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HKEx-LD93-2 (June 2010)

Parties Company A — a Main Board issuer
Issue Whether Company A must aggregate three work packages under a procurement agreement
Listing Rules Main Board Rules 14.22, 14.23
Decision Company A must aggregate the three work packages, and treat them as if they were one transaction


1. Company A was engaged in the telecommunication business.
2. It entered into a procurement agreement with an independent contractor to provide it with a turnkey delivery for network expansion in Country X. The agreement was divided into three work packages based on different work locations. Company A could terminate any part of the agreement at any time.
3. Company A considered that, although all three work packages were awarded to one contractor under one procurement agreement, each was a separate transaction and should not be aggregated because:
a. Each work package was distinct and separate from the others, entailing different types of work, covering different locations, involving different technologies and calling for a different pace of expansion. Also, each had an individual contract value. Company A would need to issue individual orders under each work package before the contractor was obliged to provide services.
b. During the tender process, bidders were invited to submit a tender for each of the three work packages or any combination.
c. The procurement agreement was only a framework agreement and did not affect the distinctiveness and separateness of each work package. The purpose of using one agreement for all three work packages was to enhance efficiency and minimise costs and duplication of documents. It could also help lock in the contractor on terms favourable to Company A.


4. Rule 14.22 states that:
... the Exchange may require listed issuers to aggregate a series of transactions and treat them as if they were one transaction if they are all completed within a 12 month period or are otherwise related. ...
5. Rule 14.23 further states that:
Factors which the Exchange will take into account in determining whether transactions will be aggregated include whether the transactions:
(1) are entered into by the listed issuer with the same party or with parties connected or otherwise associated with one another;
(2) involve the acquisition or disposal of securities or an interest in one particular company or group of companies;
(3) involve the acquisition or disposal of parts of one asset; or
(4) together lead to substantial involvement by the listed issuer in a business activity which did not previously form part of the listed issuer's principal business activities.


6. Under Rule 14.22, the Exchange may require an issuer to aggregate a series of transaction if they are completed within a 12 month period or are otherwise related.
7. Rule 14.23 sets out a non-exhaustive list of factors which the Exchange will consider in applying the aggregation rule. The Rule is intended to provide guidance on the circumstances where aggregation may be required. When determining whether aggregation is required in a particular case, the Exchange will consider all relevant facts and circumstances.
8. In this case, the Exchange considered that all three work packages were related because:
a. Despite the differences identified by Company A, the three work packages were all related to the telecommunication network expansion in Country X and awarded to the same contractor.
b. The value of each individual contract was pre-agreed under the same procurement agreement.
c. The terms of the procurement agreement (including pricing) were negotiated and agreed with the same contractor as one package which, Company A submitted, could lock in the contractor on terms favourable to the company. This indicated that Company A considered the terms of all the work packages as a whole.


9. The Exchange required the three work packages to be aggregated.