LZYE Group has announced it has made its first expansion in mainland China. The Company has entered into a conditional agreement to acquire Nantong LZYE Education Advisory Limited ("LZYE NT") for a total consideration of HK$6.72m (£533k).
HK$3.36m (£266k) is payable in cash and the balance is to be satisfied by the issue of 2,240,000 new ordinary shares in LZYE issued at 12p per share. As part of the acquisition agreement, the owners of LZYE NT will assign to the Company a debt of RMB2.80m (£273k) due to the vendor from LZYE NT.
LZYE NT has secured a 10 year lease over 2,964 square metres in Happy Valley, a new shopping centre situated in Nantong, Jiangsu Province. It will be the Company's first in mainland China and will operate as the flagship centre for the Group. Commenting on the expansion Dominic Yeung, Chairman, stated, “The Company hopes it will serve to attract potential investors from China and overseas as well as acting as a showcase to attract domestic partners”.
Happy Mall is located near to a residential area in Nantong, a "second tier" city, where growth is expected to be significantly higher, with less competition, than in "first tier" cities such as Shanghai and Beijing. The average annual rental for the centre is approximately RMB 2.64m p.a. (£257.5k). The Company estimates the setup cost for the centre to be around HK$6.02 million (£477k) and payback on the investment will be 3.5 years.
LZYE NT was only established in July 2012 in China as a wholly owned foreign enterprise. The shares to be issued to the vendors of LZYE do not appear to be subject to a lock in agreement.
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