David Blennerhassett

Quiddity Advisors

Event-Driven

<ul>
<li>On the 19 May, <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a> acquired <a href="https://www.smartkarma.com/entities/china-zhengtong-auto-services" target="_blank" data-smartkarma-citation="entities:17001:1" rel="noopener">China Zhengtong Auto Services Hldg (1728 HK)</a>'s 71.04% stake in <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng Automotive Finance (2718 HK)</a> at a judicial auction. </li>
<li>Reportedly SAIC was the only bidder. The price paid appears to be at the minimum bid price of HK$1.294/share. </li>
<li>The acquisition will trigger an unconditional Offer for the H shares.  SAIC and ZhengTong have announced the outcome of the auction. But still no word from Dongzheng.</li>
</ul>

Arun George

Global Equity Research Ltd

<ul>
<li>The potential MGO price is HK$1.2430 per H Share vs <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng Automotive Finance (2718 HK)</a>’s previously noted HK$1.294 per H Share due to the change in RMB/HK$ rates.</li>
<li>The completion procedures for the auction will take place within six months. Approvals have low risk as the <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a>’s controlling shareholder is owned by the Shanghai SASAC.</li>
<li>At the last close and for a 1 November completion, the gross and annualised spread to the MGO price is 5.3% and 12.7%, respectively.</li>
</ul>

<ul>
<li>It's now official - <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a> has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0527/2022052700075.pdf" target="_blank" rel="noopener">made</a> a possible unconditional mandatory cash Offer for <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng Automotive Finance (2718 HK)</a>.</li>
<li>To recap: on the 19 May, SAIC acquired <a href="https://www.smartkarma.com/entities/china-zhengtong-auto-services" target="_blank" data-smartkarma-citation="entities:17001:1" rel="noopener">China Zhengtong Auto Services Hldg (1728 HK)</a>'s 71.04% stake in Dongzheng at a judicial auction. This triggers the mandatory Offer.</li>
<li>The new news from today's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0527/2022052700075.pdf" target="_blank" rel="noopener">announcement</a> is that the Offer price was reduced to HK$1.243/share - presumably on account of moves in HKD vs. RMB. The Offer price is final.</li>
</ul>

<ul>
<li>On 19 May, <a href="https://www.smartkarma.com/entities/saic-motor-corp-ltd-a" target="_blank" data-smartkarma-citation="entities:20833:1" rel="noopener">SAIC Motor (600104 CH)</a> emerged as the successful bidder for <a href="https://www.smartkarma.com/entities/china-zhengtong-auto-services" target="_blank" data-smartkarma-citation="entities:17001:1" rel="noopener">China Zhengtong Auto Services Hldg (1728 HK)</a>’s 71.04% stake in <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng Automotive Finance (2718 HK)</a>.</li>
<li>As SAIC will hold 30%+ of the voting rights, it will result in an MGO at a price not less than the auction price of HK$1.294 per H Share.</li>
<li>Dongzheng shares remain in a trading halt. The equity interest will transfer to SAIC and the MGO launched when the Shanghai Financial Court issues an auction sale judgment. </li>
</ul>

<ul>
<li>After both stocks were suspended on the 19 April, the forced liquidation of <a href="https://www.smartkarma.com/entities/china-zhengtong-auto-services" target="_blank" data-smartkarma-citation="entities:17001:1" rel="noopener">China Zhengtong (1728 HK)</a>'s stake in <a href="https://www.smartkarma.com/entities/shanghai-dongzheng-automotive-finance-co-ltd" target="_blank" data-smartkarma-citation="entities:27984:1" rel="noopener">Dongzheng (2718 HK)</a> will occur, via auction, on the 18 May. </li>
<li>That minimum bid price is HK$1.294/share, or a 112% premium to last close.</li>
<li>ZhengTong's stake is 71.04% of shares out. A mandatory general offer - conditional or unconditional - may materialise from the auction process. </li>
</ul>

China

Shanghai Dongzheng Automotive Finance Co., Ltd. offers auto finance products and services for the purchase of luxury brand cars. The Company provides automotive retail loan, automotive dealer loan, and other services. Shanghai Dongzheng Automotive Finance serves customers in China.

Dongzheng Automotive Finance - 2718 HK

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