Haier Electronics : CONNECTED TRANSACTION RELATING TO SUBSCRIPTION OF EQUITY INTEREST IN HAIER'S INDUSTRIAL INTERNET ENTITY AND DISPOSAL OF FOSHAN INTELLIGENCE

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HAIER ELECTRONICS GROUP CO., LTD.

海 爾 電 器 集 團 有 限 公 司 *

(incorporated in the Bermuda with limited liability)

(Stock Code: 1169)

CONNECTED TRANSACTION RELATING TO

SUBSCRIPTION OF EQUITY INTEREST IN HAIER'S INDUSTRIAL INTERNET ENTITY AND DISPOSAL OF FOSHAN INTELLIGENCE

THE SUBSCRIPTION AND DISPOSAL AGREEMENT

On 29 June 2019, the Subscription and Disposal Agreement was entered into between the Company, its wholly owned subsidiary Hefei Washing Machine, Haier Smart and the Target Company, pursuant to which the Company and Hefei Washing Machine have agreed to dispose of 25% and 75% equity interest in Foshan Intelligence, respectively, to the Target Company carrying on Haier Group's Industrial Internet business, at a consideration of RMB556,000,000, which will be satisfied by the Target Company issuing RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10%, respectively, of the enlarged registered capital of the Target Company after Completion).

At the same time, the Target Company agreed to issue RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10% of the enlarged registered capital of the Target Company) as consideration for 25% and 75% equity interest in Foshan Intelligence to be transferred by the Company and Hefei Washing Machine, respectively to the Target Company on Completion.

• For identification purpose only

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LISTING RULES IMPLICATIONS

As at the date of this announcement, Haier Smart is a substantial shareholder of the Company as it controls approximately 57.65% of the total issued share capital of the Company. As the Target Company is a subsidiary of Haier Smart, the Target Company is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Subscription and Disposal Agreement constitute connected transactions of the Company under the Listing Rules.

The Subscription and Disposal involves the Subscription and the Disposal. Pursuant to Rule 14.24 of the Listing Rules, the Subscription and Disposal will be classified by reference to the larger of the Subscription or the Disposal in terms of their respective percentage ratios, and subject to the relevant requirements applicable to such classification.

As all of the applicable percentage ratios under the Subscription and Disposal Agreement are less than 5%, the connected transactions contemplated under the Subscription and Disposal Agreement are subject to the reporting, announcement and annual review requirements, but are exempted from the circular (including independent financial advice) and shareholders' approval requirement pursuant to Rule 14A.76(2) of the Listing Rules.

Mr. Zhou Yun Jie, Mr. Li Hua Gang, Mr. Xie Ju Zhi and Mr. Liang Hai Shan have positions and related interests at Haier Group and have abstained from voting on the resolutions of the Board approving the Subscription and Disposal Agreement and the transactions contemplated thereunder.

INTRODUCTION

On 29 June 2019, the Subscription and Disposal Agreement was entered into between the Company, its wholly owned subsidiary Hefei Washing Machine, Haier Smart and the Target Company, pursuant to which the Company and Hefei Washing Machine have agreed to dispose of 25% and 75% equity interest in Foshan Intelligence, respectively, to the Target Company at a consideration of RMB556,000,000, which will be satisfied by the Target Company issuing RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10%, respectively, of the enlarged registered capital of the Target Company after Completion).

At the same time, the Target Company agreed to issue RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10% of the enlarged registered capital of the

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Target Company) as consideration for 25% and 75% equity interest in Foshan Intelligence to be transferred by the Company and Hefei Washing Machine, respectively to the Target Company on Completion.

THE SUBSCRIPTION AND DISPOSAL AGREEMENT

The principle terms of the Subscription and Disposal Agreement are set out as follows:

Date

29 June 2019

Parties

1. the Company;
2. Hefei Washing Machine
3. Haier Smart; and
4. the Target Company.

Consideration

The Company and Hefei Washing Machine

Pursuant to the Subscription and Disposal Agreement, the Company and Hefei Washing Machine agreed to dispose of 25% and 75% equity interest in Foshan Intelligence, respectively, to the Target Company at a consideration of RMB556,000,000, which will be satisfied by the Target Company issuing RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10%, respectively, of the enlarged registered capital of the Target Company after Completion).

The consideration of RMB556,000,000 of the Subscription was determined and agreed by the parties with reference to the following factors after arm's length negotiations:

1. the appraised value of the Target Company attributable to the equity interest to be acquired under the Subscription indicated in a valuation report prepared by an independent professional valuer based on asset-based method;
2. the current financial position and performance of the Target Company; and
3. the business development and prospects of the business of the Target Company.

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Target Company

The Target Company agreed to issue RMB27,550,545 and RMB82,651,636 of its registered capital to the Company and Hefei Washing Machine, respectively (representing 2.37% and 7.10% of the enlarged registered capital of the Target Company) as consideration for 25% and 75% equity interest in Foshan Intelligence to be transferred by the Company and Hefei Washing Machine, respectively to the Target Company on Completion.

The consideration of 25% and 75% equity interest in Foshan Intelligence to be transferred from the Company and Hefei Washing Machine, respectively, to the Target Company was determined and agreed by the parties with reference to various factors after arm's length negotiations, including, inter alia:

1. the current financial position and performance of Foshan Intelligence;
2. the business development and prospects of the business of Foshan Intelligence; and
3. the potential growth of the Target Company by the effect of the merger and integration of the business of Foshan Intelligence.

Conditions Precedent

The Completion of the Subscription and Disposal Agreement is conditional upon the achievement and satisfaction (or waiver) of all of the following conditions precedent:

1. The respective internal authorities vested with power to make decision of the parties having passed a resolution approving the Subscription and Disposal;
2. Haier Smart having passed a resolution agreeing to waive its pre-emptive rights regarding the Subscription;
3. The representations, warranties and undertakings of the parties are true and accurate and remain true and accurate as at the date of the Completion; the representations, warranties and undertakings shall be repeated upon Completion and having the same effect as if they were made on the date of Completion; and all undertakings and covenants specified in the Subscription and Disposal Agreement to be fulfilled on or before the date of Completion having been fulfilled;
4. The parties having signed and delivered all documents under the Subscription and Disposal Agreement and related transaction documents, and all such documents are effective; and
5. The parties having issued to other parties written document certification that each of the abovementioned conditions were satisfied.

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The parties to the Subscription and Disposal Agreement agreed that in order to procure the satisfaction of the abovementioned conditions, the parties may execute further legal documents (including but not limited to supplemental agreements) and such legal documents shall form an inseverable part of the Subscription and Disposal Agreement.

Completion

Completion shall take place on 31 October 2019 or such later date as may be agreed by the parties. However, in any event, Completion shall take place on a date no later than 31 December 2019, or such other date as may be agreed by the parties to the Subscription and Disposal Agreement.

Shareholder's Rights

The Subscription and Disposal Agreement contains the following key provisions in relation to the Company's rights as a shareholder of the Target Company:

Dilution protection

In subsequent capital increases, without the consent of the Company and Hefei Washing Machine, the Target Company shall not increase its capital at a subscription price lower than that of the Company and Hefei Washing Machine in the Subscription under the Subscription and Disposal Agreement, except where such increase in registered capital is for the purpose of the implementation of an internally approved employees' incentive scheme of the Target Company.

Pro rata rights

If the Target Company subsequently intends to increase its registered capital, the Company and Hefei Washing Machine shall each have the right to subscribe for the Target Company's newly increased equity interest in proportion to their respective equity interest in the Target Company within forty-five (45) days from the date on which the Target Company gives notice to them, except where such increase in registered capital is for the purpose of the implementation of an internally approved employees' incentive scheme of the Target Company.

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