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Thursday, 3 January 2013, 23:00 HKT
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Source: China Household Holdings Limited
Bao Yuan Holdings Approves the Acquisition of Prado
Tap Huge Growth Potential of Total Home Furnishing Solutions Market in the PRC

Hong Kong, Jan 3, 2013 - (ACN Newswire) - Bao Yuan Holdings Limited ("Bao Yuan Holdings" or "the Group") (stock code: 692) announced the approval of the acquisition of Zhongshan City Prado Style Household Company Limited ("Prado") under China Household Furniture Holdings Limited ("China Household Furniture") through its wholly-owned subsidiary at the extraordinary general meeting held today. The acquisition marks an important milestone in expanding its business into the total home furnishing solutions market in the PRC.

China Household Furniture is committed to developing into a leading one-stop home furnishing solution provider in the PRC. It offers a comprehensive range of customized and stylish home furnishing solutions including interior design, home fitting-out works and sourcing of home decor materials and items. The business of Prado is thriving with turnover, profit before tax and profit after tax reaching around HK$81.7 million, HK$13.6 million and HK$10.2 million respectively for the eight months ended 31 August 2012.

Prado has established a retail flagship store in Zhongshan while entering into agreements with franchise partners in major cities across the PRC including Changsha, Jiangmen, Guangzhou, Foshan and Shenzhen to expand its retail network. Those outlets are scheduled to commence business in mid 2013. Prado also plans to extend its business into major cities such as Beijing, Shanghai and Chongqing as well as in Hunan and Jiangsu provinces.

Prado offers integrated total home furnishing solutions to its customers, covering the overall coordination, design and execution of a wide array of home-related businesses encompassing home structure, functional design and planning of line, to the overall arrangement of decorative materials, home electrical appliances and lighting, sanitary fixtures, kitchen as well as furniture. This integrated supply chain will provide a strong momentum for the Group, thus paving the way for successful transformation and rapid growth.

Following the smooth succession of the top leaders in the PRC, its economy is expected to grow healthily. When large property developers in the PRC begin planning the fitting out of fine interior decoration for big projects, they commonly work closely with home-related services providers. Leveraging its strong R&D capability and the advantages offered by its unique business model, Prado has cemented strategic alliances with many large scale domestic property developers. It has gradually established a leading presence in the industry, while other known brands in the industry remain at the stage of promoting their brands and products to consumers directly. These companies are to a certain extent more sensitive to slowdowns in the property market. Prado's unique operational model provides an example for its peers on how to achieve a breakthrough in challenging conditions, thus pushing forward the transformation of the operational model in the entire home furnishing and fitting-out sectors.

The completion of the acquisition not only helps the Group diversify its business, and expand its scope of operations and future income base, but also generates enormous synergies with its existing business. Last September, the Group has completed the acquisition of an information technology solution provider, m3 Technology Development Limited ("m3 Technology"), which develops innovative systems and intelligent products for the retail industry. The management intends to integrate the IT capabilities of m3 Technology and the business network and expertise in home furnishing solutions of Prado. This integration enables expansion into the emerging smart home market in order to capture the immense opportunities arising from this new consumer trend. In realising synergies, the Group and China Household Furniture can benefit from cross selling opportunities by utilising their own customer base and supplier network as well as improving operational efficiencies through sharing of resources.

China Household Furniture expects to see improvement in its revenue and profitability driven by the continuous growth of the market for high-end home furnishing solutions. According to the sale and purchase agreement, the vendor has guaranteed that the audited consolidated net profit after tax for each of the three financial years ended 31 December 2015 will not be less than HK$15 million. The Group entered into an acquisition agreement with the vendor last October at a total consideration of HK$60 million to be settled by the issue of a three-year promissory note with an annual interest rate of 4%.

Mr. Wong Man Pan, Executive Director of Bao Yuan Holdings, said, "We are pleased to see that the acquisition agreement with China Household Furniture gaining support from our shareholders. The acquisition enables us to aggressively tap the huge growth potential of the PRC home furnishing solutions market, further diversify our business scope and generate immediate revenue and a profit of not less than HK$15 million each year for the Group. Revived economic growth and rising disposable income of Chinese consumers together with the Government-sponsored "old-for-new" programme should boost home fitting-out, decoration and upgrade activities and, in turn, drive the PRC total home furnishing solutions market. We are confident that we can leverage our diversified business to expand our supplier and customer network and generate synergies with our existing business enroute to becoming a leading one-stop home furnishing solution provider. Our aim is to take the Group's business to new heights of success and bring satisfactory returns to our shareholders."

About Bao Yuan Holdings Limited

By vertical integration of the industry chain for the home furnishing business, Bao Yuan Holdings Limited provides a one-stop total home furnishing business as it aims to become a leading home furnishing solutions provider in the PRC. The Group has a business presence around the world with a business scope encompassing the sales of fabrics, garments and other related accessories, fashion, exploration and mining, securities investment and money lending businesses.

Media Enquiries:
Strategic Financial Relations Limited
Heidi So, Tel: +852 2864 4826, Email: heidi.so@sprg.com.hk
Ming Chan, Tel: +852 2864 4892, Email: ming.chan@sprg.com.hk
Gladys Kong, Tel: +852 2864 4806, Email: gladys.kong@sprg.com.hk
Fax: +852 2527 1196
http://www.sprg.com.hk

Topic: Merger & Acquisition
Sectors: Textiles & Clothing, Financial General, Business General
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