Zhejiang Expressway The Proposed Spin-off and Separate Listing of Spinco

 
TIDMZHEH 
 
Hong Kong Stock Exchanges and Clearing Limited and The Stock Exchange of Hong 
Kong Limited take no responsibility for the contents of this announcement, make 
no representation as to its accuracy or completeness and expressly disclaim any 
liability whatsoever for any loss howsoever arising from or in reliance upon 
the whole or any part of the contents of this announcement. 
 
                         ZHEJIANG EXPRESSWAY CO. LTD. 
 (A joint stock limited company incorporated in the People's Republic of China 
                            with limited liability) 
                              (Stock code: 0576) 
 
               PROPOSED DISCLOSEABLE TRANSACTION IN RELATION TO 
             THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF SPINCO 
                        ON THE SHANGHAI STOCK EXCHANGE 
 
THE PROPOSED SPIN-OFF 
Reference is made to the announcements of the Company dated 16 November 2012, 7 
May 2013, 2 May 2017 and 23 May 2017 in relation to the Proposed Spin-off (the 
" Announcements "). Terms defined in the Announcements shall have the same 
meanings therein, unless the context otherwise requires. 
 
The Hong Kong Stock Exchange has confirmed that the Company may proceed with 
the Proposed Spin-off. By the Approval for the Initial Public Offering of 
Shares of Zheshang Securities Co., Ltd. issued by the CSRC on 12 May 2017, the 
CSRC has formally approved SpinCo's application for the A Share Listing. 
According to the latest listing timetable, SpinCo has launched its initial 
public offering in the PRC on 13 June 2017 and the dealings in the A shares of 
the SpinCo on the Shanghai Stock Exchange are expected to commence on 26 June 
2017. 
 
The Proposed Spin-off is conditional upon, among other things, the approval of 
the Shanghai Stock Exchange and completion of the Offering. Further 
announcement(s) will be made by the Company in relation to any material 
development with respect to the Proposed Spin-off and the A Share Listing as 
and when appropriate. 
 
PROPOSED DISCLOSEABLE TRANSACTION 
As at the date of this announcement, the Company has an indirect interest of 
approximately 52.15% in SpinCo. It is expected that if the Offering proceeds, 
the total number of shares to be offered under the Offering will be 333,333,400 
shares and the offer price is RMB8.45 per share. 
 
It is contemplated that immediately following the completion of the Proposed 
Spin-off, the indirect interest of the Company in SpinCo will be reduced to 
approximately 46.93% and SpinCo will continue to be an indirect subsidiary of 
the Company. 
 
The Proposed Spin-off will result in a reduction of the indirect shareholding 
of the Company in SpinCo, so it will constitute a deemed disposal on the part 
of the Company under Rule 14.29 of the Listing Rules. Since it is contemplated 
that one or more of the relevant percentage ratios of the Proposed Spin-off 
exceeds 5% but is less than 25%, the Proposed Spin-off will constitute a 
discloseable transaction of the Company subject only to reporting and 
announcement requirements but exempt from shareholders' approval requirement. 
 
NO ASSURED ENTITLEMENT TO SHAREHOLDERS 
Due to the legal and regulatory impediments to the Company's provision of the 
Assured Entitlement to the Shareholders in respect of the Proposed Spin-off, 
the Company applied to the Hong Kong Stock Exchange for the Waiver and the 
Waiver was granted to the Company on 22 March 2013. Accordingly, the 
Shareholders will not be entitled to any distribution in specie of, or 
preferred application, for the A shares of SpinCo in connection with the 
Proposed Spin-off even if it materializes. 
 
Having considered the benefits that the Proposed Spin-off may bring to the 
Group as set out in the section headed "Reasons for and benefits of the 
Proposed Spin-off" below, the Board considers that the Proposed Spin-off in the 
absence of the Assured Entitlement is fair and reasonable and in the interests 
of the Company and the Shareholders as a whole. 
 
GENERAL 
Shareholders and potential investors should note that the Proposed Spin-off is 
subject to, among other things, the approval of the Shanghai Stock Exchange and 
the completion of the offering. There is no assurance that the Proposed 
Spin-off will take place. Accordingly, Shareholders and potential investors are 
reminded to exercise caution when dealing in the securities of the Company. 
 
THE PROPOSED SPIN-OFF 
Reference is made to the announcements of the Company dated 16 November 2012, 7 
May 2013, 2 May 2017 and 23 May 2017 in relation to the Proposed Spin-off. 
 
The Hong Kong Stock Exchange has confirmed that the Company may proceed with 
the Proposed Spin-off. By the Approval for the Initial Public Offering of 
Shares of Zheshang Securities Co., Ltd. issued by the CSRC on 12 May 2017, the 
CSRC has formally approved SpinCo's application for the A Share Listing. 
According to the latest listing timetable, SpinCo has launched its initial 
public offering in the PRC on 13 June 2017 and the dealings in the A shares of 
the SpinCo on the Shanghai Stock Exchange are expected to commence on 26 June 
2017. 
 
Change of the shareholding structure of SpinCo 
As at the date of this announcement, the Company has an indirect interest of 
approximately 52.15% in SpinCo. It is expected that if the Offering proceeds, 
the total number of shares to be offered under the Offering will be 333,333,400 
shares and the offer price is RMB8.45 per share. 
 
It is contemplated that immediately following the completion of the Proposed 
Spin-off, the indirect interest of the Company in SpinCo will be reduced to 
approximately 46.93% and SpinCo will continue to be an indirect subsidiary of 
the Company. 
 
The shareholding structure of SpinCo as at the date of this announcement is set 
out below: 
 
https://photos.prnasia.com/prnk/20170613/1874744-1 
 
The shareholding structure of SpinCo immediately following completion of the 
Proposed Spin-off is set out below: 
 
https://photos.prnasia.com/prnh/20170613/1874744-1-b 
 
Conditions 
The Proposed Spin-off is conditional upon, among other things, the approval of 
the Shanghai Stock Exchange to the A Share Listing and completion of the 
Offering. Further announcement(s) will be made by the Company in relation to 
any material developments with respect to the Proposed Spin-off and the A Share 
Listing as and when appropriate. 
 
Intended use of proceeds 
SpinCo is estimated to receive net proceeds of approximately RMB2.76 billion 
from the Offering (after the deduction of the underwriting fees and other 
expenses in relation to the A Share Listing). SpinCo intends to use the 
proceeds from the Offering to increase the net capital and expand the business 
of SpinCo (including but not limited to expanding its investment banking 
business and enhancing its research team). 
 
INFORMATION ON THE COMPANY, THE GROUP AND SPINCO 
The Company is an infrastructure company principally engaged in investing in, 
developing and operating high-grade roads. The Group also engages in securities 
related business carried on by SpinCo. 
 
SpinCo is a joint stock limited company restructured in the PRC on 12 September 
2012 and is an indirectly-owned subsidiary of the Company. As at the date of 
this announcement, it is engaged in securities related business (including but 
not limited to securities brokerage, investment banking, proprietary trading 
and asset management). 
 
Set out below is certain financial information in relation to SpinCo Group for 
the two years ended 31 December 2016, respectively, as extracted from the PRC 
audited consolidated financial statements of SpinCo for the relevant years: 
 
                       For the year ended For the year ended 
                         31 December 2015   31 December 2016 
 
                                (Audited)          (Audited) 
 
                                      RMB                RMB 
 
Net Profit before tax    2,525,081,495.76   1,643,219,655.04 
 
Net Profit after tax     1,834,338,303.77   1,240,999,462.08 
 
Net assets               8,449,116,259.83   9,565,498,901.73 
 
REASONS FOR AND BENEFITS OF THE PROPOSED SPIN-OFF 
The Board believes that the Proposed Spin-off would be in the interests of the 
Group as it would enable the market to appraise and assess the value of the 
Group more effectively and provide a separate fund raising platform for SpinCo, 
which will allow SpinCo to develop new businesses and become more competitive 
and will in turn benefit the Group. 
 
The Proposed Spin-off is designed to facilitate the future growth of both the 
SpinCo Group and the Remaining Group. As the SpinCo will remain as a subsidiary 
of the Company, the Company's shareholders will continue to enjoy the benefits 
from the development of the securities related businesses. 
 
As the Proposed Spin-off will not result in the Company's loss of control over 
SpinCo, the Proposed Spin-off will be accounted for as an equity transaction 
and will not result in the recognition of any gain or loss in the Company's 
consolidated statement of profit or loss and other comprehensive income. 
 
Having considered the benefits that the Proposed Spin-off may bring to the 
Group as set out above, the Board considers that the Proposed Spin-off is fair 
and reasonable and in the interests of the Company and the Shareholders as a 
whole. 
 
NO ASSURED ENTITLEMENT 
Under the Listing Rules, a listed issuer is required to have due regard to the 
interests of its existing shareholders by providing them with an assured 
entitlement to the shares in the entity which is proposed to be spun-off for 
separate listing. After due and careful consideration of the Proposed Spin-off 
and having taken into account the advice from the Company's PRC legal counsel, 
the Board has resolved not to provide the Shareholders with the Assured 
Entitlement under the Proposed Spin-off for the following reasons: 
 
  * The  shares  proposed to be offered by SpinCo and listed on the Shanghai 
    Stock Exchange are A shares which, under the relevant PRC laws, are only 

    available for subscription by investors within the PRC (excluding Hong 
    Kong, Macau and Taiwan regions). 
  * Individual investors who are foreign natural persons cannot invest in the A 
    share market of the PRC, except for those from Hong Kong, Macau Special 
    Administrative Region and Taiwan who work and live in the PRC or those 
    foreign natural persons who have obtained the permanent resident permit in 
    the PRC. As to institutional investors, those who are foreign legal persons 
    are not permitted to invest in the A share market of the PRC other than as 
    explicitly provided under the relevant PRC laws and regulations (that is, 
    in the capacity of qualified foreign institutional investor in accordance 
    with Measures for the Administration of Securities Investment within the 
    Borders of China by Qualified Foreign Institutional Investors, Measures for 
    the Pilot Programme of Domestic Securities Investment by RMB Qualified 
    Foreign Institutional Investors or in accordance with the provisions of the 
    Administrative Measures for Foreign Investors' Strategic Investment in 
    Listed Companies). Accordingly, there are legal impediments and it is not 
    feasible to make available an assured entitlement to the shares in SpinCo 
    to all the existing shareholders of the Company under the relevant PRC laws 
    and regulations. 
 
Due to the legal and regulatory impediments to the Company's provision of the 
Assured Entitlement to the Shareholders in respect of the Proposed Spin-off as 
mentioned above, the Company applied to the Hong Kong Stock Exchange for the 
Waiver and the Waiver was granted to the Company on 22 March 2013. Accordingly, 
the Shareholders will not be entitled to any distribution in specie of or 
preferred application for the A shares of SpinCo in connection with the 
Proposed Spin-off even if it materializes. 
 
Having considered the benefits that the Proposed Spin-off may bring to the 
Group as set out in the section headed "Reasons for and benefits of the 
Proposed Spin-off" above, the Board considers that the Proposed Spin-off in the 
absence of the Assured Entitlement is fair and reasonable and in the interests 
of the Company and the Shareholders as a whole. 
 
OVERLAPPING OF DIRECTORSHIPS 
As the Company is an indirect controlling shareholder of SpinCo, there is an 
overlapping of directorships between the Company and SpinCo. There are nine 
directors on the board of SpinCo, comprising six directors and three 
independent directors. Mr. Zhan Xiaozhang and Ms. Luo Jianhu, two executive 
Directors, are also members of the board of directors of SpinCo. 
 
Mr. Zhan Xiaozhang and Ms. Luo Jianhu were appointed to the board of SpinCo to 
represent the interests of the Company. Neither of them takes part in the daily 
operation of SpinCo. 
 
Mr. Wu Chenggen is a director and the chief executive officer of SpinCo. The 
daily operations of SpinCo are principally managed by Mr. Wu Chenggen and other 
non-director senior management of SpinCo. Mr. Wu Chenggen is responsible for 
overseeing SpinCo's day-to-day operations and management, and implementing 
decisions and plans approved by the board of directors of SpinCo. Except for 
Mr. Wu Chenggen, all other directors of SpinCo (including Mr. Zhan Xiaozhang 
and Ms. Luo Jianhu) do not take part in the daily operations of SpinCo. 
 
If any situation of conflict of interest arises, Mr. Zhan Xiaozhang and Ms. Luo 
Jianhu will, if required, abstain from voting on the relevant resolutions in 
the meetings of the boards of the respective companies in accordance with the 
respective articles of association and PRC laws. Under the Company's articles 
of association, each Director has one vote at the meetings of the Board 
regardless of whether he/she is an executive or non-executive Director. If in 
any circumstances where Mr. Zhan Xiaozhang and Ms. Luo Jianhu were required to 
abstain from voting on relevant resolutions in any board meeting of the Company 
due to their directorship in SpinCo, there will remain four out of six 
Directors (excluding the INEDs), or seven out of nine Directors (including the 
INEDs) who would be entitled to vote. Similarly, at SpinCo's level, there will 
be four out of six directors (excluding the INEDs), or seven out of nine 
directors (including the INEDs) who will be entitled to vote if Mr. Zhan 
Xiaozhang and Ms. Luo Jianhu were required to abstain from voting. Therefore, 
there will be sufficient non-common members of the Board to function 
independently and properly. 
 
LISTING RULES IMPLICATIONS 
The Proposed Spin-off will result in a reduction of the indirect shareholding 
of the Company in SpinCo, so it will constitute a deemed disposal on the part 
of the Company under Rule 14.29 of the Listing Rules. Since it is contemplated 
that one or more of the relevant percentage ratios of the Proposed Spin-off 
exceeds 5% but is less than 25%, the Proposed Spin-off will constitute a 
discloseable transaction of the Company subject only to reporting and 
announcement requirements but exempt from shareholders' approval requirement. 
 
Since no Shareholders' approval is required for the Proposed Spin-off, the 
Company will not form an independent board committee to advise the Shareholders 
on the implications of not providing the Assured Entitlement. Please refer to 
the section headed "No Assured Entitlement" for (i) the reasons why the Board 
has decided not to provide the Shareholders with the Assured Entitlement under 
the Proposed Spin-off and (ii) the view of the Board on the implications of not 
providing the Assured Entitlement. 
 
GENERAL 
Shareholders and potential investors should note that the Proposed Spin-off is 
subject to, among other things, the approval of the Shanghai Stock Exchange and 
completion of the Offering. There is no assurance that the Proposed Spin-off 
will take place. Accordingly, Shareholders and potential investors are reminded 
to exercise caution when dealing in the securities of the Company. 
 
DEFINITIONS 
In this announcement, unless the context specifies otherwise, the following 
defined expressions have the following meanings: 
 
"A shares"     the shares of an issuer which are listed on the A-share market 
               of a stock exchange on the PRC 
 
"A             the holders of A shares of SpinCo 
Shareholders" 
 
"A Share       the proposed listing of the A shares of SpinCo on the Main Board 
Listing"       of the Shanghai Stock Exchange 
 
"Assured       in relation to the Proposed Spin-off, means the assured 
Entitlement"   entitlement to the A shares of SpinCo either by way of a 
               distribution in specie of the A shares of SpinCo held by the 
               Group or by way of preferred application in any offering of 
               existing or new shares in SpinCo under the Offering 
 
"Board"        the board of Directors 
 
"Company"      Zhejiang Expressway Co., Ltd., a joint stock limited company 
               incorporated in the PRC with limited liability 
 
"CSRC"         the China Securities Regulatory Commission 
 
"Director(s)"  director(s) of the Company 
 
"Group"        the Company and its subsidiaries 
 
"H shares"     overseas listed foreign shares in the ordinary share capital of 
               the Company, with a par value of RMB1.00 each, which are listed 
               on the Hong Kong Stock Exchange 
 
"H             the holders of H shares 
Shareholders" 
 
"Hong Kong"    the Hong Kong Special Administrative Region of the PRC 
 
"Hong Kong     The Stock Exchange of Hong Kong Limited 
Stock 
Exchange" 
 
"INED"         the independent non-executive director 
 
"Listing       the Rules Governing the Listing of Securities on the Hong Kong 
Rules"         Stock Exchange 
 
"Offering"     the proposed initial public offering of the A shares of SpinCo 
               in connection with the A Share Listing 
 
"PRC"          the People's Republic of China, for the purpose of this 
               announcement, excludes Hong Kong, Macau Special Administrative 
               Region and Taiwan 
 
"Proposed      the proposed spin-off and separate listing of SpinCo on the 
Spin-off"      Shanghai Stock Exchange 
 
"Remaining     the Group excluding the SpinCo Group 
Group" 
 
"SpinCo"       Zheshang Securities Co., Ltd, a joint stock limited company 
               restructured in the PRC on 12 September 2012 and is an 
               indirectly-owned subsidiary of the Company 
 
"SpinCo Group" SpinCo and its subsidiaries 
 
"Shanghai      the Shanghai Stock Exchange 
Stock 
Exchange" 
 
"Shareholders" shareholders of the Company 
 
"Waiver"       a waiver from strict compliance with the requirements of 
               offering the Assured Entitlement to the Shareholders under 
               paragraph 3(f) of Practice Note 15 of the Listing Rules 
 
                                            On behalf of the Board 
                                                  ZHEJIANG EXPRESSWAY CO., LTD. 
                                                 ZHAN Xiaozhang 
                                               Chairman 
 
Hangzhou, PRC, 13 June 2017 
 
As at the date of this announcement, the executive directors of the Company 
are: Mr. ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu; the non-executive 
directors of the Company are: Mr. WANG Dongjie, Mr. DAI Benmeng, and Mr. ZHOU 
Jianping; and the independent non-executive directors of the Company are: Mr. 
ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang, Rosa. 
 
 
 
 
 
 
END 
 

(END) Dow Jones Newswires

June 13, 2017 08:34 ET (12:34 GMT)