Original title: Shenzhen Expressway(00548.HK) 10 billion in Bay area Development (00737.HK) Source: Caihua Network

[Caihua Social News] Shenzhen Expressway (00548.HK) announced that it intends to purchase 71.83% of Bay area Development (00737.HK) from Shenzhen through its wholly-owned subsidiary Meihua Industries, with a total cost of no more than 10.479 billion yuan, including equity transfer of 2.45 billion yuan, debt compensation of about 7.89 billion yuan for Shenzhen Investment Control, and bear the taxes and obligations of the transaction as well as the obligation to make up the difference. This transaction is not only an important step for the company's indirect controlling shareholders to practice evading inter-industry competition and injecting assets, but also a strategic step for Shenzhen Expressway to actively layout Guangdong-Hong Kong-Macau Greater Bay Area with the help of the acquisition of high-quality toll road assets.

Shenzhen Expressway said that it can grasp the business opportunities brought about by Shenzhen's strategy of promoting state-owned enterprise reform and industrial layout optimization, so as to achieve the goal of acquiring high-quality toll road assets in the Bay area, and expanding the business scale and profit base of Shenzhen expressway toll road. The transaction is also in line with the reform policies and measures of Shenzhen SASAC.

Shenzhen Expressway pointed out that the regional market share, future profitability and cash flow in the highway industry can be improved through transactions. The Bay area has developed into a listed company in Hong Kong, and Shenzhen Expressway can also obtain a high-quality investment and financing platform through transactions to further enhance the development space and market value of Shenzhen Expressway Group and achieve sustainable long-term development. The transaction will further consolidate the core advantages of investment, construction and operation of Shenzhen Expressway, which is in line with the development strategy and overall interests of Shenzhen Expressway.

Shenzhen Investment Control is an indirect controlling shareholder of Shenzhen Expressway, which has made a commitment to Shenzhen Expressway, including the commitment to avoid competition with Shenzhen Expressway, to support the development of Shenzhen Expressway and to inject and integrate assets into Shenzhen Expressway. Based on the above commitment, Shenzhen Investment Control initially planned to acquire Bay area development through Shenzhen Expressway in 2017, but was told by Shenzhen Expressway that it was not feasible at that time, so it would not carry out the acquisition.

On the other hand, the reconstruction and expansion of Guangzhou-Shenzhen Expressway has been included in the development plan of Guangdong-Hong Kong-Macau Greater Bay Area and the highway network planning of Guangdong Province, which is a key project for Guangdong Province and the governments of Guangzhou, Dongguan and Shenzhen along the route. If the reconstruction and expansion plan of the Guangzhou-Shenzhen Expressway can be implemented smoothly, the capacity of the Guangzhou-Shenzhen Expressway will be further enhanced, and the Guangzhou-Shenzhen Pearl Company can also apply to government departments for approval to extend the toll life. The asset scale and toll operation period of the toll road of Shenzhen Expressway after the completion of the transaction will also be further enhanced. The initial investment for the reconstruction and expansion of Guangzhou-Shenzhen Expressway is estimated to be about 47.1 billion yuan, but the relevant investment and financing plans have not yet been determined.

Shenzhen Expressway said that the company is formulating and comparing long-term financing plans, which may adopt ways such as increasing capital or borrowing from Meihua, providing guarantee for Meihua's financing, and replacing Meihua's overseas financing. We will optimize the capital ratio, foreign currency borrowing ratio, and term structure ratio, and control medium-and long-term financing costs at a reasonable level.