NON-PUBLIC A SHARE ISSUE AND SUBSCRIPTION BY CNAHC
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Air China Limited.
中
AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 00753)
(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES UNDER
SPECIFIC MANDATE; AND
(2) CONNECTED TRANSACTION: SUBSCRIPTION OF
NEW A SHARES BY CNAHC
Independent Financial Adviser
to the Independent Board Committee and the Independent Shareholders
PROPOSED NON-PUBLIC ISSUANCE OF A SHARES UNDER SPECIFIC MANDATE
On 2 August 2022, the Board approved the Non-public Issuance of A Shares, pursuant to which the Company will issue no more than 4,357,444,555 A Shares to no more than 35 (inclusive) specific investors (including CNAHC) at the Issue Price with an expected proceeds (before deducting relevant issuance expenses) of no more than RMB15.0 billion.
CONNECTED TRANSACTION: SUBSCRIPTION OF NEW A SHARES BY CNAHC
According to the proposal of the Non-public Issuance of A Shares, the Company and CNAHC entered into the Share Subscription Agreement on 2 August 2022, pursuant to which, the Company has agreed to issue, and CNAHC has agreed to subscribe for A Shares at the Issue Pricein the amount of not less than RMB5.5 billion. Immediately upon the completion of the Non- public issuance of A Shares, the total number of Shares held by CNAHC and its wholly-owned subsidiaries shall not be less than 50.01% of the total issued shares of the Company.
LISTING RULES IMPLICATIONS
The new A Shares under the Non-public Issuance of A Shares will be issued pursuant to a specific mandate to be sought from the Shareholders at the EGM and the Class meetings. According to the relevant requirements of Chapter 19A of the Listing Rules, the Company will proceed with the Non-public Issuance of A Shares after obtaining approvals from the Independent Shareholders at the EGM by way of special resolution and from the A Shareholders at the A Shareholders' Class Meeting and from the H Shareholders at the H Shareholders' Class Meeting to be convened in accordance with the Articles of Association by way of special resolutions.
Since CNAHC is the controlling shareholder of the Company, and hence a connected person of the Company, CNAHC A Share Subscription constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to the announcement, reporting and independent shareholders' approval requirements. An Independent Board Committee comprising the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the Share Subscription Agreement. Gram Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the same.
GENERAL INFORMATION
The Company is to convene an EGM and Class Meetings for Shareholders to consider and approve the Non-public Issuance of A Shares and the CNAHC A Share Subscription. Notices of the above meetings will be despatched to the Shareholders on or before 5 August 2022. A circular containing, among others, details of the Non-public Issuance of A Shares and CNAHC A Share Subscription, will be despatched to the Shareholders on or before 25 August 2022 to allow sufficient time for the preparation of the relevant information for inclusion in the circular.
The Company advises its Shareholders and potential investors to note that the proposed Non-public Issuance of A Shares is subject to certain conditions being satisfied, and consequently the proposed Non-public Issuance of A Shares may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the securities of the Company.
1. INTRODUCTION
On 2 August 2022, the Board approved the Non-public Issuance of A Shares, pursuant to which the Company will issue no more than 4,357,444,555 A Shares to no more than 35 (inclusive) specific investors (including CNAHC) at the Issue Price with an expected proceeds (before deducting relevant issuance expenses) of no more than RMB15.0 billion.
According to the proposal of the Non-public Issuance of A Shares, the Company and CNAHC entered into the Share Subscription Agreement on 2 August 2022, pursuant to which, the Company has agreed to issue, and CNAHC has agreed to subscribe for A Shares at the Issue Price in the amount of not less than RMB5.5 billion. Immediately upon the completion of the Non-public issuance of A Shares, the total number of Shares held by CNAHC and its wholly- owned subsidiaries shall not be less than 50.01% of the total issued shares of the Company.
In respect of the above Non-public Issuance of A Shares (including the CNAHC A Share Subscription), the Board has approved the following resolutions: (i) the proposal in relation to the satisfaction of the Company of the requirements for the Non-public Issuance of A Shares;
(ii) the proposal in relation to the proposal of the Non-public Issuance of A Shares by the Company in 2022; (iii) the proposal in relation to the plan of the Non-public Issuance of A Shares by the Company in 2022; (iv) the proposal in relation to the feasibility analysis report on the use of proceeds of the Non-public Issuance of A Shares by the Company in 2022; (v) the proposal in relation to the dilution of current returns, remedial measures and the corresponding undertakings of relevant entites for the Non-public Issuance of A Shares by the Company in 2022; (vi) the proposal in relation to the report on use of proceeds from previous fund-raising activities of the Company; (vii) the proposal in relation to the related (connected) transaction concerning the entering into of the conditional share subscription agreement with specific subscriber; (viii) the proposal in relation to the authorization by the Shareholders to the Board's authorized person(s) to proceed with relevant matters in respect of the Non-public Issuance in their sole discretion; and (ix) the proposal in relation to future plan for dividend return to the Shareholders for the coming three years (2022-2024).
2. PROPOSAL OF THE NON-PUBLIC ISSUANCE OF A SHARES
A summary of the proposal of the Non-public Issuance of A Shares is set out as follows:
(1) Class and par value of Shares to be issued: A Shares with a par value of RMB1.00 each
The aggregate par value of the A Shares to be issued under the Non-public Issuance of A Shares will be not more than RMB4,357,444,555 (inclusive).
The new A Shares to be issued pursuant to the Non- public Issuance of A Shares will rank pari passu with the existing A Shares and H Shares in all respects.
(2) Method and time of issue: The Non-public Issuance of A Shares is undertaken by
way of Non-public Issuance to specific Subscribers.
The Company will issue A Shares to the Subscribers at an appropriate timing within the validity period upon obtaining the approval of the CSRC.
(3) Target subscribers, method of subscription:
The Subscribers under the Non-public Issuance of A Shares include not more than 35 (inclusive) specific investors (including CNAHC). CNAHC shall subscribe for A Shares in the amount of not less than RMB5.5 billion in cash, and immediately upon the completion of the Non-public issuance of A Shares, the total number of Shares held by CNAHC and its wholly-owned subsidiaries shall not be less than 50.01% of the total issued shares of the Company. Other Subscribers include securities investment and fund management companies, securities companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other qualified institutional that meet the requirements of the CSRC. Any securities investment and fund management company, securities company and qualified foreign institutional investor and Renminbi qualified foreign institutional investor subscribing for the shares through two or more products under their management shall be regarded as one Subscriber. Trust companies, as Subscribers, are limited to use their own funds to subscribe for the shares.
Apart from CNAHC, other Subscribers shall be determined by the Board and its authorized persons, and upon discussions with the sponsor (the lead underwriter) (Note) based on the subscription quotations of the Subscribers within the authorization of the general meeting in accordance with Implementation Rules and other relevant provisions after obtaining the approval of the CSRC for the Non- public Issuance of A Shares. If the national laws, administrative regulations, departmental rules and normative documents provide new requirements on the subscriber of non-public issuance of shares, the Company will adjust accordingly according to the new requirements.
All Subscribers will subscribe for the A Shares under the Non-public Issuance of A Shares in cash and at the same price.
As CNAHC is the controlling shareholder of the Company as at the date of this announcement, CNAHC A Share Subscription shall constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. The Company shall comply with relevant regulatory rules and be subject to transaction approvalanddisclosureproceduresaccordingly.
It is expected that the Subscribers (other than CNAHC) and their respective ultimate beneficial owners are and will continue to be third parties independent of the Company and its connected persons of the Company after the completion of the Non-public Issuance of A Shares. If any Subscriber (other than CNAHC) is a connected person of the Company, the Company will take all reasonable measures to comply with the relevant requirements under Chapter 14A of the Listing Rules.
Note: As at the date of this announcement, the Company has not engaged any sponsor or underwriter. The sponsor (the lead underwriter) will be engaged and the sponsor agreement will be entered into by the Board or its authorized persons as appropriate in their sole discretion pursuant to the authorization granted by the Shareholders at the EGM on normal commercial terms.
(4) Issue Price and pricing method:
The Pricing Benchmark Date of the Non-public Issuance of A Shares shall be the first day of the issuance period of the Non-public Issuance of A Shares. The issuance period shall be determined by the Company upon satisfaction of all conditions precedent to the Non- public Issuance of A Shares.
The Issue Price of the Non-public Issuance of A Shares shall not be lower than 80% of the average trading price of A Shares (Note 1) in the 20 Shanghai Trading Days prior to the Pricing Benchmark Date (excluding the Pricing Benchmark Date, the same below), and the Company's audited net assets per share attributable to ordinary shareholders of the parent company (Note 2) as at the end of the most recent period prior to the Pricing Benchmark Date, whichever is higher (i.e. the "Base Issue Price", with two decimal places according to the "round up method").
Notes:
1. The average trading price of A Shares in the 20 Shanghai Trading Days prior to the Pricing Benchmark Date = the total trading value of A Shares in the 20 Shanghai Trading Days prior to the Pricing Benchmark Date/the total trading volume of A Shares in the 20 Shanghai Trading Days prior to the Pricing Benchmark Date.
2. The net assets per share attributable to ordinary shareholders of the parentcompany = equityattributable to the shareholders of the parent company/number of total issued ordinary shares of the Company.
The above pricing principle of the Issue Price was determined mainly based on the requirements of the Administrative Measures and the Implementation Rules.
The net price to the Company of each new A Share to be issued will be determined and disclosed upon completion of the Non-public Issuance of A Shares and the relevant expenses incurred or to be incurred in relation to the Non-public Issuance of A Shares in accordance with the requirements of the Listing Rules.
In the event that the Company distributes dividends, grants bonus shares, converts capital reserve into share capital or carries out any other ex-right or ex-dividend activities during the period from the balance sheet date of the latest unaudited financial report prior to the Pricing Benchmark Date to the issuance date, the above net assets per share attributable to ordinary shareholders of the parent company shall be adjusted accordingly. In the event that the Company distributes dividends, grants bonus shares, converts capital reserve into share capital or carries out any other ex-right or ex-dividend activities during the period from the Pricing Benchmark Date to the issuance date, the Issue Price shall be adjusted on ex-right or ex-dividend basis.
On the basis of the aforementioned Base Issue Price, the final Issue Price shall be determined by the Board and its authorized persons, pursuant to the authorization of the Shareholders, with the sponsor (the lead underwriter) through negotiationsbased on the subscription quotations of the Subscribers in accordance with the laws and regulations and requirements of regulatory departments after obtaining the approval documents of the CSRC.
CNAHC will directly accept the final Issue Price determined based on the results of the bidding without taking part in the bidding. If no offer is made or the Issue Price cannot be determined through bidding, CNAHC will subscribe for the shares at the Base Issue Price to continue to participate in the Non-public Issuance of A Shares, at a total subscription amount of not less than RMB5.5 billion.
(5) Issue number: The number of A Shares to be issued under the Non- public Issuance of A Shares, shall be calculated by dividing the total raised proceeds by the Issue Price (rounded down to the nearest integer, with the corresponding subscription amount to the fractional part deducted accordingly) and shall not be more than 30% of the total issued shares of the Company immediately prior to the Non-public Issuance of A Shares. As at the date of this announcement, the total share capital of the Company is 14,524,815,185 Shares. Based on which, the number of shares to be issued under the Non-public Issuance of A Shares will not exceed 4,357,444,555 shares (inclusive).
In the event that the Company grants bonus shares, converts capital reserve into share capital or carries out any other ex-right or ex-dividend activities or any other events leading to changes in the total share capital of the Company takes place during the period from the date of the announcement of Board resolution for the Non- public Issuance of A Shares to the issuance date, the number and maximum number of shares to be issued under the Non-public Issuance of A Shares shall be adjusted accordingly.
Subject to the above maximum number of A Shares to be issued, the final number of A Shares to be issued will be determined by the Board or its authorized person(s), pursuant to theauthorizationgranted by the Shareholders at the EGM and Class Meetings, with the sponsor (the lead underwriter) through negotiations based on the actual circumstances at the time of issuance in accordance with the requirements of the relevant laws, administrative regulations, departmental rules or normative documents after obtaining the approval of the CSRC for the Non-public Issuance of A Shares. The final number shall also be subject to the adjustments by regulatory departments including CSRC (if any).
(6) Lock-up Arrangement: Upon completion of the Non-public Issuance of A Shares, the
shares subscribed by CNAHC under the Non-public Issuance of A Shares shall not be transferred within eighteen (18) months from the date of completion of the issuance, and the shares subscribed by other Subscribers under the Non-public Issuance of A Shares shall not be transferred within six (6) months from the date of completion of the issuance. Upon expiration of the lock-up period, the decrease in holding of the Shares by the Subscribers un shall be handled in accordance with the Company Law, the Securities Law, the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, other lawsregulations, departmental rules and normative documents and the Articles of Association of the Company.
Within the lock-up period, shares derived from events such as the grant of bonus shares and conversion of capital reserve into share capital by the Company for the shares obtained by the Subscribers under the Non-public Issuance of A Shares shall also comply with the above lock-up arrangement.
(7) Listing Venue: Upon expiration of the lock-up period, the A Shares to be issued under
the Non-public Issuance of A Shares will be listed and traded on the Shanghai Stock Exchange. The Company will apply to the Shanghai Stock Exchange for the listing of, and permission to deal in, the A Shares to be issued pursuant to the Non- public Issuance of A Shares.
(8) Arrangement relating to the
accumulated undistributed
profits prior to this issuance:
Both new Shareholders and existing Shareholders are entitled to the accumulated undistributed profits of the Company prior to the Non-public Issuance of A Shares upon completion of the Non-public Issuance of A Shares according to their respective shareholdings.
(9) Amount and use of proceeds: Gross proceeds to be raised from the Non-public
Issuance of A Shares will be no more than RMB15.0 billion (before deducting relevant issuance expenses), which are intended to be used in the following ways:
No. Name of Project Proposed proceeds
to be applied
(RMB in 100 million)
1 Purchasing 22 aircraft 108.00
2 Replenishing working capital 42.00
Total: 150.00
The Company proposed to use RMB10.8 billion to purchase 22 aircraft, including 9 ARJ21 aircraft, 4 A320 NEO aircraft and 9 A350 aircraft, expected to be delivered in 2022 - 2023, and RMB4.2 billion to replenish the working capital which will be invested according to the fund need of the Company during its daily operation.
If the actual amount of net proceeds after deducting relevant issuance expenses of the Non-public Issuance of A Shares is less than the above proposed amount of proceeds to be applied, the Company will, based on the actual amount of net proceeds and schedule of the projects and in compliance with relevant laws and regulations, determine the application details including the priority and specific amount of proceeds to be applied to each project, and the shortage of funds will be self-financed by the Company through internal resources.
In order to ensure a smooth implementation of the fund- raising investment, and to protect the interest of all shareholders of the Company, before receiving the proceeds of the Non-public Issuance of A Shares, the Company will use its own funds or self-raised funds depending on the progress of the investment projects, and replace such funds according to relevant prescribed procedures upon receiving the proceeds.
(10) Validity Period of the
Resolution of this issuance:
The resolutions in relation to the Non-public Issuance of A Shares shall remain valid for twelve (12) months from the date on which relevant resolutions are considered and approved by the Shareholders. If the national laws, administrative regulations, departmental rules and normative documents provide new requirements on the non-public issuance of shares, the Company will adjust accordingly according to the new requirements.
3. CNAHC A SHARE SUBSCRIPTION
The principal terms of the Share Subscription Agreement between the Company and CNAHC are set out as follows:
(1) Parties: (i) the Company (as issuer); and
(ii) CNAHC (as Subscriber).
(2) Date: 2 August 2022
(3) Subscription Price and
Payment:
CNAHC shall subscribe for new A Shares at the final Issue Price for the Subscribers to be determined by the Board and its authorized persons in the manner as set forth in the paragraph "(4) Issue Price and pricing method" under the section headed "1. Proposal of the Non-public Issuance of A Shares" above.
CNAHC will commit not less than RMB5.5 billion in cash, which, upon the satisfaction of all the conditions precedent stipulated in the Share Subscription Agreement, will be paid by CNAHC, in cash to the designated account within five business days upon receipt of the payment notice of the subscription.
If no offer is made or the Issue Price cannot be determined through bidding, CNAHC will subscribe for the shares at the Base Issue Price to continue to participate in the Non-public Issuance of A Shares.
(4) Number of A Shares to be subscribed for:
The number of A Shares to be subscribed by CNAHC under the Non-public Issuance of A Shares is calculated by dividing the total commitment of CNAHC by the Issue Price and rounded down to the nearest integer.
The final number of A Shares to be issued is subject to adjustment in the manner as set forth in the paragraph "(5) Issue number" under the section headed "1. Proposal of the Non-public Issuance of A Shares" above.
CNAHC shall subscribe in the amount in cash of not less than RMB5.5 billion. Upon completion of the Non- public Issuance of A Shares, the total number of Shares held by CNAHC and its wholly-owned subsidiaries shall not be less than 50.01% (inclusive) of the total issued shares of the Company.
(5) Conditions precedent for the Share Subscription
Agreement:
The Share Subscription Agreement will be established upon executed and sealed by the legal representative or authorized representative of the parties and take effect when all the following conditions are met:
(i) matters relating to the Non-public Issuance of A Shares have been approved by Directors at the Board meeting and Shareholders at the EGM and the Class Meetings;
(ii) matters relating to the subscription of A Shares by CNAHC under the Non-public Issuance of A Shares have been approved by CNAHC through internal decision procedures;
(iii) matters relating to the Non-public Issuance of A Shares have been approved by the body performing the duty of supervision and management of state-owned assets or by its authorized body; and
(iv) matters relating to the Non-public Issuance of A Shares have been approved by the CSRC.
The date of effectiveness of the Share Subscription Agreement shall be the date when all above conditions are satisfied. Neither the Company nor CNAHC has the right to waive any of the conditions above.
As at the date of this announcement, the Non-public Issuance of A Shares has been considered and approved by the Board. None of the other conditions under the Share Subscription Agreement has been fulfilled.
(6) Others: The arrangement relating to the lock-up and entitlement to accumulated undistributed profits of the Company prior to the Non-public Issuance of A Shares shall be in the same manner as set out under the section headed "1. Proposal of the Non-public Issuance of A Shares" above.
4. DILUTIVE EFFECTS OF THE NON-PUBLIC ISSUANCE OF A SHARES ON THE SHAREHOLDING STRUCTURE OF THE COMPANY
For illustration purpose only, set out below is the respective dilutive implication of the Non- public Issuance of A Shares on the shareholding structure of the Company based on different subscription scenarios, assuming that (i) the total amount of proceeds raised from the Non- public Issuance of A Shares is RMB15.00 billion; (ii) the Issue Price is RMB4.23 per share, being the Company's audited net assets per share attributable to ordinary shareholders of the parent company as at the end of the most recent period prior to the date of this announcement; and (iii) no additional Shares will be issued after the date of this announcement until the completion of the Non-public Issuance of A Shares.
4.1 CNAHC subscribes A Shares in the amount of RMB6.466 billion, that is, following the completion of the subscription, the total number of Shares held by CNAHC and its wholly-owned subsidiaries reaches 50.01% of the total issued shares of the Company, and the Subscribers (other than CNAHC) are not and will not become core connected persons of the Company after the completion of the Non-public Issuance of A Shares:
|
Shareholders |
As at the date of this announcement |
Immediately Upon Completion of the Non-public Issuance of A Shares |
||
|
|
Number of shares held |
Approximate percentage of the total number of shares in issue |
Number of shares held |
Approximate percentage of the total number of shares in issue |
|
1. CNAHC and its associates |
7,508,571,617 |
51.70% |
9,037,264,329 |
50.01% |
|
(i) CNAHC |
5,952,236,697 (A Shares) |
40.98% |
7,480,929,409 (A Shares) |
41.40% |
|
Shareholders |
As at the date of this announcement |
Immediately Upon Completion of the Non-public Issuance of A Shares |
||
|
|
Number of shares held |
Approximate percentage of the total number of shares in issue |
Number of shares held |
Approximate percentage of the total number of shares in issue |
|
(ii) CNACG |
1,332,482,920 (A Shares) |
9.17% |
1,332,482,920 (A Shares) |
7.37% |
|
223,852,000 (H Shares) |
1.54% |
223,852,000 (H Shares) |
1.24% |
|
|
2. Cathay Pacific |
2,633,725,455 (H Shares) |
18.13% |
2,633,725,455 (H Shares) |
14.57% |
|
3. Public Shareholders |
4,382,518,113 |
30.17% |
6,399,924,691 |
35.42% |
|
(i) Public A Shareholders |
2,677,412,204 |
18.43% |
4,694,818,782 |
25.98% |
|
(ii) Public H Shareholders |
1,705,105,909 |
11.74% |
1,705,105,909 |
9.44% |
|
Sub-total (H Shares) |
4,562,683,364 |
31.41% |
4,562,683,364 |
25.25% |
|
Sub-total (A Shares) |
9,962,131,821 |
68.59% |
13,508,231,112 |
74.75% |
|
Total |
14,524,815,185 |
100% |
18,070,914,476 |
100% |
4.2 CNAHC (as the sole Subscriber) subscribes in the total amount of RMB15.00 billion:
|
Shareholders |
As at the date of this announcement |
Immediately Upon Completion of the Non-public Issuance of A Shares |
||
|
|
Number of shares held |
Approximate percentage of the total number of shares in issue |
Number of shares held |
Approximate percentage of the total number of shares in issue |
|
1. CNAHC and its associates |
7,508,571,617 |
51.70% |
11,054,670,908 |
61.17% |
|
(i) CNAHC |
5,952,236,697 (A Shares) |
40.98% |
9,498,335,988 (A Shares) |
52.56% |
|
(ii) CNACG |
1,332,482,920 (A Shares) |
9.17% |
1,332,482,920 (A Shares) |
7.37% |
|
223,852,000 (H Shares) |
1.54% |
223,852,000 (H Shares) |
1.24% |
|
|
2. Cathay Pacific |
2,633,725,455 (H Shares) |
18.13% |
2,633,725,455 (H Shares) |
14.57% |
|
Shareholders |
As at the date of this announcement |
Immediately Upon Completion of the Non-public Issuance of A Shares |
||
|
|
Number of shares held |
Approximate percentage of the total number of shares in issue |
Number of shares held |
Approximate percentage of the total number of shares in issue |
|
3. Public Shareholders |
4,382,518,113 |
30.17% |
4,382,518,113 |
24.25% |
|
(i) Public A Shareholders |
2,677,412,204 |
18.43% |
2,677,412,204 |
14.82% |
|
(ii) Public H Shareholders |
1,705,105,909 |
11.74% |
1,705,105,909 |
9.44% |
|
Sub-total (H Shares) |
4,562,683,364 |
31.41% |
4,562,683,364 |
25.25% |
|
Sub-total (A Shares) |
9,962,131,821 |
68.59% |
13,508,231,112 |
74.75% |
|
Total |
14,524,815,185 |
100% |
18,070,914,476 |
100% |
Notes:
1. The percentages shown are rounded to the nearest 2 decimal places.
2. Upon completion of the Non-public Issuance of A Shares, the Company is expected to comply with the minimum public float as required by the Listing Rules and agreed by the Hong Kong Stock Exchange (being 24.20%) in both scenarios above.
3. The Subscribers are allowed to subscribe 5% or more of the enlarged total issued Shares, and the Company does not expect any Subscribers (other than CNAHC) to become a substantial shareholder of the Company upon completion of the Non-public Issuance of A Shares.
5. LISTING RULES IMPLICATIONS
CNAHC A Share Subscription
Since CNAHC is the controlling shareholder of the Company, and hence a connected person of the Company, CNAHC A Share Subscription constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to the announcement, reporting and independent shareholders' approval requirements. An Independent Board Committee comprising the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the Share Subscription Agreement. Gram Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the same.
Non-public Issuance of A Shares
The new A Shares under the Non-public Issuance of A Shares will be issued pursuant to a specific mandate to be sought from the Shareholders at the EGM and the Class meetings. According to the relevant requirements of Chapter 19A of the Listing Rules, the Company will proceed with the Non-public Issuance of A Shares after obtaining approvals from the Independent Shareholders at the EGM by way of special resolution and from the A Shareholders at the A Shareholders' Class Meeting and from the H Shareholders at the H Shareholders' Class Meeting to be convened in accordance with the Articles of Association by way of special resolutions.
6. REASONS FOR AND BENEFIT OF THE NON-PUBLIC ISSUANCE OF A SHARES AND CNAHC A SHARE SUBSCRIPTION
The proceeds to be raised from the Non-public Issuance of A Shares, after deducting relevant issuance expenses, will be used for introducing 22 aircraft and replenishing the working capital, which will help the Company to optimize its fleet structure, replenish long-term capacity and expand its carrying capacity, while relieving the pressure of daily operating funds and reducing its asset and liability ratio.
To satisfy the above capital needs of the Group, the Company has considered and compared various fund-raising methods including debt financing and equity financing as follows and finally decides Non-public Issuance of A Shares as an appropriate financing method in line with the interests of the Company and its Shareholders as a whole after considering the following factors:
• debt financing: As opposed to equity financing, debt financing will (i) increase the gearing ratio (calculated by total liabilities divided by total assets) of the Group, especially considering that the gearing ratio of the Group has increased to approximately 80.95% as at 31 March 2022 following the issuance of six tranches super short-term commercial paper and one tranche medium term note in 2021 and one tranche super short-term commercial paper in 2022, and (ii) incur additional interest expenses to the Group;
• rights issue: It's not practicable to carry out rights issue for the Company at the current stage. Rights issue targets all existing Shareholders and shall be implemented to A Shareholders and H Shareholders simultaneously at the same price, however, it's impracticable to determine a suitable price given the substantial premium of the average closing price of A Shares over the closing price of H Shares during the recent one-year period immediately prior to the date of the Board meeting being 2 August 2022, and the different environment of capital markets of Hong Kong and Chinese mainland;
• public issuance of A Shares to unspecific investors: The Company is not able to carry out public issuance of A Shares due to failure of fulfillment of all requirements of the public issuance of A Shares such as profit making in the latest three consecutive financial years in light of the Group's financial performance for 2020 and 2021;
• issuance of H Shares: Given the abovementioned substantial premium of the average closing price of A Shares over the closing price of H Shares, issuance of H Shares will dilute the shareholding of existing Shareholders to a larger extent as the number of H Shares to be issued will be substantially more than that required under the Non-public Issuance of A Shares assuming the similar pricing bases and same issuance size as the Non-public Issuance of A Shares were adopted.
CNAHC A Share Subscription will enable the Company to obtain more support from the controlling Shareholder and further enhance its investment value. As one of the Subscribers of the Non-public Issuance of A Shares, CNAHC shows its confidence in the future development of the Company and its determination in continuously supporting the development of the Company, which will facilitate the enhancement of investment value of the Company, thereby maximizing the interests of the Shareholders and effectively safeguarding the interests of the minority Shareholders.
Based on the foregoing, the Directors (including the independent non-executive Directors) are of the opinion that although the CNAHC A Share Subscription is not entered into in the ordinary and usual course of business of the Group, the terms and conditions of the issue of new A Shares under the Non-public Issuance of A Shares and the Share Subscription Agreement are fair and reasonable, on normal commercial terms or better and in the interests of the Company and its Shareholders as a whole.
Mr. Song Zhiyong, Mr. Ma Chongxian and Mr. Feng Gang are considered to have a material interest in CNAHC A Share Subscription and therefore have abstained from voting on the relevant Board resolutions concerning (i) the proposal in relation to the proposal of the Non- public Issuance of A Shares by the Company in 2022; (ii) the proposal in relation to the plan of the Non-public Issuance of A Shares by the Company in 2022; (iii) the proposal in relation to the entering into of the conditional share subscription agreement with specific subscriber, for approving the Non-public Issuance of A Shares; and (iv) the proposal in relation to the authorization by the Shareholders to the Board's authorized person(s) to proceed with relevant matters in respect of the Non-public Issuance in their sole discretion. Save as mentioned above, none of the other Directors has a material interest in CNAHC A Share Subscription and the Non-public Issuance of A Shares and hence no other Director has abstained from voting on relevant Board resolutions.
7. FUND-RAISING ACTIVITIES IN THE PAST TWELVE MONTHS
The Company has not conducted any equity fund raising activities during the twelve months immediately before the date of this announcement.
8. GENERAL INFORMATION OF THE PARTIES
The Company
The Company is principally engaged in providing air passenger, air cargo and related services.
CNAHC
CNAHC directly holds 40.98% of the Company's shares and holds 10.72% of the Company's shares through its wholly-owned subsidiary CNACG, and is a controlling shareholder of the Company. As at the date of this announcement, the SASAC of the State Council is a controlling shareholder and de facto controller of CNAHC. CNAHC primarily operates all the state-owned assets and state-owned equity interests invested by the State in CNAHC and its invested entities, aircraft leasing and aviation equipment and facilities maintenance businesses.
9. EGM AND H SHAREHOLDERS' CLASS MEETING
The Company will convene the EGM and Class Meetings for the Shareholders to consider and, if thought fit, to pass resolutions in respect of, the Non-public A Share Issue (including the CNAHC A Share Subscription).
CNAHC, being a Subscriber under the Non-public Issuance of A Shares, has a material interest in the Non-public Issuance of A Shares. As at the date of this announcement, CNAHC directly holds 5,952,236,697 A Shares in the Company, representing 40.98% of the existing issued share capital of the Company; CNACG holds 1,332,482,920 A Shares and 223,852,000 H Shares in the Company, representing 9.17% and 1.54% of the existing issued share capital of the Company, respectively. CNACG is a wholly-owned subsidiary of CNAHC. CNAHC, by itself and through CNACG, owns in aggregate 51.70% of the existing issued share capital of the Company. CNAHC and its associates (including CNACG) shall therefore abstain from voting on the following resolutions at the EGM and the Class Meetings approving the Non-public Issuance of A Shares: (i) the proposal in relation to the proposal of the Non-public Issuance of A Shares by the Company in 2022; (ii) the proposal in relation to the plan of the Non-public Issuance of A Shares by the Company in 2022; (iii) the proposal in relation to the entering into of the conditional share subscription agreement with specific subscriber; and (iv) the proposal in relation to the authorization by the Shareholders to the Board's authorized person(s) to proceed with relevant matters in respect of the Non-public Issuance in their sole discretion. Other than CNAHC and its associates, no Shareholders are required to abstain from the resolutions at the EGM and the Class Meetings on matters relating to the Non-public Issuance of A Shares.
Notices of the above meetings will be despatched to the Shareholders on or before 5 August 2022. A circular containing, among others, details of the Non-public Issuance of A Shares and CNAHC A Share Subscription, will be despatched to the Shareholders on or before 25 August 2022 to allow sufficient time for the preparation of the relevant information for inclusion in the circular.
The Company advises its Shareholders and potential investors to note that the proposed Non- public Issuance of A Shares is subject to certain conditions being satisfied, and consequently the proposed Non-public Issuance of A Shares may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the securities of the Company.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Administrative Measures" the Administrative Measures for the Issuance of Securities by
Listed Companies (Revised in 2020) 《(上
法2020年) issued by CSRC
"A Shareholders" holders of A Shares
"A Shareholders' Class Meeting"
the class meeting of the A Shareholders to be convened by the Company to consider and, if thought fit, approve, among other things, the Non-public Issuance of A Shares
"A Share(s)" the ordinary shares issued by the Company, with a par value of
RMB1.00 each, which are listed on the Shanghai Stock Exchange
"Articles of Association" the articles of association of the Company
"associates" has the meaning ascribed thereto under the Listing Rules
"Board" the board of directors of the Company
"Cathay Pacific" Cathay Pacific Airways Limited, an associate of the Company
"Class Meetings" the A Shareholders' Class Meeting and the H Shareholders' Class
Meeting
"core connected person" has the meaning ascribed thereto under the Listing Rules "CNACG" China National Aviation Corporation (Group) Limited, a company
incorporated under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC and a substantial shareholder of the Company, which directly holds approximately 10.71% of the Company's issued share capital as at the date of this announcement
"CNAHC" China National Aviation Holding Corporation Ltd., a wholly PRC state-owned enterprise and the controlling shareholder of the Company, which directly and indirectly holds an aggregate of approximately 51.70% of the Company's issued share capital as at the date of this announcement
"CNAHC A Share Subscription"
the proposed subscription of new A Shares by CNAHC pursuant to the Share Subscription Agreement as part of the Non-public Issuance of A Shares
"Company" Air China Limited, a company incorporated in the People's Republic of China, whose H shares are listed on the Hong Kong Stock Exchange as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A shares are listed on the Shanghai Stock Exchange
"connected person" has the meaning ascribed thereto under the Listing Rules "controlling shareholder" has the meaning ascribed thereto under the Listing Rules "CSRC" the China Securities Regulatory Commission
"Director(s)" the director(s) of the Company
"EGM" the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, the Non-public Issuance of A Shares
"Group" the Company and its subsidiaries
"HK$" Hong Kong dollar, the lawful currency of Hong Kong
"H Shareholders" holders of the H Shares
"H Shareholders' Class Meeting"
the class meeting of the H Shareholders to be convened by the Company to consider and, if thought fit, approve, among other things, the Non-public Issuance of A Shares
"H Share(s)" the ordinary shares issued by the Company, with a par value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange
"Hong Kong" the Hong Kong Special Administrative Region of the PRC "Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited
"Implementation Rules" Detailed Implementation Rules for the Non-Public Issuance of
Stocks of Listed Companies (Revised in 2020) 《( 上
發2020年) issued by CSRC
"Independent Board Committee"
a board committee comprising Mr. Li Fushen, Mr. He Yun, Mr. Xu Junxin and Ms. Winnie Tam Wan-chi, all being the independent non-executive Directors of the Company
"Independent Financial Adviser"
or "Gram Capital"
Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the CNAHC A Share Subscription
"Independent Shareholders" the shareholders of the Company, other than CNAHC and its associates
"Issue Price" the issue price of the Non-public Issuance of A Shares
"Listing Rules" the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"Non-public Issuance of A Shares"
the proposed non-public issuance of not more than 4,357,444,555 new A Shares to no more than 35 (inclusive) specified investors (including CNAHC) by the Company at the Issue Price with an expected proceeds (before deducting relevant issuance expenses) of no more than RMB15.0 billion
"PRC" or "China" the People's Republic of China, excluding, for the purpose of this announcement only, Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
"Pricing Benchmark Date" the first day of the issuance period of the Non-public Issuance of A Shares
"RMB" Renminbi, the lawful currency of the PRC
"SASAC" the State Asset Supervision and Administration Commission of the State Council of the PRC
"SFO" Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)
"Shanghai Trading Day"
a day on which the Shanghai Stock Exchange is open for dealing or trading in securities
"Share Subscription Agreement"
the conditional subscription agreement in respect of the 2022 Non- public Issuance of A Shares entered into between the Company and CNAHC on 2 August 2022, pursuant to which, the Company has agreed to issue, and CNAHC has agreed to subscribe for A Shares at the Issue Price in the amount of not less than RMB5.5 billion
"Shareholders" A Shareholders and H Shareholders
"Subscribers" means not more than 35 (inclusive) specific investors (includingCNAHC) in the Non-public Issuance of A Shares
"substantial shareholder" has the meaning ascribed thereto under the Listing Rules "%" per cent
By order of the Board
Air China Limited
Huang Bin Huen Ho Yin
Joint Company Secretaries
Beijing, the PRC, 2 August 2022
As at the date of this announcement, the directors of the Company are Mr. Song Zhiyong, Mr. Ma Chongxian, Mr. Feng Gang, Mr. Patrick Healy, Mr. Li Fushen*, Mr. He Yun*, Mr. Xu Junxin* and Ms. Winne Tam Wan-chi*.
* Independent non-executive Director of the Company
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