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XINCHEN CHINA POWER HOLDINGS LIMITED อોʕਗɢછٰϞࠢʮ̡
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1148)
CONTINUING CONNECTED TRANSACTIONS
AND
RENEWAL OF CONTINUING CONNECTED TRANSACTIONS
CONTINUING CONNECTED TRANSACTIONS
On 18 October 2018, the Company entered into (a) the Huachen Purchase Agreement 2018-2020 with Huachen for a term commencing from 18 October 2018 to 31 December 2020; and (b) the Brilliance China Licence Agreements 2018-2020 with Brilliance China for a term commencing from 1 September 2018 to 31 December 2020, as to the conduct of the Continuing Connected Transactions 2018-2020.
RENEWAL OF CONTINUING CONNECTED TRANSACTIONS
On 18 October 2018, (a) Mianyang Xinchen, a wholly-owned subsidiary of the Company, entered into (i) the Huachen Lease Agreement 2019-2021 with Shenyang Brilliance Power; and (ii) the Wuliangye Construction Services Agreement 2019-2021 with Mianyang Xin Xinmao; and (b) the Company or its subsidiary entered into the Framework Agreements 2019-2021 with Huachen, Brilliance China and certain subsidiaries of Wuliangye, as to the continued conduct of the Continuing Connected Transactions 2016-2018 for the three financial years commencing from 1 January 2019 to 31 December 2021.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Brilliance China and Wuliangye are interested in 400,000,000 and 400,000,000 Shares, representing approximately 31.20% and 31.20% of the issued share capital of the Company, respectively. Accordingly, each of Brilliance China and Wuliangye is a connected person of the Company under Rule 14A.07(1) of the Listing Rules. Huachen, being interested in approximately 42.32% of the issued share capital of Brilliance China, is a controlling shareholder of Brilliance China. It is deemed as a connected person of the Company by the Stock Exchange under Rule 14A.07(6) of the Listing Rules.
As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules for the Exempted Continuing Connected Transactions are, on an annual basis, over 0.1% but all of them are less than 5%, the Exempted Continuing Connected Transactions are subject to the reporting, announcement and annual review requirements but exempt from the circular, independent financial advice and shareholders' approval requirements under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules for the Non-exempted Continuing Connected Transactions are, on an annual basis, over 5%, the Non-exempted Continuing Connected Transactions are subject to reporting, announcement, annual review and Independent Shareholders' approval requirements as set out in Chapter 14A of the Listing Rules.
GENERAL
The Independent Board Committee has been established to advise the Independent Shareholders as to (i) the Non-exempted Continuing Connected Transactions; and (ii) the Proposed Caps for the Non-exempted Continuing Connected Transactions.
The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of (i) the Non-exempted Continuing Connected Transactions; and (ii) the Proposed Caps for the Non-exempted Continuing Connected Transactions.
A circular containing, amongst other things, details of the Non-exempted Continuing Connected Transactions and the Proposed Caps for the Non-exempted Continuing Connected Transactions, the letter from the Independent Board Committee and the letter from the Independent Financial Adviser and a notice convening the Extraordinary General Meeting for the Independent Shareholders to consider and, if thought fit, approve (i) the Non-exempted Continuing Connected Transactions; and (ii) the Proposed Caps for the Non-exempted Continuing Connected Transactions, in accordance with the requirements of the Listing Rules, will be despatched to the Shareholders on or before 8 November 2018.
I. CONTINUING CONNECTED TRANSACTIONS
On 18 October 2018, the Company entered into (a) the Huachen Purchase Agreement 2018-2020 with Huachen for a term commencing from 18 October 2018 to 31 December 2020; and (b) the Brilliance China Licence Agreements 2018-2020 with Brilliance China for a term commencing from 1 September 2018 to 31 December 2020, as to the conduct of the Continuing Connected Transactions 2018-2020.
A. Exempted Continuing Connected Transactions 1. Purchase of engine components from Huachen
Background
On 18 October 2018, the Company entered into the Huachen Purchase Agreement 2018-2020 with Huachen for a term commencing from 18 October 2018 to 31 December 2020.
Huachen Purchase Agreement 2018-2020
Date : 18 October 2018
Parties : (1) The Company, as the purchaser; and
(2) Huachen, as the seller
Term
: The Huachen Purchase Agreement 2018-2020 shall be for a term commencing on 18 October 2018 and ending on 31 December 2020 (both dates inclusive). Unless terminated prior to its expiry date, the Huachen Purchase Agreement 2018-2020 shall be renewable for an additional term of three years subject to fulfillment of all necessary statutory and regulatory requirements including but not limited to any applicable requirement under the Listing Rules.
Nature of transactions
: Pursuant to the agreement, the Group has agreed to purchase various engine components (which do not include those (including the Remaining Materials) purchased under the Huachen Purchase Agreement) from the Huachen Group.
Consideration : The price for each purchase of engine components from the Huachen Group is determined by reference to the prevailing market price from time to time.
Pricing policy
Prevailing market price means the price at which the same type of engine components can be obtained from independent third party suppliers on normal commercial terms or better in the ordinary course of business. For the purpose of obtaining market prices, the Group will make reference to the price quotations obtained from other independent third party suppliers of engine components of comparable quality, quantity and specifications. In any event, the terms of each purchase from the Huachen Group will be no less favourable than the terms which can be obtained from independent third party suppliers of engine components of comparable quality, quantity and specifications.
2. Licence from Brilliance China to the Company for use of office premises, ancillary utilities and office supplies
Background
Brilliance China has been licensing the exclusive use of a part of the Office Premises which is one-third in floor area to the Company for use as office premises, together with the use of ancillary utilities and office supplies, pursuant to a licence agreement whose term expired on 31 August 2018. As all of the applicable percentage ratios under Rule 14.07 of the Listing Rules for the transactions contemplated under the aforesaid licence agreement are less than 5% and the total licence fees paid by the Company thereunder for the eight months ended 31 August 2018 are less than HK$3,000,000 and given that such transactions were conducted on normal commercial terms, according to Rule 14A.76(1) of the Listing Rules such transactions are fully exempt from the reporting, announcement, annual review and shareholders' approval requirements under Chapter 14A of the Listing Rules. On 18 October 2018, the Company entered into the Brilliance China Licence Agreements 2018-2020 with Brilliance China for a term commencing from 1 September 2018 to 31 December 2020 for the continued use of such part of the Office Premises, together with the use of ancillary utilities and office supplies.
Brilliance China Licence Agreements 2018-2020
Date : 18 October 2018
Parties : (1) The Company, as the licensee; and
(2) Brilliance China, as the licensor
Term
: The Brilliance China Licence Agreements 2018-2020 shall be for a term commencing on 1 September 2018 and ending on 31 December 2020 (both dates inclusive).
Nature of transactions
: Pursuant to the agreements, Brilliance China has licensed the exclusive use of a part of the Office Premises which is one-third in floor area to the Company for use as office premises, together with the use of ancillary utilities and office supplies.
Consideration : The licence fee is determined based on (a) as regards the use of the Office Premises, one-third of the rent actually payable by Brilliance China to the landlord of the Office Premises and the relevant management fees and government rates; and (b) as regards the ancillary utilities and office supplies, one-third of the historical amounts paid by Brilliance China therefor.
II. RENEWAL OF CONTINUING CONNECTED TRANSACTIONS
On 18 October 2018, (a) Mianyang Xinchen, a wholly-owned subsidiary of the Company, entered into (i) the Huachen Lease Agreement 2019-2021 with Shenyang Brilliance Power; and (ii) the Wuliangye Construction Services Agreement 2019-2021 with Mianyang Xin Xinmao; and (b) the Company or its subsidiary entered into the Framework Agreements 2019-2021 with Huachen, Brilliance China and certain subsidiaries of Wuliangye, as to the continued conduct of the Continuing Connected Transactions 2016-2018 for the three financial years commencing from 1 January 2019 to 31 December 2021.
B. Exempted Continuing Connected Transactions 1. Rental of factory premises from Shenyang Brilliance Power
Background
As disclosed in the 2015 Announcement, Shenyang Brilliance Power and Mianyang Xinchen entered into the Existing Lease Agreement in relation to the Factory Premises for a term expiring on 31 December 2018. The Factory Premises are part of the E2 Factory, which is primarily for the accommodation of the E3 engine production lines, the connecting rod production lines and other related assets in the E2 Factory.
Huachen Lease Agreement 2019-2021
Date : 18 October 2018
Parties : (1) Mianyang Xinchen, as the lessee; and
(2) Shenyang Brilliance Power, as the lessor
Term
: The Huachen Lease Agreement 2019-2021 shall be for a term of three years commencing on 1 January 2019 and ending on 31 December 2021 (both dates inclusive). Mianyang Xinchen may request to renew the term of the Huachen Lease Agreement 2019-2021 by giving three months' written notice to Shenyang Brilliance Power prior to the expiry of the original term or terminate the Huachen Lease Agreement 2019-2021 upon the consent of Shenyang Brilliance Power to be sought by three months' prior written notice to
Shenyang Brilliance Power.