TIDMLED
RNS Number : 4630A
LED International Holdings Ltd
22 December 2014
22 December 2014
LED International Holdings Limited
("LED" or the "Company")
Proposed acquisition of Shenzhen Ruihetai Industry Co.
Limited
Suspension of trading of the Company's shares
Related party transaction
The board of directors of LED (the "Board") is pleased to
announce that on 22 December 2014 the Company entered into a
conditional agreement under which it or a member of its Group will
acquire the majority of the issued share capital of Shenzhen
Ruihetai Industry Co. Limited ("RHT") (the "Acquisition") from Ms.
Li Sai Ying and Mr. Lin Zhong (together, the "Vendors") at a
maximum consideration of RMB11,259,903 (approximately GBP1,136,000)
(the "Consideration"). The Consideration is to be satisfied by
issue and allotment of new shares in LED and through a three-year
non-interest bearing convertible loan note.
LED's Chief Executive Officer, Stephen Chan, said: "I am
delighted to announce this significant acquisition of Shenzhen
Ruihetai. Shenzhen Ruihetai has a very strong distribution network
through which we will be able to promote our green products and
diversify our product offerings. Also, the readiness of the vendors
in committing to a profit guarantee is a testament to their
confidence in Shenzhen Ruihetai and its future potential."
Background to RHT
RHT is a large-scale grain enterprise incorporated in the
People's Republic of China (the "PRC"). It is mainly engaged in the
business of rice storage, processing, distribution, and the
wholesale and retail sale of rice. It is designated by the Shenzhen
Municipal Government as a provider of food supplies in the event of
a state of emergency in Shenzhen. RHT has invested heavily in the
latest technology and introduced advanced rice processing equipment
to ensure the quality and safety of its products.
RHT has long established relationships with business partners in
major grain-producing areas in Northeast China, Hunan, Hubei,
Jiangxi, Jiangsu, Guangxi as well as internationally in Thailand.
RHT has established rice counters in major shopping malls,
supermarkets and chain stores in residential areas throughout the
PRC and, in doing so, RHT has built a strong and reputable food
distribution network in the PRC. For the period from 1 January 2014
to 30 September 2014, RHT generated revenues of RMB59,077,179
(unaudited) (approximately GBP6,077,000) and a net profit after
taxation of RMB50,170 (unaudited) (approximately GBP5,200).
Reasons for the acquisition
The energy saving and environmental protection industry ranks
top among the seven strategic emerging industries outlined in the
PRC's Five-Year Plan. In view of rising national power consumption,
the Chinese government has introduced initiatives to reduce energy
consumption and carbon emissions which will lead to increasing
opportunities for providers of energy saving and carbon reduction
products, services and solutions within the PRC.
The Company has adopted a conservative but proactive approach
towards entering into the growing energy management contract
("EMC") market under the brand name "Green Pearl" for the past
three years. In addition to the supply of energy saving solutions,
the Company has also been considering the introduction of other
carbon reduction solutions to offer a total carbon reduction
solution to the PRC. The Board envisages that the Acquisition will
enable the Group to take advantage of the operating cash flows
generated from RHT and market its "Green Pearl" green products
through RHT's distribution network in the PRC.
The Board believes that the acquisition of RHT will give LED
immediate access to RHT's extensive distribution network in the PRC
through which LED will be able to promote its EMC business.
Summary of the Acquisition
!P The Company, or a nominated member of its group, shall
acquire majority control over RHT, the exact shareholding of which
is to be determined and is subject to the local laws and
regulations governing foreign investments in PRC companies.
!P The maximum Consideration to be paid by LED for RHT is the
net asset value of RHT as at 30 September 2014 determined by an
independent accounting firm in Hong Kong. If LED were to acquire
100 per cent. of RHT, this would amount to RMB11,259,903
(approximately GBP1,136,000).
!P The Consideration is to be satisfied by the issue of up to
334,200 new ordinary shares in the Company (the "Shares") at
HKD12.49806 per share and the issue of a three year, non-interest
bearing convertible loan note (the "Loan Notes") in the amount of
up to HKD9,746,009. The Loan notes are convertible into ordinary
shares in LED at a price of HK$12.49806. The price per Share
represents the closing mid-price of 102 pence on 19 December
2014.
!P The Company has agreed to provide a working capital loan to
RHT in the amount of RMB50 million to support the business
development of RHT and the Vendors will continue to assume
responsibility for the management and operation of RHT. In order to
finance this working capital loan, the Company intends to raise
additional funding through equity and/or debt financing.
!P As part of the Acquisition, the Vendors will provide a profit
guarantee that the annual net profit of RHT shall be at least RMB70
million for the three-year period after the completion of the
Acquisition, such amount shall exclude the green products
introduced by the Company and distributed through RHT within the
PRC during the three-year period. In the event that this profit
guarantee is not met, the Consideration payable by LED will be
reduced.
!P The Vendors have agreed to enter into a lock-in and orderly
market agreement with the Company and its Nominated Adviser,
Allenby Capital Limited, under which the Vendors have agreed not to
sell or otherwise dispose of any of their Shares during for the
three-year period following the completion of the Acquisition.
!P To comply with the local laws and regulations governing
foreign investments in PRC companies, the exact structure and terms
of the Acquisition and the Loan Notes are subject to the legal
opinion of PRC lawyers.
Reverse takeover and suspension of trading in the Company's
shares
By reason of the size of RHT in relation to the Company, the
Acquisition is classified as a reverse takeover under the AIM Rules
for Companies. The AIM Rules require that completion of the
Acquisition is conditional, amongst other things, upon and subject
to the approval of the Company's shareholders, which will be sought
at a general meeting of the Company, and the publication of an AIM
admission document, which will be posted to the Company's
shareholders as soon as it is available.
In consequence, trading in the Company's shares will be
suspended from 12.00 Noon. today pending the preparation and
publication of the AIM admission document and the notice of general
meeting setting out the details of the Acquisition and seeking
shareholder approval.
Related party transaction
As Mr. Lin Zhong is sole shareholder of Speedy Dragon Holdings
Limited, a substantial shareholder of the Company, the acquisition
of RHT constitutes a related party transaction pursuant to Rule 13
of the AIM Rules for Companies. The Company's directors, having
consulted with the Company's nominated adviser, Allenby Capital
Limited, consider that the terms of the Acquisition are fair and
reasonable insofar as the Company's shareholders are concerned.
**Ends**
For further information:
LED International Holdings Limited
Stephen Chan - Chief Executive Officer +852 2243 3100
Allenby Capital Limited
Nick Naylor / Alex Price +44 (0) 20 3328 5656
Notes to Editors:
LED International Holdings Limited and its subsidiaries
specialise in the provision of EMC contracts under which the Group
installs energy saving products in its customers' premises,
including lighting and reactance filtering equipment supplied by
the Group, and the subsequent savings made by the customers in
their electricity charges are then shared between the Group and the
customers thereby enabling the Group to generate recurring revenue
rather than one-off sales revenue. Historically, the Group's
business has been the development, manufacture and sale of
low-powered light-emitting diode ("LED") display screens and
modules.
Under EMC contracts, the Group provides energy efficiency
solutions, including LED lighting, reactance filtering energy
saving and other energy efficiency solutions.Specifically, the
Group overhauls its customers' existing lighting and power
consumption systems (which are based on traditional lighting
technology and power generation equipment) with proprietary LED
lighting products, reactance filtering equipment and other
solutions provided by the Group. These energy efficiency products
are installed in customers' premises. The Group bears all the
upfront costs associated with the supply and installation of the
energy efficiency solutions and these costs are then recouped by
sharing in the monthly energy savings generated by the customers'
use of the energy efficiency solutions over the period of the
contracts. The Group receives revenue from customers on several
different payment terms including on a pre-payment, monthly or
quarterly basis.
For more information, please visit: http://www.led-intl.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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