Boyuan Announces Going Private Transaction

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES/

TORONTO, June 23, 2020 /CNW/ - Boyuan Construction Group, Inc. (the "Company" or "Boyuan") (Toronto Stock Exchange "TSX": BOY) today announced a proposed "go private" transaction (the "Transaction") to be completed by way of a share consolidation and redemption pursuant to section 36 of the Canada Business Corporations Act (the "CBCA").

If the Transaction becomes effective, then Mainway Management Limited (the "Controlling Shareholder"), which is controlled by Mr. Shou Cailiang, President, CEO and a director of Boyuan, will own 100% of the Common Shares of the Company ("Common Shares").

In the Transaction, the Common Shares will be consolidated at the Effective Time (as defined below) on the basis of eight million (8,000,000) pre-consolidation Common Shares to one (1) post-consolidation Common Share (the "Consolidation"). In lieu of fractional Common Shares, shareholders of the Company ("Shareholders"), other than the Controlling Shareholder, who would otherwise receive less than one (1) whole post-Consolidation Common Share in exchange for their pre-Consolidation Common Shares held immediately prior to the Consolidation will be entitled to receive cash consideration of C$0.50 (the "Cash Consideration") for each pre-Consolidation Common Share (the "Redemption").

The Cash Consideration of C$0.50 per pre-Consolidation Common Share represents an implied 28.00% premium to the volume weighted average trading price of the Common Shares for the five (5) trading days ended June 18, 2020, a 30.33% premium to the volume weighted average trading price of the Common Shares for the fifteen (15) trading days ended June 18, 2020 and a 37.36% premium to the volume weighted average trading price of the Common Shares for the thirty (30) trading days ended June 18, 2020. The Transaction therefore presents an efficient liquidity mechanism for all Shareholders at a premium to the recent share price which could not otherwise be generated from the trading platforms given the Company's liquidity and capital structure.

The aggregate Cash Consideration required to purchase the fractional Common Shares resulting from the Consolidation is approximately C$7.36 million.  For purposes of the Transaction, the Cash Consideration to be paid to redeem fractional Common Shares and the amount to be paid to any dissenting Shareholder will be sourced from the Company's working capital and the balance if any from a loan to be obtained by the Controlling Shareholder or the Company.

Special Committee, Valuation and Fairness Opinion

In April, 2020, Company management undertook an informal review of the Company's Canadian listing to assess the effect that an unfavourable relationship between Canada and China and the impact of the COVID 19 virus on the business of the Company and financing potentials. Information collected by management over the course of prior months and quarters made it increasingly evident that the Common Shares were very thinly traded, making it difficult for Shareholders to sell efficiently through the facilities of the TSX. These issues present significant challenges to the Company's efforts to raise the additional capital in Canada it needs efficiently.

On June 2, 2020, a special committee of independent directors (the "Special Committee") was appointed by the board of directors of the Company (the "Board") to consider and evaluate a potential "go-private" transaction, the effect of which, among other things, would be that the Controlling Shareholder would become the sole Shareholder, the Common Shares would be delisted from the TSX and the Company would, following the Transaction, apply to cease to be a reporting issuer (or the equivalent) in any jurisdiction of Canada. 

The Special Committee was comprised of four (4) independent directors (Messrs. Francis Leong, Jack Duffy and FANG Lixin and Ms. LIU Manhong), and was mandated, among other things, to (i) recommend the engagement of an independent valuator to perform a formal valuation of the Common Shares; (ii) oversee and supervise the process carried out by the Company in negotiating the Transaction; (iii) review and consider the terms and conditions of the Transaction and (iv) advise the Board with respect to any recommendation that the Board should make to Shareholders. The Transaction constitutes a "business combination" for the purposes of Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions ("MI 61- 101").

MI 61-101 provides that, unless exempted, an issuer proposing to carry out a transaction such as the Transaction is required to: (i) engage an independent valuator to prepare a valuation of the affected securities (and any non-cash consideration being offered therefore) and provide to the holders of the affected securities a summary of such valuation; and (ii) obtain the approval of a majority of the "minority" shareholders (as that term is used in MI 61-101) unless an exemption is available or discretionary relief is granted by applicable securities regulatory authorities.

On recommendation of the Special Committee, the Company appointed BDO Canada LLP ("BDO") to prepare a Valuation and Fairness Opinion in accordance with the formal valuation requirements of MI 61-101. BDO determined that, subject to the assumptions, limitations and qualifications set out in its report, the Cash Consideration is fair, from a financial point of view, to the Shareholders (other than the Controlling Shareholder) (the "Minority Shareholders").

Following consideration of the surrounding circumstances, including the Valuation and Fairness Opinion, the Special Committee has concluded that the Transaction is fair to the Shareholders and in the best interests of the Shareholders and Boyuan.

Accordingly, the Special Committee unanimously recommended that the Board approve the Transaction and the implementation of the Consolidation and Redemption, subject to the receipt of all required Shareholder and other regulatory approvals, including approval of the TSX. Following an extensive review of the terms of the Transaction, the Valuation and Fairness Opinion and the recommendation of the Special Committee, the Board has unanimously (with three interested director abstaining) approved the Transaction, having determined that the Transaction is in the best interests of the Company. The Board recommends that all Shareholders vote in favour of the Transaction Resolution (as defined below).

Conditions to implementing the Transaction

Closing of the Transaction will occur as soon as reasonably practicable following the receipt of the shareholder and regulatory approvals, or such later date as the parties may agree (the "Effective Date"). The implementation of the Transaction is conditional upon the satisfaction, on or before the effective time of the Consolidation (the "Effective Time") on the Effective Date, of the following conditions precedent:

1. approval of not less than 66⅔% of votes cast by Shareholders at a special meeting of the Shareholders to be held to adopt a special resolution to approve an amendment to the articles of the Company to consolidate the Common Shares and to allow the redemption of fractional Common Shares resulting from the Consolidation (the "Transaction Resolution");
2. for the purposes MI 61-101, approval of not less than 50% of votes cast by Minority Shareholders at a special meeting of the Shareholders of the Transaction Resolution;
3. the Transaction shall have resulted in the number of Securityholders being reduced to the Controlling Shareholder such that the Company can successfully apply for a decision under applicable Canadian securities legislation that it is not a reporting issuer in any jurisdiction of Canada;
4. all regulatory approvals, including the approval of the TSX, will have been received by the Company;
5. there shall not be in force any law and no governmental authority shall have issued any order or decree restraining or prohibiting the completion of the Transaction; and
6. the Company shall have made payment to the depository for the Cash Consideration.

Meeting

The Company plans to call a special meeting of shareholders to be held on August 21, 2020 in Toronto, Ontario (the "Meeting"). Shareholders entitled to vote at the Meeting will be asked to approve the Transaction Resolution authorizing the Consolidation and Redemption by: (a) at least two-thirds of the votes cast by shareholders present in person or represented by proxy at the Meeting; and (b) for the purposes of MI 61-101, a majority of the votes cast by the Minority Shareholders, present in person or represented by proxy at the Meeting. All shareholders of record as of July 20, 2020 (the "Record Date") will be entitled to receive notice of and to vote at the Meeting on the basis of one vote for each common share held. Shareholders should ensure that their proxies are submitted and received at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting or the adjournment thereof at which such proxies are to be used.

The Controlling Shareholder has entered into an insider support agreement with the Company pursuant to which it has agreed to vote for the Transaction Resolution. 

Minority Shareholders will be entitled to dissent and be paid the fair value of their Common Shares in accordance with and subject to strict compliance with section 190 of the CBCA, which constitutes an enforceable appraisal remedy for the purposes of MI 61-101, a majority of the votes cast by the Minority Shareholders, present in person or represented by proxy at the Meeting, will be required for the Transaction to be completed.

Full details of the Transaction, the dissent rights and the Meeting, and a copy of the Valuation and Fairness Opinion will be included in a Management Information Circular which the Company will mail to Shareholders and which will be posted on Boyuan's SEDAR profile at www.sedar.com.

About Boyuan Construction Group, Inc.

Backed by a longstanding track record, Boyuan Construction Group, Inc. ("Boyuan" or the "Company") has the knowledge and expertise to design and build a wide range of commercial and residential developments, as well as municipal infrastructure and engineering projects. Based in Jiaxing City and with a growing presence in both Zhejiang Province and Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the Hainan Province. The Company's current project backlog includes residential, commercial, industrial and mixed-use developments. For more information visit www.boyuangroup.cn.

Forward looking statements

This news release may contain "forward-looking statements" within the meaning of applicable Canadian securities laws. Examples of forward-looking information in this news release includes but is not limited to statements and information concerning the Transaction; the Meeting of the Shareholders; any future intentions of the Company to de-list the Common Shares from the TSX and cease to be a reporting issuer in the applicable provinces of Canada.  Forward-looking statements are often, but not always, identified by the use of words such as ''seek'', ''anticipate'', ''contemplate'', ''target'', ''believe'', ''plan'', ''estimate'', ''expect'', and ''intend'' and statements that an event or result ''may'', ''will'', ''can'', ''should'', ''could'' or ''might'' occur or be achieved and other similar expressions. Forward-looking information by its nature requires assumptions and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information, and readers are cautioned not to place undue reliance on such information. These statements are based on expectations, estimates and projections as at the date of this news release and are subject to a number of risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievement may vary materially from those expressed or implied by the forward-looking information contained in this news release. These risk factors should be carefully considered and readers are cautioned not to place undue reliance on forward-looking information, which is current only as of the date of this news release. All subsequent forward-looking information attributable to Boyuan herein is expressly qualified in its entirety by the cautionary statements contained in or referred to herein. Boyuan does not undertake any obligation to release publicly any revisions to this forward-looking information to reflect events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

SOURCE Boyuan Construction Group, Inc.

Boyuan Construction Group, Paul Law, CFO, +(852) 9329 5088, [email protected]; NATIONAL Capital Markets, Trevor Heisler, Investor Relations, [phone], [email protected]