Buyout of key refinery subsidiary

HaiKe Chemical Group Ltd

Buyout of key refinery subsidiary

HaiKe Chemical Group Limited ("HaiKe" or the "Company"), the AIM quoted (AIM: HAIK) petrochemical, specialty chemical and biochemical business based in China, today announces that it has bought out the minority stake in Dongying Hi-Tech Ruilin Chemical Co., Ltd. ("Hi-Tech Ruilin") for a total consideration of RMB121 million (circa £12 million) taking HaiKe's interest in Hi-Tech Ruilin from 65.7% to 88.85%.

Hi-Tech Chemical Group Ltd ("Hi-Tech Chemical"), the Company's 88.85%-owned subsidiary, entered into a share purchase agreement with Shandong Jindayuan Group Company Limited ("Jindayuan") on 15 June 2012 to acquire 104,000,000 shares in Dongying Hi-Tech Ruilin Chemical Co., Ltd. ("Hi-Tech Ruilin") representing 26% of the Hi-Tech Ruilin shares in issue for a total consideration of RMB121 million (circa GBP12 million). RMB21 million will be paid by cash, the remaining RMB100 million will be settled by a one-year interest bearing advance from Jindayuan with a coupon at market level (circa 8%).

Following the acquisition, Hi-Tech Chemical's shareholding in Hi-Tech Ruilin increased from 74% to 100%. HaiKe's interest in Hi-Tech Ruilin increased from 65.7% to 88.85%. This acquisition was completed on 10 July 2012.

Hi-Tech Ruilin made an audited profit of RMB48 million (circa GBP4.8 million) for the year ended 31 December 2011. During the first six months of 2012, it recorded an unaudited loss of RMB96 million (circa GBP9.7 million) due to a low utilization rate as a result of an annual overhaul and a weak domestic economy. The acquisition of Hi-Tech Ruilin represents good value for the Company's shareholders and will put HaiKe in a stronger position to create operational and cost synergies within the group.

Mr. Xiaohong Yang, Executive Chairman of HaiKe, commented:

The buyout of Hi-Tech Ruilin represents a positive step towards enhancing synergies between our two refineries as well as consolidating the business. We believe the acquisition will benefit our overall financial and operational performance in the medium to long run."

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