FACTS |
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Company A proposed to acquire the Target that was engaged in the exploration, exploitation and processing of mineral resources in some offshore areas (the Areas). The acquisition was subject to disclosure and shareholder approval requirement under Chapter 14 of the Rules.
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The consideration for the acquisition would include cash and consideration shares and convertible bonds to be issued by Company A. It was agreed that:
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Company A would pay 10% of the consideration to the Vendor upon completion of the acquisition on the basis that the Vendor produced a valuation report showing that the Areas had Indicated Resources of value not less than 10% of the consideration.
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Company A would deliver to an escrow agent the convertible bonds representing the remaining 90% of the consideration. After completion of the acquisition, the Vendor could perform extra works in the Areas during a specified period, and the escrow agent would release an amount of convertible bonds to the Vendor according to the value of any additional Indicated Resources discovered. After the specified period, Company A would cancel any convertible bonds that had not been released to the Vendor, and the consideration for the acquisition would be reduced accordingly.
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The size of the acquisition was very significant to Company A. When assessing whether the acquisition would constitute a reverse takeover, one of the factors that the Exchange considered was whether the Target could meet the new listing requirements (see Guidance Letter HKEX-GL104-19 for guidance on the application of the reverse takeover Rules). There was an issue whether the Target could meet Rule 18.03(2) which requires a new applicant mineral company to have at least a portfolio of Indicated Resources, and the portfolio must be meaningful and of sufficient substance.
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4. |
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Company A submitted that it would only pay the consideration based on the value of the Indicated Resources identified under a reporting standard acceptable by the Rules. The portfolio of mineral resources to be acquired was meaningful and of sufficient substance.
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