China Carbon Neutral Development Group Limited has issued a supplementary announcement detailing the terms and post-acquisition developments of its 60% equity purchase in Zailiang New Energy.

The transaction price was confirmed at HK$30.00 million, equating to 56.75% of Zailiang’s original valuation. The valuation, prepared by Zhonglin Asset (Beijing) on 31 May 2023 using a 13.45% CAPM discount rate, was adjusted after negotiations to reflect slower-than-expected growth and heightened project risks. As at 31 December 2022, Zailiang’s total assets stood at RMB 80.83 million, of which the acquired 60% represented RMB 48.50 million. Zailiang’s results have been consolidated into the Group’s statements from 1 January 2023 to 30 June 2024.

Strategically, the acquisition secures one of the limited waste battery recycling and reuse licences issued by China’s Ministry of Industry and Information Technology, considered a scarce asset in the rapidly expanding lithium-ion battery recycling market. Management cited the licence’s scarcity, alignment with the Group’s sustainability strategy, review of Zailiang’s 2023 sales and profit, and counterparty considerations as core factors in agreeing the final price.

The Board outlined several governance enhancements to prevent future disclosure lapses, including: tighter internal controls over major transactions, mandatory compliance training for directors and senior management, immediate escalation of potential deals to senior executives and the company secretary, and real-time monitoring of Listing Rule size tests by the finance department.

An independent valuation by Vincorn Consulting and Appraisal on 30 September 2024, conducted after a severe July 2024 rainstorm in Henan that disrupted Zailiang’s operations, resulted in a HK$5.00 million impairment of acquisition goodwill for the period 1 January 2023–30 June 2024.