China Hongxing's proposed sale of Profitstart to include units, loans waiver

SINGAPORE-LISTED China Hongxing Sports Limited on Tuesday announced that it had entered into a supplemental deed on Nov 22 over its sale and purchase agreement of Profitstart Group Limited to its former chief executive.

The supplemental deed seeks to clarify that - on top of the agreement made on Sept 20 - the sale of Profitstart will also include subsidiaries Fujian Hongrong Shoes & Garments Co Ltd and Fujian Hongrong Sports Goods Co Ltd.

There will also be a waiver by Denis Wu Rongzhao, China Hongxing's former CEO and executive director, and Wu Rongguang - a member of the controlling shareholder group, of all the monies owed to them by China Hongxing, amounting to some 64.4 million yuan.

The 100 million yuan (S$20.44 million) offer - made on Sept 20 - to acquire the company's operating subsidiaries is being carried out through Jiayao Investments Limited, owned by Mr Denis Wu.

The proposed sale will also see the disposal of 10,000 ordinary shares, representing the entire issued and paid-up capital of Profitstart.

In a filing with the Singapore Exchange on Sept 21 , the company also said the 100 million yuan package comprises of 28 million yuan in cash, which is intended to be made available for distribution to minority shareholders only.

With regard to the cash element of the sale, shareholders' approval will be "obtained at a future executive general meeting for the distribution of at least 80 per cent of the cash consideration in the form of dividends or return of capital by the company to the shareholders", China Hongxing said.

The Wu family - which owns about 33 per cent of China Hongxing - will also renounce their rights to receive any dividend arising from the distribution of the cash consideration.

Upon the disposal of Profitstart, the existing inter-company loan of 3.01 billion yuan will also be waived.