JD to Acquire 36.8% Equity Stake in JD Digits
Beijing, China June 25, 2020JD.com, Inc. (NASDAQ: JD), today announced that it has entered into agreements with JD Digits, pursuant to
which JD will, through a consolidated PRC domestic company, acquire an aggregate of 36.8% equity interest in JD Digits by converting its profit sharing right with respect to JD Digits as set forth in the Framework Agreement entered into between the
two parties in 2017, and investing additional RMB1.78 billion in cash in JD Digits.
In June 2017, JD completed the reorganization of JD Digits and
received a 40% profit sharing right, which may be converted into 40% of JD Digits equity interest (Maximum Interest), subject to potential proportional dilution as a result of any subsequent equity financings or increases of JD
Digits share incentive plan. In connection with JD Digits additional round of financing in 2018 and the increases of JD Digits share incentive plan, the Maximum Interest was diluted to 35.9%. Pursuant to the agreements that JD
recently entered into with JD Digits, concurrently with the conversion of the profit sharing right into 35.9% equity interest of JD Digits, JD will invest additional RMB-1.78 billion in cash in JD Digits to acquire additional equity interest to
satisfy the minimum capital registration requirement under the PRC laws. Upon the closing of this transaction, the Company will hold an aggregate of 36.8% equity interest in JD Digits.
The closing of the transaction is subject to necessary PRC regulatory approval and certain other conditions. Upon closing, the Framework Agreement, including
the current profit-sharing arrangement between JD and JD Digits, will terminate, and JD Digits will become an equity method investee of JD.
In connection
with the acquisition of equity interests in JD Digits, JD has entered into a series of agreements with JD Digits which provide the rights of JD as a shareholder. JD will continue to enjoy substantially all the rights that it currently enjoys under
the Framework Agreement. As contemplated under the Framework Agreement, certain rights such as the right to liquidity event payment are terminated upon JDs conversion of the profit sharing right into the Maximum Interest of JD Digits. Certain
of JDs rights will be terminated immediately before JD Digits submits its application for initial public offering (IPO). These rights, however, will be restored in the event the IPO application is rejected by the relevant
authorities or withdrawn by JD Digits. These agreements will be filed as exhibits to JD.coms annual report or to other filings with the SEC, as required.
In addition, on June 20, 2020, the shareholders of JD Digits passed a unanimous resolution to restructure JD Digits as a company limited by shares
(股份有限公司 in Chinese) and adopt the dual class voting structure. The shares that Mr. Richard Qiangdong Liu and his controlled entity Suqian Linghang Fangyuan Equity Investment Partnership
(Suqian Linghang Fangyuan) acquired during the spinoff and private financing transactions of JD Digits will be entitled to ten votes per share, whileMr. Liu and his controlled entities must abstain from voting on any related
party transaction with JD Digits. As a result of this dual class voting shareholding structure, JD will hold approximately 18.7% voting power, and Mr. Richard Qiangdong Liu and Suqian Linghang Fangyuan together will hold 54.7% of the total
voting power of JD Digits.
About JD.com
JD.com is a leading technology driven e-commerce company transforming to become the leading supply chain based
technology and service provider. The companys cutting-edge retail infrastructure seeks to enable consumers to buy whatever they want, whenever and wherever they want it. The company has opened its technology and infrastructure to partners,
brands and other sectors, as part of its Retail as a Service offering to help drive productivity and innovation across a range of industries. JD.com is the largest retailer in China, a member of the NASDAQ100 and a Fortune Global 500
company.
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