Huazhang Technology Holding Limited (“Huazhang” or the “Group”, HKSE: 1673) is pleased to announce that, the Company and three individuals have entered into the Sale and Purchase Agreement in relation to the purchase of the Equity Interest of Hangzhou MCN and Hangzhou Haorong, headbox distributors in the PRC, and the Sunplus Contracts for an initial consideration of RMB34 million (equivalent to approximately HK$38.50 million) (subject to adjustment), which RMB9 million (equivalent to approximately HK$10.20 million) will be settled partly by cash and partly by the Company’s allotment and issue of new Shares at Completion, at an issue price of HK$2.55 per Share, at a premium of approximately 4.94% to the closing price of HK$2.43 per Share as quoted on the Stock Exchange today.
Hangzhou MCN and Hangzhou Haorong established in 2001 and 2006 respectively, are principally engaged in the research, development and distribution of headbox. Hangzhou MCN has developed various kinds of stainless headboxes including rectifier roll headbox, hydraulic headbox, turbulence channel headbox, inclined wire and cylinder former headbox and turbulent flow away headbox etc. and Hangzhou Haorong has developed various kinds of high frequency shake, headbox control system, etc.
In the event that the average net profit after taxation of the two Target Companies for the two years ended 31 December 2018 equals to or exceeds RMB4 million (equivalent to approximately HK$4.50 million), the initial consideration for the transactions contemplated under the Sale and Purchase Agreement will be adjusted. For the year ended 31 December 2016, unaudited net profit after taxation of the two Target Companies recorded RMB1.25 million (equivalent to approximately HK$1.40 million).
In addition, the Sunplus Contracts consist of the benefit of two partly unperformed contracts entered into by Sunplus Industrial in relation to the sale and distribution of headbox to its customers based in the Republic of Indonesia and the Republic of India. The aggregate amount of receivables under the Sunplus Contracts as at the date of the Sale and Purchase Agreement was approximately US$25,000 (equivalent to approximately HK$194,750).
Mr. Zhu Gen Rong, Chairman of Huazhang, said, “In view of the Target Companies having the patents and know-how in production of the headbox, we consider that, by acquiring the Equity Interest, the Group will have synergy between our existing products and headbox. In the meantime, the acquisition of the Equity Interest would be able to diversify the Group’s products and lead the Group to own one of the core technologies of paper making production equipment. It benefits our export business which is in line with the national strategy ‘A Belt, A Road’.”