Kaisa Group (01638) announced that on March 18, 2026, the seller (Yiwang Development Limited, a wholly-owned subsidiary of the company) and Kaisa Health (an affiliate of the company, acting as the buyer) entered into an agreement. Under this agreement, the seller conditionally agreed to sell, and Kaisa Health conditionally agreed to purchase the entire issued share capital of the target company (Chongxing Limited) for a consideration of RMB 21.6037 million. Assuming a share consolidation has taken effect, the consideration will be settled entirely by Kaisa Health allotting and issuing 2.79 million consideration shares to the seller at an issue price of HK$8.75 per share. Assuming the share consolidation is effective, the 2.79 million consideration shares represent approximately (i) 2.77% of Kaisa Health's existing issued share capital as of the announcement date, and (ii) approximately 2.69% of Kaisa Health's issued share capital as enlarged by the allotment and issue of the consideration shares (in each case, accounting for the impact of the share consolidation and assuming no other changes to Kaisa Health's share capital).

As of the agreement date, the target company holds the entire issued share capital of Chenghe, which holds a 99% equity interest in Dongguan Chenghe. Dongguan Chenghe directly holds the entire issued share capital of Kaisa Medical Investment, which in turn directly holds a 54.84% equity interest in the project company (Qinghai Pharmaceutical Co., Ltd.). The project company is engaged in the research, development, manufacturing, and sale of pharmaceuticals (including narcotic drugs) in China. It holds a drug manufacturing license issued by the Qinghai Provincial Medical Products Administration and owns self-operated R&D and production facilities in Xining City, Qinghai Province, with a total land area of approximately 76,000 square meters and a total floor area of approximately 43,890 square meters. Additionally, the project company has established the Shanghai Research Institute in Shanghai, specializing in the research and development of active pharmaceutical ingredients and finished dosage forms. These R&D investments are expected to facilitate further commercialization and achieve leapfrog development in the coming years.

Each target holding company (including the target company, Chenghe, Dongguan Chenghe, and Kaisa Medical Investment) is an investment holding company with no substantive business operations. The primary asset held by the target group is the project group, and the main business of the target group is the project business. Upon completion of the transaction, Kaisa Health will hold a 54.84% equity interest in the project company through the target company. The member companies of the target group (including, for clarity, the project group) will become subsidiaries of Kaisa Health, and consequently, their financial performance and position will be consolidated into Kaisa Health's consolidated financial statements.

As of the agreement date, the company held an interest in approximately 42.99% of the total issued shares of Kaisa Health. Since November 2017, Kaisa Health has been accounted for as a subsidiary of the company. After the transaction's completion, the company's interest in Kaisa Health will increase by approximately 1.53% to approximately 44.52%, and Kaisa Health will continue to be accounted for as a subsidiary of the company. Following the transaction's completion, the company will continue to hold the target company through Kaisa Health (its subsidiary), and the target company will continue to be accounted for as a subsidiary of the company.

Therefore, the company's effective shareholding interest in the project company was 54.2916% (100% x 99% x 54.84%) as of the agreement date. After the transaction, the company's effective interest in the project company will be 24.1706% (44.52% x 99% x 54.84%), resulting in the company divesting an effective 30.1210% interest in the project company.

The project business and Kaisa Health's existing business both operate within the health sector, making their business natures similar. Specifically, both the project business and the dental business involve the research, development, and production of medical products, which are sold and distributed to downstream service providers and end-user patients through third-party distributors. This transaction allows the group to consolidate similar businesses onto a single platform, achieving business integration and benefiting from improved economies of scale. By integrating the project business with Kaisa Health's existing operations, economies of scale in sales and marketing activities can be realized. This integration provides cross-referral sales opportunities through the respective distribution networks of the project business and the existing business within China's public and private healthcare systems, particularly in the dental field. The complementary synergies generated from integrating the two businesses will expand the scale and growth potential of the combined operations, thereby enhancing revenue, profitability, and cash flow.

Upon completion of the transaction, the company will continue to hold the target group (including the project group) through Kaisa Health (its subsidiary) and will benefit from this business integration on a more sustainable basis, enabling the company to deliver better returns to its shareholders.