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Renhe Commercial proposes to buy Chinese holding company for 5.4B yuan

A Renhe Commercial Holdings Co. Ltd. subsidiary agreed to buy United Progress Group Ltd., an investment holding company that owns lands and properties in China, from New Amuse Ltd. for 5.4 billion yuan.

If the acquisition is pursued, the Yield Smart Ltd. unit will gain nine Chinese landlord entities that own land plots, logistics parks and produce markets in the Chinese provinces of Shandong, Heilongjiang, Liaoning and Guizhou.

To fund the proposed acquisition, Renhe Commercial is planning to issue convertible bonds worth approximately HK$6.51 billion at 100% of their principal amount. The 10-year bonds may be converted into 39,914,259,000 shares at 16.3 Hong Kong cents per share.

In addition, Yield Smart exchanged contracts to buy Wise Path Holdings Ltd. for HK$1.47 billion in cash from Vast Equity Investment Ltd. The target operates fruits, vegetables and seafood markets and land and properties in Hangzhou.

Renhe is planning a roughly HK$2.15 billion rights issues to fund the Hangzhou deal. The Hong Kong-listed Chinese developer is issuing about 13,189,830,130 rights shares at 16.3 cents apiece, with any remaining proceeds to be used for facility upgrades, software and information systems development and installation, and for general working capital. Renhe's controlling shareholder Super Brilliant Investments Ltd. will underwrite the rights issue.

New Amuse is a substantial shareholder of Renhe, while Vast Equity is an independent third party. Both agreements were entered into June 5 and are subject to a number of conditions.

An independent committee composed of the company's independent nonexecutive directors was formed to advise shareholders on the two proposals. An independent financial adviser is also expected to be appointed in due course. Renhe shareholders will meet at an extraordinary general meeting, scheduled on or about July 10, to vote on the planned acquisitions.

Also at the extraordinary general meeting, shareholders will vote on the company's proposal to increase its authorized share capital to HK$1.50 billion through the issuance of an additional 70 billion shares.

As of June 5, U$1 was equivalent to 6.41 Chinese yuan.