Haier Biomedical Announces Proposed Sale of 17.11% Equity Stake in Mesa Biotech, Inc.

Original Title: Stock Code: 688139 Stock Abbreviation:Haier BiomedicalAnnouncement No.: 2021-001 Qingdao Haier Biomedical Co., Ltd. Announcement on the Proposed Sale of Equity in an Investee Company

The Board of Directors and all directors of the Company hereby guarantee that there are no false records, misleading statements, or material omissions in this announcement, and they shall bear legal liability for the truthfulness, accuracy, and completeness of its content in accordance with the law.

Important Notice:

● As of the date of disclosure of this announcement, Qingdao Haier Biomedical Co., Ltd. (hereinafter referred to as “Haier Biomedical” or the “Company”) holds an aggregate of 17.11% equity interest in Mesa Biotech, Inc. (hereinafter referred to as “Mesa”) (hereinafter referred to as the “Target Equity”).

● The Company’s associate, Mesa, entered into an Agreement and Plan of Merger (the “Merger Agreement”), governed by the laws of the State of Delaware, with Thermo Fisher Scientific Inc. (“Thermo Fisher”). The total consideration to be paid by Thermo Fisher for the acquisition of all equity interests in Mesa is approximately USD 450 million, with the final amount subject to determination based on agreed-upon adjustment mechanisms. In addition, upon Mesa’s achievement of specified operational milestones, Thermo Fisher will pay an additional consideration of approximately USD 100 million, with the exact amount determined based on the extent of milestone achievement and agreed-upon adjustments as stipulated in the agreement.

● Based on the aforementioned arrangements, Qingdao Haier Biomedical Co., Ltd. intends to sell all of its held equity interests in the target company (hereinafter referred to as the “Transaction”) to Thermo Fisher Scientific Inc. The Transaction is subject to approval by the Company’s Board of Directors and shareholders’ general meeting. As of the date of this announcement, the Company has issued a notice convening a Board of Directors meeting to deliberate matters related to the Transaction.

● This transaction does not constitute a material asset restructuring of the listed company, nor does it qualify as a related-party transaction.

● This transaction is expected to increase the company’s pre-tax investment income for 2021 by approximately RMB 349 million, with the exact amount to be determined upon final confirmation of the consideration received from this transaction.

I. Overview of the Transaction

(I) Overview of the Transaction

1. Transaction Background

The Company recently received notice from its U.S. affiliate, Mesa Biotech, Inc. (“Mesa”), that Thermo Fisher Scientific Inc. intends to acquire 100% of the equity interests in Mesa and has entered into a merger agreement governed by the laws of the State of Delaware. Pursuant to the terms of the merger agreement and applicable Delaware law, upon obtaining approval from shareholders representing more than one-half of the voting rights corresponding to all equity interests in Mesa, Thermo Fisher Scientific Inc. will acquire 100% of Mesa.

From June to November 2018, Haier Biomedical made a total investment of USD 20 million in Mesa Biotech, both directly and indirectly. As of the date of disclosure of this announcement, the Company holds a total of 17.11% equity interest in Mesa Biotech. Specifically, Haier Biomedical directly holds 14.54% of the equity interest in Mesa Biotech, and indirectly holds 2.57% of the equity interest through its wholly-owned subsidiary, Haier BioMedical HK Co., Limited.

2. Details of the Transaction Subject

Mesa was founded in 2015 by Ms. Hong Cai, Mr. Robert Bruce Carey, and Mr. John W. Elling, primarily engaging in the research, development, and production of molecular diagnostics and point-of-care testing (POCT) products.

3. Transaction Matters

Haier Biomedical plans to sell all of its equity interest in the target company to Thermo Fisher Scientific, with consideration amounting to approximately:

(1) The sale proceeds for the initial tranche of the target equity are approximately USD 77 million (the “Initial Consideration,” with the exact amount to be determined prior to payment, subject to adjustments as stipulated in the merger and acquisition agreement); and

(2) Additional consideration of approximately USD 17 million, contingent upon Mesa achieving specific operational targets (the “Additional Consideration,” with the exact amount determined based on the achievement of operational targets as stipulated in the M&A Agreement and subject to adjustments as provided therein).

Thermo Fisher’s designated entity shall pay the initial consideration and any additional consideration (if applicable) to Haier Biomedical in cash.

4. Transaction Price and Premium Over Book Value

Without considering the adjustments stipulated in the Merger and Acquisition Agreement:

(1) In the case of only the initial consideration, the target equity carries a premium of approximately USD 57 million over the book value of the original investment, representing a transaction appreciation rate of 285%;

(2) If the initial consideration and all additional consideration are received, the premium of the target equity over the carrying value of the original investment would be approximately USD 74 million, representing a transaction appreciation rate of 370%.

5. Use of Proceeds

The proceeds from this transaction will be used to develop the company's core business.

(II) Voting Results of This Transaction

To ensure the timeliness of the Company’s information disclosure, as of the date of this announcement, the transaction has not yet been reviewed and approved by the Board of Directors and the Shareholders’ Meeting of Haier Biomedical.

The Company will convene a meeting of the Board of Directors as soon as practicable, and has issued notices to all directors regarding the convening of such meeting on the date of disclosure of this announcement in relation to the matters concerning the Transaction. The Company will timely disclose the review and approval status of the Transaction in due course. Investors are advised to pay attention to such disclosures.

(III) Approvals and Other Procedures Still Required for This Transaction

1. This transaction does not involve related-party transactions.

2. This transaction does not constitute a material asset restructuring as stipulated by laws and regulations such as the "Administrative Measures for Material Asset Restructuring of Listed Companies" and the "Special Provisions on Material Asset Restructuring of STAR Market Listed Companies."

II. Information on the Counterparties to This Transaction

(I) Overview of Thermo Fisher Scientific

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(II) Key Financial Data of Thermo Fisher Scientific for the Most Recent Fiscal Year

Unit: million USD

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Note: The above data are sourced from Thermo Fisher Scientific's 2019 Annual Report.

(3) Description of Other Relationships

There is no affiliated relationship between Thermo Fisher Scientific and the Company.

III. Basic Information on the Subject Matter of This Transaction

(I) Name and Category of the Transaction Subject

This transaction constitutes an asset sale as described in Item (1) of Article 7.1.1 of the Rules Governing the Listing of Stocks on the STAR Market of the Shanghai Stock Exchange, with the subject matter being the 17.11% equity interest in Mesa Biotech, Inc. directly and indirectly held by Qingdao Haier Biomedical Co., Ltd.

(II) Basic Information on the Transaction Subject

1. Basic Information of Mesa

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2. The title to the target equity proposed for sale by the Company is clear and unencumbered, free from any mortgages, pledges, or other restrictions on transfer. The target equity is not subject to any litigation, arbitration, or judicial measures such as attachment or freezing, and there are no other circumstances that would impede the transfer of title.

3. Mesa’s Key Financial Data for the Most Recent Year and Period

Unit: USD 10,000

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4. Mesa's Shareholding Structure Prior to the Transaction

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IV. Pricing of the Transaction Target

Based on Mesa’s operating performance and development prospects, Thermo Fisher Scientific, in consultation with Mesa’s management and founding teams, finalized the consideration for this transaction. The total consideration paid by Thermo Fisher Scientific to acquire 100% of Mesa’s equity is approximately USD 450 million, with the exact amount subject to determination based on agreed-upon adjustment items. Additionally, upon Mesa’s achievement of specific operational targets, Thermo Fisher Scientific will pay an additional consideration of approximately USD 100 million, with the final amount determined according to the extent of completion of the agreed operational targets and the adjustment items stipulated in the agreement.

V. Impact of the Transaction on the Listed Company

This transaction is expected to increase the Company’s pre-tax investment income for 2021 by approximately RMB 349 million, which will facilitate further integration of the Company’s existing resources, enhance cash liquidity, and better support its core business operations. The transaction aligns with the Company’s actual operational conditions and future development needs, and does not compromise the legitimate interests of minority shareholders.

VI. Risk Disclosure

1. Under Delaware law, which governs the Merger Agreement, the Merger Agreement still requires approval by shareholders holding more than one-half of the voting rights corresponding to all equity interests in Mesa. If shareholders holding more than one-half of the voting rights corresponding to all equity interests in Mesa approve Thermo Fisher’s acquisition of all equity interests in Mesa and approve the Merger Agreement, then under Delaware common law, such approving shareholders have the right to require dissenting shareholders to join the transaction and sell their equity interests in Mesa to Thermo Fisher. Accordingly, even if the board of directors or shareholders’ meeting of Qingdao Haier Biomedical Co., Ltd. does not approve the sale of the target equity interests, there remains a risk that the Company may be compelled to sell the target equity interests pursuant to Delaware common law and the Company’s voting agreement.

2. The closing of this transaction is subject to the satisfaction of closing conditions, including approval by U.S. regulatory authorities.

3. The signing, performance, interpretation, and dispute resolution of the transaction documents related to this transaction are governed by foreign statutory laws or common law. The Company has insufficient understanding and application of relevant foreign statutory laws and common law, and it did not participate in the negotiation and drafting of the transaction documents, which may pose certain risks to the execution of this transaction. To address this, the Company has engaged foreign professional lawyers to provide legal advisory and consulting services for this transaction.

4. Due to the impact of the epidemic, the exchange rate between the Renminbi and the US dollar has fluctuated significantly in recent periods. As the consideration for this transaction is denominated and payable entirely in US dollars, the Company will be exposed to certain risks of foreign exchange gains or losses arising from exchange rate fluctuations on the consideration received for this transaction.

5. The specific amount of consideration actually received by the Company for this transaction shall be determined prior to payment, subject to adjustments as stipulated in the merger and acquisition agreement. There may be certain discrepancies between the estimated amounts of relevant revenue or gains disclosed in this announcement and the actual amounts. The final profit or loss arising from this transaction shall be subject to the amounts confirmed in the Company’s 2021 Annual Audit Report. Investors are hereby advised to exercise caution regarding investment risks.

Hereby announced.

Board of Directors of Qingdao Haier Biomedical Co., Ltd.

January 21, 2021