Background
As disclosed in the announcement of the Company 16 March 2017, the Company and Sany Group entered into the Supplemental Master Sales Agreement (2017-2019) to renew the transactions under the Master Sales Agreement. The Supplemental Master Sales Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Master Sales Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Supplemental Master Sales Agreement (2020-2022)
Particulars of the Supplemental Master Sales Agreement (2020-2022) are set forth as follows:
Parties: | (1) | the Company, and |
(2) | Sany Group | |
Transaction: | The Company (or its subsidiaries) agreed to sell to Sany Group (or | |
its subsidiaries) raw materials which were originally sourced by the | ||
Group for its own use, parts and components and certain second-hand | ||
manufacturing equipment for the production of Sany Group's products. | ||
Term: | The Supplemental Master Sales Agreement (2020-2022) has a fixed | |
term of three years ending 31 December 2022. | ||
Price: | Raw Materials and Parts and Components | |
The basis of determining prices of raw materials will be determined | ||
based on the arm's length negotiation and with reference to the original | ||
procurement costs of raw materials sourced by the Group or the value | ||
of the raw materials or parts and components as shown in the SAP | ||
financial software of the Group, which should be in any event no less | ||
favorable to the Group than is available to Independent Third Parties. |
9
Second-hand Manufacturing Equipment
The basis of determining prices of the second-hand manufacturing equipment will be determined on arm's length negotiation and with reference to the below formula, which is a default formula set by the Group's SAP financial software following the Group's accounting policy for depreciation and valuation on equipment and also applicable to the valuation of all equipments of the Group, and should be in any event no less favorable to the Group than is available to Independent Third Parties.
Price = Original Purchase Price - Original Purchase Price (1-3%) x (number of years since the equipment was purchased by our Group/10 years)
"3%" represents the minimum residual value of equipment and "10 years" represents the maximum durable years of equipment and both of them are set according to the Group's accounting policy.
Payment Schedule:Payment will be settled as agreed by the parties according to the specific order, which will be in line with their respective normal terms of supplies which are applicable to Independent Third Parties.
Historical figures: | Financial | Historical | ||
Year/Period Ended | Historical Caps | Transaction Amount | ||
31 | December 2017 | RMB100,150,000 | RMB19,851,000 | |
31 | December 2018 | RMB101,390,000 | RMB42,677,000 | |
30 | November 2019 | RMB103,180,000 | RMB62,131,036 |
Proposed annual cap: It is proposed that the annual cap amounts for the transactions contemplated under the Supplemental Master Sales Agreement (2020- 2022) for the three financial years ending 31 December 2022 will be set at RMB103,520,060, RMB89,330,618 and RMB89,136,176, respectively.
Basis of the proposed | The proposed annual caps under the Supplemental Master Sales |
- annual cap:Agreement (2020-2022) are determined with reference to (i) the historical transaction amount, and (ii) that Group plans to further streamline resources which may result in more surplus inventories and second-hand equipment for disposal.
10
Reasons For and Benefits of the Supplemental Master Sales Agreement (2020-2022)
Sany Group is principally engaged in, among others, the manufacture and distribution of engineering machineries for construction purposes while the Group's raw material or spare parts and components inventories can be used in manufacturing of engineering machinery products. By selling the redundant stocks of the Group to the Sany Group, the Group can enhance its inventory flexibility. In addition, the Group will sell the relevant raw material to Sany Group at prices which should be in any event no less favorable to the Group than is available to Independent Third Parties.
The Group currently expects that it will have certain amount of redundant second-hand manufacturing equipment because (i) part of the manufacturing lines will cease to be used as the production process of the Company is adjusted; and (ii) the relocation of the manufacturing line currently located at Hunan manufacturing plant has result in further excess second-hand manufacturing equipment whilst the redundant second-hand manufacturing equipment can be re-utilised by Sany Group for their manufacturing. The Company will sell such second-hand manufacturing equipment in order to streamline its own manufacturing resources and the proceeds from the sales will be accounted to the working capital of the Group. In addition, the Group will sell the relevant second-hand manufacturing equipment to Sany Group at prices which should be in any event no less favourable to the Group than is available to Independent Third Parties.
Therefore, the Directors (including the independent non-executive Directors) are of the view that the Supplemental Master Sales Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Supplemental Master Sales Agreement (2020-2022), is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Supplemental Master Sales Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Supplemental Master Sales Agreement (2020-2022) or has abstained from voting on the relevant board resolution approving the Supplemental Master Sales Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
11
Accordingly, the transactions under the Supplemental Master Sales Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
Pursuant to Rule 14A.76(2) of the Listing Rules, as each of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Supplemental Master Sales Agreement (2020-2022) is more than 0.1% but less than 5%, the transactions contemplated under the Supplemental Master Sales Agreement (2020-2022) are subject to the reporting and announcement requirements, and exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
(C) SUPPLEMENTAL MASTER TRANSPORTATION AGREEMENT (2020-2022)
Background
As disclosed in the announcements of the Company dated 16 March 2017, 29 August 2018, and 27 September 2019, the Company and Sany Logistics entered into the Supplemental Master Transportation Agreement (2017-2019) to renew the transactions under the Master Transportation Agreement and increased the annual caps thereafter. The Supplemental Master Transportation Agreement (2017-2019) will expire on 31 December 2019 and the Company and Sany Logistics entered into the Supplemental Master Transportation Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
Supplemental Master Transportation Agreement (2020-2022)
Particulars of the Supplemental Master Transportation Agreement are set forth as follows:
Parties: | (1) | the Company, and |
(2) | Sany Logistics | |
Transaction: | Sany Logistics will provide certain logistics services to the Company | |
or its subsidiaries in connection with the transportation of energy | ||
equipment, logistics equipment and automated machinery. | ||
In respect of each sale of transportation task, the Company and Sany | ||
Logistics will enter into separate transportation agreements to specify, | ||
among others, the exact types and number of products to be transported, | ||
the distance, and the transportation period. | ||
Term: | The Supplemental Master Transportation Agreement (2020-2022) has a | |
fixed term of three years ending 31 December 2022. |
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Services fee: | The service fees payable shall be determined based on arm's | ||
length negotiation with reference to (i) means of transportation, (ii) | |||
transportation distance, (iii) transportation location, (iv) weight of the | |||
goods transported and (v) gasoline price, which should be in any event | |||
no less favorable to the Group than is available to Independent Third | |||
Parties. | |||
Payment: | A monthly invoice for service fees shall be issued by Sany Logistics to | ||
the Company and payment for the service fees will be settled by way of | |||
telegraphic transfer or cheque in the following month upon receipt of | |||
the invoice by the Company. | |||
Historical figures: | Financial | Historical | |
Year/Period Ended | Historical Caps | Transaction Amount | |
31 December 2017 | RMB49,790,000 | RMB44,102,000 | |
31 December 2018 | RMB122,000,000 | RMB104,131,000 | |
30 November 2019 | RMB220,000,000 | RMB150,130,780 | |
Proposed annual cap: | It is proposed that the annual cap amounts for the transactions | ||
contemplated under the Supplemental Master Transportation Agreement | |||
(2020-2022) for the three financial years ending 31 December 2022 will | |||
be set at RMB327,600,000, RMB425,880,000 and RMB553,644,000, | |||
respectively. | |||
Basis of the proposed | T h e p r o p o s e d a n n u a l | c a p s u n d e r t h e S u p p l e m e n t a l M a s t e r | |
annual cap: | Transportation Agreement (2020-2022) are determined with reference | ||
to (i) the historical transaction amounts, (ii) prevailing market price | |||
for logistics service fees in the open market in the PRC, and (iii) the | |||
anticipated expanding business volume of the Group's products and the | |||
expected logistics services to be involved. |
Reasons For and Benefits of the Supplemental Master Transportation Agreement (2020-2022)
The Company considers that Sany Logistics offers competitive prices as compared to its peers. Sany Logistics also has extensive experience in logistics services for energy equipment and logistics equipment, and is familiar with the Group's requirements and standards.
Therefore, the Directors (excluding the independent non-executive Directors, whose views will be set out in the circular to be sent to the Shareholders) are of the view that the Supplemental Master Transportation Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
13
Since Sany Group, being a party to the Supplemental Master Transportation Agreement (2020-2022), is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Supplemental Master Transportation Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Supplemental Master Transportation Agreement (2017-2019) or has abstained from voting on the relevant board resolution approving the Supplemental Master Transportation Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A. 12(1)(c) and hence a connected person of the Company under the Listing Rules.
Sany Logistics, being a wholly-owned subsidiary of Sany Group, is therefore an associate of Mr. Liang Wengen under Rule 14A. 12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Supplemental Master Transportation Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
As one or more of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Supplemental Master Transportation Agreement (2020-2022) are expected to exceed 5%, the Supplemental Master Transportation Agreement (2020-2022) would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
-
SUPPLEMENTAL PRODUCTS SALES AGREEMENT (2020-2022)
Background
As disclosed in the announcements of the Company dated 16 March 2017 and 20 March 2017, the Company and Sany Group entered into the Supplemental Products Sales Agreement (2017-2019) to renew the transactions under the Sales Agreement. The Supplemental Products Sales Agreement (2017- 2019) will expire on 31 December 2019 and the Company and Sany Group entered into the Supplemental Products Sales Agreement (2020-2022) on 18 December 2019 to renew the transactions thereof with a fixed term of three years ending 31 December 2022.
14
Supplemental Products Sales Agreement (2020-2022)
Particulars of the Supplemental Products Sales Agreement (2020-2022) are set forth as follows.
Parties: | (1) | the Company, and |
(2) | Sany Group | |
Subject Matter: | Pursuant to the Supplemental Products Sales Agreement (2020- | |
2022), the Company agreed to sell or procure its subsidiaries to sell its | ||
finished products to Sany Group or its subsidiaries for sales to the end | ||
customers. | ||
Term: | The Supplemental Products Sales Agreement (2020-2022) has a fixed | |
term of three years ending 31 December 2022. | ||
Sales Contracts: | In respect of each sale of products by the Company (or its subsidiaries) | |
to Sany Group (or its subsidiaries), the Company (or its subsidiaries) | ||
and Sany Group (or its subsidiaries) shall enter into separate | ||
agreements to specify the exact types and number of products being | ||
sold, the relevant delivery arrangements and, where applicable, the | ||
selling prices of such products. | ||
Pricing: | Since the Supplemental Products Sales Agreement (2020-2022) serves | |
the purpose for the Company to take advantage of Sany Group's sales | ||
network to sell its finished products to end-customers in a large scale, | ||
and in other words, the Group just sells the finished products to end- | ||
customers through Sany Group's sales network, under an arrangement | ||
which Sany Group does not actually receive any mark-up against the | ||
prices under the Supplemental Products Sales Agreement (2020-2022), | ||
the prices of the finished products under the Sales Agreement are | ||
determined according to the costs involved (raw material costs, labour | ||
costs and manufacturing expenses) plus the gross profit margin, ranging | ||
from 25%-40% for domestic sales and from 25%-35% for overseas | ||
sales (considering the overseas sales involve higher transportation | ||
costs). Such gross profit margin is the same as that the Group charges | ||
on Independent Third Party customers when the Group sells the | ||
finished products to them directly. In any event, the prices at which the | ||
Company (or its subsidiaries) sells its product(s) to Sany Group (or its | ||
subsidiaries) shall not be less than the price at which the Company (or | ||
its subsidiaries) sells the same product(s) to other distributors. | ||
Payment terms: | The price of any products being sold under the Supplemental Products | |
Sales Agreement (2020-2022) shall be paid by telegraphic transfer | ||
within three months after delivery and the relevant products having | ||
passed the inspection by Sany Group. |
15
Historical figures:Below sets forth the historical caps and actual transaction amounts for the transactions contemplated for the two financial years ended 31 December 2018 and the eleven months ended 30 November 2019:
Financial | Historical | ||
Year/Period Ended | Historical Caps | Transaction Amount | |
31 | December 2017 | RMB993,000,000 | RMB402,812,938 |
31 | December 2018 | RMB995,000,000 | RMB395,220,484 |
31 | November 2019 | RMB996,000,000 | RMB280,081,240 |
Proposed annual cap: It is proposed that the annual cap amounts for the transactions contemplated under the Supplemental Products Sales Agreement (2020- 2022) for the three financial years ending 31 December 2022 will be set at RMB599,200,000, RMB781,596,000 and RMB1,018,203,480, respectively.
To elaborate, the annual cap under the Supplemental Products Sales Agreement (2020-2022) covers two business segments of the Group: logistics equipment sector, formerly known as port machinery sector and energy equipment sector, formerly known as mining machinery sector.
Logistics equipment
The annual caps of the sales arrangement between the Group and Sany Group in terms of logistics equipment for the three financial years ending 31 December 2022 will be approximately RMB249,200,000, RMB281,596,000 and RMB318,203,480, determined based on (i) the historical transaction amount in terms of logistics equipment o f a p p r o x i m a t e l y R M B386,381,709, R M B374,023,968, a n d RMB262,954,471 million for the two years ended 31 December 2018 and the eleven months ended 30 November 2019; and (ii) the Group's anticipated manufacturing capacity of the logistics equipment and sales plan to end-customers from 2020 to 2022.
Energy equipment
The annual caps of the sales arrangement between the Group and Sany Group in terms of energy equipment for the three financial years ending 31 December 2022 will be approximately RMB350,000,000, RMB500,000,000 and RMB700,000,000, determined based on (i) the historical transaction amount in terms of energy equipment of approximately RMB16,431,229, RMB21,196,516 and RMB17,126,769 for the two years ended 31 December 2018 and the eleven months ended 30 November 2019; and (ii) the Group's sales plan of energy equipment from 2020 to 2022.
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Basis of the proposed | The proposed annual caps are calculated and determined after taking |
annual cap: | into account (i) the Group's anticipated manufacturing capacity for the |
years ending 31 December 2022, (ii) the Group's expected plans to take | |
advantage of Sany Group's domestic and overseas sales network and | |
sales experiences to enhance the Group's sales, especially emerging | |
products such as mining trucks and wide-bodied vehicles; and (iii) the | |
PRC government's preferential policy which expects to stimulate the | |
development of the Group's logistics equipment and energy equipment. |
Reasons For and Benefits of the Supplemental Products Sales Agreement (2020-2022)
By selling the Group's products to the Sany Group, which will then be sold to end-customers in a large scale, the Group can take advantage of Sany Group's domestic and overseas sales network and sales experiences to enhance the Group's sales.
The Directors (excluding the independent non-executive Directors, whose views will be set out in the circular to be sent to the Shareholders) are of the view that the Supplemental Products Sales Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Supplemental Product Sales Agreement (2020-2022), is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Supplemental Product Sales Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Supplemental Products Sales Agreement (2017-2019) or has abstained from voting on the relevant board resolution approving the Supplemental Products Sales Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 85.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Supplemental Products Sales Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
As one or more of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Supplemental Products Sales Agreement (2020-2022), are expected to exceed 5%, the Supplemental Products Sales Agreement (2020-2022) would be subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
17
- MASTER LEASE AGREEMENT (2020-2022) Background
On 18 December 2019, the Company and Sany Group entered into the Master Lease Agreement (2020- 2022), pursuant to which the Group agreed to lease certain premises from Sany Group or its subsidiaries with a fixed term of three years ending 31 December 2022.
Master Lease Agreement (2020-2022)
Particulars of the Master Lease Agreement (2020-2022) are set forth as follows:
Parties: | (1) the Group (as the lessee), and |
(2) SG Group (as the lessor) | |
Transaction: | Pursuant to the Master Lease Agreement (2020-2022), SG Group agreed |
to lease the certain premises to the Group, details of which are set forth | |
as below. | |
Properties: | Hunan Property: certain premises of the factories owned by Sany Auto |
Manufacturing with a total floor area of up to approximately 33,614 | |
sq.m located in Sany Industry Town, Xingsha Town, Changsha County, | |
Hunan Province, the PRC, | |
Hunan R&D Property: 3rd floor of R&D building and 5th floor of | |
R&D building owned by Sany Auto Manufacturing with a total floor | |
area of up to approximately 5,500 sq.m located in Sany Industry Town, | |
Xingsha Town, Changsha County, Hunan Province, the PRC, | |
Sale Outlets Networking Property: (i) certain working areas and | |
dormitories owned by Sany Auto Manufacturing with a total floor area | |
of up to approximately 980 sq.m located in Ningxia Hui Autonomous | |
Region, Xi'an City, Shanxi Province, Chengdu City, Sichuan Province, | |
the PRC; (ii) certain working areas and dormitories owned by Sany | |
Northwest Heavy Industry with a total area of up to approximately | |
1,500 sq.m located in Sany Northwest Industry Zone, Urumqi City, | |
Xinjiang Uygur Autonomous Region, the PRC, | |
Beijing Property: (i) certain premises of the factories owned by BeiJing | |
Sany Sun Valley Technology Co., Ltd. with a floor area of up to | |
approximately 3,700 sq.m located in Sany Huilongguan Industry Zone, | |
Changpin District, Beijing, the PRC, | |
Beijing R&D Property: up to approximately 300 working spaces owned | |
by BeiJing Sany Sun Valley Technology Co., Ltd. located in Sany | |
Huilongguan Industry Zone, Changpin District,Beijing, the PRC, and | |
Jiangsu Property: certain premises of the factories owned by Sany | |
Heavy Machinery Co., Ltd. with area up to approximately 5,400 sq.m | |
located in Sany Industry Zone, Kunshan City, Suzhou City, Jiangsu | |
Province, the PRC. | |
18 |
Fees: | The fees under the lease will consist of rental and utility changes | |
because the Group agreed to pay electricity and water charges | ||
incurred by it under the Master Lease Agreement (2020-2022) to SG | ||
Group, which SG Group shall in turn pay such charges to the relevant | ||
authorities. | ||
(1) | The rental was determined based on market price of similar areas | |
and locations. | ||
Hunan Property: up to RMB9.05 per square meter per month, | ||
which is determined based on arm's length negotiation between | ||
the parties and by reference to market rates of similar location and | ||
areas, payable monthly within the first week of each month. | ||
Hunan R&D Property: up to RMB5.29 per square meter per month, | ||
which is determined based on arm's length negotiation between | ||
the parties and by reference to market rates of similar location and | ||
areas, payable monthly within the first week of each month. | ||
Sale Outlets Networking Property: (i) up to RMB23.2 per square | ||
meter per month; (ii) up to RMB18.2 per square meter per month, | ||
which is determined based on arm's length negotiation between | ||
the parties and by reference to market rates of similar location and | ||
areas, payable monthly within the first week of each month. | ||
Beijing Property: up to RMB28.2 per square meter per month, | ||
which is determined based on arm's length negotiation between | ||
the parties and by reference to market rates of similar location and | ||
areas, payable monthly within the first week of each month. | ||
Beijing R&D Property: up to RMB1,000 per working space per | ||
month, which is determined based on arm's length negotiation | ||
between the parties and by reference to market rates of similar | ||
location and areas, payable monthly within the first week of each | ||
month. | ||
Jiangsu Property: up to RMB26.0 per square meter per month, | ||
which is determined based on arm's length negotiation between | ||
the parties and by reference to market rates of similar location and | ||
areas, payable monthly within the first week of each month. | ||
(2) | The relevant electricity and water charges shall be settled an | |
as incurred basis in accordance with the prices set forth by the | ||
relevant authorities calculated based on the actual usage by the | ||
Group under the lease. | ||
Term: | three years ending 31 December 2022 |
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Historical figures(1): | Financial | Historical | |
Year/Period Ended | Historical Caps | Transaction Amount | |
31 December 2017 | RMB13,770,000 | RMB10,623,000 | |
31 December 2018 | RMB16,670,000 | RMB10,819,000 | |
30 November 2019 | RMB20,900,000 | RMB8,692,193 | |
Note (1): The historical transactions only covered Hunan Property and Hunan R&D | |||
Property. | |||
Note (2): In accordance with IFRS16, at the commencement date of the lease | |||
arrangement, right-of-use assets and lease liabilities will be recognized | |||
based on the present value of the lease payments discounted using the | |||
Group's incremental borrowing rate. | |||
Proposed annual cap and | It is proposed that | the maximum aggregate amount of fees under | |
its basis: | the Master Lease | Agreement (2020-2022) for the three financial | |
years ending 31 December 2022 will be set at RMB15,409,732, | |||
RMB18,820,662 and RMB23,339,185, respectively, determined based | |||
on (1) the maximum annual rental payable by the Group pursuant to | |||
the Master Lease Agreement (2020-2022) and expected expansion of | |||
the leasing area in line with the expanding manufacturing capacity and | |||
business operation of the Group, and (2) the expected use of water and | |||
electricity by the Group under the Master Lease Agreement (2020- | |||
2022). |
Reasons For and Benefits of the Master Lease Agreement (2020-2022)
The business operations of Hunan Sany Port Equipment (and its predecessor) have been utilizing the Hunan Property for industrial use even before it was acquired by the Group from Sany Group. The lease of Hunan Property and Hunan R&D Property allows Hunan Sany Port Equipment to continue to use Hunan Property and Hunan R&D Property for its production and R&D and avoid any unnecessary disruption to its operations.
Sany Heavy Equipment has multiple sales networking locations in China. Leasing Sale Outlets Networking allows Sany Heavy Equipment to leverage Sany Group's sufficient locations and well- equipped office facilities of Sany Group to build local accessories warehouses and maintain the daily business operations of branches.
The business operation of Sany Intelligent Mining, the industrial automation system integration of Sany Machinery Intelligence and business operation of robot equipment demands Beijing property for industrial propose. Leasing Beijing Property and Beijing R&D Property allows Sany Intelligent Mining and Sany Machinery Intelligence to leverage talent advantages in Beijing so as to attract high-end technical talents in automation and intelligence and to enhance R&D capabilities of the Company and product competitiveness.
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The business operation of Sany Machinery Intelligence's electric forklift demands Jiangsu Property for industrial propose. Leasing Jiangsu Property allows Sany Machinery Intelligence to leverage a complete industrial chain in Yangtze River Delta so as to facilitate the production and research of electric forklift.
Therefore, the Directors (including the independent non-executive Directors) are of the view that the Master Lease Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Master Lease Agreement (2020-2022), is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Master Lease Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Master Lease Agreement (2020-2022), none of the Directors has abstained from voting on the relevant board resolution approving the Master Lease Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which is in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A. 12(1)(c) and hence a connected person of the Company under the Listing Rules.
Each of Sany Auto Manufacturing, Sany Sun Valley, Sany Heavy Machinery and Sany Northwest Heavy Industry, being a subsidiary of Sany Group, is therefore an associate of Mr. Liang Wengen under Rule 14A. 12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Master Lease Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
Pursuant to Rule 14A.76(2) of the Listing Rules, as each of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Master Lease Agreement (2020-2022) is more than 0.1% but less than 5%, the transaction contemplated under the Master Lease Agreement (2020-2022) is subject to the reporting and announcement requirements, and exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
21
-
AUTOMATED MACHINERY SALES AGREEMENT (2020-2022)
Background
On 18 December 2019, the Company and Sany Group entered into the Automated Machinery Sales Agency Agreement (2020-2022) with a fixed term of three years ended 31 December 2022.
Automated Machinery Sales Agreement (2020-2022)
Particulars of the Automated Machinery Sales Agreement (2020-2022) are set forth as follows.
Parties: | (1) | the Company, and |
(2) | Sany Group | |
Subject Matter: | The Company (or its subsidiaries) agreed to sell to Sany Group (or its | |
subsidiaries) automated and robot machinery and relevant ancillary | ||
parts which were newly developed and manufactured by the Group | ||
for Sany Group upgrade its intelligent equipment and intelligent | ||
manufacturing. | ||
Term: | The Automated Machinery Sales Agreement (2020-2022) has a fixed | |
term of three years ending 31 December 2022. | ||
Sales contract: | In respect of each sale of products by the Company (or its subsidiaries), | |
the Company (or its subsidiaries) shall enter into separate sales | ||
agreements to specify the exact products and relevant ancillary parts to | ||
be sold. | ||
Price: | The prices are determined according to the costs involved (R&D costs, | |
raw material costs, labour costs and manufacturing expenses) plus the | ||
gross profit margin ranging from 20% to 35%, which shall be in any | ||
event no less favourble to the Group than available to Independent | ||
Third Parties. | ||
Payment terms: | Pursuant to Automated Machinery Sales Agreement (2020-2022), the | |
purchase price of the sold products shall be paid by way of telegraphic | ||
transfer within three months after the products are delivered and related | ||
products have passed the inspection of Sany Group. | ||
Historical figure: | There was no such transaction arrangement between the Group and | |
Sany Group because automated machinery and robot machinery were | ||
newly developed and manufactured by the Group. | ||
Proposed annual cap: | It is proposed that the annual cap for the transactions under the | |
Automated Machinery Sales Agreement (2020-2022) for the three |
financial years ending 31 December 2022 will be RMB205,000,000, RMB308,000,000 and RMB310,000,000.
22
Basis of the proposed annual cap:
The proposed annual cap is determined based on arm's length negotiation and with reference to (i) the Group's estimated production capacity of industrial automation and integrated robotic application equipment and the sales plans from 2020 to 2022; and (ii) Sany Group' estimated increasing demand for intelligent manufacturing upgrading.
Reasons for and the Benefits of the Automated Machinery Sales Agreement (2020-2022)
Considering that the Group just started to develop and manufacture automated machinery and robot machinery in late 2019, while Sany Group is the connected person of the Company, the Group is able to sell such products efficient and Sany Group is able to provide feedback to the Group on the functions in a timely manner so that the Group is able to improve the R&D and manufacturing process efficiently and effectively. In addition, the Group's selling price of relevant products to Sany Group should be in any event no less favorable to the Group than that to Independent Third Parties.
Therefore, the Directors (excluding the independent non-executive Directors, whose views will be set forth in the circular to be sent) are of the view that the Automated Machinery Sales Agreement (2020- 2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Automated Machinery Sales Agreement (2020-2022) is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Automated Machinery Sales Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Automated Machinery Sales Agreement (2020-2022) or has abstained from voting on the relevant board resolution approving the Automated Machinery Sales Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which is in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Automated Machinery Sales Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules.
23
Pursuant to Rule 14A.76(2) of the Listing Rules, as each of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Automated Machinery Sales Agreement (2020-2022) is more than 5%, the transaction contemplated under the Automated Machinery Sales Agreement (2020-2022) is subject to the reporting and announcement requirements, and the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
(G) MASTER SALES AGENCY AGREEMENT (2020-2022)
Background
On 18 December 2019, the Company and Sany Group entered into the Master Sales Agency Agreement (2020-2022) with a fixed term of three years ending 31 December 2022.
Master Sales Agency Agreement (2020-2022)
Particulars of the Master Sales Agency Agreement (2020-2022) are set forth as follows.
Parties: | (1) | the Company, and |
(2) | Sany Group | |
Subject Matter: | Sany Group agreed to act as the sales agency for the Group for the | |
overseas end-customers and the Company agreed to pay Sany Group for | ||
the agency fees based on the actual amount of the sales transactions. | ||
Sales Agency Contract: | In respect of each sale of products by the Company (or its subsidiaries), | |
the Company (or its subsidiaries) shall enter into the sales contract | ||
with the end-customers directly, and the Company and Sany Group (or | ||
its subsidiaries) shall enter into separate sales agency agreements to | ||
specify the exact agency fees of the relevant products being sold. | ||
Pricing: | The basis of determining sales agency fees payable will be determined | |
on arm's length negotiation and with reference to the below formula |
and the sales agency fees paid by the Company (or its subsidiaries) to Sany Group (or its subsidiaries) shall not be higher than the sales agency fees paid to the Independent Third Party agencies for similar products and regions.
Sales agency fees = Sales revenue of sold products × 5%
Note: The Group's recent average sales expenses rate is approximately 6% and Sany Group is willing to offer a slightly lower expenses ratio of 5%.
24
Payment terms:Invoice for sales agency fees shall be issued by Sany Group (or its subsidiaries) to the Company and payment for the sales agency fees will be settled by way of telegraphic transfer or cheque in the following month upon receipt of the invoice by the Company.
Historical figure:There was no historical transaction arrangement between the Group and Sany Group.
Proposed annual cap: It is proposed that the annual cap for the transactions under the Master Sales Agency Agreement (2020-2022) for the three financial years ending 31 December 2022 will be RMB5,000,000, RMB6,000,000 and RMB7,000,000.
Basis of the proposed annual cap:
The proposed annual caps are determined after taking into account the Group's expected sales plans for overseas regions where the end- customers are less centralized located.
Reasons for and the Benefits of the Master Sales Agency Agreement (2020-2022)
The sales agency mode is mainly adopted for overseas regions where the end-customers are less centralized located. The Group can take advantage of Sany Group's strong overseas sales network to procure the end-customers and then expand the relevant market gradually, which would be much more commercially efficient than the Group seeking and coordinating with the customers one by one directly. Therefore, it is reasonable for Sany Group to charge certain agency fees.
Therefore, the Directors (including the independent non-executive Directors) are of the view that the Master Sales Agency Agreement (2020-2022) has been entered into in the ordinary and usual course of business on normal commercial terms and the terms thereof are fair and reasonable and in the interest of the Company and the Shareholders as a whole.
Since Sany Group, being a party to the Master Sales Agency Agreement (2020-2022) is an associate of Mr. Liang Wengen, Mr. Liang Zaizhong, being the son of Mr. Liang Wengen, has abstained from voting on the Board resolution approving the Master Sales Agency Agreement (2020-2022) due to conflict of interests.
Save as disclosed above, no Director has a material interest in the Master Sales Agency Agreement (2020-2022) or has abstained from voting on the relevant board resolution approving the Master Sales Agency Agreement (2020-2022).
Listing Rules Implications
As at the date of this announcement, Mr. Liang Wengen is a controlling shareholder of the Company by virtue of 10,870,000 ordinary Shares directly held by him and his indirect 56.38% interests in Sany Hong Kong, which is in turn holds 2,098,447,688 ordinary shares and 479,781,034 Convertible Preference Shares, which, in aggregate, represents 83.53% of the issued share capital of the Company.
25
Sany Group, being held by Mr. Liang Wengen as to 56.74%, is therefore an associate of Mr. Liang Wengen under Rule 14A.12(1)(c) and hence a connected person of the Company under the Listing Rules.
Accordingly, the transactions under the Master Sales Agency Agreement (2020-2022) constitute continuing connected transactions of the Company under the Listing Rules. Pursuant to Rule 14A.76(2) of the Listing Rules, as each of the applicable percentage ratios (other than the profits ratio) as calculated in accordance with Chapter 14 of the Listing Rules for the proposed cap amount in respect of the Master Sales Agency Agreement (2020-2022) is more than 0.1% but less than 5%, the transaction contemplated under the Master Sales Agency Agreement (2020-2022) is subject to the reporting and announcement requirements, and exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.
INTERNAL CONTROL
To ensure that the actual prices for the transactions under the connected transactions are on normal commercial terms and on terms no less favorable to the Company than to Independent Third Parties, the internal audit department of the Group will conduct regular checks to review and assess whether the products/services have been procured or sold or provided in accordance with the terms of the relevant agreement and on normal commercial terms. In addition, the Company has engaged external auditors to conduct annual review of these connected transactions.
EGM
The Company will hold the EGM to approve the Supplemental Master Purchase Agreement (2020- 2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022), and the proposed annual caps for the continuing connected transactions contemplated thereunder.
Vinco Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022).
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CIRCULAR
A circular containing, inter alia, (i) further information on the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022);
- the notice of the EGM; (iii) the letter from Vinco Capital Limited to both the Independent Board Committee and the Independent Shareholders regarding the Supplemental Master Purchase Agreement (2020-2022), the Supplemental Master Transportation Agreement (2020-2022), the Automated Machinery Sales Agreement (2020-2022) and the Supplemental Products Sales Agreement (2020-2022) and the transactions thereunder; and (iv) the recommendation of the Independent Board Committee to the Independent Shareholders in connection thereto, will be despatched to the Shareholders as soon as possible. It is currently expected that the circular will be despatched to the Shareholders on or before 13 January 2020.
INFORMATION ABOUT THE COMPANY
The Company is an investment holding company and its subsidiaries are principally engaged in the design, manufacture and sales of roadheader, combined coal mining unit, mining transportation vehicles, port machinery and marine heavy equipment products.
INFORMATION ABOUT SANY GROUP
Sany Group is principally engaged in the manufacture and distribution of engineering machineries for construction purposes, and machinery leasing, manufacture of automobile and educational businesses.
INFORMATION ABOUT SANY LOGISTICS
Sany Logistics is a subsidiary of Sany Group and it is principally engaged in domestic freight transportation services, freight transportation agency services, logistics information consulting services and export trading.
INFORMATION ABOUT HUNAN SANY PORT EQUIPMENT
Hunan Sany Port Equipment is a subsidiary of Sany Group and it is principally engaged in research and development, manufacturing and sales of part machinery and engineering vessel.
INFORMATION ABOUT SANY AUTO MANUFACTURING
Sany Auto Manufacturing is a subsidiary of Sany Group and it is principally engaged in the manufacturing of equipment in the concrete industry, including pump trucks and trailer pumps.
INFORMATION ABOUT SANY SUN VALLEY
Sany Sun Valley is a subsidiary of Sany Group and it is principally engaged in corporate management and consultation, technology promotion and technical services.
27
INFORMATION ABOUT SANY HEAVY MACHINERY
Sany Heavy Machinery is a subsidiary of Sany Group and it is principally engaged in research and development, manufacture and sale of excavators, off-highway dump trucks, rotary drilling rigs and demolition machines, also engaged in the wholesale and import and export businesses of engineering machinery accessories.
INFORMATION OF SANY NORTHWEST HEAVY INDUSTRY
Sany Northwest Heavy Industry is a subsidiary of Sany Group and it is principally engaged in research and development, manufacturing and sale of construction machineries and equipment, lifting machineries and general equipment, electrical equipment.
DEFINITIONS
In this announcement, the following expressions shall have the following meanings unless the context otherwise requires:
"associate" | has the same meaning ascribed to it under the Listing Rules; |
"Automated Machinery Sales | means the automated machinery and robot machinery sales |
- Agreement (2020-2022)" agreement dated 18 December 2019 in relation to the sales of automated and robot machinery sales agreement to Sany Group for its own use
"Board" | means the board of Directors; |
"Company" | means Sany Heavy Equipment International Holdings Company |
Limited ( 三一重裝國際控股有限公司), a company incorporated | |
with limited liability on 23 July 2009 under the laws of the Cayman | |
Islands and the Shares of which are listed on the Stock Exchange | |
(stock code: 631); | |
"connected person" | has the same meaning ascribed to it under the Listing Rules; |
"controlling shareholder" | has the same meaning ascribed to it under the Listing Rules; |
"Convertible Preference Shares" | means the limited-voting convertible preference shares of the |
Company; | |
"Director(s)" | means the directors of the Company; |
28
"EGM" | the extraordinary general meeting of the Company to be convened to, |
among others, consider and if thought fit, approve the Supplemental | |
Master Purchase Agreement (2020-2022), the Supplemental Master | |
Transportation Agreement (2020-2022), the Automated Machinery | |
Sales Agreement (2020-2022) and the Supplemental Products Sales | |
Agreement (2020-2022); | |
"Group" | means the Company and its subsidiaries; |
"HK$" | means Hong Kong dollar, the lawful currency of Hong Kong; |
"Hong Kong" | means the Hong Kong Special Administrative Region of the PRC; |
"Hunan Property" | means certain premises owned by Sany Auto Manufacturing, |
leased to Hunan Sany Port Equipment pursuant to the Master Lease | |
Agreement; | |
"Hunan R&D Property" | means certain premises owned by Sany Auto Manufacturing, |
leased to Hunan Sany Port Equipment pursuant to the Master Lease | |
Agreement; | |
"Beijing Property" | means certain premises owned by Sany Sun Valley, leased to Sany |
Intelligent Mining and Sany Machinery Intelligence pursuant to the | |
Master Lease Agreement; | |
"Beijing R&D Property" | means certain premises owned by Sany Sun Valley, leased to Sany |
Intelligent Mining and Sany Machinery Intelligence pursuant to the | |
Master Lease Agreement; | |
"Jiangsu Property" | means certain premises owned by Sany Heavy Machinery, leased |
to Sany Machinery Intelligence pursuant to the Master Lease | |
Agreement; | |
"Sale Outlets Networking | means certain premises owned by Sany Northwest Heavy Industry |
Property" | and Sany Auto Manufacturing, leased to Sany Heavy Equipment |
pursuant to the Master Lease Agreement; | |
"Hunan Sany Port Equipment" | means Hunan Sany Port Equipment Co., Ltd.* ( 湖南三一港口設備 |
有限公司), a company established under the laws of the PRC and a | |
wholly-owned subsidiary of the Company; |
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"Sany Intelligent Mining" | means Sany Intelligent Mining Technology Co., Ltd.* ( 三一智礦科 |
技有限公司), a company established under the laws of the PRC and | |
a subsidiary of the Company; | |
"Sany Machinery Intelligence" | means Sany Machinery Intelligence Co., Ltd.* ( 三一機器智能有 |
限公司) (subject to the name approval by local administration for | |
market regulation), a company established under the laws of the PRC | |
and a subsidiary of the Company; | |
"Sany Heavy Equipment" | means Sany Heavy Equipment Co., Ltd.* ( 三一重型裝備有限公司), |
a company established under the laws of the PRC and a wholly- | |
owned subsidiary of the Group; | |
"Independent Board | means an independent board committee of the Board comprising |
Committee" | all the independent non-executive Directors, who have no material |
interest in the Supplemental Master Purchase Agreement (2020- | |
2022), the Supplemental Master Transportation Agreement (2020- | |
2022), the Automated Machinery Sales Agreement (2020-2022) and | |
the Supplemental Products Sales Agreement (2020-2022), namely, | |
Mr. Poon Chiu Kwok, Mr. Ng Yuk Keung and Mr. Hu Jiquan; | |
"Independent Third Party(ies)" | means an individual(s) or a company(ies) who or which is/are |
independent of and not connected with (within the meaning of | |
the Listing Rules) any Director, chief executive or substantial | |
shareholders (within the meaning of the Listing Rules) of the | |
Company, its subsidiaries or any of their respective associates; | |
"Independent Shareholders" | means the Shareholders who are not interested in or involved in the |
Supplemental Master Purchase Agreement and the Sales Agreement; | |
"Listing Rules" | means the Rules Governing the Listing of Securities on the Main |
Board of the Stock Exchange; | |
"Master Lease Agreement | means the master lease agreement dated 18 December 2019 entered |
(2020-2022)" | into between the Company and Sany Group in relation to the lease of |
certain premises of Sany Group by the Company or its subsidiaries; |
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"Master Purchase Agreement" | means the master purchase agreement dated 31 December 2014 |
entered into between the Company and Sany Group in relation to (1) | |
the purchase by the Group of certain parts and components from SG | |
Group; and (2) the purchase by the Group of certain second-hand | |
manufacturing equipment, including but not limited to machine tools, | |
for the manufacturing of the Group, from SG Group; | |
"Master Transportation | means the transportation service agreement dated 31 December 2014 |
Agreement" | entered into between the Company and Sany Logistics in relation to |
the provision of certain logistics services by Sany Logistics to the | |
Company or its subsidiaries; | |
"Master Sales Agreement" | means the master sales agreement dated 25 August 2014 entered |
into between the Company and Sany Group, pursuant to which | |
the Company (or its subsidiaries) agreed to sell certain parts and | |
components to Sany Group (or its subsidiaries); | |
"Master Sales Agency | means the master sales agency agreement dated 18 December 2019 |
- Agreement (2020-2022)" entered into between the Company and Sany Group, pursuant to which the Company agreed to engage Sany Group to act as the sales agent for certain of its products;
"PRC" | the People's Republic of China; |
"RMB" | means Renminbi, the lawful currency of the PRC; |
"R&D" | research and development; |
"Sany Group" | means 三一集團有限公司(Sany Group Limited*), a company with |
limited liability established on 18 October 2000 under the laws of the | |
PRC; | |
"Sales Agreement" | means the sales agreement entered into between the Company and |
the Sany Group on 19 June 2015 in respect of the sales of finished | |
products by the Company to Sany Group; | |
"Sany Auto Manufacturing" | means Sany Auto Manufacturing Co., Ltd.* ( 三一汽車製造有限 |
公司), a company established under the laws of the PRC and a | |
subsidiary of Sany Group; | |
"Sany Sun Valley" | means Beijing Sany Sun Valley Technology Co., Ltd.* ( 北京三一 |
太陽谷科技有限公司), a company established under the laws of the | |
PRC and a subsidiary of Sany Group; |
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"Sany Heavy Machinery" | means Sany Heavy Machinery Co., Ltd.* ( 三一重機有限公司), a |
company established under the laws of the PRC and a subsidiary of | |
Sany Group; | |
"Sany Northwest Heavy Industry" | means Sany Northwest Heavy Industry Co., Ltd., a company |
established under the laws of the PRC and a wholly-owned | |
subsidiary of the Sany Group; | |
"Sany Hong Kong" | means Sany Hong Kong Group Limited, a company with limited |
liability incorporated on 14 October 2005 under the laws of Hong | |
Kong, and the controlling shareholder of the Company; | |
"Sany Logistics" | means Hunan Sany Logistics Co., Ltd.* ( 湖南三一物流有限公司), |
a company with limited liability established under the laws of the | |
PRC, a wholly-owned subsidiary of Sany Group | |
"SG Group" | means Sany Group and its subsidiaries; |
"Share(s)" | means ordinary share(s) of HK$0.10 each in the share capital of our |
Company; | |
"Shareholder(s)" | means the holder(s) of the ordinary share(s) of the Company with a |
nominal value of HK$0.10 each; | |
"Stock Exchange" | means The Stock Exchange of Hong Kong Limited; |
"subsidiary" | has the meaning ascribed to it in sections 15 of the Companies |
Ordinance (Chapter 622 of the Laws of Hong Kong); | |
"Supplemental Master | means the supplemental agreement entered into between the |
Purchase Agreement" | Company and Sany Group on 19 June 2015 in respect of the revised |
annual cap under the Master Purchase Agreement; | |
"Supplemental Master | means the supplemental agreement entered into between the |
- Purchase Agreement (2016)" Company and Sany Group on 7 January 2016 in relation to (1) the purchase by the Group of certain parts and components from SG Group and (2) the purchase by the Group of certain second-hand manufacturing equipment, including but not limited to machine tools, for the manufacturing of the Group from SG Group;
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"Supplemental Master
- Purchase Agreement
- (2017-2019)"
"Supplemental Master
- Purchase Agreement
- (2020-2022)"
means the supplemental agreement entered into between the Company and Sany Group on 16 March 2017 in relation to (1) the purchase by the Group of certain parts and components from SG Group and (2) the purchase by the Group of certain second-hand manufacturing equipment for the manufacturing of the Group from SG Group;
means the supplemental agreement entered into between the Company and Sany Group on 18 December 2019 in relation to (1) the purchase by the Group of certain parts and components from SG Group and (2) the purchase by the Group of certain second-hand manufacturing equipment for the manufacturing of the Group from SG Group;
"Supplemental Master | means | the | supplemental | agreement | entered into between the |
Sales Agreement" | Company and Sany Group on 19 June 2015 in respect of the revised | ||||
annual cap under the Master Sales Agreement; | |||||
"Supplemental Master | means | the | supplemental | agreement | entered into between the |
- Sales Agreement (2016)" Company and Sany Group on 7 January 2016, pursuant to which the Company (or its subsidiaries) agreed to sell parts and components and second-hand manufacturing equipment to Sany Group (or its subsidiaries);
"Supplemental Master | means the supplemental agreement entered into between the |
Sales Agreement | Company and Sany Group on 16 March 2017, pursuant to which the |
- (2017-2019)"Company (or its subsidiaries) agreed to sell certain raw materials and second-hand manufacturing equipment to Sany Group (or its subsidiaries);
"Supplemental Master Sales | means the supplemental agreement entered into between the |
- Agreement (2020-2022)" Company and Sany Group on 18 December 2019, pursuant to which the Company (or its subsidiaries) agreed to sell certain raw materials and second-hand manufacturing equipment to Sany Group (or its subsidiaries);
"Supplemental Master | means the supplemental agreement entered into between the |
Transportation Agreement" | Company and Sany Logistics on 19 June 2015 in respect of the |
revised annual cap under the Master Transportation Agreement; |
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"Supplemental Master | means the supplemental agreement entered into between the | |
Transportation Agreement | Company and Sany Logistics on 7 January 2016 in relation to the | |
(2016)" | provision of certain logistics services by Sany Logistics to the | |
Company or its subsidiaries; | ||
"Supplemental Master | means the supplemental agreement entered into between the | |
Transportation Agreement | Company and Sany Logistics on 16 March 2017 in relation to the |
- (2017-2019)"provision of certain logistics services by Sany Logistics to the Company or its subsidiaries;
"Supplemental Master | means the supplemental agreement entered into | between the |
Transportation Agreement | Company and Sany Logistics on 18 December 2019 | in relation to |
- (2020-2022)"the provision of certain logistics services by Sany Logistics to the Company or its subsidiaries;
"%" | means per cent. |
- for identification only
By the order of the Board of Directors
Sany Heavy Equipment International Holdings Company Limited
Mr. Liang Zaizhang
Chairman
Hong Kong, 18 December 2019
As at the date of this announcement, the executive Directors are Mr. Liang Zaizhang, Mr. Qi Jian, Mr. Fu Weizhong and Mr. Zhang Zhihong, the non-executive Directors are Mr. Tang Xiuguo, and Mr. Xiang Wenbo, and the independent non-executive Directors are Mr. Ng Yuk Keung, Mr. Poon Chiu Kwok and Mr. Hu Jiquan.
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