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Home Media Centre Press Release Tongda Group Announces The Acquisition of Manufacture and Sales of Parts of a Handsets Company

Tongda Group Announces The Acquisition of Manufacture and Sales of Parts of a Handsets Company

 

(Hong Kong, 29 April 2015) – Tongda Group Holdings Limited (“Tongda” or the “Group”) (Stock Code: 698) has entered into an Acquisition Agreement with Grand Prosper Investments Limited (“Vendor” or the “Target Company”). Tongda (Xiamen) Company Limited (“Tongda Xiamen” or “the purchaser”), a fully-owned subsidiary of the Group, agreed to acquire at a consideration of HK$275,077,000 the entire issued share capital of the Grand Prosper Investments Limited. The Consideration shall be paid to the Vendor as to HK$30,357,000 by way of cash and as to the balance of HK$244,720,000, by procuring the Company to allot and issue 190,000,000 Consideration Shares at HK$1.288 per Share to the Vendor, credited as fully paid. The Target Company is the beneficial owner of 25% of the entire equity interests of Tongda (Xiamen) and Tongda Electronic (“the PRC Companies”), and their subsidiaries (together as “The PRC Group”).

 

 

 

Lock-Up Period

 

There is a three-year lock-up period in this transaction, during which the Vendor will not (and will procure its nominee(s) not to), in respect of the relevant Consideration Shares, pledge, sell or contract to sell or otherwise transfer or dispose of (either conditionally or unconditionally, or directly or indirectly, or otherwise) any of the Consideration Shares, save in accordance with the following:

 

(a) No disposal of any Consideration Shares is allowed during the period of 1 year from the Completion Date;

 

(b) Disposal(s) of up to 30% of the initial number of Consideration Shares (i.e., up to 57,000,000 Consideration Shares) is allowed during the period from the 1st anniversary of the Completion Date to the 2nd anniversary of the Completion Date;

 

(c) Disposal(s) of up to 60% of the initial number of Consideration Shares (i.e., up to 114,000,000 Consideration Shares inclusive of any Consideration Shares disposed of pursuant to (b) above) is allowed during the period from the 2nd anniversary of the Completion Date to the 3rd anniversary of the Completion Date; and

 

(d) Disposal(s) of up to 100% of the initial number of Consideration Shares (i.e., up to all the 190,000,000 Consideration Shares) is allowed during the period from the 3rd anniversary of the Completion Date and thereafter.

 

 

 

Basis of the Consideration

 

The Consideration was determined after arm’s length negotiations between the Purchaser and the Vendor with reference to (i) the net assets value of the Target Company as shown in its unaudited management accounts for the year ended 31 December 2014 together with 25% of the net assets value of the PRC Group as shown in its unaudited consolidated management accounts for the year ended 31 December 2014; (ii) the price-to-earning ratio of the Target Company based on the unaudited management accounts of the Target Company for the year ended 31 December 2014 and 25% of the profit of the PRC Group as shown on the unaudited consolidated management accounts for the year ended 31 December 2014; and (iii) prospects of the PRC Group.

 

 

 

Financial Information of the PRC Group

 

For the year ended 31 December 2014, the unaudited profit of Tongda Electronic after income tax rose by 238.1% to HK$44,457,000 (2013: HK$13,149,000), while the unaudited profit of Tongda (Xiamen) rose by 440.6% to HK$154,006,000 (2013: HK$28,490,000). For the year ended 31 December 2014, the total unaudited profit of the PRC Companies after income tax was HK$198,463,000 (2013: HK$41,639,000).

 

 

 

Reasons for and Benefits of the Acquisition

 

The PRC group mainly produces handset components and plastic parts. In view of expansion of smartphone market, and the domestic handset brands are focusing more on outstanding specifications and product differentiation, the Directors consider that there will be a growing demand on the products with better decoration for appearance, texture and functionality. Apart from the manufacturing of handsets components including battery covers, display frames and middle frames, the Group has been actively searching for other business opportunities so as to diversify the Group’s business into a new line of business with growth potential and to broaden its source of income that can bring return to the Shareholders. Apart from the handsets segment, the Target Company actively taps into the worldwide household durable products industry and sports gear for producing the plastic products. Having considered that the PRC Group is equipped with experience in the industry with diversified clientele and being specialized in providing precise plastic products solutions, the Directors believe that the prospect of the PRC Group is promising.

 

 

 

Mr. Wang Ya Nan, Chairman and CEO of Tongda Group, said, “With the rising demand from major customers on a mid-range-to-high-end product line, the development in differentiated product segments, including the metal casing and functional antenna components, will benefit. The Group is closely monitoring the market trend and is committed to the research and development of the diverse application of decoration technology with increased capacity for metal handset casing when necessary. Tongda Group is continuing new technology development to enhance the manufacturing productivity of metal casings and upgrading the overall integrating capacity of the handset operation. We remain proactive, and constantly strive to create a sustainable growth performance so as to bring greater returns for shareholders.”

 

 

 

 

 

Home Media Centre Press Release Tongda Group Announces The Acquisition of Manufacture and Sales of Parts of a Handsets Company