Buyout of minority in a key subsidiary

6 June 2011

HaiKe Chemical Group Ltd

Buyout of minority in a key subsidiary

HaiKe Chemical Group Limited ("HaiKe" or the "Company"), the AIM quoted (AIM: HAIK) petrochemical, speciality chemical and biochemical business based in China, today announces that in line with the strategy to continue to diversify the group business from low margin refining to the downstream chemical area it now owns over 90% of the shares in a key subsidiary.

HaiKe has acquired a further 8,741,000 shares (29.137%) in Shandong Hi-Tech Shengli Electrochemical Co., Ltd. ("Shengli") for a total cash consideration of RMB22.7m (circa US$3.5m). The acquisition was made via its 88.5% subsidiary Shandong Hi-Tech Chemical Group Ltd. ("Hi-Tech Chemical").

This acquisition, which was made at a 48% discount to Shengli's net assets at the year- end 2010, takes Hi-Tech Chemical's total shareholding in Shengli to 29,937,500 shares. This represents 99.792% of the issued equity, and HaiKe's ultimate shareholding in Shengli thus increases to 91.45%.

By acquiring a further 25.89% of Shengli, HaiKe's net profit would have increased by circa RMB4.0m (circa US$0.6m) for the first 5 months in 2011.

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

"This acquisition creates substantial opportunities for HaiKe to enhance its profitability and to further develop its speciality chemical business in line with HaiKe's overall strategy. Shengli has been a source of stable income to the Group, and this strategic move enlarges our exposure in the production of caustic soda and chlorine based chemical products."

Notes to Editors:

Shengli is focused on the production of base chemicals (alkaline substances with a high pH). Shengli's main products include sodium hydroxide based products such as caustic soda and a range of chlorine based chemical products. Shengli also has its own salt field covering nearly 1,000 acres which has the capacity to produce over 50,000 tonnes per annum of crude salt, used in the production process.

In the twelve months to the 31st December 2010 net assets if Shengli stood at RMB148.7m (circa US$22.9m) with net assets per share at RMB4.96 (US$0.76). Between January and May 2011, Shengli's unaudited net profits stood at RMB15.3m

The total number of shares in Shengli is 30,000,000 at RMB1.00 each.

Prior to the acquisition the shareholding structure of Shengli was: Hi-Tech Chemical: 13,696,500 shares (45.655%); Profit United Investment Limited: 7,500,000 shares (25%) and 41 individual investors: 8,803,500 shares (29.345%).

Following the acquisition the shareholding structure of Shengli will be: Hi-Tech Chemical: 22,437,500 shares (74.792%); Profit United Investment Limited: 7,500,000 shares (25%) and 3 individual investors: 62,500 shares (0.208%).

HaiKe owns 88.85% of Hi-Tech Chemical and 100% of Profit United Investment Limited.