6 February 2017

Taihua plc

("Taihua" or the "Company")

Proposed Tender Offer

Taihua, the China-based pharmaceutical company specialising in the cultivation of Traditional Chinese Medicine ("TCM") raw materials, manufacture of TCM and certain Active Pharmaceutical Ingredients, is pleased to announce the terms of a proposed Tender Offer.

Under the Tender Offer, each Eligible Shareholder is entitled to have up to approximately 22.536802 per cent of his or her shareholding purchased at the Tender Price (3.28 pence per Share) with the potential to tender a greater number of Shares depending on the number of Shares tendered by other Shareholders. The Tender Price represents a premium of 4.96 per cent to the closing mid-market price of 3.125 pence per Share on 3 February 2017, being the last practicable date prior to the publication of the Circular. The Tender Offer is being made available to all Shareholders who are on the Register at the close of business on 20 February 2017, with the exception of holders in certain overseas jurisdictions.

The Company has the authority granted by Shareholders to purchase up to 8,173,733 Ordinary Shares on 12 August 2016. A circular which sets out the full details of the Tender Offer is expected to be posted to Shareholders today (the "Circular").  The Circular will also be available on the Company's website (http://www.taihuaplc.com).

The Tender Offer is being made by Daniel Stewart & Company plc, the Company's corporate broker, as principal on the basis that all Shares that it buys under the Tender Offer will be purchased from it by the Company.

Further details of the Tender Offer are set out below.

Capitalised terms used, but not defined in this announcement shall have the same meaning as set out in the Circular.

EXPECTED TIMETABLE

Enquiries:

Nicholas Lyth, Taihua plc                                            0776 990 6686

Katy Mitchell, WH Ireland Limited                               +44 161 832 2174

Further details of the Tender Offer

Introduction

The Tender Offer is being made available to all Shareholders who are on the Register at the close of business on 20 February 2017, with the exception of holders in certain overseas jurisdictions. Shareholders can decide whether they want to tender some or all of their Shares at a price of 3.28 pence per Share, representing a premium of 4.96% per cent to the closing mid-market price of 3.125 pence per Share on 3 February 2017, being the last practicable date prior to the publication of the Circular.

The Tender Offer is being made by Daniel Stewart, the Company’s corporate broker, as principal on the basis that all Shares that it buys under the Tender Offer will be purchased from it by the Company. The Company has the authority from Shareholders to purchase the Shares granted by a resolution of the shareholders dated 12 August 2016. The Board is making no recommendation to Shareholders in relation to participation in the Tender Offer.

However, Shareholders should note that all of the Directors who hold Shares except Nicholas Lyth and Mr Tao Ji (the Company’s largest shareholder), have agreed to waive their rights to participate in the Tender Offer in order to ensure that their percentage holding in the Company’s issued share capital is to a material extent maintained following the Tender Offer.

Nicholas Lyth, the non-executive chairman of the Company, has expressed to the Board that he intends to tender some or all of his Shares at the Tender Price.  

Background to the Tender Offer

Open Offer

The Company announced on 16 September 2016 the success of the Open Offer and the subsequent issue and allotment of 22,911,312 Ordinary Shares at an issue price of 2.63 pence raising £602,567.51.

As explained in the Open Offer Circular, the reason for the Open Offer was to enable the Company to raise funds in order to conduct a share buyback programme. The Company took this action following requests made by shareholders to the Directors.

Use of Tender Offer

Following the successful Open Offer, the Directors commenced discussions with the Company’s advisers in relation to the best structure to execute the proposed share buyback.

As Shareholders will know, the recent trading volume in Shares has been very low. If the Company purchases back any significant number of its Shares by way of market purchases then it would be necessary for such buyback to follow the trading volume limit as set by the Market Abuse Regulations. Pursuant to the Market Abuse Regulations, an issuer must not purchase on any trading day more than 25% of the average daily volume of its shares traded over a period of reference.

Given the recent levels of low liquidity, it may take much longer than expected for the Company to complete the share buyback by way of market purchases if it fully complies with the aforesaid trading volume limit as set by the Market Abuse Regulation.

The Directors therefore believe that the Tender Offer is the most appropriate method by which the Company can offer Shareholders an opportunity to reduce their holdings of Shares.

The Tender Offer

The Tender Offer is being made by Daniel Stewart to all Shareholders (other than certain Overseas Shareholders). Full details of the Tender Offer, including the terms and conditions on which it is being made, are set out in Part III of the Circular and, in relation to Shareholders holding Shares in a certificated form, on the Tender Form to be sent to Shareholders who hold their Shares in certificated form.

The Tender Offer is conditional on the satisfaction of the Conditions specified in Part III of the Circular.

The Tender Offer involves the following:

• The Tender Offer is being made to Shareholders (other than certain Overseas Shareholders) by Daniel Stewart for the purchase of up to 8,173,733 Shares. Under the Tender Offer, each Shareholder is entitled to have up to approximately 22.536802 cent of his shareholding (having taken into account of the waiver by certain Directors and major Shareholders as set out below) purchased by Daniel Stewart at the Tender Price together with potentially further purchases depending on the of Shares tendered by other Shareholders.

• The Offer is being made at a premium of 4.96 cent to the closing mid-market price on 3 February 2017.

• Shareholders (other than certain Overseas Shareholders) will be able to decide to tender none, some or all of their Shares within the limits the Offer.

• Tenders in excess of a Shareholders’ Basic Entitlement will only be accepted to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares.

• The Form to be completed by Shareholders who hold their Shares in certificated form contains a box to enable those Shareholders who wish to tender their Basic Entitlement to do so (Box 2A). If you hold Shares in certificated form and tick this box, the Receiving Agent will calculate Basic Entitlement on the Record Date. If wish to tender a different number of Shares to your Basic Entitlement, insert such of Shares in the alternate box provided ont he Form (Box2B).

• Shareholders who hold their Shares in uncertificated form (i.e. in who wish to tender their Basic Entitlement should send a instruction through CREST to the account set out in paragraph3.3.1of Partofthe Circular.The Receiving Agent will calculate Basic Entitlement on the Date and return any excess Shares. wish tender a different number of Shares to your Basic Entitlement, should send a Instruction through CREST to the same member account specifying such of Shares that wish totender.

• If the total number of Shares validly tendered by all Shareholders equates to a number greater than 8,173,733Shares,tenderswillbeacceptedinthesetout

  • all Shares validly tendered by any Shareholder up to their Basic Entitlement will be accepted in full; and

  • all Shares validly tendered by Shareholders in excess of their Basic Entitlements will be satisfied pro-rated to the Basic Entitlement so far as possible taking into account fractions and liquidity at the discretion of the Board. The number of Shares to be purchased in the Tender Offer will not, in any event, exceed 8,173,733 Shares.

• All successfully tendered Shares purchased by Daniel Stewart will be repurchased from Daniel Stewart by the Company and will be immediately cancelled and will not rank any future dividends.

• Any rights of Shareholders who choose to tender their Shares will be unaffected.

Taxation

Shareholders who sell Shares pursuant to the Tender Offer should, subject to the potential application of Chapter 1 of Part 13 ITA 2007 (in respect of individual Shareholders) and Part 15 of CTA 2010 (in respect of corporate Shareholders), be treated as having sold their Shares in the normal way. Shareholders may, depending on their individual circumstances, incur a liability to taxation on capital gains. UK individual and corporate Shareholders should be aware that HMRC may seek to treat part or the whole of the disposal proceeds of their Shares as income under Chapter 1 of Part 13 ITA 2007 and Part 15 of CTA 2010 respectively. Further information on the UK taxation consequences of the Tender Offer is set out in Part IV of the Circular.

Waiver by Certain Directors and Major Shareholders

The following Directors who are the Shareholders have agreed to waive their rights to participate in the Tender Offer: (1) Mingjian Yin; (2) Yunwu Liu; and (3) Chun Chai.

Tao Ji, the Company’s largest Shareholder, also agreed to waive his rights to participate in the Tender Offer.

Overseas Shareholders

Shareholders with registered or mailing addresses outside the UK, or who are citizens or nationals of, or resident in, a jurisdiction other than the UK, should read paragraph 9 of Part III of the Circular and the relevant provisions of the Tender Form. It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal requirements in their jurisdiction, including, without limitation, any relevant requirements in relation to the ability of such holders to complete and return a Tender Form.

Repurchase Agreement

Under the terms of the Repurchase Agreement, the Company will acquire, through an on-market purchase, all of the Exit Shares at an aggregate price equal to the amount paid by Daniel Stewart for the Exit Shares. Further details of the Repurchase Agreement are set out in paragraph 2 of Part V of the Circular.

The Company will also be liable to pay Daniel Stewart’s fees, costs and expenses under the terms of Daniel Stewart’s engagement letter by the Company in connection with the Tender Offer.

Action to be taken

The procedure for tendering your Shares depends on whether your Shares are held in certificated form or uncertificated form and is summarised below.

a. Shares held certificated form

Shareholders who hold Shares in certificated form and who wish to tender any or all of their existing holding of Shares should complete the Tender Form in accordance with the instructions printed thereon and in Part III of the Circular and return it by post or by hand (during normal business hours only) to the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. A pre-paid envelope is enclosed for this purpose for holders in the UK only. Shareholders who hold their Shares in certificated form should also return their share certificate(s) and/or other document(s) of title in respect of the Shares tendered. Tender Forms and share certificate(s) and/or other document(s) of title must be received as soon as possible but in any event by no later than 1.00 p.m. on 20 February 2017.

b. Shares held uncertificated form

Shareholders who hold their Shares in uncertificated form (i.e. in CREST) and who wish to tender any or all of their Shares should tender electronically through CREST so that the TTE instruction settles by no later than 1.00 p.m. on 20 February 2017. Further details of the procedures for tendering and settlement are set out in Part III of the Circular.

Recommendation

The Directors can make no recommendations to Shareholders in relation to participation in the Tender Offer. Whether or not Shareholders decide to tender all or any of their Shares will depend on, among other things, their view of the Company’s prospects and their own individual circumstances, including their tax position.

All of the Directors who hold Shares except Nicholas Lyth have agreed to waive their rights to participate in the Tender Offer in order to ensure that their percentage holding in the Company’s issued share capital is to a material extent maintained following the Tender Offer.

Nicholas Lyth, the non-executive chairman of the Company, has expressed his intention to tender some or all of his Shares at the Tender Price.