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ZHEJIANG EXPRESSWAY CO LD: Discloseable and Connected Transactions


ZHEJIANG EXPRESSWAY CO LD: Discloseable and Connected Transactions 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.

ZHEJIANG EXPRESSWAY CO., LTD.

(A joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock code: 0576)

DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO ACQUISITION OF AN AGGREGATE 76.55% EQUITY INTEREST IN ZHEJIANG JINHUA YONGJIN EXPRESSWAY CO., LTD.

DISCLOSEABLE AND CONNECTED TRANSACTIONS

On 20 March 2013, the Company entered into the Communications Group Agreement with Communications Group pursuant to which the Company conditionally agreed to purchase from Communications Group a 66.283% equity interest in the Target Company held by Communications Group at a cash consideration of RMB655,356,327 (equivalent to approximately HK$809,081,885).

On the same date, the Company entered into the Yiwu Agreement with Yiwu Development pursuant to which the Company conditionally agreed to purchase from Yiwu Development a 10.267% equity interest in the Target Company held by Yiwu Development at a cash consideration of RMB101,512,354 (equivalent to approximately HK$125,323,894). As the Company currently owns a 23.45% equity interest in the Target Company, upon completion of both Acquisition Agreements, the Company will beneficially own the entire equity interest in the Target Company.

EXEMPT CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS

As at the date of this announcement, the Target Company is a party to each of the Ancillary Agreements. Upon completion of the Communications Group Agreement, the Target Company will enter into the New Ancillary Agreements in replacement of the respective existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the Road Clearance and Emergency Service Agreement which will terminate). By virtue of the counterparties of each of the New Ancillary Agreements and the Maintenance Work Agreement being subsidiaries (and hence associates) of Communications Group, the New Ancillary Agreements and the Maintenance Work Agreement will each constitute a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As each of the applicable percentage ratios under the Listing Rules for the New Ancillary Agreements and the Maintenance Work Agreement, individually or in aggregate, is less than 0.1%, such transactions are exempt from the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

As at the date of this announcement, the Target Company is a party to each of the Loan Agreements and the Credit Agreement pursuant to which (in the case of the Loan Agreements) Communications Group agreed to entrust Zhejiang Communications Financial to provide, and (in the case of the Credit Agreement) Zhejiang Communications Financial agreed to provide, to the Target Company the Loans in the total maximum amount of RMB410,000,000 (equivalent to approximately HK$506,172,840). As at the date of this announcement, the Target Company has utilised the full amount of the Loans under the Loan Agreements and the Credit Agreement.

Upon completion of the Acquisitions, the Target Company will become a wholly-owned subsidiary of the Company and the Loan Agreements and the Credit Agreement will constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As the Loan Agreements and the Credit Agreement will constitute financial assistance provided by a connected person for the benefit of a wholly-owned subsidiary of the Company on normal commercial terms where no security over the assets of the Target Company is granted in respect of the Loan Agreements or the Credit Agreement, the transactions thereunder are exempt from the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a substantial shareholder (as defined in the Listing Rules) of the Company. Therefore, Communications Group is a connected person of the Company and as a result, the Communications Group Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Under the terms of the Yiwu Agreement, completion of the Yiwu Agreement is conditional upon, among other things, the prior completion of the Communications Group Agreement (but not vice versa). Accordingly, although Yiwu Development is an Independent Third Party, Yiwu Development is also treated as a connected person of the Company and the Yiwu Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the relevant percentage ratio for the Acquisitions is over 5% but less than 25% (with the consideration under the Acquisitions Agreements being, whether individually or in aggregate, more than HK$10,000,000), the Acquisitions also constitute discloseable transactions for the Company under Chapter 14 of the Listing Rules.

On the above basis, the Acquisitions are subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules applicable to connected transactions, and the reporting and announcement requirements under Chapter 14 of the Listing Rules applicable to discloseable transactions.

In view of the interest of Communications Group in the Acquisition Agreements, Communications Group and its associates will abstain from voting at the general meeting to be convened by the Company to, among others, consider and approve the resolutions in relation to the Acquisition Agreements and the transaction contemplated thereunder.

GENERAL

The Company will put forward, among other things, ordinary resolutions to approve the Communications Group Acquisition and the Yiwu Acquisition, at a general meeting to be convened by the Company for the Independent Shareholders' consideration and approval.

An Independent Board Committee has been formed to consider the Acquisitions, and ABCI Capital Limited has been appointed as the Company's independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Acquisitions are fair and reasonable and whether the Acquisitions are in the interests of the Company and the Shareholders as a whole.

A circular containing, among other things, (i) details of the Acquisitions, (ii) a letter from the Independent Board Committee to the Independent Shareholders regarding the Acquisitions, (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders regarding the Acquisitions, and (iv) a notice of general meeting, is expected to be dispatched to the Shareholders on or before 12 April 2013.

DISCLOSEABLE AND CONNECTED TRANSACTIONS

1. Communications Group Agreement

Date

20 March 2013

Parties

Vendor: Communications Group Purchaser: The Company

Target interest to be acquired

66.283% equity interest in the Target Company

Consideration and payment terms

The consideration for the 66.283% equity interest in the Target Company is RMB655,356,327 (equivalent to approximately HK$809,081,885), and will be payable by the Company in cash within 5 business days after the effective date of the Communications Group Agreement.

Consideration adjustment

The consideration payable by the Company under the Communications Group Agreement was determined on the assumption that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved will be 25 years. As at the date of the Communications Group Agreement and the date of this announcement, the toll collection rights period of the Ningbo-Jinhua Expressway is pending final approval by the relevant PRC governmental authorities. It is expected that such approval will be granted before 31 December 2013 and in the event that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved is different from 25 years, Communications Group and the Company have agreed to enter into a supplemental agreement to adjust downward the consideration with reference to the valuation of the Target Company to be carried out by the PRC Domestic Valuer (please see paragraph 3 "Basis of consideration" below) taking into account the difference of the toll collection rights period.

Conditions precedent

Completion of the Communications Group Agreement is conditional upon:

(1) approval of the Communications Group Agreement by the Board and the board of directors of Communications

Group having been obtained;

(2) approval by the Company's Independent Shareholders of the Communications Group Acquisition having been

obtained in accordance with the Listing Rules; and

(3) approval of the Zhejiang SASAC having been obtained in connection with the Communications Group

Agreement.

Completion of the Communications Group Agreement is not conditional upon the completion of the Yiwu Agreement.

If any of the above conditions shall not have been fulfilled on or before 31 December 2013, either party is entitled to terminate the Communications Group Agreement by giving written notice to the other party.

As at the date of this announcement, the condition under paragraph (1) above has been satisfied.

Effective date

The Communications Group Agreement will become effective upon satisfaction of all the conditions mentioned under "Conditions precedent" above. The parties have agreed, however, that if at any time after the Communications Group Agreement becomes effective any relevant PRC governmental department with authority over the agreement seeks to revoke such agreement so as to render performance of the Communications Group Agreement impossible, the parties will terminate the Communications Group Agreement and Communications Group will be required to repay all amounts already paid by the Company under this agreement together with interest at the prevailing bank lending interest rate promulgated by the People's Bank of China for the same period.

Capital injection

The parties have agreed that, within 120 days after the completion of the Communications Group Agreement, the Company will inject additional capital into the Target Company. The Company plans to make a capital injection of up to RMB1,400,000,000 into the Target Company so that the Target Company will apply such capital to fully repay its interest-bearing loans (including, but not limited to, the Loans under the Loan Agreements and the Credit Agreement to the Communications Group). The Company plans to use its internal resources to fund such capital injection.

New Ancillary Agreements

The parties have agreed that, upon completion of the Communications Group Agreement, the Target Company shall enter into the New Ancillary Agreements which shall replace and supersede the existing Ancillary Agreements (other than the Maintenance Work Agreement which will continue and the Road Clearance and Emergency Service Agreement which will terminate).

Governing law

The laws of the PRC

2. Yiwu Agreement

Date

20 March 2013

Parties

Vendor: Yiwu Development Purchaser: The Company

Target interest to be acquired

10.267% equity interest in the Target Company

Consideration and payment terms

The consideration for the 10.267% equity interest in the Target Company is RMB101,512,354 (equivalent to approximately HK$125,323,894), and will be payable by the Company in cash within 5 business days after the effective date of the Yiwu Agreement.

Consideration adjustment

The consideration payable by the Company under the Yiwu Agreement was determined on the assumption that the toll collection rights period of the Ningbo- Jinhua Expressway as finally approved will be 25 years. As at the date of the Yiwu Agreement and the date of this announcement, the toll collection rights period of the Ningbo-Jinhua Expressway is pending final approval by the relevant PRC governmental authorities. It is expected that such approval will be granted before 31 December 2013 and in the event that the toll collection rights period of the Ningbo-Jinhua Expressway as finally approved is different from 25 years, Yiwu Development and the Company have agreed to enter into a supplemental agreement to adjust downward the consideration with reference to the valuation of the Target Company to be carried out by the PRC Domestic Valuer (please see paragraph 3 "Basis of consideration" below) taking into account the difference of the toll collection rights period.

Conditions precedent

Completion of the Yiwu Agreement is conditional upon:

(1) the Communications Group Agreement becoming unconditional in accordance with its terms and its prior

completion;

(2) approval of the Yiwu Agreement by both the Board and the board of directors of Yiwu Development having

been obtained;

(3) the approval by the Company's Independent Shareholders of the Yiwu Acquisition having been obtained in

accordance with the Listing Rules and approval of the Yiwu Acquisition by the shareholders of Yiwu

Development; and

(4) approval of the Zhejiang SASAC having been obtained in connection with the Yiwu Agreement.

If any of the above conditions shall not have been fulfilled on or before 31 December 2013, either party is entitled to terminate the Yiwu Agreement by giving written notice to the other party.

As at the date of this announcement, the condition under paragraph (2) above has been satisfied.

Effective date

The Yiwu Agreement will become effective upon satisfaction of all the conditions mentioned under "Conditions precedent" above. The parties have agreed, however, that if at any time after the Yiwu Agreement becomes effective any relevant PRC governmental department with authority over the agreement seeks to revoke such agreement so as to render performance of the Yiwu Agreement impossible, the parties will terminate the Yiwu Agreement and Yiwu Development will be required to repay all amounts already paid by the Company under this agreement together with interest at the prevailing bank lending interest rate promulgated by the People's Bank of China for the same period.

Governing law

The laws of the PRC

3. Basis of consideration

The consideration of RMB655,356,327 (equivalent to approximately HK$809,081,885) under the Communications Group Agreement and RMB101,512,354 (equivalent to approximately HK$125,323,894) under the Yiwu Agreement were determined based on arm's length negotiations between the Company and Communications Group and Yiwu Development, respectively.

A number of factors were considered by the parties when determining the consideration of the Communications Group Agreement and the Yiwu Agreement, including, amongst others, the Valuation Report prepared by Jones Lang LaSalle, as well as the PRC Valuation Report prepared by the PRC Domestic Valuer and commissioned by the Communications Group pursuant to the requirements of Zhejiang SASAC and relevant PRC laws and regulations.

The Company relied on the Valuation Report when determining the consideration under the Acquisition Agreements, pursuant to which the appraised value of the entire equity interest of the Target Company as at 30 September 2012 was RMB1,026,000,000. The Communications Group relied instead on the PRC Valuation Report when determining the consideration under the Communications Group Agreement, pursuant to which the appraised value of the entire equity interest of the Target Company as at 30 September 2012 was RMB988,700,000. The Company did not appoint the PRC Domestic Valuer, nor was the Company involved in the preparation of the PRC Valuation Report. The Company and Communications Group and Yiwu Development then agreed on the final consideration payable under the Acquisition Agreements following arm's length negotiations.

The Acquisitions constitute a transfer of State-owned assets in the PRC and therefore require the approval by the Zhejiang SASAC in accordance with the relevant PRC laws and regulations. As at the date of this announcement, the PRC Valuation Report commissioned by the Communications Group has been submitted to Zhejiang SASAC for registration.

4. Principal assumptions for the income approach adopted for the Valuation Report

The appraised value of the entire equity interest of the Target Company under the Valuation Report was prepared using the income approach based on the discounted cash flow method. As a result, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. Therefore, this announcement is subject to the requirements under Rules 14.60A and 14.62 of the Listing Rules in relation to profit forecast.

As required under Rule 14.62(1) of the Listing Rules, details of the key assumptions used in determining the value of the entire equity interest in the Target Company upon which the Valuation Report was issued are set out below:

-- The projected business of the Target Company can be achieved with the effort of the management of

the Company.

-- In order to realise the growth potential of the business of the Target Company and maintain a

competitive edge, additional manpower, equipment and facilities are necessary to be employed and

that the facilities and systems of the Target Company are sufficient for future expansion.

-- There will be no material change in the existing political, legal, technological, fiscal or economic

conditions, which might adversely affect the business of the Target Company.

-- The operational and contractual terms stipulated in the relevant contracts and agreements of the

Target Company will be honoured.

-- Copies of the operating licences and company incorporation documents provided to Jones Lang LaSalle

by the Target Company are reliable and legitimate.

-- Natural weather can have an impact on toll roads, including flooding and other types of extreme

weather, which may force toll roads to close, and that no extended closure will occur to the toll

roads managed by the Target Company.

-- The accuracy of the financial and operational information provided to Jones Lang LaSalle by the


       Target Company.
    -- The capital structure of the Target Company will not change.

-- Share capital injections and shareholder's loans will be made to the Target Company when necessary.

Deloitte, acting as the reporting accountants of the Company, has examined the calculations of the discounted future estimated cash flows in which the Valuation Report is based, which do not involve the adoption of accounting policies in its preparation.

The Directors confirm that the valuation of the entire equity interest of the Target Company in the Valuation Report, which constitutes a profit forecast under Rule 14.61 of the Listing Rules, has been made after due and careful enquiry.

A letter from Deloitte in compliance with Rule 14.62(2) of the Listing Rules and a letter from the Board in compliance with Rule 14.62(3) of the Listing Rules are included in the Appendices to this announcement.

As at the date of this announcement, Deloitte (certified public accountants) does not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person to subscribe for securities in any member of the Group.

To the best of the Directors' knowledge, information and belief, Deloitte is an Independent Third Party.

Deloitte has given and has not withdrawn its written consent to the publication of this announcement with inclusion of its report and all references to its name in the form and context in which it is included.

5. Original cost of the 66.283% and the 10.267% equity interest in the Target Company to Communications

Group and Yiwu Development respectively

Upon establishment of Jinhua Jinyong Investments (the predecessor of the Target Company) in February 2002, its registered capital was RMB200,000,000.

In September 2002, Communications Group acquired a 58.33% equity interest in Jinhua Jinyong Investments by contributing RMB280,000,000 to the increased registered capital of Jinhua Jinyong Investments of RMB480,000,000. In September 2003, the name of Jinhua Jinyong Investments was changed to its present name. In September 2004, the Target Company's registered capital was increased by RMB80,000,000 and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Communications Group was consequently diluted to 50%. In April 2005, the Target Company's registered capital was further increased to RMB800,000,000 and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Communications Group was further diluted to 35%. In March 2007, the Company acquired 23.45% equity interest in the Target Company from two former shareholders of the Target Company at a total consideration of RMB281,400,000. In February 2009, Communications Group acquired a 30% equity interest in the Target Company from a former shareholder of the Target Company at a consideration of RMB240,000,000. In June 2010, Communications Group acquired a 1.283% equity interest in the Target Company by contributing RMB7,655,000 to the increased registered capital of the Target Company of RMB900,000,000.

Upon establishment of Jinhua Jinyong Investments (the predecessor of the Target Company) in February 2002, Yiwu Investments (the predecessor of Yiwu Operations) acquired a 33% equity interest in Jinhua Jinyong Investments by contributing RMB66,000,000 to its registered capital. In September 2004, Yiwu Investments (the predecessor of Yiwu Operations) made a further capital contribution of RMB26,400,000 to the Target Company. In April 2009, the name of Yiwu Investments was changed to its present name and in the same year, Yiwu Operations transferred its capital contributions in the Target Company in the total amount of RMB92,400,000 to Yiwu Development. The registered capital of the Target Company was increased as described above and, not having made any further capital contribution to the Target Company, the equity interest in the Target Company owned by Yiwu Development was consequently diluted to 10.267%.

INFORMATION ON THE TARGET COMPANY

The Target Company is a limited liability company incorporated in the PRC on 8 February 2002 and with a registered capital of RMB900,000,000 as at the date of this announcement. As at the date of this announcement, the Target Company is owned as to 66.283%, 23.45% and 10.267% by Communications Group, the Company and Yiwu Development respectively.

The Target Company is principally engaged in the operation and management of the Jinhua Section of the Ningbo-Jinhua Expressway. The Ningbo-Jinhua Expressway is a branch line of the Shenyang-Haikou Expressway within the State expressway network linking the eastern and western parts of Zhejiang Province, connecting to Hangjinqu Expressway and Ningbo Loop Expressway. Jinhua Section of the Ningbo- Jinhua Expressway, under the Target Company's operation, is a dual four-lane expressway located in Chengzhou City, Dongyang City, Yiwu City and Jinhua City of Zhejiang Province with a total length of approximately 69.7km. As at the date of this announcement, the toll collection rights period of the Ningbo-Jinhua Expressway has not been finally approved by the relevant governmental authorities and in accordance with the relevant expressway regulations in the PRC, the toll collection rights period of an expressway shall not be more than 25 years. Based on information provided by the Target Company, in 2012, the Jinhua Section of the Ningbo-Jinhua Expressway recorded an average daily traffic volume of 12,084 in full-trip equivalents, while toll income amounted to RMB231,480,990 according to audited financial statements of the Target Company prepared in accordance with generally accepted accounting principles in the PRC by the PRC statutory auditor of the Target Company.

The net asset value of the Target Company based on its audited financial statements for the years ended 31 December 2011 and 2012 prepared in accordance with generally accepted accounting principles in the PRC by the PRC statutory auditor of the Target Company are set out below:


                                                       As at 31 December
                                                      2011              2012
                                                   RMB'000           RMB'000
                                                 (audited)         (audited)

Net asset value                                    669,588           650,883
                                                 =========         =========

 
The net profit/(loss) before and after tax and extraordinary items of the 
Target Company based on its 
audited financial statements for the years ended 31 December 2011 and 2012 
prepared in accordance with 
generally accepted accounting principles in the PRC by the PRC statutory 
auditor of the Target Company are 
set out below:
                                                       For the year ended
                                                      2011              2012
                                                   RMB'000           RMB'000
                                                 (audited)         (audited)

net profit/(loss) before tax and 
 extraordinary items                               -28,108           -18,704 
net profit/(loss) after tax and
 extraordinary items                               -28,108           -18,704


EFFECT OF THE ACQUISITIONS


Upon completion of both the Communications Group Acquisition and the Yiwu 
Acquisition, the Company will 
beneficially own the entire equity interest in the Target Company. In the event 
that only the Communications 
Group Acquisition is completed, the Company will beneficially own in aggregate 
89.733% of the Target 
Company's equity interest. In each case (assuming at least the Communications 
Group Acquisition is 
completed), the Target Company will become a subsidiary of the Company and the 
accounts of the Target 
Company will be consolidated into the accounts of the Company.



REASONS FOR AND BENEFITS OF THE ACQUISITIONS


After completion of the Acquisitions, the total length of expressways managed 
by the Company will increase 
from approximately 389.60km to approximately 459.35km. The main businesses of 
the Company will be enhanced 
through the Acquisitions which help to increase the market share and 
competitive strength of the Company in 
Zhejiang Province. The Jinhua Section of Ningbo-Jinhua expressway connects with 
the Shaoxing Section of 
Ningbo-Jinhua Expressway (which is managed by Shengxin Expressway Co., Ltd., in 
which the Company currently 
owns 50% equity interest), and crosses with the Shangsan Expressway managed by 
the Company. The Directors 
believe that the Acquisitions will facilitate the Company to better utilise its 
experience and advantages 
in toll operation and to complement the Company's existing network of 
expressways, and are in line with the 
Company's development strategy.

The terms of the Communications Group Agreement and the Yiwu Agreement were 
arrived at after arm's length 
negotiations between the Company and Communications Group and between the 
Company and Yiwu Development, 
respectively, and are on normal commercial terms, taking into account various 
factors and with reference to 
the Valuation Report commissioned by the Company and the PRC Valuation Report 
commissioned by the 
Communications Group. The Directors (excluding the members of the Independent 
Board Committee, the opinion 
of which will be set out in the Circular after taking into account the 
independent financial adviser's 
advice to be set out in the Circular) consider that the terms of the 
Acquisitions are fair and reasonable 
and in the interests of the Company and the Shareholders as a whole.



INFORMATION ON THE COMPANY, COMMUNICATIONS GROUP AND YIWU DEVELOPMENT


The Company is a joint stock company established under the laws of the PRC with 
limited liability on 1 
March 1997, the H Shares of which are listed on the Main Board of the Stock 
Exchange. It is principally 
engaged in investing in, developing and operating high-grade roads in the PRC. 
The Group also carries on 
certain other businesses such as automobile servicing, operation of gas 
stations and billboard advertising 
along expressways, as well as securities related business.

Communications Group is a wholly State-owned enterprise established in the PRC 
on 29 December 2001 and is 
principally engaged in a diverse range of businesses, including investment, 
operations, maintenance, toll 
collection and ancillary services of expressways, construction and building of 
transportation project, 
ocean and coastal transport, as well as real estate.

Based on information provided by Yiwu Development to the Company, Yiwu 
Development is a limited liability 
company incorporated in the PRC in April 2009 and is principally engaged in the 
businesses of logistics, 
passenger and freight carriage, construction and development of roads as well 
as airport management. Yiwu 
Development is an Independent Third Party.



EXEMPT CONNECTED TRANSACTIONS AND NEW CONTINUING CONNECTED TRANSACTIONS


1.  New Continuing Connected Transactions

As at the date of this announcement, the Target Company is a party to each of 
the Ancillary Agreements. 
Since the terms of the existing Ancillary Agreements (other than the 
Maintenance Work Agreement) do not 
conform with the requirements of Chapter 14A of the Listing Rules relating to 
continuing connected 
transactions, including that they must be on normal commercial terms, it is 
proposed that, upon completion 
of the Communications Group Agreement, the Road Clearance and Emergency Service 
Agreement will terminate 
and the Target Company will enter into the New Ancillary Agreements (which 
comply with the relevant Listing 
Rules requirements) to replace and supersede the existing Ancillary Agreements 
(other than the Maintenance 
Work Agreement which will continue and the Road Clearance and Emergency Service 
Agreement which will 
terminate). By virtue of the counterparties of each of the New Ancillary 
Agreements and the Maintenance 
Work Agreement being subsidiaries (and hence associates) of Communications 
Group, the New Ancillary 
Agreements and the Maintenance Work Agreement would have each constituted a 
continuing connected 
transaction for the Company under Chapter 14A of the Listing Rules. As each of 
the applicable percentage 
ratios under the Listing Rules for the New Ancillary Agreements and the 
Maintenance Work Agreement 
individually or in aggregate is less than 0.1%, such transactions are exempt 
from the reporting, 
announcement, annual review and independent shareholders' approval requirements 
under Chapter 14A of the 
Listing Rules.

A brief description of the Maintenance Work Agreement and each New Ancillary 
Agreement is set out below:


Maintenance Work Agreement

As at the date of this announcement, the Target Company is a party to the 
Maintenance Work Agreement in 
connection with the provision by Zhejiang Shunchang of certain maintenance work 
in respect of the Jinhua 
Section of the Ningbo-Jinhua Expressway to the Target Company. The Maintenance 
Work Agreement has a term of 
three years from 1 January 2013 to 31 December 2015 and the Target Company has 
agreed to pay an annual fee 
of RMB5,366,206 (or RMB16,098,618 for all three years) for the maintenance work 
performed over this period.


New Service Area Operation Agreement

Upon completion of the Communications Group Agreement, the Target Company and 
Zhejiang Communications 
Investment will enter into the New Service Area Operation Agreement, in 
connection with the operation in 
the Dongyang Service Area, including, the provision of, among other things, 
petrol station services, 
catering services, supermarket services, vehicle repair services. The term of 
the New Service Area 
Operation Agreement is for three years. Zhejiang Communications Investment will 
be entitled to 20% of the 
annual profits recognised by it through managing the Dongyang Service Area if 
the amount of such profits is 
not more than RMB3,762,479, and 80% of any additional profits which is more 
than RMB3,762,479 in that year. 
The rest of the profits will be paid to the Target Company.


New Service Area Utilities Services Agreement

Upon completion of the Communications Group Agreement, the Target Company and 
Zhejiang Communications 
Investment will enter into the New Service Area Utilities Services Agreement, 
in connection with the 
provision of utilities facilities and services in the Dongyang Service Area 
such as car park, washroom, 
lounge area. The term of the New Service Area Utilities Services Agreement is 
for three years. The Target 
Company will be required to pay an annual fee of RMB600,000 to Zhejiang 
Communications Investment for the 
services provided under this agreement.
 

2. Loan Agreements and Credit Agreement

As at the date of this announcement, the Target Company is a party to each of 
the Loan Agreements and the 
Credit Agreement pursuant to which (in the case of the Loan Agreements) 
Communications Group agreed to 
entrust Zhejiang Communications Financial to provide, and (in the case of the 
Credit Agreement) Zhejiang 
Communications Financial agreed to provide, to the Target Company the Loans in 
the total maximum amount of 
RMB410,000,000 (equivalent to approximately HK$506,172,840) at an interest rate 
of (in the case of the Loan 
Agreements) 5.24% per annum and (in the case of the Credit Agreements) 5.40% 
per annum respectively. The 
term of the Loan Agreements is from 28 February 2013 to 10 August 2015 and they 
shall be repaid in full at 
the end of the term. The term of the Credit Agreement is from 8 March 2013 to 7 
March 2014 and it shall 
also be repaid in full at the end of the term. The Target Company, with written 
consent of the 
Communications Group, may prepay the Loan Agreements subject to the payment of 
applicable interests to be 
calculated on the basis of the actual number of days and the amount utilised 
under the Loan Agreements. The 
Target Company may also prepay the Credit Agreement after obtaining written 
consent of Zhejiang 
Communications Financial and subject to the payment of applicable interests to 
be calculated on the basis 
of the actual number of days and the amount utilised under the Credit 
Agreement. The Loans were granted on 
the credit of the Target Company and no security was granted by the Target 
Company to Communications Group 
or Zhejiang Communications Financial to secure the Loans.

As at the date of this announcement, the Target Company has utilised the full 
amount of the Loans under the 
Loan Agreements and the Credit Agreement.

Upon completion of the Acquisitions, the Target Company will become a wholly- 
owned subsidiary of the 
Company and the Loan Agreements and the Credit Agreement will constitute a 
connected transaction for the 
Company under Chapter 14A of the Listing Rules. As the Loan Agreements and the 
Credit Agreement will 
constitute financial assistance provided by a connected person for the benefit 
of a wholly-owned subsidiary 
of the Company on normal commercial terms where no security over the assets of 
the Target Company is 
granted in respect of the Loan Agreements or the Credit Agreement, the 
transactions thereunder are exempt 
from the reporting, announcement, annual review and independent shareholders' 
approval requirements under 
Chapter 14A of the Listing Rules.

 
RELATIONSHIP BETWEEN THE PARTIES AND LISTING RULES IMPLICATIONS


As at the date of this announcement, Communications Group holds approximately 
67% of the issued share 
capital of the Company. By virtue of this shareholding interest, Communications 
Group is a substantial 
shareholder (as defined in the Listing Rules) of the Company. Therefore, 
Communications Group is a 
connected person of the Company and as a result, the Communications Group 
Agreement constitutes a connected 
transaction for the Company under Chapter 14A of the Listing Rules. Under the 
terms of the Yiwu Agreement, 
completion of the Yiwu Agreement is conditional upon, among other things, the 
prior completion of the 
Communications Group Agreement (but not vice versa). Accordingly, although Yiwu 
Development is an 
Independent Third Party, Yiwu Development is also treated as a connected person 
of the Company and the Yiwu 
Agreement also constitutes a connected transaction for the Company under 
Chapter 14A of the Listing Rules. 
As the relevant percentage ratio for the Acquisitions is over 5% but less than 
25% (with the consideration 
under the Acquisition Agreements being, whether individually or in aggregate 
more than HK$10,000,000), the 
Acquisitions also constitute discloseable transactions for the Company under 
Chapter 14 of the Listing Rules.

On the above basis, the Acquisitions are subject to the reporting, announcement 
and independent 
shareholders' approval requirements under Chapter 14A of the Listing Rules 
applicable to connected 
transactions, and reporting and announcement requirements under Chapter 14 of 
the Listing Rules applicable 
to discloseable transactions.

In view of the interest of Communications Group in the Acquisition Agreements, 
Communications Group and its 
associates will abstain from voting at the general meeting to be convened by 
the Company to, among others, 
consider and approve the resolutions in relation to the Acquisition Agreements 
and the transaction 
contemplated thereunder.


GENERAL


The Company will put forward, among other things, ordinary resolutions to 
approve the Communications Group 
Acquisition and the Yiwu Acquisition, at a general meeting to be convened by 
the Company for the Independent 
Shareholders' consideration and approval.

The Independent Board Committee comprising all the independent non-executive 
Directors, namely, Mr. Zhang 
Junsheng, Mr. Zhou Jun and Mr. Pei Ker-Wei, has been formed to consider the 
Acquisitions, and ABCI Capital 
Limited has been appointed as the Company's independent financial adviser to 
advise the Independent Board 
Committee and the Independent Shareholders as to whether the terms of the 
Acquisitions are fair and 
reasonable and whether the Acquisitions are in the interests of the Company and 
the Shareholders as a whole.
 
A circular containing, among other things, (i) details of the Acquisitions, 
(ii) a letter from the 
Independent Board Committee to the Independent Shareholders regarding the 
Acquisitions, (iii) a letter of 
advice from the independent financial adviser to the Independent Board 
Committee and the Independent 
Shareholders regarding the Acquisitions, and (iv) the notice of general 
meeting, is expected to be 
dispatched to the Shareholders on or before 12 April 2013.


DEFINITIONS


In this announcement, unless the context specifies otherwise, the following 
defined expressions have the 
following meanings:



"Acquisitions"                   the proposed acquisitions by the Company of a 
66.283% and a 10.267% equity 

interest in the Target Company from Communications Group and Yiwu

Development, respectively, pursuant to the Acquisition Agreements

"Acquisition Agreements" the Communications Group Agreement and the Yiwu Agreement

"Ancillary Agreements" the Maintenance Work Agreement, the Service Area Operation Agreement, the

Service Area Utilities Services Agreement and the Road Clearance and

Emergency Service Agreement

"associate(s)" has the meaning ascribed to it under the Listing Rules

"Board" the Board of Directors

"business day" any day, other than a Saturday or Sunday or a public holiday in the PRC,

on which banks are generally open for business in the PRC

"Circular" the circular to be issued to the Shareholders in connection with the

Acquisitions and a general meeting to be convened by the Company in

accordance with the Listing Rules

"Communications Group" Zhejiang Communications Investment Group Co., Ltd., a wholly State-owned

enterprise established in the PRC, and the controlling shareholder of the

Company

"Communications Group the proposed sale and purchase of a 66.283% equity Acquisition" interest Acquisition" in the Target Company pursuant to the Communications Group Agreement

"Communications Group the agreement dated 20 March 2013 entered into between the Company and Agreement" Communications Group, pursuant to which the Company conditionally agreed

to purchase from Communications Group a 66.283% equity interest in the

Target Company

"Company" Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated

in the PRC with limited liability

"Completion" completion of the Acquisition Agreements, or either of them (as the

context may require) in accordance with their respective terms

"connected person(s)" has the meaning ascribed to it under the Listing Rules

"controlling shareholder" has the meaning ascribed to it under the Listing Rules

"Credit Agreement" the agreement dated 8 March 2013 entered into between the Target Company

and Zhejiang Communications Financial, pursuant to which Zhejiang

Communications Financial provided to the Target Company a loan for the

maximum amount of RMB70,000,000 during the term of the agreement

"Deloitte" Deloitte Touche Tohmatsu, the auditors of the Company

"Director(s)" the director(s) of the Company

"Dongyang Service Area" the Dongyang service area of the Ningbo-Jinhua Expressway

"Group" the Company and its subsidiaries

"H Shares" overseas listed foreign shares in the share capital of the Company with a

nominal value of RMB1 per share, which are listed on the Main Board of the

Stock Exchange

"Hong Kong" the Hong Kong Special Administrative Region of the PRC

"HK$" Hong Kong dollars, the lawful currency of Hong Kong

"Independent Board Committee" an independent committee of the Board comprising all independent

non-executive Directors, namely, Mr. Zhang Junsheng, Mr. Zhou Jun and Mr.

Pei Ker-Wei

"Independent Shareholders" Shareholders who are independent within the meaning of the relevant

provisions of the Listing Rules, and, in relation to the approval of the

Acquisitions at a general meeting to be convened by the Company for such

purpose, means the Shareholders other than Communications Group and its

associates

"Independent Third Party" a party independent and not connected with the Company, any of its

subsidiaries or any of their respective directors or substantial

shareholders

"Jinhua Jinyong Investments" Zhejiang Jinhua Jinyong Expressway Construction Investments Co., Ltd.), a

limited liability company incorporated in the PRC and the predecessor of

the Target Company

"Jinhua Section of the the Jinhua section of the Ningbo-Jinhua Expressway, starting from the Ningbo-Jinhua Expressway" Bailingfeng Tunnel between Chengzhou City and Dongyang City and ending at

Hongtangfan, Fucun Town, Jindong District, Jinhua City with a total length

of approximately 69.7km

"Jones Lang LaSalle" Jones Lang LaSalle Corporate and Appraisal Advisory Limited, an

independent valuer appointed by the Company

"Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange

"Loans" two loans of a maximum amount of RMB170,000,000 each granted by

Communications Group and Zhejiang Communications Financial to the Target

Company pursuant to the Loan Agreements, and one loan of a maximum amount

of RMB70,000,000 granted by Zhejiang Communications Financial to the

Target Company pursuant to the Credit Agreement

"Loan Agreements" two agreements both dated 28 February 2013 entered into among the Target

Company, Communications Group and Zhejiang Communications Financial with

the same terms, pursuant to which Communications Group entrusted Zhejiang

Communications Financial to provide to the Target Company a loan for the

maximum amount of RMB170,000,000 under each agreement during the term of

the agreement

"Maintenance Work Agreement" the agreement dated 28 December 2012 entered into between the Target

Company and Zhejiang Shunchang in connection with the provision of certain

maintenance work in respect of the Jinhua Section of the Ningbo-Jinhua

Expressway to the Target Company

"New Ancillary Agreements" the New Service Area Operation Agreement and the New Service Area Utilities

Services Agreement

"New Service Area Operation the agreement to be entered into between the Target Company and Zhejiang Agreement" Communications Investment upon completion of the Communications Group

Agreement, in connection with the operation in the Dongyang Service Area,

including, the provision of, among other things, petrol station services,

catering services, supermarket services, vehicle repair services

"New Service Area Utilities the agreement to be entered into between the Target Company and Zhejiang Services Agreement" Communications Investment upon completion of the Communications Group

Agreement, in connection with the provision of utilities facilities and

services in the Dongyang Service Area such as car park, washroom, lounge

area

"Ningbo-Jinhua Expressway" the expressway (No. G1512) connecting Ningbo City, Shaoxing City and

Jinhua City of Zhejiang Province with a total length of 185km

"percentage ratio" has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules

"PRC" the People's Republic of China (for the purpose of this announcement,

excludes Hong Kong, Macau and Taiwan)

"PRC Domestic Valuer" the PRC qualified domestic valuer appointed by the Communications Group

"PRC Valuation Report" the valuation report prepared by the PRC Domestic Valuer and commissioned

by the Communications Group in respect of the Target Company

"RMB" Renminbi, the lawful currency of the PRC

"Road Clearance and the agreement dated 15 December 2011 entered into between the Target Emergency Service Company and Zhejiang Communications Hangjinqu Jinhua Management Office, in Agreement" connection with the provision of certain road clearance and emergency

service in respect of the Jinhua Section of the Ningbo-Jinhua Expressway

to the Target Company

"Service Area Operation the agreement dated 30 December 2010 entered into between the Target Agreement" Company and Zhejiang Communications Investment, in connection with the

operation in the Dongyang Service Area, including, the provision of, among

other things, petrol station services, catering services, supermarket

services, vehicle repair services

"Service Area Utilities the agreement dated 30 December 2010 entered Services into between the Agreement" Target Company and Zhejiang Communications Investment, in connection with

the provision of utilities facilities and services in the Dongyang Service

Area such as car park, washroom, lounge area

"Shareholder(s)" holder(s) of the share(s) of the Company

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"subsidiary(ies)" has the meaning ascribed to it under the Listing Rules

"Target Company" Zhejiang Jinhua Yongjin Expressway Co., Ltd., a limited liability company

incorporated in the PRC and owned as to 66.283%, 23.45% and 10.267% by

Communications Group, the Company and Yiwu Development respectively

"Valuation Report" the valuation report dated 19 March 2013 prepared by Jones Lang LaSalle

and commissioned by the Company in respect of the Target Company

"Yiwu Acquisition" the proposed sale and purchase of a 10.267% equity interest in the Target

Company pursuant to the Yiwu Agreement

"Yiwu Agreement" the agreement dated 20 March 2013 entered into between the Company and

Yiwu Development, pursuant to which the Company has conditionally agreed

to purchase from Yiwu Development a 10.267% equity interest in the Target

Company

"Yiwu Development" Yiwu Communications Development Co., Ltd., a limited liability company

incorporated in the PRC and an Independent Third Party

"Yiwu Investments" Yiwu State-owned Assets Investments Holdings Co., Ltd., a limited

liability company incorporated in the PRC and the predecessor of Yiwu

Operations

"Yiwu Operations" Yiwu State-owned Assets Operations Co., Ltd., a limited liability company

incorporated in the PRC and an Independent Third Party

"Zhejiang Communications Zhejiang Communications Investment Group Financial Co., Ltd., a Financial" wholly-owned subsidiary of the Communications Group

"Zhejiang Communications Zhejiang Communications Investment Group Co., Ltd. Hangjinqu Branch Jinhua Hangjinqu Jinhua Management Management Office, the Jinhua Management Office of the Hongjinqu Branch of Office" Communications Group

"Zhejiang Communications Zhejiang Communications Investment Group Industrial Development Co., Ltd., Investment" a company incorporated in the PRC and a wholly-owned subsidiary of

Communications Group

"Zhejiang SASAC" State-owned Assets Supervision and Administration Commission of the

People's Government of Zhejiang Province of the PRC

"Zhejiang Shunchang" Zhejiang Shunchang High-grade Expressway Maintenance Co., Ltd.), a company

incorporated in the PRC and an indirectly-owned subsidiary of

Communications Group

"%" per cent.

In this announcement, the translation of RMB into HK$ is based on the exchange of rate of HK$1 to RMB0.81. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ using such exchange rate or any other exchange rate or at all.

On behalf of the Board

ZHEJIANG EXPRESSWAY CO., LTD.


                                                                                
     ZHAN Xiaozhang
                                                                                
        Chairman

Hangzhou, PRC, 20 March 2013


As of the date of this announcement, the executive directors of the Company 
are: Mr. ZHAN Xiaozhang, Ms. 
LUO Jianhu and Mr. DING Huikang; the non-executive directors of the Company 
are: Mr. LI Zongsheng, Mr. WANG 
Weili and Mr. WANG Dongjie; and the independent non-executive directors of the 
Company are: Mr. ZHANG 
Junsheng, Mr. ZHOU Jun and Mr. PEI Ker-Wei.

In compliance with Rule 14.60A of the Listing Rules, the text of each of the letters from Deloitte to the Directors confirming it has examined the calculations of the discounted future estimated cash flows for the Valuation Report, and the letter from the Board confirming that the Valuation Report has been made after due and careful enquiry, both dated 20 March 2013, for the purpose of, among other things, inclusion in this announcement are reproduced below:

APPENDIX I - LETTER FROM THE BOARD

Listing Division The Stock Exchange of Hong Kong Limited 11/F., One International Finance Centre, 1 Harbour View Street, Central, Hong Kong

20 March 2013

Dear Sirs,

Discloseable and Connected Transactions - Acquisition of an aggregate 76.55% Equity Interest in the Target Company

We refer to the valuation report dated 19 March 2013 (the "Valuation Report") and prepared by Jones Lang LaSalle Corporate and Appraisal Advisory Limited (the "Independent Valuer") in relation to the valuation of the entire equity interest of Zhejiang Jinhua Yongjin Expressway Co., Ltd. (the "Target Company"), the valuation of which constitutes a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

We have reviewed and discussed the bases and assumptions upon which the valuation of the entire equity interest of the Target Company has been made with the Independent Valuer, and reviewed the valuation for which the Independent Valuer is responsible. We have also considered the report from, Deloitte Touche Tohmatsu, dated 20 March 2013 regarding whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the bases and assumptions set out in the Valuation Report. We have noted that the discounted future estimated cash flows do not involve the adoption of accounting policy.

On the basis of the foregoing, we are of the opinion that Valuation Report and the valuation therein prepared by the Independent Valuer have been made after due and careful enquiry.

Yous faithfully,

On behalf of the Board

ZHEJIANG EXPRESSWAY CO., LTD.


                                                                                
    ZHAN Xiaozhang
                                                                                
       Chairman
    APPENDIX II - LETTER FROM DELOITTE


Deloitte Touche Tohmatsu
35/F One Pacific Place
88 Queensway
Hong Kong
Tel: +852 2852 1600
Fax: +852 2541 1911
Email: mail@deloitte.com.hk
www.deloitte.com/cn

20 March 2013


The Board of Directors
Zhejiang Expressway Co., Ltd.
12/F, Block A, Dragon Century Plaza
1 Hangda Road
Hangzhou City, Zhejiang Province
PRC 310007


ACCOUNTANTS' REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS 
IN CONNECTION WITH THE 
VALUATION OF THE ENTIRE EQUITY INTEREST OF ZHEJIANG JINHUA YONGJIN EXPRESSWAY 
CO., LTD., A 23.45% OWNED 
ASSOCIATE OF ZHEJIANG EXPRESSWAY CO., LTD. (THE "COMPANY")


We have examined the calculations of the discounted future estimated cash flows 
on which the valuation 
prepared by Jones Lang LaSalle Corporate and Appraisal Advisory Limited dated 
19 March 2013, in respect of 
the entire equity interest in Zhejiang Jinhua Yongjin Expressway Co., Ltd 
("Yongjin Expressway"), a 23.45% 
owned associate of the Company, as at 30 September 2012 (the "Valuation") is 
based. Yongjin Expressway is a 
company established in the PRC whose principal asset is the Jinhua section of 
the Ningbo-Jinhua Expressway. 
The Valuation based on the discounted future estimated cash flows is regarded 
as a profit forecast under 
Rule 14.61 of the Rules Governing the Listing of Securities on The Stock 
Exchange of Hong Kong Limited (the 
"Listing Rules") and will be included in an announcement dated 20 March 2013 to 
be issued by the Company in 
connection with the acquisition of an aggregate 76.55% equity interest in 
Yongjin Expressway (the 
"Announcement").


Directors' responsibility for the discounted future estimated cash flows

The directors of the Company are responsible for the preparation of the 
discounted future estimated cash 
flows in accordance with the bases and assumptions determined by the directors 
and set out in the 
Announcement (the "Assumptions"). This responsibility includes carrying out 
appropriate procedures relevant 
to the preparation of the discounted future estimated cash flows for the 
Valuation and applying an 
appropriate basis of preparation; and making estimates that are reasonable in 
the circumstances.
 

Reporting accountants' responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the 
calculations of the 
discounted future estimated cash flows on which the Valuation is based and to 
report solely to you, as a 
body, as required by Rule 14.62(2) of the Listing Rules, and for no other 
purpose. We do not assume 
responsibility towards or accept liability to any other person for the contents 
of this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance 
Engagements 3000 "Assurance 
Engagements Other Than Audits or Reviews of Historical Financial Information" 
issued by the Hong Kong 
Institute of Certified Public Accountants. This standard requires that we 
comply with ethical requirements 
and plan and perform the assurance engagement to obtain reasonable assurance on 
whether the discounted 
future estimated cash flows, so far as the calculations are concerned, have 
been properly compiled in 
accordance with the Assumptions. Our work does not constitute any valuation of 
Yongjin Expressway.

Because the Valuation relates to discounted future estimated cash flows, no 
accounting policies of the 
Company have been adopted in its preparation. The Assumptions include 
hypothetical assumptions about future 
events and management actions which cannot be confirmed and verified in the 
same way as past results and 
these may or may not occur. Even if the events and actions anticipated do 
occur, actual results are still 
likely to be different from the Valuation and the variation may be material. 
Accordingly, we have not 
reviewed, considered or conducted any work on the reasonableness and the 
validity of the Assumptions and do 
not express any opinion whatsoever thereon.


Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash 
flows, so far as the 
calculations are concerned, have been properly compiled, in all material 
respects, in accordance with the 
Assumptions.



Deloitte Touche Tohmatsu 
Certified Public Accountants 
Hong Kong

-0- Mar/21/2013 17:06 GMT

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