By 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.
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(Incorporated in the Cayman Islands with limited liability)
(Stock code: 00853) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE EXCLUSIVE DISTRIBUTION AGREEMENTS AND EXTENSION OF JAPAN DISTRIBUTION AGREEMENT BACKGROUND
The Board is pleased to announce that on 17 January 2014, MP Shanghai, a wholly-owned subsidiary of the Company, and the Controlling Shareholder Group (excluding JIMRO Co., Ltd.) entered into the Exclusive Distribution Agreements to renew the Old Exclusive Distribution Agreements. In addition, the Company had also informed JIMRO Co., Ltd. in writing that, according to the terms of the Japan Distribution Agreement, the Company had accepted the Japan Distribution Agreement to be extended automatically for one year. Accordingly, MP Shanghai will supply the drug-eluting stent systems and balloon catheters to the Controlling Shareholder Group and the Controlling Shareholder Group will act as the Group's exclusive distributors of the aforesaid products in Thailand, Philippines, Indonesia, Pakistan and Japan.
As at the date of this announcement, the Controlling Shareholder Group are subsidiaries of Otsuka
Holdings Co., Ltd., who is the ultimate controlling shareholder of the Company having approximately
33.29% equity interest in the Company. Therefore, the Controlling Shareholder Group are connected persons of the Company as defined under the Listing Rules. Accordingly, the transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement between MP Shanghai and the Controlling Shareholder Group constitute connected transactions of the Company.
As the relevant applicable percentage ratios (as defined in the Listing Rules) in respect of the proposed Annual Caps of the transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement exceed 0.1% but is less than 5%, the transactions contemplated under the Exclusive Distribution Agreements constitute continuing connected transactions of the Company pursuant to Chapter 14A of the Listing Rules, and are subject to reporting, annual review and announcement requirements, but are exempted from the independent Shareholders' approval requirements.
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Reference is made to the prospectus of the Company, in respect of the existing continuing connected transactions under the Old Exclusive Distribution Agreements and Japan Distribution Agreement. Reference is also made to the announcement of the Company dated 18 March 2013, in respect of the renewal of the Old Exclusive Distribution Agreements for one year. The Old Exclusive Distribution Agreements have expired on 31 December 2013 and the Old Japan Distribution Agreement will expire on 16 February 2014, according to the terms of the Japan Distribution Agreement, the Japan Distribution Agreement would automatically renew for another period of one year after 10 years period from its execution date unless either party have an objection.
The Board is pleased to announce that on 17 January 2014, MP Shanghai, a wholly-owned subsidiary of the Company, and the Controlling Shareholder Group (excluding JIMRO Co., Ltd.) entered into the Exclusive Distribution Agreements to renew the Old Exclusive Distribution Agreements. In addition, the Company had also informed JIMRO Co., Ltd. in writing that, according to the terms of the Japan Distribution Agreement, the Company had accepted the Japan Distribution Agreement to be extended automatically for one year. Accordingly, MP Shanghai will supply the drug-eluting stent systems and balloon catheters to the Controlling Shareholder Group and the Controlling Shareholder Group will act as the Group's exclusive distributors of the aforesaid products in Thailand, Philippines, Indonesia, Pakistan and Japan. Details of the Exclusive Distribution Agreements and the Japan Distribution Agreement, each of which is a separate framework agreement, is set out below.
Date : 17 January 2014
Parties : (i) MP Shanghai, as the supplier; and
(ii) Controlling Shareholder Group (excluding JIMRO Co., Ltd.) as the purchaser.
Subject matter : MP Shanghai will supply medical products, consisting mainly the drug- eluting stent systems and balloon catheters to the Controlling Shareholder Group (excluding JIMRO Co., Ltd.).
Term : The Exclusive Distribution Agreements is for a term of 1 year
Pricing standards : As the Controlling Shareholder Group (excluding JIMRO Co., Ltd.) are the sole distributors of their respective countries, pricing of the products will be negotiated between the Controlling Shareholder Group (excluding JIMRO Co., Ltd.) and MP Shanghai with reference to
(i) the state controlled price for medical products; or in the absence of such pricing
(ii) the market price of similar products within the respective markets; or in the absence of such pricing
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(iii) the cost of the products plus a reasonable margin not lower than those offered to distributors in other countries.
Payment terms : The payment term will be specified on each separate contract to be agreed by the parties.
Date : 16 February 2004
Parties : (i) MP Shanghai, as the supplier; and
(ii) JIMRO Co., Ltd., as the purchaser.
Subject matter : MP Shanghai will supply medical products, consisting mainly the drug- eluting stent systems and balloon catheters to the JIMRO Co., Ltd.
Term : The terms of the Japan Distribution Agreements will be automatically extended on a one-year duration basis for subsequent years, unless terminated in accordance with the terms of the applicable distribution agreements (subject to compliance with the provisions under the Listing Rules regarding continuing connected transactions).
Pricing standards : As JIMRO Co., Ltd. is the sole distributors of the Company in Japan, pricing of the products will be negotiated between the JIMRO Co., Ltd. and MP Shanghai with reference to
(i) the state controlled price for medical products; or in the absence of such pricing
(ii) the market price of similar products within the respective markets; or in the absence of such pricing
(iii) the cost of the products plus a reasonable margin not lower than those offered to distributors in other countries.
Payment terms : The payment term will be specified on each separate contract to be agreed by the parties.
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The following table sets out the historical transaction amounts for the three years ended 31 December
2013, the historical annual caps for the three years ended 31 December 2013 and the proposed Annual Cap amount for the financial year ending 31 December 2014 contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement:
In RMB
million
In RMB
million
In RMB
million
In RMB
million
In RMB
million
In RMB
million
In RMB
million
The Exclusive Distribution Agreements and Japan Distribution
Agreement 26.66 23.33 20.92 51.65 67.14 30 42.70
The proposed Annual Cap amounts for the financial years ending 31 December 2014 for the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement have been determined based on:
(1) the historical transaction amounts in 2011, 2012 and 2013;
(2) the expected inflation in the cost of manufacturing the products;
(3) the estimated growth in sales volume of the Controlling Shareholder Group;
(4) the anticipated purchase of the products provided in Thailand, Philippines, Indonesia, Pakistan and
Japan; and
(5) a buffer to accommodate for any unexpected increase in sales volume.
The Directors are of the view that the proposed Annual Cap amount contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement set out above is fair and reasonable so far as the Company and its Shareholders are concerned.
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The Group has been supplying the Group's medical products, mainly drug-eluting stent systems and balloon catheters to the Controlling Shareholder Group under the Old Exclusive Distribution Agreements and the Japan Distribution Agreement since February 2004 and January 2008. As the Controlling Shareholder Group has extensive distribution networks in the countries they operate in, it will be beneficial for the Company to utilise these distribution channels to increase the sales of products of the Group. Furthermore, it is not viable for the Company to set up a distribution network in these countries just to distribute its products as would incur significant cost and consume resources. Therefore, the best alternative is to utilise existing networks of current distributors and compensate these distributors for their services.
In view of (i) the long-established relationships between the Group and the Controlling Shareholder Group; and (ii) the aforesaid benefits of established distributive networks, the Directors (including the independent non-executive Directors) are of the view that (i) the continuing connected transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement will be carried out in the ordinary and usual course of business and in the interests of the Company and its Shareholders as a whole; (ii) the terms of the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement are on normal commercial terms or on terms not less favourable than those of similar transactions with independent third parties and are fair and reasonable to the Company and its Shareholders; and (iii) the proposed Annual Cap amount of the continuing connected transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement for the financial year ending 31 December 2014 is fair and reasonable, and in the interests of the Company and its Shareholders as a whole. To the best knowledge of the Directors, the Directors are not aware of any reason not to enter into the aforementioned continuing connected transactions.
The Group is a leading developer, manufacturer and operator focusing in the minimally invasive intervention products for the treatment of vascular diseases and pathological changes.
MP Shanghai, a wholly owned subsidiary of the Company that is involved in the research and development manufacturing and distribution of minimally invasive intervention products for the treatment of vascular diseases.
Thai Otsuka Pharmaceutical Co., Ltd, is involved in the manufacturing and distribution medical products in Thailand.
Otsuka (Philippines) Pharmaceutical, Inc., is involved in the distribution medical products in Philippines. P.T. Otsuka Indonesia, is involved in the manufacturing and distribution medical products in Indonesia.
Otsuka Pakistan Ltd., is involved in the manufacturing of intravenous solutions and distribution medical products in Pakistan.
JIMRO Co., Ltd. is involved in the manufacturing and distribution for medical device products in Japan and overseas.
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As at the date of this announcement, the Controlling Shareholder Group are subsidiaries of Otsuka
Holdings Co., Ltd., who is the ultimate controlling shareholder of the Company having approximately
33.29% equity interest in the Company. Therefore, the Controlling Shareholder Group are connected persons of the Company as defined under the Listing Rules. Accordingly, the transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement between MP Shanghai and the Controlling Shareholder Group constitute connected transactions of the Company.
As the relevant applicable percentage ratios (as defined in the Listing Rules) in respect of the proposed annual caps of the transactions within the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement exceed 0.1% but is less than 5%, the continuing connected transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement constitute continuing connected transactions of the Company pursuant to Chapter 14A of the Listing Rules, and are subject to reporting, annual review and announcement requirements, but are exempted from the independent Shareholder's approval requirements.
Save and except for Mr. Norihiro Ashida and Mr. Hiroshi Shirafuji, who hold senior management positions in Otsuka Holdings Co., Ltd., have abstained from voting on the Board resolution in relation to the aforesaid continuing connected transactions, none of the Directors has a material interest in the transactions contemplated under the Exclusive Distribution Agreements and the extension of Japan Distribution Agreement or was required to abstain from voting on the Board resolution for considering and approving the same.
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
"Annual Cap(s)" t h e proposed annual maximum aggregate values amounts of the transactions contemplated under the Exclusive Distribution Agreements;
"associate(s)" has the same meaning as ascribed to this term under the Listing Rules; "Board" the board of directors of the Company;
"Company" MicroPort Scientific Corporation, a company incorporated in the Cayman Islands, the shares of which are listed on the main board of the Stock Exchange (Stock Code: 00853);
"connected person(s)" has the same meaning ascribed thereto under the Listing Rules;
"Controlling Shareholder
Group"
Thai Otsuka Pharmaceutical Co., Ltd, Otsuka (Philippines) Pharmaceutical, Inc., P.T. Otsuka Indonesia, Otsuka Pakistan Ltd., and JIMRO Co., Ltd.;
"Director(s)" the director(s) of the Company;
"Exclusive Distribution
Agreements"
the agreements dated 17 January 2014 entered into between MP Shanghai and the Controlling Shareholder Group;
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"Group" the Company, its subsidiaries;
"Hong Kong" the Hong Kong Special Administrative Region of the PRC;
"Japan Distribution
Agreement"
the agreement dated 16 February 2004 into between MP Shanghai and
JIMRO Co., Ltd.;
"Listing Rules" the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited;
"MP Shanghai" MicroPort Medical (Shanghai) Co., Ltd ( 'tki-ff
