Sale shares acquisition
The company announced that it acquired an investment holding company from Shenzhen Tongqingwang for RMB469m, of which RMB338m has been paid prior to this agreement and the rest of RMB131m will be paid within 10 days after the completion. The acquired company will also repay RMB60m shareholder loan to Tongqingwang subsequently.
The acquired company holds 88.6% in Nanchang Hengdeli, which is engaged in the business of sales of watches, gold, jewellery and eyewear. Financial status of the acquired company and Nanchang Hengdeli is as following:
The consideration of RMB469m was mainly based on the considerations of the acquired company’s net assets (consists of mainly the self-use commercial properties of Nanchang Hengdeli) and financial position as at 30 Nov 2013. The company believes the acquisition will strengthen and consolidate the retail market of watches of the company in the central areas of Mainland China and enable the company to cater the demands for watches in Nanchang and its nearby cities and therefore enhance the company's competitiveness.
DB view
We believe the acquired company has lower profit than Nanchang Hengdeli as it takes on debt. We will get more clarification from the conference call held at 4:30 pm HKT in the afternoon.