KCC Capital Corporation announces proposed qualifying transaction involving
Shenyang Lufeng Foodstuff Co., Ltd. of China


Trading Symbol: NEX:KIC.H

TORONTO, July 19 /CNW/ - KCC Capital Corporation (NEX:KIC.H) (the "Company") today announced that it has entered into a letter of intent dated as of June 30, 2010 with Feng Prosperous International Limited, a British Virgin Islands company, relating to the acquisition of Shenyang Lufeng Foodstuff Co., Ltd. ("Shenyang Lufeng") (a private Chinese company) through its holding company, Lvfeng Development Limited (a private Hong Kong company), and its holding company, Lvfeng International Limited (a private British Virgin Islands company), (collectively, "Lufeng" and the acquisition, the "Acquisition"). This transaction is intended to constitute the Company's Qualifying Transaction (the "Transaction") and is not a Non Arm's Length Qualifying Transaction (as defined by the policies of the TSX Venture Exchange (the "Exchange")).

Overview of Lufeng

Lufeng is principally engaged in the raising, slaughtering and processing of beef cattle, and the production, sale, marketing, distribution and export of fresh chilled and frozen beef products. Lufeng's key market area is the city of Shenyang, capital of the province of Liaoning in China, but it also exports product to various countries in the Middle East.

Shenyang Lufeng was incorporated in 1996 in Shenyang, China and since then, it has rapidly become a significant producer and supplier in China's meat industry, and has achieved consistent profitability and growth since inception. Shenyang Lufeng has achieved distinction in the Chinese food industry by maintaining high quality management standards and international safety certifications.

For the nine-month transition year ended September 30, 2009, Lufeng had revenues of US$21.4 million and net income of US$3.3 million. The following table sets out selected financial information of Lufeng for the nine-month transition year ended September 30, 2009. All financial figures contained in this press release are based on audited financial statements of Lufeng prepared in accordance with United States generally accepted accounting principles.

                                                   Nine-Month Transition
                                                         Year Ended
                                                     September 30, 2009
                                                     (Audited) (in US$)
        Revenues                                          21,400,862
        Net income (comprehensive)                         3,300,186
        Cash and cash equivalents                          1,580,823
        Assets at end of period                           28,569,216
        Liabilities                                        8,326,026
        Shareholders' Equity                              20,243,190

Shenyang Lufeng has approximately 530 employees and is one of the largest fresh frozen meat producers in the province of Liaoning. Shenyang Lufeng meets all Islamic food qualifications and all of its products are produced under the direct supervision of the Association of Islam in order to comply with Halal criteria. In the international market, Lufeng's products are sold to Jordan, Kuwait, Qatar, Lebanon and the United Arab Emirates.

The Chinese Beef Industry

The Chinese beef industry has developed into an industry of international significance since the mid-1980s. Prior to reforms that began in the late 1970s, policymakers had generally protected cattle from slaughter because of their importance as working animals.

As a consequence of the removal of restrictions on slaughtering cattle in the late 1970s, specialized production of beef cattle commenced, with the number of cattle in China doubling, from approximately 72 million in 1980 to approximately 105 million in 2009, and the number of cattle slaughtered grew dramatically, from approximately 3 million in 1980 to approximately 44 million in 2009 (source: United States Department of Agriculture).

Also, numerous "slaughter households" across China became involved in the slaughter and sale of beef, competing with the state-controlled network of general food companies. The consequence of this was the evolution of a highly fragmented market, divided between a mass market that accounts for the majority of cattle slaughtered in China, and a premium market. Mass market beef comes primarily from cattle killed by these slaughter households, and is generally sold fresh, as low-value, undifferentiated beef by stall-holders in so-called "wet markets" or the rural trade markets. Premium beef is generally aimed at the urban market and comes from modern agro-industrial producers such as Lufeng.

Shenyang Lufeng is one of a number of larger, agro-industrial producers with modern equipment, cold and freezer storage and transportation facilities, and industrial-scale feedlots that have emerged, reflecting a desire for safe, high-quality beef, particularly amongst urban dwellers.

The Chinese government has been actively involved in the development of the industry. With recent health concerns, the Chinese government has put in place certain reforms. These reforms are expected by Lufeng to result in a re-structuring of the beef industry to reduce excess capacity by rural trade market producers and migrate production to more efficient, sanitary, modern operations which distribute their products through supermarkets while, at the same time, preserving and even creating jobs in rural regions.

The Transaction

Pursuant to the terms of the Acquisition, the Company will acquire control of Lufeng, and as consideration, subject to Exchange approval, the Company will issue such number of common shares representing approximately 97.12% of the issued and outstanding common shares of the Company after completion of the Acquisition (not including the completion of the Concurrent Offering (as defined below)). The consideration for the Acquisition will be settled between the Company and Lufeng prior to executing the definitive agreement for the Acquisition (the "Definitive Agreement") based on the understanding that the current shareholders of the Company will own approximately 2.88% of Lufeng at the closing of the Transaction (not including the completion of the Concurrent Offering).

It is expected that the Company will complete a concurrent offering prior to the closing of the Transaction, subject to the approval of the Exchange (the "Concurrent Offering"). Based on the Concurrent Offering, the Company expects to apply for and be exempted from the Exchange's sponsorship requirement.

With the recent transfer to NEX, 1,100,000 seed shares of the Company have been cancelled. The Company currently has 8,600,000 common shares issued and outstanding and has outstanding options exercisable into 970,000 common shares of the Company at an exercise price of CAN$0.10 per share expiring January 29, 2013.

Based on the current capital structure of the Company, it is expected that the Company will complete a 14.93-to-1 share consolidation prior to the closing of the Concurrent Offering (the "Consolidation"), such that the existing Company shareholders will hold approximately 575,868 common shares immediately prior to the Acquisition and that the existing holders of the Company options will hold options to acquire approximately 64,953 common shares of the Company at an exercise price of approximately CAN$1.493 per share.

Upon completion of the Transaction, it is expected that the resulting issuer will meet the public distribution requirements of an Exchange Tier 1 issuer. Shareholders of the Company and the resulting issuer will be subject to applicable Exchange escrow policies. It is also expected that Ms. Chen Yan, a Guinea-Bissau citizen, who currently controls 100% of Lufeng, will also control the resulting issuer. Ms. Yan is the wife of Xinwen Wang, the current Chief Executive Officer of Shenyang Lufeng and a proposed director and officer of the resulting issuer.

In addition, prior to completion of the Acquisition, it is intended that the Company will continue out of British Columbia and into the Cayman Islands or to such other jurisdiction as is mutually agreeable to the Company and Lufeng (the "Continuation").

The approval of the Company's shareholders will be required for the Continuation and such other matters in support of the Transaction including, if required, a change of name to Hengqi Foods Inc. or such other name to be determined by Lufeng (the "Name Change"). The principal shareholders of the Company, including Douglas C. Betts, David Lake, David Charnock and Dean Gendron, are expected to enter into a voting support agreement to approve the Consolidation, the Continuation and such other matters in support of the Transaction (including, if required, the Name Change). The Company intends to call a shareholders' meeting to be held to consider and, if thought fit, to approve such matters.

The completion of the Transaction will be subject to at least the following mutual conditions precedent:

    1.  the execution of the Definitive Agreement;

    2.  the approval of the Consolidation, the Continuation and other matters
        in support of the Transaction (including, if required, the Name
        Change) by the requisite majority of the votes cast by the
        shareholders of the Company at a properly constituted meeting of the
        shareholders of the Company;

    3.  the receipt of all necessary regulatory, corporate and third party
        approvals, including the approval of the Exchange, and compliance
        with all applicable regulatory requirements and conditions in
        connection with the Transaction;

    4.  the maintenance of the Company's listing on NEX;

    5.  the confirmation of the representations and warranties of each party
        to the Definitive Agreement as set out in such agreement;

    6.  the absence of any material adverse effect on the financial and
        operational condition or the assets of each of the parties to the
        Definitive Agreement;

    7.  the delivery of standard completion documentation including, but not
        limited to, legal opinions from Canadian legal counsel, legal
        opinions from their own respective Chinese legal counsel, officers'
        certificates and certificates of good standing or compliance; and

    8.  other condition precedents customary for a transaction such as the

In addition to the above listed mutual conditions precedent, the completion of the Transaction is also subject to the condition precedent in favour of the Company that Lufeng will have completed their corporate restructuring for the Transaction to the satisfaction of the Company. The completion of the Transaction is also subject to the following conditions precedent in favour of Lufeng:

    1.  at closing, except for certain budgeted liabilities and the
        obligations to a sponsor or agent appointed jointly by the Company
        and Lufeng in connection with this Transaction, the Company will have
        no liabilities or obligations (contingent or otherwise) inclusive of
        liabilities relating to the fees and disbursements of its counsel
        appointed in connection with this Transaction, as evidenced by an
        officer's certificate of the Company to be tendered on closing of the

    2.  the completion of the Concurrent Offering;

    3.  at closing, the Company will have cash of not less than CAN$373,000
        (including the Deposits and any Advances (as defined below) to
        Lufeng, and not including the net proceeds of the Concurrent

    4.  the termination of all agreements involving the Company and relating
        to administration or leases without any further liability to the
        Company or the resulting issuer; and

    5.  if required by Lufeng, the establishment by the Company of a wholly-
        owned subsidiary incorporated under the laws of British Columbia or

The conditions precedent in favour of the Company may be waived in whole or in part by the Company and the conditions precedent in favour of the Company may be waived in whole or in part by the Company and those in favour of Lufeng may be waived in whole or in part by Lufeng.

The completion of the Transaction is expected to occur on the day that is the tenth business day following the satisfaction or waiver of the conditions precedent (other than those conditions precedent to be completed concurrent with the closing) or such other date as mutually agreed to by the Parties, but in any event no later than December 31, 2010.

Each of the Company and Lufeng will generally bear their own respective costs and expenses associated with the Transaction. In addition, the Company has agreed to pay to Lufeng CAN$25,000 as a non-refundable deposit (the "Deposit"). The Company has also agreed to, at the request of Lufeng, advance to Lufeng a loan of up to CAN$100,000 in accordance with Exchange Policy 2.4 (the "Advances") subject to certain conditions precedent in favour of the Company including: (a) Lufeng requests the Advances in writing; (b) the security provided for the Advances is acceptable to the Company, acting reasonably; and (c) Exchange acceptance of the Advances. These conditions precedent in favour of the Company, other than Exchange acceptance, may be waived in whole or in part by the Company.

Overview of Management and the Board of Directors


It is expected that the management of the resulting issuer will consist of Xinwen Wang as Chief Executive Officer, President and Chairman; Nelson Smith as Chief Financial Officer; and Zhiqing Chang as Vice President.

Xinwen Wang is currently the Chief Executive Officer and Chairman of Shenyang Lufeng. Mr. Wang founded Shenyang Lufeng in 2001. Previously, he was the owner-manager of Shenyang Ling Hai Shoes Co., Ltd.

Nelson Smith is currently a consultant to Shenyang Lufeng. Mr. Smith is qualified as a chartered accountant. He has largely spent his career as an investment banker, most recently as Chairman of Versant Partners Inc., an institutional investment dealer, from 2005 to 2006. Since then, Mr. Smith has been a capital markets advisor, providing advice to companies seeking to go public and list on Canadian stock exchanges.

Zhiqing Chang is currently the Deputy General Manager of Shenyang Lufeng. Mr. Chang has worked in operations for Beijing Luzun Construction and Engineering Company (1999 to 2002), Shenyang Luoquan Business Trading Company (2002 to 2006), and Liaoning Jianhe Zhongheng Steel Trading Company (2006 to 2009) prior to joining Shenyang Lufeng in 2009.

Board of Directors

It is the intention of the Company and Lufeng to establish and maintain a board of directors with a combination of appropriate skill sets that is compliant with all regulatory and corporate governance requirements, including any applicable independence requirements. The board of directors of the Company currently consists of four members. Upon completion of the Transaction, the board is expected to be reconstituted to be comprised of five members, of which four members will be nominated or approved solely by Lufeng and one member will be from the existing board of the Company and a non-Canadian resident, to be approved by Lufeng, subject to the policies of the Exchange and Canadian securities laws. The following are the proposed directors for the resulting issuer: Xinwen Wang, Michael Manley, Elliott Jacobson, Douglas Betts, and Yazhou Hao.

Mr. Manley has been the Chairman and Chief Executive Officer of Wesbridge Capital Corporation, a company specializing in advising China based companies, since 2004 and was President prior thereto for seven years. Mr. Manley has extensive experience both professionally and as a principal in corporate restructuring, strategic planning, mergers and acquisitions, real estate development and international project acquisitions and management. Mr. Manley is, or has been, a director of a number of public companies including Zungui Haixi Corporation, ClubLink Corporation, Armbro Enterprises, Hanfeng Evergreen Inc., Cathay Forest Products Corp. and Migao Corporation.

Elliott Jacobson has over 30 years of public accounting experience and has serviced a wide range of clients from Canadian corporations to multinational organizations. Until June 2010, Mr. Jacobson led the audit practice for entrepreneurial public companies in the greater Toronto area for Deloitte & Touche LLP, which participated in the original listings on the Exchange, Toronto Stock Exchange, Alternative Investment Market, Swiss Stock Exchange, American Stock Exchange for more than 150 new public companies with business operations in China and Israel, as well as Canada and the United States.

Mr. Betts is President and Chief Executive Officer of Kingsway International Holdings Limited, a Toronto Stock Exchange listed company, which has its head office located in Hong Kong. Kingsway Group is a financial services firm with a full service broker dealer operation in Hong Kong. In addition, it invests in, and provides a broad range of financial services, to the natural resources sector with a particular focus on mining and oil and gas investments in China, Australia and Canada. It is also engaged in the operation of investment funds, and other investment vehicles as well as holding interests in various operating companies particularly in the mining sector.

Yazhou Hao is has been an economic consultant to Shenyang Lufeng since 2006. Mr. Hao is the former Deputy Chairman of the Yuhong District Political Consultative Committee (2002 to 2006) and the former Chairman of the Bureau of Town Enterprises Management of the Shenyang Yuhong District (1997 to 2002).

About KCC Capital Corporation

KCC Capital Corporation, a capital pool company within the meaning of the policies of the Exchange, was incorporated in British Columbia on August 2, 2007 and was listed on the Exchange on January 31, 2008. The Company does not have any operations and has no assets other than cash. The Company's business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction.

Trading in the common shares of the Company was halted on April 1, 2010 by the Exchange and was subsequently suspended due to the fact that the Company had not completed a Qualifying Transaction within the Exchange's prescribed time frame. On July 6, 2010, following the Company's application to the Exchange, and the prescribed cancellation of 1,100,000 seed shares of the Company, the Company's listing was transferred to the NEX Board of the Exchange. However, the Company may continue to pursue a Qualifying Transaction. Trading is expected to remain suspended until after the Exchange accepts and confirms the completion of the Transaction.

Except for statements of historical fact, all statements in this press release, including, but not limited to, statements regarding future plans, objectives and payments are forward-looking statements that involve various risks and uncertainties.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange has in no way passed on the merits of the proposed transaction and has neither approved or disapproved the contents of this press release.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


This press release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company's current expectations. When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release includes information relating to the Acquisition (including the structure of the Acquisition), the Transaction (including shareholder approval, principal shareholder support, and other terms such as the Continuation, the Name Change, and the completion or termination), the Concurrent Offering, the principal owner, and the directors and management of the resulting issuer upon completion of the Transaction. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: risks associated with the completion of the Transaction and matters relating thereto and the risks associated with the marketing and sale of securities, the need for additional financing, reliance on key personnel, the potential for conflicts of interest among certain officers or directors with certain other projects, and the volatility of the Company's common share price and volume. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Investors are cautioned against attributing undue certainty to forward-looking statements.

There are a number of important factors that could cause the Company's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to Lufeng's business such as failure of the business strategy, stable supply prices, demand and market prices for its products, and government regulations; risks related to Lufeng's operations, such as additional financing requirements and access to capital, reliance on key and qualified personnel, insurance, competition, intellectual property and reliable supply chains; risks related to Lufeng and its business generally such as potential exposure to tax under Canadian income tax, Chinese regulations relating to offshore special purpose companies, recent Chinese regulations relating to cross-border mergers and acquisitions, environmental protection, currency exchange rates and conflicts of interest; and risks related to doing business in China such as tax, repatriation of profit and currency conversion, acquisition and appropriation of land use rights, foreign investment, permits and business licenses, employment contracts, government intervention, shareholders' rights and enforcement of judgments and a developing legal system.

The Company cautions that the foregoing list of material factors is not exhaustive. When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. While the Company may elect to, it does not undertake to update this information at any particular time.



For further information: For further information: Gary Quedado, Telephone: 416-861-3099, Email: gquedado@kingswaygroup.ca

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