Greenway, December 4, China Southern Communications (01617.HK) announced that on November 26, 2023, Pacific Smart, an indirect wholly owned subsidiary of the company, other shareholders, employee share option program participants, and buyer Beijing Wantong New Development Group Co., Ltd. and the target company Source Photonics Holdings (Cayman) Limited entered into a framework agreement with the target company Source Photonics Holdings (Cayman) Limited. According to this, Pacific Smart (as seller 1) conditionally agreed to the sale and the buyer conditionally agreed The purchase of shares of approximately 3.48% (on a fully diluted basis) of the total issued share capital of the target company on the date of the framework agreement is approximately 3.48%.

The buyer is expected to pay Pacific Smart no less than US$21.559 million for the shares to be sold. The anticipated cost was determined based on (i) the target company's initial agreed value of US$620 million; and (ii) the shares for sale accounted for approximately 3.48% of the target company's issued share capital (on a fully diluted basis). After the formal valuation is completed, Pacific Smart will then enter into formal purchase and sale agreements with the other parties to the agreement.

Target Group is a leading global supplier of advanced technology solutions for optical communication and data connectivity.

The company is a well-known supplier of optical communication products, and the Group is mainly engaged in the manufacture and sale of various optical cable products and related equipment and the processing and sale of color-coated steel sheets; while the target group is a leading global supplier of advanced technological solutions for optical communication and data connectivity.

In 2022, the target company and its direct and indirect holding companies completed the corporate restructuring. According to this, all SPV2A preferred shares held by Pacific Smart were exchanged for an amount equivalent to the number of Class A preferred shares of the target company (and thus equivalent to the percentage of shares in the target company). However, since several rounds of new investors made new investments in the target company after the original acquisition was completed, the number of Class A preferred shares of the target company held by PacificSmart increased to 8,116,697 shares (to be further increased to 8,235,293 shares before a formal trading agreement was signed), which is equivalent to 3.48% of the target company's shares on the date of the framework agreement (on a comprehensive dilution basis) according to the anti-dilution provisions of the underlying company's articles of association documents.

Furthermore, in 2021, the management of the target group changed and the target group's business strategy changed. As a result, the target group chose to focus on operating its business through its original corporate structure, yet its management did not accept the group's invitation to set up a joint venture to produce optical modules. As a result, the expected positive business synergy between the group and the target group was not realized after the group acquired shares for sale in 2020.

The board of directors believes that the sale provides a good opportunity for the Group to monetize the Group's investment in the target company, thereby consolidating the Group's cash position and enabling the Group to better equip itself and withstand any market downturn. Since the relevant additional cash balance can be used as general working capital for the Group's daily operations, it will also be possible to invest when other business opportunities arise in the future.

The company has applied for shares from the Stock Exchange to resume trading on the Stock Exchange starting December 5, 2023 (Tuesday) at 9:00 a.m.