Who would have thought that after the buyer paid hundreds of millions of yuan and completed the industrial and commercial change, an equity transfer transaction suddenly encountered termination and evolved into a “stock for debt”.
This “strange” transaction occurred between Guangdong Taiantang Pharmaceutical Co.Ltd(002433) (002433. SZ) and internet medical “unicorn” Chengdu Medical cloud Technology Co., Ltd. (hereinafter referred to as “Chengdu Medical cloud”).
On the last trading day before the Spring Festival, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) announced that it would stop selling its 47.35% equity of kangaido to Chengdu Medical cloud. In the morning of the first trading day (February 7) after the Spring Festival, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) opened lower than the limit.
Despite the termination of the transaction, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) relies on the hundreds of millions of yuan of share transfer funds paid by the counterparty to alleviate the urgency of cashing its corporate bonds. At the same time, it also helps the company briefly “beautify” its performance. According to the repayment agreement, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) only needs to repay the share right payment to Chengdu Medical cloud in installments, and there are relief clauses.
That’s not over. After the sale of kangaido’s equity, since the first half of 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) performance has soared, the share price of listed companies has soared, and the cash out behind the controlling shareholders has exceeded 200 million yuan.
Outside investors are quite puzzled that what is the secret behind Guangdong Taiantang Pharmaceutical Co.Ltd(002433) selling kangaido to Chengdu Medical cloud? Why can “firm” transactions be reversed and terminated?
equity transfer becomes “stock for debt”
In April 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) announced that it would sell the 47.35% equity of kangaido held by the listed company to Chengdu Medical cloud, and entrust the voting right of holding 4% equity of kangaido to Chengdu Medical cloud. Chengdu Medical cloud has 51.35% voting right of kangaido to realize the actual control of the latter.
Guangdong Taiantang Pharmaceutical Co.Ltd(002433) IPO on Shenzhen Stock Exchange in June 2010. In November 2014, four years after listing, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) followed the trend and acquired Guangdong kangaido Digital Health Technology Co., Ltd. (hereinafter referred to as kangaido) with a capital of 350 million yuan. Its main business is across the pharmaceutical wholesale and retail (pharmaceutical e-commerce) business in addition to traditional Chinese medicine.
After Guangdong Taiantang Pharmaceutical Co.Ltd(002433) became the owner, the operation of kangaido gradually improved and gave a great boost to the performance of the parent company, becoming the main source of income for Guangdong Taiantang Pharmaceutical Co.Ltd(002433) for many years.
According to the reply of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) to the reorganization inquiry letter of Shenzhen Stock Exchange, from 2018 to 2020, the proportion of kangaido’s revenue in Guangdong Taiantang Pharmaceutical Co.Ltd(002433) revenue was 64.79%, 77.26% and 78.44% respectively, and the proportion of kangaido’s net profit in Guangdong Taiantang Pharmaceutical Co.Ltd(002433) net profit was 14.19%, 20.22% and 117.42% respectively.
Guangdong Taiantang Pharmaceutical Co.Ltd(002433) said that the original intention of the company to acquire kangaido was to strengthen the market scale of the company’s proprietary Chinese medicine products with the help of the advantages of kangaido pharmaceutical e-commerce. However, as the policy reform of the pharmaceutical e-commerce industry did not meet expectations, the company’s main products were not suitable for vigorous promotion on the e-commerce platform. Although kangaido’s business grew rapidly, it did not form a synergistic effect with the company’s focused Chinese patent medicine business. Due to the large demand for funds for the promotion of pharmaceutical e-commerce business, the net profits of kangaido in 2019 and 2020 were 20.5878 million yuan and 31.5731 million yuan respectively, while the cash flows from operating activities were -33.6963 million yuan and -198 million yuan respectively, which put great pressure on the operating funds of listed companies.
According to the disclosure of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) , the listed company previously held 77.35% equity of kangaido, of which 30% equity has been pledged to the bond trustee Gf Securities Co.Ltd(000776) as the debt repayment guarantee of “16 Tai’an debt”, so it sold the remaining 47.35% equity.
The first financial reporter found that the transaction itself was controversial, and investors questioned the suspicion of “sale”.
According to the report on the sale of major assets (Draft) released by Guangdong Taiantang Pharmaceutical Co.Ltd(002433) , in March 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) transferred its equity corresponding to the capital contribution of kangaido of 1.3915 million yuan to Zhendong Shengming at the price of 30 million yuan. “At the time of this share transfer, the overall equity valuation of kangaido was 2.6 billion yuan.”
In April 2021, one month later, in the transaction between Guangdong Taiantang Pharmaceutical Co.Ltd(002433) and Chengdu Medical cloud, the valuation of 100% equity of kangaido was determined at 1.58 billion yuan, with a difference of 1.020 billion yuan. The benchmark transfer consideration of 47.35% kangaido equity transferred by Chengdu Medical cloud is 748 million yuan.
The Shenzhen Stock Exchange also expressed doubts in the restructuring inquiry letter, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) said that the transaction background is different, and according to the business performance of kangaido from 2017 to September 2019, it basically meets the requirements of spin off listing. Therefore, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) initiated the introduction of investors, equity transfer and spin off and listing of subsidiaries. Under the expectation of kangaido’s spin off listing, investors are also willing to accept higher valuation.
This equity transaction is to adjust the strategic structure of the company and focus its main business on the R & D, manufacturing and sales of Chinese patent medicine and the preliminary processing and sales of Chinese patent medicine in the future when the performance of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) has fallen sharply and the payment of “16 Tai’an debt” has expired and delayed.
Even if the underlying price is low, it does not affect the normal progress of this transaction. The timeline published by Guangdong Taiantang Pharmaceutical Co.Ltd(002433) shows that on May 25, 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) announced that Chengdu Medical cloud paid 60% of the equity payment, and the industrial and commercial change is in progress; On July 6, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) also said that both parties to the transaction had completed the corresponding industrial and commercial registration procedures for the transfer of the underlying equity, and Chengdu Yiyun had legally obtained 47.35% equity of kangaido.
This transaction once boosted Guangdong Taiantang Pharmaceutical Co.Ltd(002433) ‘s performance in the 2021 semi annual report and the third quarterly report. Guangdong Taiantang Pharmaceutical Co.Ltd(002433) the 2021 semi annual report shows that the sale of kangaido’s equity has generated an investment income of 495 million yuan for the company, resulting in an increase in the total profit. The net profit attributable to the shareholders of the listed company reached 520 million yuan, a sharp increase of 1865.72% over the same period in 2020. In the first three quarters of 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) net profit was 553 million yuan, a year-on-year increase of 1263.81%.
If the general transaction fails, the buyer and the seller can directly “refund and return”. To the surprise of the outside world, according to the termination and repayment agreement signed between Guangdong Taiantang Pharmaceutical Co.Ltd(002433) and Chengdu Medical cloud this time, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) can be repaid in installments, and the repayment time limit is as long as 6 years.
According to the termination and repayment agreement signed by both parties, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) will gradually return the initial payment of 449 million yuan paid by Chengdu Medical cloud in the next six years, i.e. from 2023 to the end of 2028. Ke Shaobin, the son of Ke Shuquan, the actual controller of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) (now the chairman and general manager of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) ), shall be jointly and severally liable for the above debts.
In addition, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) also signed a supplementary agreement with Chengdu Medical cloud, which provided a loan of 218 million yuan to kangaido.
According to the agreement, the money can also be repaid in five batches, and the deadline for the last repayment is also “December 31, 2028”.
According to the agreement of both parties, the equity transfer payment and loan payment shall be the capital occupation interest calculated according to the loan market quotation rate (LPR) published by the national interbank lending center from May 14, 2021 to the actual repayment date.
Some people in the financial market believe that although there are interest requirements for the return of the above share transfer funds and the loan, this is only the most basic interest of the loan in the bank market. “This money is equivalent to a ‘long-term low interest loan’, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) can use these funds at a very low cost, which is another good ‘deal’.”
is there a clue long before “quitting marriage”?
A good deal was suddenly terminated, which surprised the outside investors. There was a lot of discussion and different opinions in the Guangdong Taiantang Pharmaceutical Co.Ltd(002433) stock bar, and even the internal staff of kangaido were surprised. According to the investigation of the first financial reporter, in fact, the clue of this seemingly successful business may have already appeared.
In fact, the core business of the Medical Union is chronic disease management, which is commonly known in the industry as “doctor leading patient”, that is, connect chronic patients through registered doctors in the Medical Union platform and prescribe drugs on the Medical Union platform. The reporter found that as an Internet hospital with long-term layout of doctors and patients, Chengdu Medical cloud system lacks a medical e-commerce platform, which turns the relationship between doctors and patients on the Medical Union platform into drug sales revenue.
“Chengdu Medical cloud and kangaido match in business, and the two have high synergy. Chengdu Medical cloud has arranged the field of internet pharmaceutical e-commerce through the acquisition of kangaido. Through kangaido’s mature online sales channels, it can quickly expand the online drug sales sector, combine Internet hospitals with internet pharmaceutical e-commerce, and further expand its market share.” Guangdong Taiantang Pharmaceutical Co.Ltd(002433) said in its reply to the regulatory inquiry.
The actual controller of the founder and CEO of Chengdu Medical cloud is 35 year old Wang Shirui. As the core soul of Chengdu Medical cloud, Wang Shirui served as a core executive in kangaido, which is obviously the key to this transaction.
“Boss Wang (Wang Shirui) has never met. There is no telephone or wechat. We will sign when the industry and commerce changes.” Recently, referring to the acquisition between Guangdong Taiantang Pharmaceutical Co.Ltd(002433) and Chengdu Medical cloud, an authority within kangaido who asked not to be named told the first financial reporter.
Although the industrial and commercial information of kangaido has also been changed, Wang Shirui only served as a director of this platform for a short time.
According to the industrial and commercial data of kangaido, on July 6, 2021, Chengdu Yiyun became the shareholder of kangaido, and Chen Yanhui, the former director of kangaido, withdrew, Wang Shirui served as the director, and the legal representative was changed from Chen Yanhui to Wang Shirui.
According to the change record of tianyancha industrial and commercial data, Wang Shirui withdrew from the director of kangaido on October 14, 2021. Wang Shirui also stepped down as the legal representative and was replaced by a person named He Xia.
At present, it is unclear why the transaction between the two sides was terminated. Even though Chengdu Medical cloud issued the statement on major asset restructuring, it did not explain in detail the reasons for the termination of the transaction, but stated that “according to the provisions of the equity transfer agreement and the results of delivery audit, both parties reached an agreement and decided to terminate the equity transfer.”
Throughout the growth history of the Medical Association, the Internet giant has been listed on the market, but it seems that it is not going well in 2021. In May 2014, Wang Shirui, who studied at West China Medical College, founded Chengdu Medical cloud and Medical Union app. With its huge Doctor Network in its alma mater, the Medical Union has rapidly grown into an Internet hospital with a large number of registered doctors and users, won the favor of capital and accumulated several rounds of financing. Behind the financiers of the Medical Union in the past, there were many giants such as Tencent, Sequoia China and Huaxing capital, which have been valued at billions of dollars so far.
In recent years, rumors about the IPO of the Medical Union have been heard all the time. First, it is rumored that it wants to go on the science and innovation board, and then it is rumored to be the Hong Kong stock exchange. According to the public information, the Medical Union may submit the prospectus in June 2021. Post media reported that in mid-2021, the Medical Union encountered “financial audit problems” and “it audit problems” in the process of preparing for listing, and failed to submit the prospectus.
According to public information, in 2021, the Medical Union also started a wave of layoffs, with a scale of more than 1000 layoffs. Many former employees said that the reason given by the medical union company was “organizational adjustment”. In addition, some former employees filed a lawsuit with the Medical Union.
The subject of this transaction, kangaido, seems to have a “hard time”. “The situation is not very good, (mainly) some ‘side effects’ brought about by the change of shareholders. The company’s revenue has decreased a lot and many employees have left.” The above-mentioned kangaido internal authority said. This is consistent with the discussion on the social platform claiming to be the employees of kangaido. Many users said that more employees of kangaido left in 2021.
reduction and cash out
For the reasons behind the sale of some shares of kangaido, it seems that an unavoidable fact is that Guangdong Taiantang Pharmaceutical Co.Ltd(002433) is too “short of money”.
Before selling the equity of kangaido, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) encountered the practical embarrassment that the corporate bonds issued in 2016 had expired on February 2, 2021. Through the approval of the bondholders’ meeting, it is agreed to extend the cashing date to November 30, 2021, and Guangdong Taiantang Pharmaceutical Co.Ltd(002433) will repay 20%, 20%, 30% and 30% of the total principal of the debt before April 30, June 30, September 30 and November 30 respectively, “At that time, listed companies will still face the debt repayment pressure of nearly 1 billion yuan. The stripping of pharmaceutical e-commerce business will bring 748 million yuan of cash inflow to listed companies, which will significantly alleviate the working capital pressure of listed companies.” Guangdong Taiantang Pharmaceutical Co.Ltd(002433) scale.
Guangdong Taiantang Pharmaceutical Co.Ltd(002433) also said that after the transaction is completed, the listed company will peel off the original pharmaceutical e-commerce business, quickly return the funds, and focus on the R & D, production and sales of Chinese patent medicine, primary processing and sales of traditional Chinese medicine materials, so as to further optimize the business operation of the listed company.
“The first payment obtained from the original transaction is mainly used to repay the company’s debt and reduce the company’s debt risk.” Talking about the impact of terminating the sale of major assets on the company, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) said bluntly in the announcement.
However, at present, the performance expectation of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) 2021 is a huge loss. On January 29, 2022, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) released the performance forecast for 2021, which said that the company’s net profit loss attributable to shareholders of listed companies ranged from 788 million yuan to 798 million yuan, a decrease of 3645.45% – 3690.44% over the same period of the previous year.
There are two main reasons for the loss. First, the company repaid 900 million corporate bonds during the reporting period, resulting in insufficient marketing working capital investment, a sharp decline in operating income, and an operating loss of about 332 million yuan to 342 million yuan; Second, during the reporting period, the operating performance of factor companies kangaido and Guangdong Hongxing Group Co., Ltd. fell sharply, resulting in the impairment of goodwill of 314 million yuan and 131 million yuan respectively, with a total impairment of goodwill of 445 million yuan.
In any case, thanks to the “good” brought by the previous sale of some shares of kangaiduo, the share price of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) listed companies also rose, and the controlling shareholder Guangdong Taiantang Pharmaceutical Co.Ltd(002433) Group Co., Ltd. (hereinafter referred to as Guangdong Taiantang Pharmaceutical Co.Ltd(002433) group) cashed out more than 200 million yuan.
On June 26, 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) disclosed the announcement of pre reduction of controlling shareholders. As of December 29, 2021, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) group had reduced its holdings of 37201000 shares, accounting for 4.85% of the total share capital of the company. From July 19, 2021 to November 19, 2021, the Guangdong Taiantang Pharmaceutical Co.Ltd(002433) group reduced its holdings of 15.287 million shares (accounting for 1.99%) in the price range of 5.17-6.49 yuan / share through centralized bidding; From July 27, 2021 to December 22, 2021, 21914000 shares (accounting for 2.86%) were reduced by block trading at the price of RMB 4.71-6.32/share. Calculated at the middle price, the two holdings were cashed out by 210 million yuan.
Even if the holdings are reduced and cashed out, Guangdong Taiantang Pharmaceutical Co.Ltd(002433) group still holds Guangdong Taiantang Pharmaceutical Co.Ltd(002433) 154 million shares (accounting for 20.08%), which is the controlling shareholder of listed companies, and Ke Shuquan family is still the actual controller of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) . However, as of January 25, 2022, more than 80% of the equity of Guangdong Taiantang Pharmaceutical Co.Ltd(002433) group was pledged. The shares held by Ke Shaofen (holding 29.85 million shares, accounting for 3.89%) and Guangdong jinpibao Investment Co., Ltd. (holding 1.2 million shares, accounting for 0.16%) are all pledged.
