SINGAPORE - The controlling shareholders of China Jinjiang Environment Holding Company are selling their interests in China Green Energy, which owns a 29.79 per cent stake in China Jinjiang, for 1.6 billion yuan ($322.3 million).
The purchasers are Zhejiang Energy International and Zheneng Capital Holdings Co, both controlled by Zhejiang Provincial Energy Group Co, a state-owned provincial energy enterprise.
The group's controlling shareholders Dou Zhenggang and Wei Xuefeng are deemed interested in 49.99 per cent of China Green Energy, while their daughter Jennifer Wei holds 50.01 per cent of the interests.
Following the transaction, Mr Dou and Ms Wei Xuefeng will be considered the second-largest controlling shareholders of the company, with their collective shareholding going from 55.61 per cent to 25.82 per cent. The remaining 44.39 per cent comprises other instituitional substantial shareholders, certain directors and the public.
The group said the deal was struck because the controlling shareholders believe the purchasers, as shareholders, will be able to facilitate the financing and future development of China Jinjiang. When the deal is completed, the purchasers plan to nominate two executive directors to China Jinjiang's board.
The group added that both Mr Dou and Ms Wei Xuefeng will work with the purchasers to ensure a smooth transition in the group's management, with the transaction expected to take place by Sept 10.
As the collective shareholding of Mr Dou, Ms Wei Xuefeng and immediate family members have dropped below 45 per cent, they have also disclosed the transaction will result in a change of control of the company.
This is with regard to conditions of the July 2017 issuance of US$200 million in 6 per cent senior notes due 2020, and the indenture entered with Citicorp International as trustee; as well as a loan facility entered with Standard Chartered Bank (Hong Kong) in June 2018 to borrow US$200 million ($273.1 million).
For the notes, Mr Dou and Ms Wei Xuefeng disclosed that the change in control may result in a change of control triggering event, which sees the occurrence of both a change in control and S&P Global Ratings or Moody's Investors Service decreasing the rating of the notes within a period of six months.
This would require the company to make an offer to purchase all outstanding notes at a purchase price 101 per cent of the principal amount together with accrued and unpaid interest to the date of purchase.
As for the loan facility, a change of control occurs when Mr Dou and Ms Wei Xuefeng no longer own more than 45 per cent of the company's shares; along with an entity having greater voting power than the couple collectively.
When this occurs, China Jinjiang will need to notify the agent Standard Chartered Bank (Hong Kong). Should the majority lenders require it, the agent will have to give notice on declaring all outstanding loans and amounts with accrued interest immediately due and payable.
The price of the deal takes into account the audited net asset value of the group as at Dec 31, 2018, and may be adjusted to account for any changes to the profitability and/or loss of the group from Dec 31, 2018 to the signing date, which is on June 10, 2019.
The deal is also conditional to the purchasers and China Green Energy obtaining all necessary corporate approvals for the transfer of sale shares and satisfactory due diligence by the purchasers on the group.
It is also provided there are no material adverse changes to the listing status of the company and its operations, financial conditions, assets, liabilities or prospects of the group.
The deal is also subject to the consent and clearances from applicable laws, regulations in both China and Singapore. This includes the Singapore Exchange Securities Trading, or any consent, approval and authorisation in relation to overseas investment and anti-monopoly issues under China's laws and regulations.
China Jinjiang Environment shares were trading at $0.595 on Tuesday (June 11), up one cent or 1.71 per cent as at 9.54am.