World Precision Machinery has proposed to acquire Wanning Yinhu Hot Spring Holiday Hotel Co., Ltd for a total consideration of RMB155 million ($30.3 million).
The group’s wholly-owned subsidiary, Jiangsu World Tourism Investment Management Co. (JWTIM), entered into a share transfer agreement with Wei Haitao, Wei Laiyun, Wu Jianguo and Wang Yinjie (the sellers) on Jan 6, where Jiangsu World Tourism will acquire 100% of the shares in Wanning Yinhu Hot Spring Holiday Hotel. The sellers hold 100% of the shares in the target company. Shandong Zhongda Industrial Group, which has undertaken to be jointly and severally liable with the sellers for the responsibilities and obligations of the sellers under the agreement, is the obligor. The sellers are employees of the obligor.
Wanning Yinhu Hot Spring Holiday Hotel is a Chinese-incorporated company with a registered capital of RMB150 million, of which RMB1.8 million has been paid up.
The company is a dormant one but holds assets such as the right to use the 54,430 sqm (585,879.64 sq ft) state-owned land till April 1, 2050. The land is located in Xinglong Hot Spring Tourism Zone, Wanning City, in China’s Hainan province.
The company’s assets also include the buildings and fixtures located at the plot of land. Furthermore, it has a lease over the water surface of the state-owned land of 41.72 mu or 21,813.47 sqm till March 31, 2050.
Based on the agreement, the purchase price is payable in four instalments.
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The first instalment of RMB10 million will have to be paid within three business days upon the signing of the agreement. The second instalment of RMB50 million will have to be paid within six months upon the transfer and registration of the shares in Wanning Yinhu to JWTIM. The third instalment of RMB50 million will have to be paid within six months after the second instalment is paid, while the fourth and final instalment of RMB45 million will have to be paid within 12 months after the third instalment.
The payments for each instalment are subject to several conditions. This includes there being no material adverse changes in the business and operations of the target company among others.
According to World Precision Machinery, the proposed acquisition is for investment purposes and is in line with the parameters set out under its group strategy plan. The group strategy plan outlines the group’s investment strategy planning for the next five to 10 years. It also sets out parameters for the group’s future investments that are in line with the group’s long-term business and investment strategy.
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Had the group effected the proposed acquisition on Dec 31, 2021, its net tangible assets (NTA) per share would have been at RMB2.92, up from RMB2.88. Similarly, its earnings per share (EPS) would have increased to RMB0.32 on a pro forma basis, up from RMB0.28.
KPMG China has been appointed by World Precision Machinery to conduct financial due diligence for the proposed acquisition.
As at 9.40am, shares in World Precision Machinery are trading flat at 38 cents.
