Learn Mandarin by Case Study: Vanke Overseas M&A: Lithium Real Estate Case

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Vanke Overseas M&A: Lithium Real Estate Case

#Macro Economics#M&A#Real Estate#Securities#Market Outlook#Capital Markets#Credit Rating

preview: executive summary

THE DISPOSAL
The Board announces that on 21 January 2022 (after trading hours), the Seller, the Purchaser and the Purchaser Guarantor entered into the SPA, pursuant to which the Seller has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from the Seller, the Sale Shares at the Consideration subject to the terms of the SPA. The Sale Shares represent the entire issued share capital of the Target Company, which directly holds the Property.

Upon Completion, the Target Company will cease to be a subsidiary of the Group and the financial results of the Target Company will no longer be consolidated into the financial statements of the Group.

Consideration
The Consideration payable under the SPA shall be the Estimated NAV as adjusted by the Net Asset Value Adjustment.

Upon Completion, the Purchaser shall procure that the Purchaser’s solicitors shall pay the amount equal to the Estimated NAV less the Rent Guarantee Monies and the Seller’s Title Indemnity Policy Contribution in cash by electronic transfer of immediately available funds to the bank account of the Seller’s solicitor.

The Consideration was arrived at following arm’s length negotiations with the Seller having regard to (i) the preliminary valuation of the Property of approximately £125 million as at 30 November 2021 conducted by an independent property valuer; and (ii) a premium on the Property of approximately £7 million.

The preliminary valuation of the Property is carried out by Knight Frank, an independent surveyor to the Company. The surveyor values the Property by the income approach. The Company will include the valuation report of the Property in the circular to be despatched to the Shareholders.

Assuming that the Estimated NAV is equal to the Completion NAV, the Consideration comprises the consideration for the Sale Shares being approximately £38 million.

Upon Completion, the Seller will receive the amount equal to the Estimated Shareholder’s Loan as the Purchaser shall procure the Target Company to repay all such loan on a dollar-todollar basis.

On a date falling not more than 10 Business Days after the final agreement or determination of the Completion Accounts:
(1) if the Completion NAV is greater than the Estimated NAV, the Purchaser shall pay to the Seller in cash an amount equal to the Net Asset Value Adjustment;
(2) if the Completion NAV is less than the Estimated NAV, the Seller shall pay to the
Purchaser in cash an amount equal to the Net Asset Value Adjustment;
(3) if the Completion Shareholder’s Loan is greater than the Estimated Shareholder’s Loan, the Purchaser shall procure that the Target Company shall pay to the Seller the amount equal to the Shareholder’s Loan Adjustment; and
(4) if the Completion Shareholder’s Loan is less than the Estimated Shareholder’s Loan, the Seller shall pay to the Purchaser (on behalf of the Target Company) an amount equal to the Shareholder’s Loan Adjustment.

The Completion NAV will be determined on the basis of the value of the Property being fixed at £132,000,000 as agreed by the parties under the SPA.

REASONS AND BENEFITS OF THE DISPOSAL
The Group completed the acquisition of the Property on 30 June 2019 with a view to investing and expanding its business in the United Kingdom and thus minimising the risk of solely investing in Hong Kong.

The Company is currently of the view that it is more beneficial to the Company and its Shareholders as a whole to dispose of the Property by way of disposal of the Sale Shares at the Consideration. Taking into consideration of the proceeds from the Disposal, the Board considers that the Disposal provides an optimal opportunity for the Company to realise cash and unlock the value of its investment in the Property at fair market value. In light of the above, the Company considers the Disposal to be a good exit opportunity.

FINANCIAL IMPACT ON THE GROUP
Assuming that the Estimated NAV is equal to Completion NAV, based on the Consideration less the unaudited net asset value of the Target Company as at 30 November 2021, for illustrative purpose, an unaudited gain before taxation of approximately £4 million will be recognised from the Disposal.

The actual gain or loss arising from the Disposal shall be determined based on the net asset value of the Target Company and the amount of the Sale Loan as at the date of Completion, and also the amount of expenses actually incurred incidental to the Disposal.

The above calculation and accounting treatment are subject to review by the auditors of the Group. The actual financial impact to the Group arising from the Disposal to be recorded in the Group’s consolidated accounts will be recalculated based on the net asset value of the Target Company as at the date to which Completion Accounts are drawn up.

preview: key point

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ˋ ˉ ˇ ˋ

万科海外

Wànkē hǎi wài

Vanke Overseas

ˉ ˋ

公布

gōng bù

to announce

HSK 5

ˋ ˉ

卖方

mài fāng

seller

、

ˇ ˉ

买方

mǎi fāng

acquirer

ˊ

及

jí

and

ˇ ˉ

买方

mǎi fāng

acquirer

ˉ ˇ ˊ

担保人

dān bǎo rén

guarantor

ˋ ˋ

订立

dìng lì

to conclude (treaty, contract, agreement etc)

ˇ ˋ ˊ ˋ

买卖协议

mǎi mài xié yì

agreement for sale and purchase

。

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