PuraPharm Shareholders Vote for Acquisition of Firms Planting, Trading Raw Chinese Herbs

Secures Stable Supply of High-quality Raw Chinese Herbs; Further Improves Competitive Advantage; Favourable to Long-term Business Development

HONG KONG — PuraPharm Corporation Limited (“PuraPharm” or the “Group”, HKEX: 1498), a leading Hong Kong-based Chinese medicine company specialising in the research and development, production and sale of Concentrated Chinese Medicine Granules (“CCMG”) products under the “Nong’s” brand, has announced that its acquisition agreement signed with Gold Sparkle Plantation Company Limited (“Gold Sparkle Plantation”) on 9 November 2016 was unanimously voted for at its extraordinary general meeting held yesterday.

Pursuant to the agreement, the Group is to acquire the entire equity interest in Gold Sparkle (Guizhou) HZ Plantation Co., Ltd. and Gold Sparkle (Guizhou) Chinese Medicine Co., Ltd. owned by Gold Sparkle Plantation at a total consideration of RMB190 million (equivalent to approximately HK$217.512 million), based on the issue price of HK$4.50 per consideration share.

Upon completion of the acquisition, the two companies become the Group’s indirect wholly-owned subsidiaries, immediately enabling PuraPharm to enter into the traditional Chinese medicine (“TCM”) decoction pieces sector.

According to the “Consultation Paper on Measures for the Administration of Traditional Chinese Medicine Granules” published by China Food and Drug Administration (“CFDA”) in December 2015, CCMG manufacturers will be required to improve traceability of the origin of raw Chinese herbs used in manufacturing CCMG products and therefore CCMG manufacturers are recommended to set up raw Chinese herb plantation bases on their own or through a joint venture.

The acquisition will ensure a stable supply of high-quality raw Chinese herbs in compliance with Good Agricultural Practices for the Group. Having its own plantation will enable PuraPharm to maintain its competitiveness in the CCMG industry.

The Group is optimistic about the growth potential and prospects of the TCM decoction pieces business, which is highly complementary to its existing CCMG business. Retail sales of the Chinese herbs market in China amounted to approximately RMB196.8 billion in 2014 with an estimated CAGR of approximately 19.1% up to 2019. The optimised product mix of the Group’s existing CCMG and over-the-counter Chinese healthcare products as well as TCM decoction pieces greatly improve the competitiveness of the Group.

Mr. Abraham Chan, Founder, Chairman, Chief Executive Officer and Executive Director of PuraPharm, said, “I thank our shareholders for the support and approval of the acquisition agreement. The acquisition provides a good opportunity for PuraPharm to enter into the TCM decoction pieces industry and also enables the Group to comply with the practices as stipulated by the CFDA. Consequently, PuraPharm can obtain a stable supply of high-quality raw Chinese herbs at a lower cost, which is favourable to its long-term development. We will continue to meet the huge market demand for Chinese medicine and maximise returns for our shareholders.” – BusinessNewsAsia.com