Solomon Systech (02878) has entered into a new Products Sales and Distribution Agreement with CEAC International Ltd. (CEACI) on 28 October 2026, replacing the current 2024 agreement that ends on 31 December 2026. The renewed arrangement will run from 1 January 2027 to 31 December 2029 and maintains CEACI as a non-exclusive distributor for Solomon Systech’s integrated circuit (IC) and driver products in Mainland China and Hong Kong.
Key commercial terms • Pricing: product prices will be set with reference to costs, technology requirements and prevailing market levels. Management will benchmark CEACI’s prices against those offered to independent customers to ensure arm’s-length terms. • Payment: CEACI will settle invoices in cash within 30 days, consistent with terms granted to other customers. • Governance: sales department prepares prices, which are reviewed by department heads and approved by the business unit head.
Transaction history and proposed caps • FY 2024 sales to CEACI: US$43.17 million (cap: US$65 million) • FY 2025 sales: US$47.65 million (cap: US$75 million) • 9 months to 30 Sep 2026: US$34.71 million (cap: US$85 million)
New annual caps reflect expected demand growth from new display-driver IC launches, wider customer coverage and higher average selling prices: • FY 2027: US$70.00 million • FY 2028: US$82.00 million • FY 2029: US$96.00 million
Regulatory considerations China Electronics Corporation (CEC) holds an indirect 28.27% stake in Solomon Systech via subsidiary Huada and owns 37.41% of CEACI’s parent, CECP. CEACI is therefore a connected person under Hong Kong Listing Rule 14A. Given that the highest percentage ratio exceeds 5%, the agreement constitutes a continuing connected transaction requiring independent shareholders’ approval. CEC, Huada and their associates will abstain from voting at the forthcoming extraordinary general meeting (EGM). A circular with further details and the independent financial adviser’s opinion will be dispatched on or before 18 November 2026.
Strategic rationale Management cites a long-standing relationship with CEACI, the distributor’s extensive customer network and anticipated industry tailwinds—such as increasing investment in AI-related infrastructure and forthcoming product launches—as key drivers for the renewal. The arrangement is expected to support revenue visibility, preserve operating efficiency and allow flexibility to capture demand fluctuations over the next three years.
Board approval and independent review The board approved the agreement on 28 October 2026. Directors linked to CEC abstained from voting. An independent board committee and Sorrento Capital, appointed as independent financial adviser, will opine on the fairness and reasonableness of the terms and caps for consideration by independent shareholders at the EGM.