Qihang Equipment Company Limited Proposed disposal and investing policy (6120A)

TIDMQIH

RNS Number : 6120A

Qihang Equipment Company Limited

23 December 2014

23 December 2014

Qihang Equipment Company Limited

("Qihang" or the "Company")

Disposal of Operating Business

Adoption of Investing Policy

Directorate Change

Change of Name

Qihang announces that it is today posting a circular to shareholders ("Circular") containing a notice of a general meeting of the Company ("General Meeting") to be held at 9.00am on 9 January 2015, at the offices of Peterhouse Corporate Finance Limited ("Peterhouse"), New Liverpool House, 15-17 Eldon Street, London, EC2M 7LD. The Circular contains proposals (the "Proposals") for, inter alia:

   --     the disposal of the Company's trading subsidiary ("Disposal") ; 
   --     the adoption of an Investing Policy under AIM Rule 15; and 
   --     the change of name to Eastbridge Investments Limited 

Background

Since the July 2011 completion of the acquisition of Qihang's current operating business, Jiangsu Qihang CNC Machinery Tools Co., Ltd ("JSQH"), JSQH has struggled to meet the expectations of the Board. The Directors believe that this has mainly been due to difficulties arising from the economic downturn as well as difficulties in JSQH's particular market.

On 30 September 2014 the Company announced that it would be unable to publish its interim accounts to 30 June 2014 in line with the AIM Rules and as a result, its ordinary shares of 2.5 pence each ("Ordinary Shares") were suspended from trading on AIM on the same day.

The Company has now secured financing which will allow it to settle certain outstanding creditors and thus, in due course, publish its interim results to 30 June 2014. The publication of the interim results should allow the Directors to apply for the resumption of trading in the Ordinary Shares on AIM. Further information on the financing is set out below.

As is reflected in the Company's consolidated accounts, JSQH's business has materially underperformed since its acquisition and its balance sheet has remained weak throughout the period. Whilst the employees of JSQH continue to develop, manufacture and sell good quality products in China, there can be no certainty that JSQH will return to its former levels of turnover or profitability in the foreseeable future. Moreover, the debt sitting on JSQH's balance sheet continues to constrain Qihang from exploiting opportunities available to it.

The Directors therefore believe that JSQH has negligible value, due to the level of its debts and its recent operating performance and, as a result, have decided to dispose of this business. In addition the Board is proposing certain other changes to the Company, outlined in the Circular, the net effect of which will be to return the Company to being an investing company on AIM.

Terms of the Disposal and Placing

The terms of the Disposal are that the two controlling shareholders of Qihang, Proudstyle Limited ("Proudstyle") and Bo Sheng Investment Development Limited ("Bo Sheng"), will acquire the entire share capital of the Company's subsidiary Win Yu International investments Company Limited, which in turn owns JSQH, and assume all of the operational debt of JSQH. In consideration for the acquisition, Proudstyle and Bo Sheng are transferring their Ordinary Shares back to the Company, where they will be held in treasury pending re-issue.

As part of the process, the Company has today issued 2,000,000 new Ordinary Shares ("Placing Shares") at a price of 2.5 pence each, raising a total of GBP50,000. Additionally, conditional upon the passing of the resolutions to be proposed at the General Meeting ("Resolutions"), the Company has raised a further GBP50,000 through the issue of convertible loan notes. The proceeds of these two issues will be applied to paying creditors. Application will be made for the Placing Shares to be admitted to trading on AIM upon the lifting of the current suspension from trading.

The Disposal is a related party transaction under the AIM Rules as the Bo Sheng and Proud Style are significant shareholders of the Company, holding an aggregate of 85.5 per cent of the Ordinary Shares. The Directors consider, having consulted with Northland Capital Partners Limited, the Company's Nominated Adviser, that the terms of the Disposal are fair and reasonable insofar as the Company's shareholders are concerned.

Board of Directors

Subject to the Resolutions being passed, it is proposed that immediately following the General Meeting that Qiang Hao and Roberto Lima will resign as directors of the Company with no compensation for loss of office, and will waive all claims against the Company under their appointment letters. Upon their resignation, Mr Gregory Collier will be appointed as Executive Director ("the Proposed Director"). The Company intends to appoint a further executive director to the Board following the General Meeting, at which point Mark Chapman will resign from the Board with no compensation for loss of office, and will waive all claims against the Company under his appointment letter.

Gregory Collier, aged 54, brings 31 years of financial and commercial experience, having been involved in running businesses in contract cleaning, leisure, restaurant, property, and toy distribution. In 1980, Mr. Collier founded 'Office Kleen General Maintenance', a building maintenance and services company which was subsequently acquired by Initial Services (now part of Rentokil Group). In 1986 he founded one of the first paintball leisure centres in the UK and subsequently was a partner in a number of entertainment and fitness ventures, including a Mayfair club and restaurant and a fitness centre in London.

Further disclosures in respect of Gregory Collier under paragraph (g) of Schedule Two of the AIM Rules are set out below.

 
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Gregory Collier was a director and shareholder of The Bread Store Limited, a company incorporated in England and Wales with company number 06239188. He resigned as a director on 30 June 2008 and ceased to be a shareholder on the same day. At the time of his resignation, and the transfer of his shareholding, The Bread Store Limited was a dormant company and had not traded. Subsequent to Mr Collier ceasing to have any interest or control over the affairs of The Bread Store Limited a notice of the appointment of a liquidator was lodged in respect of this company at Companies House on 1 May 2009.

Mr Collier was also a director of The Strand Health & Fitness Centre Limited at the time it was placed into administration with an estimated shortfall to creditors of GBP122,500. The company was dissolved on 13 August 1996.

Investing Policy

On completion of the Proposals, the Company will have disposed of all of its trading businesses and therefore under Rule 15 of the AIM Rules it will be re-classified as an Investing Company and will be required to adopt an Investing Policy, which must be approved by shareholders.

It is proposed that the Company's Investing Policy be one focused on the property and real estate sector, with the objective being to provide shareholders with strong investment returns and a balanced exposure to lower risk income generating assets and opportunities that will provide a higher capital return. The Company will look to invest in residential schemes as well as commercial, retail and industrial property within the UK. The Director and the Proposed Director will look to purchase assets significantly undervalued by the current market.

The Company's investment criteria will be as follows:

   --        property investments which provide a stable, predictable and low risk income stream, with opportunities to enhance value through active management; 

-- development or redevelopment opportunities where they can be pre-let to businesses with strong rental covenants, or in order to protect, enhance or extract additional value from existing investments;

   --        distressed property investments where opportunities arise as markets recover; 

-- investment whereby an injection of new finances or specialist management, the Company can enhance the prospects and therefore the future value of the investment;

-- investments where the Company is able to benefit from the Director's existing network of contacts; and

   --        the potential to deliver significant returns for the Company. 

Investments outside the above criteria will only be made where risk adjusted returns to shareholders are satisfactory and the Company has the reserves necessary to extract an above-market return from the investments.

Moreover, the criteria set out above are not intended to be exhaustive and the Director and the Proposed Director may make an investment which does not fulfil all of the investment criteria if they believe it is in the best interests of shareholders as a whole.

The Proposed Director believes that his experience will assist the Company in the identification, evaluation and funding of appropriate investment opportunities. When necessary, other external professionals will be engaged to assist in the due diligence on prospective targets and their management teams. The Company will also consider appointing additional directors with relevant experience if required.

Where the Company builds a portfolio of investments it is possible that there may be cross holdings between such assets and, as investments are made and new investment opportunities arise, further funding of the Company may also be required. The Company does not currently intend to fund any investments with debt or other borrowings but may do so in future, if appropriate. The board may also offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash or working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

The Director and Proposed Director recognise that the Investing Policy outlined above carries a certain degree of risk, but they believe that the successful implementation of the strategy may result in strong capital growth for shareholders.

Change of Name

To reflect the Disposal and the new Investing Policy, the Company proposes to change its name to Eastbridge Investments Plc.

Full details of the Proposals are set out in the Circular, a copy of which is being sent to shareholders today and is available at http://www.qihangequipment.com/

For further additional information please contact:

 
 Qihang Equipment Company Limited        Tel: [phone] 
  Mark Chapman, Chairman                  892130 
 Nominated Adviser and Joint Broker      Tel: +44 (0)20 
  Northland Capital Partners Limited      7382 1100 
  William Vandyk / Matthew Johnson 
 Joint Broker                            Tel: +44 (0)20 
  Peterhouse Corporate Finance Limited    7469 0934 
  Fungai Ndoro/Lucy Williams 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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