China Shineway Pharmaceutical : Connected Transaction Disposal of the Entire Equity Interests in Jing Li Yuan Biotechnology Limited

Microsoft Word - E_02877_Connected Transactions_2013.doc

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.

CHINA SHINEWAY PHARMACEUTICAL GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 02877) CONNECTED TRANSACTION DISPOSAL OF THE ENTIRE EQUITY INTERESTS IN JING LI YUAN BIOTECHNOLOGY LIMITED THE AGREEMENT

The Board is pleased to announce that on 1 July 2016, the Vendor, an indirect wholly- owned subsidiary of the Company, and the Purchaser entered into the Agreement, pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire the entire equity interests of Jing Li Yuan at the consideration of RMB80,000,000.

LISTING RULES IMPLICATIONS

The Purchaser is an associate of Mr. Li and hence a connected person of the Company. The Disposal therefore constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more applicable percentage ratios in respect of the Disposal exceeds 0.1% but is less than 5%, the Disposal is subject to the reporting and announcement requirements but exempt from shareholders' approval requirement under Chapter 14A of the Listing Rules.

INTRODUCTION

The Board is pleased to announce that on 1 July 2016, the Vendor, an indirect wholly- owned subsidiary of the Company, and the Purchaser entered into the Agreement, pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire the entire equity interests of Jing Li Yuan at the consideration of RMB80,000,000.

THE AGREEMENT

The principal terms of the Agreement are as follows:

Date	:	1 July 2016
Parties	:	The Vendor The Purchaser
Assets to be disposed of	:	The Vendor agreed to sell and the Purchaser agreed to acquire the entire equity interests of Jing Li Yuan.
Consideration	:	RMB80,000,000 (equivalent to approximately HK$93,600,000) The consideration shall be paid by the Purchaser to the Vendor within 60 days from the date of the Agreement through wire transfer.
The consideration was determined after arm's length negotiations between the Purchaser and the Vendor with reference to the equity contribution to Jing Li Yuan.
The Disposal is unconditional and completion of the Disposal shall take place upon completion of the registration of the transfer of the equity interests and obtaining relevant approval from relevant PRC governmental authorities. Upon completion of the Disposal, Jing Li Yuan will cease to be a subsidiary of the Company.

INFORMATION ON JING LI YUAN

Jing Li Yuan is a company established in the PRC with limited liability and has a registered capital of RMB80,000,000. Jing Li Yuan was established on 3 February 2015 and has not commenced business since its establishment.

Set out below is certain financial information of Jing Li Yuan prepared in accordance with International Accounting Standards:

For the period from 3 February 2015 (date of incorporation) to 31 December 2015	For the period from 1 January 2016 to 30 June 2016
RMB'000 (Audited)	RMB'000 (Unaudited)
Net profit before taxation	1,749	974
Net profit after taxation	1,749	946

Based on the audited financial statements of Jing Li Yuan, the audited net assets value of Jing Li Yuan as at 31 December 2015 was RMB81,749,000. Based on the unaudited financial statements of Jing Li Yuan, the unaudited net assets value of Jing Li Yuan as at 30 June 2016 was RMB80,000,000.

FINANCIAL IMPACT ON THE GROUP

It is expected that the Group will not record any gain or loss on the Disposal, of which is calculated based on the sale proceeds from the Disposal in the amount of RMB80,000,000 less the carrying amount of the net asset value of Jing Li Yuan of RMB80,000,000 as of 30 June 2016.

The proceeds arising from the Disposal will be used by the Group as its working capital.

REASONS FOR AND BENEFITS OF THE DISPOSAL

Jing Li Yuan was established on 3 February 2015 and has not commenced business since its establishment. The management of the Company reviewed the Company's strategies and plans and considered that it is in the better interests of the Company to streamline the structure of the Group by disposing Jing Li Yuan to the Purchaser.

The Directors (including the independent non-executive Directors) consider that the terms of the transactions contemplated under the Agreement are fair and reasonable, and the transactions contemplated under the Agreement are on normal commercial terms or better and in the ordinary and usual course of business of the Group and in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

Ms. Ren is the spouse of Mr. Li, an executive Director, and indirectly owns 100% of the interests in the Purchaser. The Purchaser is an associate (as defined in the Listing Rules) of Mr. Li and hence a connected person of the Company. The Disposal therefore constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more applicable percentage ratios in respect of the Disposal exceeds 0.1% but is less than 5%, the Disposal is subject to the reporting and announcement requirements but exempt from shareholders' approval requirement under Chapter 14A of the Listing Rules.

Mr. Li is deemed to be materially interested in the Disposal. Accordingly, he has abstained from voting on the relevant Board resolutions. Ms. Lee Ching Ton Brandelyn, being the daughter of Mr. Li, has also abstained from voting on the relevant Board resolutions. Save as disclosed above, none of the Directors (including the independent non-executive Directors) has any material interest in the Disposal and so none of them was required to abstain from voting in respect of such Board resolutions.

GENERAL INFORMATION

The Group is principally engaged in research and development, manufacture and trading of Chinese pharmaceutical products.

The Purchaser is principally engaged in the business of property and investment holding.

DEFINITIONS

"Agreement"	the equity transfer agreement dated 1 July 2016 entered into by and between the Vendor and the Purchaser in relation to the Disposal
"Board"	the board of Directors
"Company"	China Shineway Pharmaceutical Group Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited
"connected person(s)"	has the meaning ascribed thereto under the Listing Rules
"Director(s)"	the director(s) of the Company
"Disposal"	the disposal of the entire equity interests of Jing Li Yuan by the Vendor to the Purchaser pursuant to the terms and conditions of the Agreement
"Group"	the Company and its subsidiaries
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the People's Republic of China
"Jing Li Yuan"	精力源生物科技有限公司 (Jing Li Yuan Biotechnology Limited*), a limited liability company established in the PRC and an indirect wholly-owned subsidiary of the Company
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"Mr. Li"	Mr. Li Zhenjiang (李振江), an executive Director
"Ms. Ren"	Ms. Ren Junying (任俊英), the spouse of Mr. Li