Stock Code: 000553(200553) Stock Abbreviation: ADAMA A (B) NO. 2024-55
ADAMA Ltd.Announcement on the Signing of the EntrustedManagement Agreement with Related Parties
The Company and all members of the Company’s Board of Directors confirm thatall information disclosed herein is true, accurate and complete, with no false ormisleading statement or material omission.
I. Overview of the Related-party TransactionPursuant to the commitment on the resolution of horizontal competition issued by ChinaNational Chemical Corporation Limited (hereinafter referred to as “ChemChina”), theindirect controlling shareholder of ADAMA Ltd. (hereinafter referred to as “theCompany”), and Syngenta Group Corporation Limited (hereinafter referred to as“Syngenta Group”), the controlling shareholder, both ChemChina and Syngenta Groupshall adopt appropriate measures within the committed period to gradually resolvehorizontal competition among Syngenta AG (hereinafter referred to as “SAG”), JiangsuYangnong Chemical Co., Ltd.(hereinafter referred to as “Yangnong”) and the Company.(Please refer to the Acquisition Report of ADAMA Ltd. disclosed on
www.cninfo.com.cn on 14 March 2020 and the Announcement on the Commitment
Made by the Controlling Shareholder disclosed on www.cninfo.com.cn on 7 April2022.)In order to resolve horizontal competition, the Company reached an agreement on thespecific arrangements for the entrusted management with SAG and Yangnong, andintends to enter into entrusted management agreements with SAG and Yangnongrespectively. In respect of the overlapping products between the Company and SAG,SAG will entrust the Company with the right and responsibility of managing theentrusted business of overlapping products (i.e., the agreed aspects of sales of theoverlapping products, the same as below)- please refer to Section V of thisannouncement. In respect of the overlapping products between the Company andYangnong, Yangnong entrusts the Company with the right and responsibility of
managing the entrusted business of some overlapping products; in return, the Companywill entrust Yangnong with the right and responsibility of managing the entrustedbusiness of the rest of overlapping products - please refer to Section V of thisannouncement (hereinafter collectively referred to as “the Transaction”).Both SAG and Yangnong, as legal persons controlled by Sinochem HoldingsCorporation Limited (hereinafter referred to as “Sinochem”), the indirect controllingshareholder of the Company, are related parties of the Company in accordance withItem 2, Paragraph 2 of Article 6.3.3 of the Rules Governing the Listing of Stocks on theShenzhen Stock Exchange. Therefore, the Transaction constitutes a related-partytransaction.On 6 November 2024, the Company convened the 7
thmeeting of the Tenth Session ofthe Board of Directors to consider the Proposal on Signing of the EntrustedManagement Agreement with Related Parties. All the related directors, namely Mr. QinHengde, Mr. Liu Hongsheng and Mr. An Liru, recused themselves from voting.The Transaction will be submitted to the general meeting of shareholders fordeliberation and approval because the number of non-related directors attending theBoard meeting was less than three. The Transaction was considered at the 3rdspecialized meeting of the Independent Directors of the Company in 2024. All theIndependent Directors expressed their consent.The Transaction is still subject to the approval of the general meeting of shareholders.As a related shareholder, Syngenta Group will abstain from the voting.II. Basic Information of Related Parties(I) SAGSyngenta AG, a company registered in Switzerland with its registered office atRosentalstrasse 67, 4058 Basel, Switzerland, with the share capital of CHF 9,257,814.9,mainly undertakes the businesses related to crop protection and seeds. As the date ofJune 30, 2024, SAG’s total assets is USD 33,770 million, and the net assets is USD7,476 million. From January to June in 2024, SAG’s operating revenue is USD 8,242million, and the net income is USD 274 million.Relationship with the Company: SAG is a legal person controlled by Sinochem, theindirect controlling shareholder of the Company. According to Item 2, Paragraph 2 of
Article 6.3.3 of the Rules Governing the Listing of Stocks on the Shenzhen StockExchange, SAG is a related party of the Company.Credit status: SAG produces and operates normally and is in good operational andfinancial conditions. After searching on the website of disclosure of enforcementinformation of China, SAG is not a dishonest party subject to enforcement.(II) YangnongYangnong (legal representative: Su Fu; registered address: No. 39, Wenfeng Road,Yangzhou) has registered capital of RMB 406,759,709 and mainly undertakes themanufacture of agrochemicals and fine chemicals. As the date of June 30, 2024,Yangnong’s total assets is RMB17,096,545,340.73, and the net assets is RMB10,111,325,398.64. From January to June in 2024, Yangnong’s operating revenue isRMB 5,698,700,321.55, and the net profit of RMB 763,530,575.82.Relationship with the Company: Yangnong is a legal person controlled by Sinochem,the indirect controlling shareholder of the Company. According to Item 2, Paragraph 2of Article 6.3.3 of the Rules Governing the Listing of Stocks on the Shenzhen StockExchange, Yangnong is a related party of the Company.Credit status: Yangnong produces and operates normally and is in good operational andfinancial conditions. After searching on the website of disclosure of enforcementinformation of China, Yangnong is not a dishonest party subject to enforcement.III. Basic Information about the Target of the TransactionThe nature of the Transaction is entrusted management. As explained in Section V ofthis announcement, the targets of entrusted management are the agreed aspects of salesof overlapping crop protection formulations based on production of the same activeingredient between the Company and SAG within the overlapping sales regions, andthe sales of overlapping crop protection formulations based on production of the sameactive ingredient between the Company and Yangnong within the territory of PRC.Please see details in Section V of this announcement. The sales of the entrusted businessof SAG managed by the Company in 2023 was USD 582 million approximately. Thesales of the entrusted business of Yangnong managed by the Company in 2023 wasRMB 42.40 million approximately, while the sales of the entrusted business of theCompany managed by Yangnong in 2023 was RMB 47.57 million approximately.
IV. Pricing Policy and Basis for the Related-party TransactionIn view of the lack of comparable independent third-party market prices for reference,the Parties determined the pricing of the Transaction after negotiation on the basis ofthe costs actually incurred by the trustee for the purpose of exercising its managementright and power under the Entrusted Management Agreement while complying with theprinciples of voluntariness, fairness and impartiality. There was no harm on the interestsof the Company and the non-related shareholders.V. Major Terms of the Agreement for the Transaction(I) the Company and SAG
1. Parties Signing the Agreement
The Company and SAG
2. Scope of Business under the Entrusted Management
SAG entrusts ADAMA with the right and responsibility to manage, in accordance withthe terms and conditions in the Agreement, the agreed aspects of the sale of theoverlapping products which are manufactured by SAG in the overlapping sales regions(such business of sale hereinafter referred to as the “Entrusted Business”). Overlappingproducts refer to among the Parties’ main products, the crop protection formulationproducts which are produced on the basis of identical active ingredients. With respectof single Overlapping Product, overlapping sales region refers to any country (or region,the same as below) where the Overlapping Products of both Parties are sold, providedhowever that products with small amount of annual sales in one country are excludedfrom the scope of entrustment, (meaning no more than USD 1million and no more than1% of the relevant Party’s total crop protection annual sales in that country; or no morethan USD 250,000).Any Overlapping Products that result from either of the situations below, are excludedfrom the scope of the entrusted management: a) the registration of the OverlappingProduct by ADAMA is achieved on the basis of the intellectual property right licensedby SAG or by relying on the regulatory data owned by SAG; or b) due to the lack ofregistration of the Overlapping Product in one country, ADAMA purchases suchproduct from SAG and sell it in the overlapping sales regions in order to complementits products portfolio offered to customers and/or increase its sales in that country.
The Company and SAG shall review the overlapping semi-annually and dynamicallyadjust the scope of products included in the entrusted management in accordance withthe above conditions.
3. Rights Entrusted and Relationship between the Parties
This Agreement does not change the asset ownership, the personnel employment, andthe attribution and accountability of operating result, the product liability, the HSEaccountability related to the Entrusted Business. SAG remains responsible for all claimsand debts related to the Entrusted Business.
4. Entrustment Implementation
The Company and/or subsidiaries it has assigned will organize a designated teamconsisting of person/s with the necessary expertise and experience to manage theOverlapping Products in the aspects of product strategy and go-to-market approach, inorder to achieve differentiation between the Entrusted Business and the Company’sbusiness, and to avoid issues related to horizontal competition arising from theOverlapping Products.
5. Entrustment Fee
SAG shall pay the Company an annual entrustment fee of USD 2 million (or itsequivalent of other currencies), which shall be settled and paid annually before the endof each year.
6. Term
The initial period of the Agreement shall be three years from the effective date. TheCompany shall have the right to unilaterally extend the period of the Agreement, witheach extension not exceeding three years. The entrustment fee of USD 2 million eachyear shall continue to apply during the extended period, unless otherwise agreed by theParties. If the horizontal competition between the Company and SAG is eliminated orSAG’s affiliates no longer have an obligation to resolve horizontal competition betweenthe Company and SAG prior to the expiration of the period of the Agreement (whetherthe initial period or any extended period), the Agreement shall terminate immediatelyon the date the competition is eliminated or the date the obligation is terminated(whichever occurs earlier), irrespective of whether there are further internal processesor corporate governance requirements of SAG’s affiliates or the Company’s affiliates
that need to be fulfilled with respect to termination of the Agreement.
7. Effective Conditions
The Agreement shall become effective on January 1, 2025, upon the fulfillment of allthe following conditions: (1) both Parties have signed the Agreement, and (2) bothParties have completed all internal approval processes to approve the Agreement, asrequired by the applicable regulatory rules for listed companies and their respectiveArticles of Association.(II) the Company and Yangnong
1. Parties Signing the Agreement
The Company and Yangnong
2. Scope of Business under the Entrusted Management
Both Parties agreed that, in respect of the production and sales of crop protectionformulations produced from the same active ingredient by the Company and Yangnongwithin the territory of PRC (hereinafter referred to as the “Overlapping Products”), theCompany and Yangnong shall manage the sales business of part of the OverlappingProducts respectively (such business of sale hereinafter referred to as the “EntrustedBusiness”).If any Party’s annual sales of such Overlapping Product in the territory of PRC is small(meaning no more than the RMB equivalent of USD 1 million and no more than 1% ofthat Party’s total annual crop protection formulations sales in the territory of PRC, orno more than the RMB equivalent of USD 250,000), such product is not regarded as anoverlapping one and does not fall within the scope of entrusted management under theAgreement. With respect to the entrusted Overlapping Products within the scope ofentrusted management, the one exercising the management right shall be the entrustedparty and the other shall be the delegating party.Both Parties shall review the overlapping semi-annually and dynamically adjust thescope of products included in the entrusted management.
3. Rights Entrusted and Relationship between the Parties
This Agreement does not change the asset ownership, the personnel employment, andthe attribution and accountability of operating result, the product liability, the HSE
accountability related to the Entrusted Business. The delegating party remainsresponsible for all claims and debts related to the Entrusted Business.
4. Entrustment Implementation
The entrusted party and/or subsidiaries it has assigned will organize a designated teamconsisting of person/s with the necessary expertise and experience to manage theOverlapping Products in the aspects of product strategy and go-to-market approach, inorder to achieve differentiation between the Entrusted Business and the entrustedparty’s business, and to avoid issues related to horizontal competition arising from theOverlapping Products.
5. Entrustment Fee
In view of the fact that each of the two Parties under the Agreement is acting asdelegator or trustee for the Entrusted Business of different Overlapping Products at thesame time, both Parties do not charge and pay each other entrustment fees in respect ofthe Entrusted Business under the Agreement.
6. Term
The initial period of the Agreement shall be three years from the effective date. It isautomatically extended upon expiry for one year each time. Either Party has the rightto terminate the Agreement within the extended period by sending a written notice oftermination three months in advance. If the horizontal competition between the twoParties is eliminated or the two Parties’ affiliates no longer have an obligation to resolvehorizontal competition prior to the expiration of the period of the Agreement (whetherthe initial period or any extended period), the Agreement shall terminate immediatelyon the date the competition is eliminated or the date the obligation is terminated(whichever occurs earlier), irrespective of whether there are further internal processesor corporate governance requirements of both Parties’ affiliates that need to be fulfilledwith respect to termination of the Agreement.
7. Effective Conditions
The Agreement shall become effective on January 1, 2025, upon the fulfillment of allthe following conditions: (1) Both Parties have signed the Agreement, and (2) bothParties have completed all internal approval processes to approve the Agreement, asrequired by the applicable regulatory rules for listed companies and their respective
Articles of Association.VI. Purpose of the Transaction and Impact on the Listed CompanyThe Transaction is conducive to resolving horizontal competition among SAG,Yangnong and the Company. There is no damage to the interests of the Company andall its non-related shareholders, especially the minority shareholders, and it does notconstitute an important impact on the Company’s sustainable operating ability, profitand loss and asset status.VII. Cumulative Related-party Transactions with the Relevant Related PartyAs at the date of disclosure, the various types of related-party transactions between theCompany and subsidiaries of Sinochem, the indirect controlling shareholder, are asfollows:
1. Daily related-party transactions: The amount of daily related-party transactionsbetween the Company and subsidiaries of Sinochem for the year 2023 reached RMB3,246.42 million. The expected daily related-party transactions for 2024 have beenconsidered and approved by the general meeting of shareholders for the year 2023, witha total estimated amount of RMB 4,143.71 million. By June 30, 2024, the accrued dailyrelated-party transactions’ amount in 2024 is RMB 1,335.25 million.
2. The Company and its subsidiaries’ Deposits and Loans in the Finance Company asbeing approved by the First Extraordinary General Meeting of 2022: As of the date ofthis announcement, the balance of deposits remains RMB 379.79 million and USD 2.14million, and the loan amount is RMB 50 million.
3. At the 33rd meeting of the Ninth Session of the Board of Directors of the Companyon 25 April 2024, the Company considered and passed the Proposal on a Credit Facilityand Related-party Transaction with a Related Party, agreeing that Adama FahrenheitB.V. (“ADAMANL”), a wholly-owned subsidiary indirectly held by the Company, andSyngenta Group (NL) B.V. (“SGNL”) to enter into a financing agreement, wherebySGNL provided ADAMANL with an additional credit facility of USD 200 million. Thetransaction has been considered and approved at the First Extraordinary GeneralMeeting of 2024.
4. The Third Meeting of the Tenth Session of the Board of Directors of the Companyconsidered and passed the Proposal on the Purchase of Liability Insurance for
Directors, Supervisors and Senior Executives as a Related-party Transaction on 12June 2024, and agreed to purchase liability insurance for the directors, supervisors andsenior management of the Company by joining the directors’ and senior management’sliability insurance of Syngenta Group, and share its insurance proportion with thepremium expense of USD115,680. The transaction has been considered and approvedby the Second Extraordinary General Meeting of 2024.VIII. Opinions Agreed by a Majority of the Independent DirectorsThe 3rd Specialized Meeting of the Independent Directors of the Company in 2024 washeld to consider this Proposal on the Signing of the Entrusted Management Agreementwith Related Parties and issued an agreed opinion. The Independent Directors are ofthe view that:
1. The matters in respect of the signing of the entrusted management agreementsbetween the Company and SAG and Yangnong respectively constitute related-partytransactions.
2. The procedures of the Board of Directors for the consideration of the related-partytransaction shall be in compliance with the laws, regulations and the Articles ofAssociation of the Company. Mr. Qin Hengde, Mr. Liu Hongsheng and Mr. An Liru asthe related-party directors at the board shall recuse themselves from voting.
3. Regarding the signing of the entrusted management agreements between theCompany and SAG and Yangnong respectively, the transaction arrangements, includingthe prices, are fair and conducive to resolving the potential horizontal competition.There are no circumstances under which the interests of the Company and the non-related shareholders as well as the minority shareholders are being jeopardized.IX. Conclusion of the Intermediary’s OpinionsUpon verification, the Financial Adviser, China International Capital CorporationLimited, is of the view that this related-party transaction has been considered at the 7thmeeting of the Tenth Session of the Board of Directors of the Company, with Mr. QinHengde, Mr. Liu Hongsheng and Mr. An Liru, the related directors, recusing themselvesfrom voting; and has been considered and approved at the 3rd Specialized Meeting ofthe Independent Directors of the Company in 2024. As the number of non-relateddirectors attending the Board meeting was less than three, the Transaction will besubmitted to the general meeting of shareholders for deliberation and approval. The
decision-making procedures for this related-party transaction are in compliance withthe relevant laws and regulations, and the Transaction is conducive to resolving thehorizontal competition among SAG, Yangnong and the Company. There is no damageto the interests of the Company and all its non-related shareholders, especially theminority shareholders.Upon verification, Tian Yuan Law Firm is of the view that:
1. The conclusion, performance and interpretation of the two entrusted managementagreements to be signed between the Company and SAG and Yangnong respectivelyare governed and construed in accordance with the laws of the People’s Republic ofChina, and the terms of such entrusted management agreements comply with the lawsof the People’s Republic of China.
2. The two entrusted management agreements shall become effective on January 1,2025 upon execution by all parties and completion of all internal approval processesrequired for the approval of such agreements in accordance with their applicableregulatory rules for listed companies and their respective Articles of Association.
3. The Transaction has been considered and approved by the 3rd Specialized Meetingof the Independent Directors of the Company in 2024, and has been considered at the7th meeting of the Tenth Session of the Board of Directors of the Company. In view ofthe Transaction constituting a related-party transaction, the related directors abstainedfrom voting. The procedures of the 7th meeting of the Tenth Session of the Board ofDirectors of the Company for the consideration of the related-party transaction is legaland valid. The Transaction is still subject to the approval of the general meeting ofshareholders. As a related shareholder, Syngenta Group shall abstain from the voting.
4. The two entrustment management agreements to be signed respectively between theCompany and SAG and Yangnong clearly stipulate the scope of the entrusted business,the purpose of the entrustment management, and the specific measures for entrustmentimplementation, which also stipulate a mechanism for semi-annual review and dynamicadjustment. The Transaction is conducive to resolving the horizontal competitionamong SAG, Yangnong and the Company. There is no damage to the interests of theCompany and all its non-related shareholders, especially the minority shareholders.X. Documents for Reference
1. Resolutions of the 7
thMeeting of the Tenth Session of the Board of Directors of the
Company.
2. Resolution of the Specialized Meeting of Independent Directors.
3. Entrusted Management Agreement to be signed between the Company and SAG.
4. Entrusted Management Agreement to be signed between the Company andYangnong.
5. Verification opinion of the financial adviser.
6. Verification opinion of the law firm.
This announcement is hereby presented.
Board of Directors of ADAMA Ltd.
November 7, 2024