Stock Code: 000553 (200553) Stock Abbreviation: ADAMA A(B) Announcement No. 2019-54
ADAMA Ltd.
Announcement on the Acquisition of 50% of the Equity Interests in
Shanghai Dibai Plant Protection Co., Ltd.
The Company and all members of the Company’s Board of Directors confirm that all
information disclosed herein is true, accurate and complete, with no false or
misleading statement or material omission.
Please be aware:
1. In this Transaction (as defined below), the estimated purchase price of 50% ofthe equity interests in Shanghai Dibai Plant Protection Co., Ltd. (“Dibai” or “TargetCompany”) after completion of its Restructuring (as defined below) (“TargetEquities”) shall be RMB 370 million, and the final purchase price shall be determinedbased on the net debt of Dibai at Closing Date (as defined below) in accordance withthe EPA (as defined below), and is subject to the appraisal report on the TargetEquities (as defined below) duly filed with the government entities to the ADAMALtd. (“Company”) in charge of supervision and administration of state-owned assetsor authorized entities (“Government Entities”) (“Appraisal Report”).
2. This Transaction requires further approval of the Government Entities.
3. Required government review from the perspective of anti-trust law in relationto this Transaction shall be completed.
4. This Transaction shall further be approved by the shareholders meeting ofJiangsu Huifeng Agrochemical Co., Ltd. (“Huifeng”).
I. Overview of the Transaction
1. On January 10, 2019, the Company and Huifeng signed the Memorandum ofUnderstanding on the Acquisition of Certain Assets (“Memorandum ofUnderstanding”), which has been publicly announced by the Company on the websitehttp://www.cninfo.com.cn on January 11, 2019 (Announcement No.: 2019-5). As animportant implementation step of the Memorandum of Understanding, the Companyexecuted Equity Purchase Agreement (“EPA”) with Huifeng on November 6, 2019,according to which the Company intends to acquire the Target Equities aftercompletion of the Restructuring and the Company agrees to purchase the TargetEquities for an estimated purchase price of RMB 370 million. The final purchaseprice shall be determined based on the net debt of Dibai at Closing Date in accordancewith the EPA, and is subject to the Appraisal Report (“Transaction”). Following thecompletion of this Transaction, the Company will hold 50% of the equity interests inreorganized Dibai.
2. On November 5, 2019, the 18th Meeting of the 8th session of the Board ofDirectors of the Company approved the Proposal and Context of on the Acquisition of50% of the Equity Interests in Shanghai Dibai Plant Protection Co., Ltd., the domesticdistribution arm of Jiangsu Huifeng Agrochemical Co., Ltd. Among the five directorsof the Company, there were five affirmative votes, zero negative votes and zeroabstentions. The Transaction is within the approval line of the Board of Directors andis not subject to the approval of the shareholders.
3. This Transaction does neither constitute a related-party transaction nor amaterial asset restructuring as stipulated by the Administrative Measures onSignificant Asset Restructuring of Listed Companies.
4. The Appraisal Report on the Target Equities of this Transaction shall be dulyfiled with the Government Entities.
5. This Transaction requires further approval of the Government Entities.
6. Required government review from the perspective of anti-trust law in relationto this Transaction shall be completed.
7. This Transaction shall further be approved by the shareholders meeting ofHuifeng.
8. The Company will timely disclose the relevant information according to theprogress of this Transaction.
II. Basic Information of the Counterparty
1. Company Name: Jiangsu Huifeng Agrochemical Co., Ltd.
2. Nature of Enterprise: Joint stock limited company (Listed, invested orcontrolled by natural individual)
3. Date of Establishment: May 26, 1989
4. Registered Capital: RMB 1,507,475,283
5. Legal Representative: Zhong Hangen
6. Unified Social Credit Code: 913209001407071551
7. Registered Address: South of Wanggangzha, Dafeng District, Yancheng City,Jiangsu Province
8. Business Scope: Crop planting; producing pesticides and hazardous chemicals(in accordance with safety permission opinions of establishment of constructionproject of hazardous chemical and approval opinions of environmental impact report);technical consultation and service of insecticides, bactericides, BZQ and herbicides;sales of chemical products (excluding pesticides and other hazardous chemicals), knitgoods, hardware, electric materials, daily groceries, daily necessities, woods, buildingmaterials, electronic computers and accessories and agricultural products (excludingnon-packaged seeds); production and sales of wrapper (including plastic products andexcluding hazardous chemicals); business of self-produced products by the companyand its member companies and export business of relevant technologies;self-management and agency of import and export of all kinds of goods andtechnologies and domestic trade. (any business which legally requires approval(s)shall be conducted after obtaining the approvals issued by relevant authorities.)
9. Material Shareholders:
No. Shareholder’s name Holding percentage
1. ZhongHangen 42.43%
2. ZhongYurong 4.82%
10. Related-party Relationship: Huifeng is not a related party of the Company,and there is no other relationship relating to property rights, businesses, assets oremployees between Huifeng and the Company (and its top 10 shareholders) that mayor has created any preferential interests.
There exist business relationships between the Company and Huifeng: TheCompany purchases pesticide active ingredients and pesticide formulations fromHuifeng, including fungicides, insecticides, herbicides and plant growth regulators,etc.
11. Credit Status: According to a search conducted on the website of publicationof enforcement information in China, Huifeng is not a dishonest party subject to anyjudicial enforcement.
III. Basic Information of the Target Asset
1. Overview of the Target Asset
(1). Target Asset: 50% of the equity interests in the reorganized Dibai
(2). Asset Category: Equity investment
(3). Encumbrance: No mortgage, pledge or any other third-party claim on the TargetEquities. The transferred equity is not involved in any major disputes, lawsuits,arbitrations, freeze or other judicial measures.
2. Overview of the Target Company
(1). Company Name: Shanghai Dibai Plant Protection Co., Ltd.
(2). Nature of Enterprise: Limited liability company (Invested by naturalindividual or controlled by legal person)
(3). Date of Establishment: September 17, 2001
(4). Registered Capital: RMB 10 million
(5). Legal Representative: Pei Binbin
(6). Unified Social Credit Code: 91310114703454316Y
(7). Registered Address: Room 217, 218, No.2 Building, No.51 Xinpei Road,Jiading District, Shanghai
(8). Business Scope: Sale of chemical products (excluding hazardous chemicals,supervised chemicals, fireworks, civic-use explosives, precursor chemicals), chemicalfertilizers, pesticides (excluding hazardous chemicals), imports and exports of goodsand technologies (any business which legally requires approval(s) shall be conductedafter obtaining the approvals issued by relevant authorities.)
(9). Shareholding Structure:
Shareholding structure of the Target Company before this Transaction was asfollows:
No. Shareholder’s name Holding percentage
1. Jiangsu HuifengAgrochemicalCo., Ltd. 100%
(10). Key Financial Figures of the Last Year And the Last Period:
(RMB (million))
As of December31, As of July31, 2019
KeyFinancialFigures 2018（FY2018） （Januaryto July,
2019）
Total assets 167.4840 84.0401
Totalliabilities 136.5847 64.5443
Totalreceivables 36.7216 65.1866
Totalamount ofcontingency
(including lawsuitsand 0 0
arbitrations)
Netassets 30.8993 19.4958
Revenues 535.7130 264.0149
Profits 75.5696 30.9323
Net profits 55.3334 23.1545
Net cash flowsgenerated 41.5379 34.2538
from operating activities
Note: In order to indicate the operation condition of the Target Company accurately andcompletely, the above financial figures are simulated and have not been audited assuming that theTarget Company has complete the Restructuring. The financial figures have include relevantfigures in relation to Dibai and Xinjiang Huifeng.
(11). Audit and Appraisal Report: The audit and appraisal with respect to theTarget Equities are under work, with a benchmark date of July 31, 2019. After thecompletion of the above process, the Company will timely disclose the audit andappraisal report according to the requirements under relevant laws and regulations.
(12). Credit Status: According to a search conducted on the website ofpublication of enforcement information in China, Dibai is not a dishonest partysubject to any enforcement.
(13). Restriction: There is no restriction on the shareholders’ rights in theArticles of Association and other relevant documents of Dibai other than which hasbeen stipulated in the applicable laws and regulations.
3. As one step of this Transaction, before Closing, the Restructuring shall becompleted by Huifeng, i.e. Huifeng shall acquire 49% of equity interests in XinjiangHuifeng Bio-Technology Co., Ltd. (“Xinjiang Huifeng”) from Xinjiang Huifeng’semployee shareholders and then transfer 100% of equity interests in Xinjiang Huifengowned by it to Dibai after completion of the acquisition aforesaid. 100% of equityinterests in Xinjiang Huifeng will ultimately be held by Dibai. The basic informationof Xinjiang Huifeng is as follows:
(1). Company Name: Xinjiang Huifeng Bio-Technology Co., Ltd.
(2). Nature of Enterprise: Limited liability company (Invested or controlled bynatural individuals)
(3). Date of Establishment: July 3, 2013
(4). Registered Capital: RMB 5 million
(5). Legal Representative: Pei Binbin
(6). Unified Social Credit Code: 91650100072216310T
(7). Registered Address: 2F, No. 2 Part, No. 1 Building, No. 56 Dalian Road,Economic Development Zone, Urumqi, Xinjiang Uygur Autonomous Region.
(8). Business Scope: Pesticide (No.1 item of the sixth category) (exceptunauthorized dangerous chemicals and precursor chemicals, explosion pronechemicals and toxic chemicals). Sales of fertilizer; development and promotion of thebio-technology
(9). Shareholding Structure:
Shareholding structure of Xinjiang Huifeng before the commencement of theRestructuring under this Transaction was as follows:
No. Shareholder’s name Holding percentage
1. Jiangsu HuifengAgrochemicalCo., Ltd. 51%
2. GuoJing 46%
3. Wang Li 3%
(10). Credit Status: According to a search conducted on the website ofpublication of enforcement information in China, Xinjiang Huifeng is not a dishonestparty subject to any enforcement.
(11). Restriction: There is no restriction on the shareholders’ rights in theArticles of Association and other relevant documents of Xinjiang Huifeng other thanwhich has been stipulated in the applicable laws and regulations.
(12). Encumbrance: No mortgage, pledge or any other third-party claim on theequity interest of Xinjiang Huifeng. The equity interest of Xinjiang Huifeng is notinvolved in any major disputes, lawsuits, arbitrations, freeze or other judicia l measures.
IV. Key Terms of the Transaction Agreement
1. Parties: The Company (the Buyer); Huifeng (the Seller)
2. Target Formulation Products: Including existing formulation registrations andnew formulation registrations, excluding TDZ-series products for bio stimulant usageand bio-agricultural sector related to micro-biotic-series products, but TDZ fordefoliants usage shall still be included.
3. Target Business: Domestic and export sales of the Target FormulationProducts.
4. Restructuring: The Company and Huifeng agree that, Huifeng will commencerestructuring in relation to the Target Business (“Restructuring”) after the EquityPurchase Agreement enters into effect. The Restructuring mainly includes:
(1). Huifeng will acquire 49% of the equity interests in Xinjiang Huifeng ownedby its employee shareholders. After this acquisition, Huifeng will hold 100% of theequity interests of Xinjiang Huifeng.
(2). After completion of the acquisition aforesaid,Huifeng will transfer 100% ofthe equity interests of Xinjiang Huifeng to Dibai.
(3). Huifeng will transfer business relationships and employees in relation to theTarget Business to Dibai and/or Xinjiang Huifeng.
(4). Huifeng will transfer/license intellectual properties in relation to the TargetBusiness to Dibai and/or Xinjiang Huifeng.
(5). After completion of the Restructuring, Dibai will hold 100% of the equityinterests of Xinjiang Huifeng and the Target Business will be operated by Dibaiand/or Xinjiang Huifeng.
(6). After completion of the Restructuring, the Company will acquire the TargetEquities in cash.
5. Purchase Price: The estimated purchase price of the Target Equities shall beRMB 370 million, with the final purchase price to be determined based on the netdebt of Dibai at Closing Date in accordance with the EPA, and is subject to theAppraisal Report.
6. Pricing Basis: The Purchase Price has been determined by both parties withmutual agreement and shall be subject to the Appraisal Report.
7. Payment: Cash payment
8. Source of the Payment: The Company’s own capital
9. Payment Arrangement:
(1). The Company shall pay RMB 30 million no later than five business daysafter the approval by Huifeng’s shareholders meeting or the approval by theGovernment Entities (whichever comes later). At the Closing Date, the Companyshall pay the remaining RMB 340 million, by way of paying RMB 310 million toHuifeng and RMB 30 million to an escrow account opened in the name of Huifeng(“Escrow Amount”).
(2). If during the period between the Closing Date and the first anniversary of theClosing Date, both dates inclusive, all terms and conditions to release the EscrowAmount set forth in the EPA have been met, 50% of the Escrow Amount will bereleased on the tenth calendar day falling after the first anniversary of the ClosingDate. If during the period between the first anniversary of the Closing Date (excludingsuch date) and the second anniversary of the Closing Date (including such date), allterms and conditions to release the Escrow Amount set forth in the EPA have beenmet, the balance of the Escrowed Amount will be released on the tenth calendar dayfalling after the second anniversary of the Closing Date.
10. Material Closing Conditions:
(1). The Restructuring has been completed;
(2). Relevant approval of in relation to this Transaction has been duly obtainedand the Appraisal Report has been duly filed with Government Entities;
(3). Required government review from the perspective of anti- trust law shall becompleted;
(4). The resumption of Huifeng’s productions of active ingredients, the capacityof which in a respective month can generate no less than 80% of the average monthlyproduction level of active ingredients for the Target Business in the EPA generatedfrom self-produced products in the financial year 2017. Huifeng shall provide allgovernment authorizations necessary for the lawful resumption and continuousoperation of the corresponding production lines, make public announcement on theresumption and provide documents issued by government entities approving theresumption.
(5). The execution by the parties of the definitive agreements (including withoutlimitation, an equity purchase agreement) in connection with the ExtendedTransaction (as defined below).
11. Closing: The closing shall take place at the registered address of theCompany within five business days after the satisfaction or waiver of all theconditions precedent set forth the EPA or at such other place or at such other time anddate as Huifeng and the Company may otherwise mutually agree in writing (“ClosingDate”).
12. Management of the Target Company after this Transaction: The Companyand Huifeng agree that commencing from the Closing Date, they will co-manage theTarget Company as shareholders, each holding 50% equity interest (after completionof the Restructuring) and having the power to appoint the same number of directors.The chairman of the board shall be selected from the board members appointed byHuifeng and shall be the legal representative of the Target Company, the CEO andCFO of the Target Company shall be nominated by the Company and appointed bythe Board of the Target Company. The Company will be responsible for setting theDibai’s commercial, marketing and branding direction.
13. Attribution of Economic Benefits During the Transition Period:
(1). The transition period of the Transaction shall commence from thebenchmark date (July 31, 2019) to the Closing Date (“Transition Period”).
(2). Before the benchmark date, all and any economic benefits, profits, interestsand losses generated by the Target Business corresponding to the Target EquityInterest shall be attributed to Huifeng.
(3). During the Transaction Period, all and any economic benefits, profits andinterests generated by the Target Business corresponding to the Target Equities shallbe attributed to Huifeng, and all and any losses suffered by the Target Businesscorresponding to the Target Equities shall be borne by Huifeng.
(4). After the Closing Date, all and any economic benefits, profits, interests andlosses generated by the Target Business corresponding to the Target Equity Interestafter shall be attributed to the Company.
14. Extended Transaction: The Company intends to acquire Huifeng’sagrochemical business located at its main site in Dafeng, Jiangsu in accordance withMemorandum of Understanding (announcement number:2019-5)(“ExtendedTransaction”). At the Closing Date, the Company will pay RMB 20 million toHuifeng as an upfront fee of the Extended Transaction.
15. Effectiveness: The Equity Purchase Agreement shall come into effect afterapproval by Huifeng’s shareholders meeting and approval by the Government Entities,whichever comes later.
16. Termination: The Equity Purchase Agreement will be terminated if theclosing conditions have not been achieved or have not been waived by either partybefore February 29, 2019.
V. Other Arrangements in this Transaction
1. Employee Settlement: After completion of this Transaction, Dibai will keepapproximately 183 employees in relation to the Target Business, the remainingemployees of Dibai will be settled by Huifeng.
2. Land Lease: This Transaction does not include any land lease arrangement.
3. Potential Related-Party Transaction after Closing: Commencing from theClosing Date,
(1). Huifeng and Dibai will be related parties of the Company;
(2). All Target Formulation Products supplied by Huifeng shall be sold anddistributed to Xinjiang HF through Dibai, or directly to Xinjiang Huifeng as perDibai’s requirements.
(3). All Target Formulation Products will be sold to external customers throughthe Dibai or Xinjiang Huifeng, provided, however, Dibai will have the right toreassign or transfer the right to sell or distribute certain Target Formulation Productsto affiliates of the Company or Huifeng, and the transaction shall be conducted atarm’s length;
(4). Huifeng shall have a right of first refusal with respect to the supply to Dibaiand Xinjiang Huifeng. In the event that Huifeng is not able to satisfy Dibai and/orXinjiang Huifeng’s demand for the Target Formulation Products, the Company willhave a right of first refusal to supply Dibai and/or Xinjiang Huifeng such productsfrom itself or its subsidiaries.
(5). Certain formulation products that were produced by Huifeng and wereexclusively promoted by the Company with its own brand before completion of thisTransaction will still be produced by Huifeng and be sold to the Company throughDibai after completion of this Transaction.
VI. Purpose of this Transaction and the Effects on the Company
Dibai has an attractive portfolio of formulated crop protection products,comprised of more than 150 product registrations, as well as an experienced salesteam of 180 employees. Under the terms of the Transaction, Dibai will obtain theexclusive, indefinite, royalty-free rights to license Huifeng’s existing and futureregistrations in China, with all its sales of Target Formulated Products in China to beconducted through Dibai (including Xinjiang Huifeng, as a subsidiary of Dibai) asmentioned above .
VII. The commercial joint-venture’s strong commercial presence, numerousdifferentiated, patented products and wide portfolio of product registrations are highlycomplementary to the Company’s. This strategic commercial joint-venture is asignificant milestone in the Company’s ongoing, rapid expansion in China, and willsignificantly bolster the Company’s commercial activities, positioning and offering inthis key crop protection market.Filling Documents
1. Equity Purchase Agreement；
2. Resolution of the 18th meeting of the 8th session of the Board of Directors ofthe Company
It is hereby announced.
Board of Directors of the Company
November 7, 2019
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