LED International Holdings Ltd Acquisition restructuring & restoration of trading (8841I)
March 31 2015 - 1:00AM
UK Regulatory
TIDMLED
RNS Number : 8841I
LED International Holdings Ltd
31 March 2015
LED International Holdings Limited
("LED" or the "Company")
Update on proposed acquisition of
Shenzhen Ruihetai Industry Co. Limited,
formation of joint venture
and
restoration of trading in LED's shares
The board of directors of LED (the "Board") is pleased to
announce an update in relation to its proposed acquisition of
Shenzhen Ruihetai Industry Co. Limited ("RHT"), further details of
which are contained in the announcement on 22 December 2014 (the
"Acquisition"). The Acquisition constitutes a reverse takeover
under the AIM Rules and, accordingly, the ordinary shares of the
Company were temporarily suspended pending, amongst other things,
the approval of the Acquisition by the Company's shareholders and
the publication of an AIM admission document.
Proposed acquisition update
The Company has received a legal opinion from its People's
Republic of China ("PRC") lawyers advising on the structure of the
Acquisition, which, as announced on 22 December 2014, is to be
determined and is subject to the local laws and regulations
governing foreign investments in PRC companies. Since that
announcement, the Board has been in discussion with the vendors of
RHT, Ms. Li Sai Ying and Mr. Lin Zhong (together the "Vendors"),
and has consulted its PRC lawyers regarding the appropriate
structure of the Acquisition.
The PRC lawyers have advised that the industry area in which RHT
operates falls under the category of "restricted foreign investment
industries". Under the current Foreign Investment Laws, foreign
investors cannot invest directly in Chinese companies that operate
in sensitive industries prohibited or restricted to foreign
investments. However, foreign investors can take effective control
of the restricted foreign investment industries through the use of
variable interest entity ("VIE") arrangements. The current proposed
structure of the Acquisition is that it would be effected through
the use of a VIE arrangement. VIE arrangements have been used for
certain companies operating in the PRC for the last 10 years in
order to enable foreign investments into certain restricted
industries within the PRC.
However, subsequent to the Company entering into terms relating
to the Acquisition, on 19 January 2015 the PRC Ministry of Commerce
announced a review of VIE arrangements and published a draft of a
new Foreign Investment Law to define foreign investment in terms of
the "actual controller" of a PRC company. There is no proposed
grandfathering provision for the existing foreign controlled VIE
arrangements in the restricted industries. Therefore, if enacted,
the new Foreign Investment Law would increase the risks for the
Company in proceeding with the Acquisition by way of a VIE
arrangement since it may retrospectively invalidate the structure
of the Acquisition.
Having considered the legal and regulatory implications of
various options of the structure of the Acquisition, the Board has
decided not to proceed with the Acquisition but instead to form a
new joint venture with the Vendors (the "Joint Venture"), as set
out below.
Formation of new joint venture
The Joint Venture will seek to establish a new distribution
business, in part by utilising the Vendor!|s network of long
established relationships with business partners in Northeast
China, Hunan, Hubei, Jiangxi, Jiangsu and Guangxi as well as
internationally in Thailand, gained through their operation of RHT,
and through the establishment of new relationships. The Joint
Venture will primarily distribute rice and other food substances
and will look to establish counters in major shopping malls,
supermarkets and chain stores in residential areas throughout the
PRC. The Company envisages that through the Joint Venture LED will
be able to leverage the distribution network to market its "Green
Pearl" green products.
The principal terms of the Joint Venture are as follows:
-- 99 per cent. will be owned by the Company with 1 per cent. being owned by the Vendors;
-- the Company will provide a working capital loan to the Joint Venture in the amount of RMB50 million, the proceeds
of which will be utilised for business development and general working capital. In order to finance this working
capital loan, the Company intends to raise additional funding through equity and/or debt financing;
-- the Vendors will be responsible for the management and operation of the Joint Venture;
-- the Vendors will provide a profit guarantee that the annual net profit of the Joint Venture shall be at least
RMB70 million per year for each of the three years following the formation of the Joint Venture, and such amount
shall exclude the green products introduced by the Company and distributed through the Joint Venture within the
PRC during the three-year period; and
-- the Vendors will be issued with up to 1,114,000 new ordinary shares in the Company (the "Shares"), which
represents 11.80 per cent. of LED's current issued share capital. The Shares will be issued in three equal annual
tranches commencing on the date of formation of the Joint Venture. The Shares will be issued at a price of
HKD12.49806 per Share. In the event that the profit guarantee is not met, the number of Shares to be issued to
the Vendors will reduce proportionately.
Further announcements in relation to the Joint Venture will be
made at the appropriate time.
Restoration of trading
On the basis that the Acquisition is no longer proceeding, the
temporary suspension to trading in the Company's ordinary shares
will be lifted with effect from 7:30am today and trading in the
Company's ordinary shares will resume.
**Ends**
For further information:
LED International Holdings Limited
Stephen Chan - Chief Executive Officer +852 2243 3100
Allenby Capital Limited
Alex Price / Alex Brearley +44 (0) 20 3328 5656
Notes to Editors:
LED International Holdings Limited and its subsidiaries
specialize in the provision of EMC contracts under which the Group
installs energy saving products in its customers!| premises,
including lighting and reactance filtering equipment supplied by
the Group, and the subsequent savings made by the customers in
their electricity charges are then shared between the Group and the
customers thereby enabling the Group to generate recurring revenue
rather than one-off sales revenue. Historically, the Group!|s
business has been the development, manufacture and sale of
low-powered light-emitting diode (!--LED!..) display screens and
modules.
Under EMC contracts, the Group provides energy efficiency
solutions, including LED lighting, reactance filtering energy
saving and other energy efficiency solutions.Specifically, the
Group overhauls its customers!| existing lighting and power
consumption systems (which are based on traditional lighting
technology and power generation equipment) with proprietary LED
lighting products, reactance filtering equipment and other
solutions provided by the Group. These energy efficiency products
are installed in customers!| premises. The Group bears all the
upfront costs associated with the supply and installation of the
energy efficiency solutions and these costs are then recouped by
sharing in the monthly energy savings generated by the customers!|
use of the energy efficiency solutions over the period of the
contracts. The Group receives revenue from customers on several
different payment terms including on a pre-payment, monthly or
quarterly basis.
The Company!|s wholly-owned direct subsidiary, Green Pearl
Leasing (China) Co. Ltd. operates a lease financing business having
been granted a highly sought after leasing finance licence to
enable the Group to provide lease financing to customers.
For more information, please visit: http://www.led-intl.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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