Securities code: 603577 securities abbreviation: Qingdao Huijintong Power Equipment Co.Ltd(603577) Announcement No.: 2022-016 Qingdao Huijintong Power Equipment Co.Ltd(603577)
Suggestive announcement on the cash acquisition of 80% equity and related party transactions of Chongqing Jiangdian Power Equipment Co., Ltd. by a wholly-owned subsidiary
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
Important content tips:
The wholly-owned subsidiary of the company plans to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. held by the related party Hebei Jinxi Section Steel Co., Ltd. in cash. This transaction constitutes a related party transaction. This transaction needs to be submitted to the second extraordinary general meeting of shareholders of the company in 2022 for deliberation. Related shareholders will avoid voting and have not communicated with other shareholders on their voting opinions.
The appraisal value-added rate of the underlying equity of this transaction is 159.59%, which is high. There are risks of business integration, failure to achieve performance commitments, valuation risks and goodwill impairment risks. Please pay attention to investment risks and exercise voting rights prudently.
Qingdao Huijintong Power Equipment Co.Ltd(603577) (hereinafter referred to as “the company”) on the same day on the website of Shanghai Stock Exchange (www.sse. Com. CN.) The notice of Qingdao Huijintong Power Equipment Co.Ltd(603577) on convening the second extraordinary general meeting of shareholders in 2022 has been issued. The relevant matters for convening this general meeting of shareholders are as follows:
1、 Basic information of the general meeting of shareholders
1. Meeting time: March 11, 2022
2. Equity registration date: March 7, 2022
3. The online voting system adopted for the general meeting of shareholders: the online voting system of the general meeting of shareholders of Shanghai Stock Exchange
4. Title of relevant proposal: proposal on cash acquisition of 80% equity and related party transactions of Chongqing Jiangdian Power Equipment Co., Ltd. by a wholly-owned subsidiary
2、 Overview of this transaction
In order to promote the national strategic layout of the company, improve the comprehensive competitiveness of the company, realize scale effect and synergy effect, solve the problem of horizontal competition between the company and its controlling shareholders, and safeguard the interests of the company and its shareholders, The company plans to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. (hereinafter referred to as “Chongqing Jiangdian” or “target company”) held by the related party Hebei Jinxi Section Steel Co., Ltd. (hereinafter referred to as “Jinxi section steel”) in cash through a wholly-owned subsidiary. On February 23, 2022, Qingdao Huadian offshore equipment Co., Ltd., a wholly-owned subsidiary of the company, and its related party Jinxi section steel signed the agreement on equity transfer of Chongqing Jiangdian Power Equipment Co., Ltd. with effective conditions between Hebei Jinxi Section Steel Co., Ltd. and Qingdao Huadian offshore equipment Co., Ltd. (hereinafter referred to as the equity transfer agreement), It is proposed to acquire 80% equity of Chongqing Jiangdian (hereinafter referred to as the “subject equity”) held by Jinxi section steel at the consideration of RMB 284 million in cash, The valuation of this transaction is based on the equity evaluation value of the target company confirmed by the income method in the asset evaluation report on the value of all equity of shareholders of Chongqing Jiangdian Power Equipment Co., Ltd. involved in the proposed equity acquisition of Qingdao Huadian offshore equipment Co., Ltd. issued by Bandung (Shanghai) asset evaluation Co., Ltd. on December 31, 2021, which shall be determined by both parties through negotiation. The appraisal value of 80% equity of Chongqing Jiangdian, the subject of this related party transaction, is 285705700 yuan. After negotiation, the transaction price of the subject equity is 284 million yuan. This Agreement shall come into force after being deliberated and approved by the general meeting of shareholders of the company. For details, please refer to the website of Shanghai Stock Exchange on the same day (www.sse. Com. CN.) The company’s announcement on the cash acquisition of 80% equity and related party transactions of Chongqing Jiangdian Power Equipment Co., Ltd. by a wholly-owned subsidiary.
3、 Risk tips
The background of this transaction is that in order to support the development of the company, the controlling shareholder first acquired the target company that does not meet the conditions for entering the listed company, and is managed by the listed company at the same time. In the custody operation, the company comprehensively manages the target company and fully grasps its advantages and risks. This transaction is also the transaction behavior after the company and intermediaries have fully investigated the target company. However, in the future production and operation process, it may still be affected by market policies, management risks, safety and environmental protection and other factors. There are certain uncertainties in the progress and effect of resource integration between the two sides, including the valuation risk of the target company, the risk of goodwill impairment, the risk of failure to realize performance commitments, the risk of business integration, etc. Please pay attention to investment risks and exercise voting rights prudently.
(I) valuation risk of the subject company
The appraisal value of 80% equity of Chongqing Jiangdian, the subject of this related party transaction, is 285705700 yuan. After negotiation, the price of the subject equity transaction is 284 million yuan. The appraised value of all shareholders’ equity of the subject company on the benchmark date of this appraisal is 357132100 yuan, which is 219556300 yuan higher than the audited book net assets of the parent company of 137.5758 million yuan, with an appreciation rate of 159.59%. The valuation appreciation rate of the underlying equity is high, which reminds investors to pay attention to the valuation risk of the underlying company.
(II) goodwill impairment risk
After the completion of this transaction, about 138 million yuan of goodwill will be formed in the company’s consolidated balance sheet, with certain impairment risk. According to the accounting standards for business enterprises, the goodwill formed by this transaction is not amortized, but it needs to be tested for impairment at the end of each year in the future. If the future operation of Chongqing Jiangdian is not as expected or the profit forecast is not realized, there is a risk of goodwill impairment, which will have an adverse impact on the company’s profits and losses. Investors should pay attention to the risk of goodwill impairment.
(III) risk of failure to fulfill performance commitments
According to the equity transfer agreement signed by both parties, the performance commitment period of this transaction is three years. Although the equity transfer agreement signed by the company and the counterparty contains performance commitment and compensation terms, considering the uncertainty of industry development, market competition and macroeconomic changes in the future, it is still not ruled out that the actual performance of the target company is lower than the promised performance during the performance commitment period, and investors are reminded of the risks caused by the failure to realize the performance commitment.
(IV) business integration risk
After the completion of this transaction, the company’s personnel, assets and business scale have increased significantly. The multi-dimensional expansion will bring challenges to the company’s existing governance pattern. There are still some uncertainties whether the company can effectively integrate the underlying assets in terms of business, assets and personnel, and give full play to the synergy of this transaction, Draw investors’ attention to the risk of business integration.
4、 Relevant description
For this matter, the related shareholders did not communicate with other shareholders on their voting opinions, and will avoid voting in the second extraordinary general meeting of shareholders in 2022.
It is hereby announced.
Qingdao Huijintong Power Equipment Co.Ltd(603577) board of directors February 24, 2022
