China Health Labs & Diagnostics Ltd. enters into agreement to be taken private at CAN$0.62 per share in cash

TSX-V:CHO

TORONTO, Nov. 8, 2013 /CNW/ - China Health Labs & Diagnostics Ltd. ("China Health" or the "Company") (TSXV:CHO) announced today that the Company and Century Delight Investment Limited ("Century Delight") have entered into an agreement (the "Agreement") pursuant to which Century Delight will become the sole shareholder of the Company following the Company taking action to redeem for cancellation all of the outstanding common shares of the Company not already owned by Century Delight for cash consideration of $0.62 per share (the "Transaction").  The Transaction is proposed to be effected by way of a share consolidation and redemption under the Companies Act (Cayman Islands).  Century Delight is a company indirectly owned and controlled by Mr. Shiping (Wilson) Yao, the Company's President and Chief Executive Officer and a member of the Company's board of directors.  Century Delight owns, or has control or direction over, 47,009,266 common shares representing approximately 72% of the Company's 65,606,686 common shares outstanding.

The consideration offered under the Transaction represents a premium of approximately 44% to the last trading price of CAN$0.43 of the shares on the TSX Venture Exchange as of October 23, 2013 (the day before the first announcement of the Transaction) or a premium of approximately 26.3% over the 30-day volume weighted average price of the shares or approximately 55.4% over the 60-day volume weighted average of the shares on the TSX Venture Exchange as of October 23, 2013.

The Transaction will be effected by way of a 47 million to one share consolidation of all of the issued and outstanding shares.  Following the consolidation, the Company will compulsorily redeem for cancellation all of the shares held by shareholders whose aggregate holding is less than one whole post-consolidation share.  As a result, upon completion of the Transaction, only Century Delight will remain as the sole shareholder of the Company.  Shareholders holding fractional shares that in aggregate are less than one whole share (other than any dissenting shareholders) following the consolidation, will be entitled to receive a cash payment of CAN$0.62 for each pre-consolidation share on the compulsory redemption of such fractional post-consolidations shares.  The Company also expects to pay approximately $67,000 in cash for the buy-out, surrender and cancellation of outstanding share purchase options.

In order to complete the Transaction, the Company is required to complete certain pre-consolidation transactions, including amending the Company's Articles of Association.  At the shareholders' meeting to be held in Vancouver, British Columbia on Wednesday, December 18, 2013 at 10:00 a.m. (local time), shareholders entitled to vote at the meeting will be asked to approve two special resolutions: (1) authorizing amendments to the Company's Articles of Association (the "Articles") to include a provision permitting the issuance of fractional shares and to revise the share redemption provisions and certain other provisions of the Articles that are necessary to provide the Company a right to compel the redemption of its share capital; and (2) authorizing amendments to the Articles to revise the share rights provisions of the Articles to vary the rights attached to the Company's share capital.  These two resolutions must each be passed by (a) at least two-thirds of the votes cast by shareholders present in person or represented by proxy at the meeting, and (b) a majority of the votes cast by all shareholders other than Century Delight, its associates and affiliates, and all persons acting jointly or in concert with them, present in person or represented by proxy at the meeting (the "Minority Shareholders").  Shareholders will also be asked to approve an ordinary resolution authorizing a consolidation of the authorized share capital of the company on the basis of one post-consolidation share for every 47 million shares held immediately prior to the consolidation, which must be passed by (a) a majority of votes cast by shareholders present in person or represented by proxy at the meeting, and (b) a majority of the votes cast by the minority shareholders present in person or represented by proxy at the meeting.

Shareholders of record as of November 6, 2013, the record date for the meeting, are entitled to receive notice of and to attend, and to vote at, the meeting or any adjournment or postponement of the Meeting.

As previously announced, a special committee of independent directors (the "Special Committee"), comprised of Paul Haber (Chair), Hong Chang, Kim Oishi and Yumin Zhuang, was established to consider and make recommendations regarding the Transaction.  The Special Committee engaged Evans & Evans, Inc. as its independent valuator and financial advisor and to prepare a valuation report and fairness opinion with respect to the Transaction.  Based on the valuation work and subject to the conditions, assumptions and qualifications set forth in valuation and fairness opinion, in the opinion of Evans & Evans, as of November 7, 2013, the consideration payable under the Transaction is fair, from a financial point of view, to the Minority Shareholders.

Having undertaken a thorough review of, and carefully considered, the Transaction, including consulting with its legal and financial advisors, the Special Committee has unanimously determined that the Transaction is in the best interests of the Company.  Accordingly, the Special Committee unanimously recommended that the Company's board of directors approve the Agreement and recommend that Shareholders vote for the Transaction.

The Company's board of directors, following the recommendation of the Special Committee, unanimously resolved (with the abstention of the interested directors) to authorize the Company to enter into the Agreement, submit the pre-consolidation and consolidation matters to a vote of the shareholders, and recommend to shareholders that they vote in favour of the pre-consolidation and consolidation matters to effect the Transaction.  A copy of the valuation and fairness opinion, the factors considered by the Special Committee in arriving at its recommendation, and other relevant background information will be included in the management information circular that will be sent to shareholders in connection with the meeting and will be filed on SEDAR at www.sedar.com.

If the Transaction is completed, the common shares of the Company will be delisted from the TSX Venture Exchange and the Company will also apply to the applicable Canadian securities regulatory authorities to cease to be a reporting issuer in each province in which it is a reporting issuer.

The Company's board of directors cautions shareholders and others considering trading in shares of the Company that the completion of the Transaction remains subject to a number of conditions including, but not limited to, receipt of all regulatory and shareholder approvals and the availability of financing for the share redemption.  There is no assurance that such financing will be available to complete the Transaction.  The completion of the Transaction is subject to the satisfaction of certain other closing conditions customary in a transaction of this nature.  If and when these conditions are satisfied, it is expected that the completion of the Transaction will be completed following the meeting in late December 2013.

Trading of the Company's common shares on the TSX Venture Exchange is expected to be voluntarily halted at least three business days prior to the shareholders' meeting scheduled for December 18, 2013 pending approval and completion of the Transaction, such halt is intended to avoid or minimize settlement and entitlement issues.

About China Health Labs & Diagnostics Ltd.

China Health, operating in China as the Biochem Group, is a leading diagnostic lab solution provider for the public healthcare industry in China. The Company develops and sells Biochem Group branded and third-party medical diagnostic products and services to diagnostic facilities in China.  Customers include large urban hospitals, rural hospitals, Chinese military and rescue operations, the Beijing government and third-party distributors.

In 2012, China Health had revenue of approximately $45.8 million, and intends to expand its business by focusing its efforts on expanding its sales network in three areas where it provides proprietary solutions, has limited competition and that are supported by Chinese government policy and budgets: BK Clinlab total lab solutions for rural hospitals and clinics, POCT solutions for military and emergency rescue services, and food safety solutions for large cities in China.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING INFORMATION

This news release contains forward-looking statements and information that are based on the beliefs of management and reflect China Health's current expectations.  When used in this news release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.  The forward-looking statements and information in this news release includes information relating to completion of the going private transaction and the expansion of the Company's business by focusing on expanding its sales network to areas where it has proprietary products, limited competition and strong government support.  The forward-looking information is based on certain assumptions, which could change materially in the future, including the assumption that the Company's products and services, operations, market, marketing plans and strategies, competitive conditions, future developments and proprietary protections continue as projected.  Such statements and information reflect the current view of China Health with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.  By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, among others, the risk that the necessary regulatory and shareholder approvals are not obtained, the financing for the share redemption is not available, the conditions to completing the transaction may not be met, the transaction may be terminated or re-negotiated on different terms, the Company may not be able to expand its business as expected through its sales network in any of the areas in which it has proprietary products, limited competition and strong government support.  These and other risks are further described under "Risk Factors" in the Company's management's discussion and analysis dated April 30, 2013, which is available on SEDAR and may be accessed at www.sedar.com.  When relying on China Health's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.  China Health has assumed a certain progression, which may not be realized.  It has also assumed that the material factors referred to above will not cause such forward-looking statements and information to differ materially from actual results or events.  However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF CHINA HEALTH AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE CHINA HEALTH MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.

SOURCE: CHINA HEALTH LABS & DIAGNOSTICS

Paul Haber
Chair of the Special Committee
China Health Labs & Diagnostics Ltd.
T:  1-416-318-6501
Email:  [email protected]