603577: Qingdao Huijintong Power Equipment Co.Ltd(603577) announcement on the cash acquisition of 80% equity and related party transactions of Chongqing Jiangdian Power Equipment Co., Ltd. by a wholly-owned subsidiary

Securities code: 603577 securities abbreviation: Qingdao Huijintong Power Equipment Co.Ltd(603577) Announcement No.: 2022-012 Qingdao Huijintong Power Equipment Co.Ltd(603577)

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:

Brief content of the transaction: Qingdao Huadian offshore equipment Co., Ltd. (hereinafter referred to as “Qingdao Huadian”), a wholly-owned subsidiary of the company, plans to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. (hereinafter referred to as “Chongqing Jiangdian” target company “) held by the related party Hebei Jinxi Section Steel Co., Ltd. (hereinafter referred to as” Jinxi section steel “), The transaction amount is 284 million yuan.

This transaction refers to the asset appraisal report on the value of all shareholders’ equity 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 Appraisal Co., Ltd. as the pricing basis.

Compensation commitment of related parties: Jinxi section steel makes a commitment to the net profits of Chongqing Jiangdian in 2022, 2023 and 2024, and makes cash compensation for the part that the cumulative net profits realized by Chongqing Jiangdian during the performance commitment period is less than the total committed net profits.

This transaction constitutes a connected transaction, does not constitute a major asset restructuring, and there are no major legal obstacles. As of this related party transaction (excluding this transaction), in the past 12 months, except for the daily related party transactions, the company has not had other types of related party transactions with the related party Jinxi section steel, nor has the company had related party transactions related to this transaction category with other related parties.

This transaction has been deliberated and approved by the second meeting of the Fourth Board of directors of the company and needs to be submitted to the general meeting of shareholders of the company for deliberation. There is uncertainty whether it can be deliberated and approved. Please pay attention to the investment risk.

There are business integration risks, failure to realize performance commitments, valuation risks and goodwill impairment risks in this transaction. Please pay attention to investment risks.

1、 Overview of related party transactions

(I) transaction background

The controlling shareholder of Qingdao Huijintong Power Equipment Co.Ltd(603577) (hereinafter referred to as the “company” Qingdao Huijintong Power Equipment Co.Ltd(603577) “and” listed company “) Hebei Jinxi iron and Steel Group Co., Ltd. (hereinafter referred to as” Jinxi stock “) served the notice on the opportunity to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. to the company. Given that Chongqing Jiangdian and Qingdao Huijintong Power Equipment Co.Ltd(603577) are companies in the same industry, According to the commitment on avoiding horizontal competition made by the controlling shareholder Jinxi Co., Ltd. on June 7, 2020, the controlling shareholder Jinxi Co., Ltd. gives priority to the above business opportunities to Qingdao Huijintong Power Equipment Co.Ltd(603577) options. At that time, the target company was in the stage of loss operation, and there was still uncertainty about its future profitability, which temporarily did not meet the conditions for direct acquisition by listed companies. However, this business opportunity has strong significance of industrial integration and potential synergy. In order to avoid investment risks and maximize the protection of the interests of the company and all shareholders, especially minority shareholders, the 19th meeting of the third board of directors and the fifth extraordinary general meeting of shareholders in 2020 were held on December 4, 2020 On December 22, 2020, the proposal on related parties’ intention to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. first and the supplementary commitment of controlling shareholders and actual controllers to further avoid horizontal competition was deliberated and approved, and Jinxi Co., Ltd. or its subsidiaries were agreed to acquire 80% equity of Chongqing Jiangdian first, and the controlling shareholders The actual controller issued the supplementary commitment on further avoiding horizontal competition, which will be injected into the listed company within 2 years after Chongqing Jiangdian meets the conditions for injection into the listed company and no later than December 31, 2023.

On December 4, 2020, Jinxi section steel, a wholly-owned subsidiary of Jinxi Co., Ltd., the controlling shareholder, signed the equity transfer agreement with effective conditions for Chongqing Jiangdian Power Equipment Co., Ltd. with Zeng Xiangxian and Chang Zhen. On the premise of stripping and injecting assets into the target company, Jinxi section steel purchased 80% of the equity of Chongqing Jiangdian at a transaction consideration of 260 million yuan, And completed the equity change registration on December 23, 2020.

According to the arrangement of the controlling shareholder’s commitment on avoiding horizontal competition and supplementary commitment on further avoiding horizontal competition, Qingdao Huijintong Power Equipment Co.Ltd(603577) signed the entrusted management agreement on Chongqing Jiangdian Power Equipment Co., Ltd. with Jinxi section steel, Zeng Xiangxian and Chongqing Jiangdian to entrust Chongqing Jiangdian with Qingdao Huijintong Power Equipment Co.Ltd(603577) operation and management. For details, please refer to the company’s interim announcement on the company’s intention to acquire 80% equity of Chongqing Jiangdian Power Equipment Co., Ltd. first and the supplementary commitment of the controlling shareholder and actual controller (2020-075) and the company’s announcement on signing the entrusted management agreement and related party transactions with related parties (2020-076). The company has managed Chongqing Jiangdian according to the above custody agreement. At present, the operation management and profitability of Chongqing Jiangdian have been significantly improved.

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 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% of the equity of Chongqing Jiangdian held by the related party Jinxi section steel in cash through its wholly-owned subsidiary. (II) basic information of the transaction

On February 23, 2022, Qingdao Huadian, a wholly-owned subsidiary of the company, and Jinxi section steel signed the equity transfer agreement between Hebei Jinxi Section Steel Co., Ltd. and Qingdao Huadian offshore equipment Co., Ltd. on Chongqing Jiangdian Power Equipment Co., Ltd. with effective conditions (hereinafter referred to as the equity transfer agreement), Qingdao Huadian plans to purchase 80% of the 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. This Agreement shall enter into force after being reviewed and approved by the general meeting of shareholders of the company.

The valuation of this transaction is based on the appraisal report on the value of all equity assets 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 Appraisal Co., Ltd. (hereinafter referred to as “Bandung asset appraisal”) on December 31, 2021 (hereinafter referred to as “asset appraisal report”) the equity appraisal value of the subject company confirmed in the appraisal report shall be determined by both parties through negotiation. According to the assets appraisal report, the appraisal conclusion adopts the appraisal result of income method. The appraisal value of all shareholders’ equity of the subject company on the benchmark date is RMB 357132100, and the appraisal value of the subject equity on the benchmark date is RMB 285705700. It is agreed by both parties through negotiation, The transaction price of the underlying equity is determined as 284 million yuan based on the above evaluation value.

The counterparty of this transaction, Jinxi section steel, is a wholly-owned subsidiary of Jinxi shares, the controlling shareholder of the company. The association relationship complies with the association relationship specified in Item (II) of paragraph 2 of article 6.3.3 of the stock listing rules of Shanghai Stock Exchange. Jinxi section steel is an affiliated party of the company. This transaction constitutes an affiliated transaction of the listed company, and the effectiveness of this transaction needs to be reviewed and approved by the general meeting of shareholders of the company, The related person who has an interest in the related party transaction will waive the right to vote on the proposal at the general meeting of shareholders.

According to the second paragraph of article 6.1.15 of the Listing Rules of Shanghai Stock Exchange: in addition to the provisions of the preceding paragraph, the company has a “purchase or sale of assets” transaction, regardless of whether the transaction object is related or not. If the total amount of assets or transaction amount involved exceeds 30% of the company’s total audited assets in the latest period within 12 consecutive months, In addition to the disclosure and audit or evaluation with reference to article 6.1.6, it shall also be submitted to the general meeting of shareholders for deliberation and approved by more than two-thirds of the voting rights held by the shareholders attending the meeting. As of December 31, 2020, the total audited assets of the company were 2572028400 yuan. The total assets involved in this transaction exceeded 30% of the total audited assets of the company in the latest period. This transaction needs to be submitted to the general meeting of shareholders for deliberation and approved by more than two-thirds of the voting rights held by the shareholders attending the meeting. According to the relevant provisions of the measures for the administration of major asset restructuring of listed companies, this connected transaction does not constitute a major asset restructuring.

2、 Basic information of both parties

(I) basic information of Transferor

Name: Hebei Jinxi Section Steel Co., Ltd

Unified social credit Code: 911302276760137681

Address: East of santunying Town, Qianxi County

Legal representative: Yu Lifeng

Registered capital: 350 million yuan

Enterprise type: limited liability company (wholly owned by foreign-invested enterprise legal person)

Date of establishment: May 30, 2008

Business scope: production of large-scale section steel and small and medium-sized section steel, sales of the company’s self-produced products and provision of after-sales service; Import and export business of ferrous metal materials, machinery and equipment, spare parts and accessories, and labor dispatch services (for projects subject to approval according to law, business activities can be carried out only with the approval of relevant departments).

Ownership structure and shareholders: Jinxi shares are 100% owned by Jinxi. Jinxi shares have good asset and cash flow conditions, abundant monetary funds, strong solvency and strong financing ability. There is no case of alleviating capital pressure through this transaction, and the shares of the company held by Jinxi shares are not pledged or frozen. Main financial data of Jinxi section steel:

Unit: 10000 yuan

Project December 31, 2020 (audited) September 30, 2021 (Unaudited)

Total assets 613599.61 689960.99

Net assets 158611.04 149344.04

Project 2020 (audited) January September 2021 (Unaudited)

Operating income 911575.53 1170865.23

Net profit 38127.98 35100.01

Introduction to related party relationship: Jinxi section steel is a wholly-owned subsidiary of Jinxi Co., Ltd., the controlling shareholder of the company. The related relationship complies with the related relationship specified in Item (II) of paragraph 2 of article 6.3.3 of the stock listing rules of Shanghai Stock Exchange. Jinxi section steel is an associated legal person of the company.

(II) basic information of the transferee

Name: Qingdao Huadian Marine Equipment Co., Ltd

Unified social credit Code: 9137028107328039xh

Address: North of gongjiazhuang village and north of Zhuzhu Road, Puji Town, Jiaozhou City, Qingdao

Legal representative: Zhu Fangying

Registered capital: 15 million yuan

Enterprise type: limited liability company (sole proprietorship of legal person invested or controlled by natural person)

Date of establishment: August 6, 2013

Business scope: R & D, manufacturing and sales of offshore drilling platforms, production platforms, offshore floating structures, special equipment and accessories for offshore engineering, iron towers and metal structures (excluding special equipment above); Marine engineering technology research and development, technical consultation, technical services, metal surface treatment (excluding electroplating); Operate the export business of the enterprise’s own products and technologies and the import business of mechanical equipment, spare parts, raw and auxiliary materials and technologies required by the enterprise (except for the goods and technologies limited or prohibited by the state).

Ownership structure: Qingdao Huijintong Power Equipment Co.Ltd(603577) holding 100%

Main financial data of Qingdao Huadian:

Unit: 10000 yuan

Project December 31, 2020 (audited) September 30, 2021 (Unaudited)

Total assets 1982.60 3288.23

Net assets 1411.35 1401.27

Project 2020 (audited) January September 2021 (Unaudited)

Operating income 5506.18 12181.95

Net profit 30.02 -10.08

This transaction is a cash acquisition. The company will increase the capital of Qingdao Huadian by 300 million yuan to enhance its capital strength. The capital source of this transaction is the company’s own or self raised funds. Up to now, the company’s financial situation is good and has the due payment capacity of this transaction. The payment method of installment is adopted this time, which can effectively alleviate the pressure of short-term capital payment. This transaction will not adversely affect the normal production, operation and liquidity of the company. 3、 Basic information of related party transactions

This transaction belongs to the transaction category of “purchase or sale of assets” stipulated in 6.1.1 of the Listing Rules of Shanghai Stock Exchange, and the subject matter of the transaction is the 80% equity of Chongqing Jiangdian held by Jinxi section steel.

(I) basic information of the target company

The target company was founded in 1996 and is located in Chongqing

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