Shanghai Stock Exchange document szkss (M & A) No. [2022] 2
-- inquiry letter on the examination of the application documents for Beijing Worldia Diamond Tools Co.Ltd(688028) issuing shares and paying cash to purchase assets and raise supporting funds
Beijing Worldia Diamond Tools Co.Ltd(688028) 、 China Securities Co.Ltd(601066) ：
In accordance with the company law, the securities law, the measures for the administration of major asset restructuring of listed companies, the special provisions on major asset restructuring of listed companies on the science and innovation board, the review rules for major asset restructuring of listed companies on the science and Innovation Board of Shanghai Stock Exchange (hereinafter referred to as the review rules for restructuring) and other laws, regulations and relevant provisions of the exchange, The audit institution of the exchange reviewed the application documents of Beijing Worldia Diamond Tools Co.Ltd(688028) (hereinafter referred to as Beijing Worldia Diamond Tools Co.Ltd(688028) , listed companies or companies) for issuing shares and paying cash to purchase assets and raise supporting funds, and formed the first round of questions.
1、 About transaction reasons
Public information shows that the underlying assets have received IPO guidance and submitted guidance and filing materials to Shenzhen Securities Regulatory Bureau on December 11, 2020.
According to the application documents: in 2021, the target company conducted IPO counseling and incurred relevant expenses.
Please explain: (1) the specific reasons for terminating the promotion of IPO; If there are relevant situations that do not meet the IPO conditions, whether the situation has been eliminated; If not eliminated, the impact of the situation on the reorganization and the solutions; (2) The progress and corresponding time of the IPO counseling process of the target company, the amount of third-party intermediary fees incurred due to IPO counseling in 2021, counterparties and main contents.
Independent financial advisers, lawyers and accountants are invited to check and express clear opinions.
2、 About the plant and relocation of the subject company
According to the application documents: (1) the existing plant of the subject company is a leased property, and the lease term is 2022.1.1-2023.12.31. Due to historical reasons, the house property right certificate cannot be obtained, and there is a risk of demolition or failure to use normally; (2) In order to deal with the defects of the ownership of the existing production plant and the potential demolition risks in the future, xinjinquan obtained an industrial land in Huizhou for the construction of its own production plant. After the construction of the plant is completed, the production capacity of xinjinquan will be gradually transferred to Huizhou xinjinquan (invested and established in 2020); (3) It is proposed to invest in the construction project of xinjinquan precision tool manufacturing center (phase I). The construction period of the project is 2 years. The project will help to break the bottleneck of insufficient production capacity and improve the automation level; (4) As of September 30, 2021, the original value of the subject company's right to use assets - houses and buildings was 14.6866 million yuan, and the book value was 11.0145 million yuan. 2) The subject asset has obtained industrial land in Huizhou for the construction of its own production plant. After completion, the production and operation of the subject asset will be relocated to the own plant. At present, the project is still under construction.
Please explain: (1) the starting time of the lease of the existing plant of the subject company, the main contents of the lease contract and the terms of breach of contract, whether there is a risk of moving out in advance and the response arrangements; (2) Whether the project under construction of Huizhou owned plant has obtained the energy-saving review opinions issued by the energy-saving review authority in accordance with the measures for energy-saving review of fixed asset investment projects, and whether the project has completed all necessary approval, filing and other procedures so far; (3) The progress of Huizhou owned plant construction project, the estimated completion time and the time for the completion of production capacity relocation of the subject asset. If it is not completed and put into operation before the expiration of the lease contract, or the leased property is demolished or cannot be used normally before it is completed and put into operation, the specific impact on the production and operation of the subject asset and effective countermeasures; (4) Whether the planned capacity and time of reaching capacity of the target company's Huizhou plant involve new capacity, and if so, analyze the capacity digestion arrangement; (5) The cost, expense and capital source of relocation from Shenzhen plant to Huizhou plant, the impact of relocation on the company's production and operation, whether it involves shutdown, re certification of supplier qualification, etc; (6) The specific contents of the subject company's use right assets, the recognition basis of the original value and the annual amortization amount.
Independent financial advisers and lawyers are requested to check (1) (2) (3) and express clear opinions. 3、 About synergy and business integration
According to the application documents: (1) through this transaction, Beijing Worldia Diamond Tools Co.Ltd(688028) can further expand the finishing field of structural parts of end products in 3C industry on the basis of the existing processing fields such as panel, substrate and screen cutting and component grinding in 3C industry; (2) After the completion of this transaction, the board of directors of the underlying assets is composed of five persons, of which the original directors of the underlying assets Zhang sulai and Zhong Shujin continue to serve as directors, and Zhong Shujin also serves as the general manager; In principle, the listed company will maintain the stability of its existing internal organization and promise to maintain the stability of xinjinquan's existing management team (except those who voluntarily resign) during the performance compensation period, and the existing management team has business autonomy; (3) All senior managers of xinjinquan (including but not limited to the general manager, deputy general manager, financial director, etc.), core technicians and other personnel in important positions shall sign non competition agreements, etc.
Please explain: (1) the application links, links and differences between the products of the listed company and the products of the target company in the 3C field, and the synergy and basis of this M & A in technology improvement and market expansion; (2) The synergy between the cemented carbide cutting tool business of the underlying asset and the main business of the listed company; (3) The purpose of the listed company's products, the capacity utilization rate and the capacity utilization rate after the IPO project is completed, the reasons for the implementation of this M & a rather than the self built production line / capacity, and whether there is the risk of overcapacity after the M & A; (4) In addition to Zhang sulai and Zhong Shujin, the sources and election arrangements of the other three directors of the subject assets, and in combination with the proceedings and decision-making mechanism of the board of directors, supplement and disclose whether the board of directors of the subject assets has special rights arrangements such as one vote veto; (5) After this transaction, whether there is any resignation of important personnel in the existing management team, technical team and other important positions of the target company, and if so, the impact on the target company; (6) The content and scope of the management team's business autonomy; The listed company's integration and control measures for the underlying assets, whether there is the risk of control failure and countermeasures.
Ask a lawyer to check (4) (5) (6) and express clear opinions.
4、 About transaction scheme
4.1 profit commitment and compensation
According to the application documents: (1) the profit commitment is expected to make a net profit of 47.66 million yuan after deducting non profits in 2021; (2) The target company is expected to move to the plant of its subsidiary Huizhou xinjinquan in 2023; The project construction amount of the target company involved in the supporting raised funds is 220 million yuan; (3) When determining the amount of net profit realized within the performance commitment period of the target company, it does not include the profits or losses generated by the listed company's new investment in the target company and its subordinate enterprises after the delivery date of this transaction; (4) In the calculation of performance compensation, the impact of future listed companies' employee equity incentive on the amount of accumulated net profit is excluded; (5) Zhang sulai and Li Huixiang, Zhong Shujin and Chen Xiaohua are husband and wife. As the main body of this profit compensation, the above personnel hold 88.66% of the shares of the target company in total; (6) The order of compensation and the proportion of cash and share compensation are not agreed in this transaction; (7) The profit forecast compensation agreement stipulates the adjustment of performance commitments by relevant parties under the circumstances of force majeure and "major changes".
The applicant is requested to disclose: (1) the compensation proportion and upper limit of compensation amount of each compensation obligor, and the proportion / amount, upper limit and order of cash and share compensation; (2) Give a major risk warning on the fact that the reimbursable assets of the compensation obligor account for less than 100% of the total transaction price.
Please explain: (1) analyze the completion of profit commitment in 2021 in combination with the expected performance in 2021; (2) How to deduct the profit or loss caused by the new investment of the listed company when determining the profit of the target company in the performance commitment period; And the impact of relevant construction funds in this allocation and raising on the performance of the target company and the arrangements for subsequent assessment of profit commitment; (3) Whether the relevant agreements on the adjustment of performance commitments meet the relevant requirements of the guidelines for the application of regulatory rules - listing class No. 1 of the CSRC.
4.2 transaction consideration and payment
According to the application documents: (1) in this transaction, the valuation of the target company corresponding to the shares held by Qianhai Yitao is 630 million yuan, and the valuation of the target company corresponding to the shares held by other counterparties is 700 million yuan; (2) Each counterparty accepts different proportions of cash payment, among which Chen Xiaohua and Li Huixiang pay 100% of the transaction consideration (46.34 million yuan) in cash; (3) The listed company plans to raise no more than 486.95 million yuan for the cash consideration of this transaction, the project construction of the target company, the supplementary working capital of the listed company and the expenses related to restructuring.
Please explain: (1) the reason why the corresponding transaction valuation of shares held by Qianhai Yitao is 10% lower; (2) The reason why the transaction consideration of Chen Xiaohua and Li Huixiang was paid in cash; (3) Combined with the analysis of the disposable cash flow of the listed company, if the allocation and offering is less than expected, the listed company will discuss the capital sources of the cash consideration, restructuring expenses, project construction of the target company and the impact on the financial situation of the listed company.
4.3 reward for excess performance
According to the application documents: (1) if the target company exceeds the promised performance during the performance commitment period, 50% of the accumulated net profit attributable to the parent company after deducting non recurring profits and losses will be rewarded to the management team of the target company, but the accumulated amount of excess performance reward shall not exceed 20% of the total transaction price of this transaction; (2) In order to ensure the quality of profits, listed companies can increase other performance incentives such as accounts receivable and net operating cash flow, and implement restrictive indicators. The specific implementation rules shall be determined by both parties through negotiation; (3) The excess performance reward is included in the current expenses of the target company. When assessing the completion of performance commitment indicators, the excess performance reward expenses are treated as non recurring profits and losses.
Please explain: (1) the procedure for determining the amount of excess performance reward; (2) Procedures for determining restrictive indicators for the implementation of performance awards; (3) Accounting treatment of excess performance awards; (4) How to determine the object of excess performance reward.
5、 About the business and technology of the subject company
5.1 main products and customers of the target company
According to the application materials: (1) the target company has long been engaged in the R & D and production of non-standard customized tools. It is a high-tech enterprise focusing on the R & D, production and sales of medium and high-end precision tools. The product types include polycrystalline diamond tools, single crystal diamond tools and cemented carbide tools; (2) The target company's tool products are widely used in 3C products, automobile manufacturing, aerospace, energy equipment, engineering machinery and other key equipment, parts, mold manufacturing and other industries, and gradually develop into one of the advanced tool enterprises in 3C industry. Huge downstream market space; (3) The target company mainly adopts the direct selling mode, and its main customers are Byd Company Limited(002594) electronics, Likai precision, Shenzhen Everwin Precision Technology Co.Ltd(300115) , Lens Technology Co.Ltd(300433) , Tongda Group, Lingyi Itech (Guangdong) Company(002600) , Kecheng group, Ruisheng precision and other industry leading companies.
Please explain to the applicant: (1) the purpose of the subdivided products of the target company and the corresponding manufacturing links; The application proportion of the target company in 3C products, automobile manufacturing and other fields is the basis for advanced tool enterprises in 3C industry; (2) The specific process of the target company's expansion of major customers, the qualification certification of major customers' suppliers, its position in its suppliers, and its competitive advantages and disadvantages; Contents and binding force of framework agreements signed with major customers; Whether major customers regularly review the supplier's qualification, if so, the review results and whether there are obstacles to subsequent certification; (3) The target company's products are the basis for non-standard customized superhard tools, which is different from customized superhard tools; Identification standard of medium and high-end cutting tools; (4) The products, amount and proportion corresponding to the direct selling and business model of the target company are mainly direct selling; (5) The coincidence between the target assets, customers, suppliers and listed companies, and the similarities and differences between the products sold or purchased.
5.2 technology of the subject company
According to the application materials: (1) the production process of the main products of the target company includes common processes and special processes, and the special processes include edge processing, edge post-treatment, etc; (2) The target company focuses on independent production; At the same time, a small number of non core processes are entrusted to outsourcing manufacturers for processing. Outsourcing processing mainly includes outsourcing coating processing, outsourcing laser processing (laser cutting of superhard tool edge) and other processes of some products; (3) When the target company has insufficient production capacity or customers have some special product needs, it will supplement the production capacity by outsourcing; (4) The core technologies of the target company include tool product design technology, edge laser processing technology, edge grinding technology and edge post-processing technology; The main products have reached China's advanced level in terms of service life, processing efficiency and processing accuracy; (5) There are three core technicians of the target company, namely Zhang sulai, Chen Pengyue and Zhong Huashan. The applicant is requested to explain: (1) the R & D investment of the subject asset during the reporting period; Scope, quantity and education distribution of R & D personnel; Specific work experience of core technicians; Proportion of R & D personnel and core technical personnel; Application and contribution of patents and core technologies; (2) Main production equipment and corresponding production process of the target company; (3) Amount of outsourced processing and main processors during the reporting period; The quantity and proportion of outsourced coating processing and outsourced laser processing, the basis for coating and cutting edge laser cutting are non core processes, and whether the target company has mastered the above process technology; (4) The products, customers, quantity, amount, proportion and gross profit margin corresponding to the capacity of the target company are supplemented by outsourcing, and the reasons why the customer still places an order with the target company when the target company's own capacity is insufficient or the customer has special needs; Whether the total amount method or net amount method is used for purchased products, and the rationality of accounting treatment; (5) The basis for the main products of the target company to reach China's advanced level in terms of service life, processing efficiency and processing accuracy.
6、 About profit forecast and valuation
6.1 profit forecast
According to the application documents: (1) the revenue growth rates of the target assets in the prediction period 2022-2026 are 7.05%, 1.43%, 13.51%, 7.27% and 2.62% respectively, and the capacity utilization rate of the target assets in the reporting period exceeds 100%; (2) In the income method evaluation, the gross profit margin of the underlying asset in the perpetual period is 54.05%, which is higher than that of many top enterprises in the same industry (; 3) the discount rate of this income method evaluation is 11.45%, which is lower than that of comparable transactions by 13.01%; (4) According to the sensitivity analysis, the discount rate
