China Securities Co.Ltd(601066)
Special opinions on the Shanghai Stock Exchange’s second inquiry letter on Fujian Start Group Co.Ltd(600734) signing the restructuring investment agreement (SSE Gong Han [2021] No. 2997)
Listed company management Department II of Shanghai Stock Exchange:
Fujian Start Group Co.Ltd(600734) (hereinafter referred to as the “company”, “listed company” or “Shida group”) disclosed the announcement on the signing of the restructuring investment agreement between the company and the restructuring investors on the evening of December 7, 2021. On December 16, 2021, it received the second inquiry letter on matters related to the signing of the restructuring investment agreement by Fujian Start Group Co.Ltd(600734) from Shanghai Stock Exchange (szgh [2021] No. 2997) (hereinafter referred to as the “company”) “Inquiry letter”). China Securities Co.Ltd(601066) (hereinafter referred to as “financial consultant” or ” China Securities Co.Ltd(601066) securities”) accepted the entrustment of Shida group, checked and issued special opinions according to the relevant issues involved in the inquiry letter.
Question 1
The announcement shows that the company’s reorganization plan takes the existing shares as the base and implements the conversion of capital reserve into shares according to the proportion of 25 shares per 10 shares. The reorganization investors paid about 900 million yuan in total and obtained about 1.556 billion shares converted into shares, with an average consideration of 0.58 yuan / share. The share price of the reorganization investors is only 1.6% of the current secondary market valuation. The company is requested to: (1) in combination with the reorganization cases of comparable listed companies, explain in detail the rationality of the consideration for the shares transferred by the reorganization investors and whether it damages the interests of minority shareholders; (2) fully disclose the ex rights of the company’s shares according to the company’s reorganization plan and the comparable cases in Shanghai stock market; (3) the low share price of the reorganization investors may lead to the risk of loss to minority shareholders.
reply:
(1) Combined with the reorganization cases of comparable listed companies, this paper explains in detail the rationality of the consideration for the shares transferred by the reorganization investors and whether it damages the interests of minority shareholders;
1、 Rationality of consideration for shares transferred by reorganization investors
Shida group’s plan to convert the capital reserve into share capital will be based on the Fuzhou intermediate people’s Court (hereinafter referred to as the “court”) ）The reorganization plan approved by the ruling shall be carried out, and the converted shares shall be used to introduce the reorganization investors. The current regulatory regulations do not make clear regulatory provisions on the consideration of the transferred shares in the reorganization procedure of the reorganization investor. The consideration of the transferred shares in the reorganization procedure of the reorganization investor is actually determined through negotiation. The consideration for the transfer of shares by the investor of Shida group is reasonable and objective. The details are as follows: 1. According to the market value report and liquidation value report issued by Zoomlion asset appraisal group Co., Ltd., taking the acceptance date of pre reorganization, i.e. March 31, 2021, as the appraisal base date, the market value of Shida group’s total assets is about 462 million yuan and the liquidation value is about 389 million yuan, The total value of property available for distribution to ordinary creditors is about 204 million yuan, and the total amount of ordinary creditor’s rights is 1.662 billion yuan. The repayment proportion of ordinary creditor’s rights in liquidation is only 12.29%. The company has been seriously insolvent.
The reorganization plan for the past two years has been approved by the court, and the debt scale exceeds 1.5 billion yuan Comparable listed companies with liquidation ratio less than 20% (as shown in the table below), the average discount rate of the investor’s consideration compared with the transaction price in the secondary market on the acceptance date of reorganization is between 18.44% – 60.98%, and the discount rate compared with the highest share price during the reorganization period is between 9.96% – 44.10%. Through comparison with comparable cases, the discount rates of 21.40% and 14.04% respectively compared with the highest transaction price on the acceptance date and the recent transaction price of Shida group’s investors are within the above range Inside.
Reorganization investor acceptance date reorganization period
Securities code securities abbreviation average consideration closing price (yuan / discount rate) maximum price discount rate (yuan / share) (yuan / share)
601777.SH Lifan Technology(Group)Co.Ltd(601777) 1.334. 3730.43%6.4520. 62%
600179.SH Antong Holdings Co.Ltd(600179) 2.945. 6943.06%6.6636. 79%
002501. SZ * ST Liyuan 0.851 5255.92%2.6731. 84%
002716.SZ Chenzhou City Jingui Silver Industry Co.Ltd(002716) 1.272. 5649.61%2.8844. 10%
603555. SHST noble 1.302 4852.42%3.2340. 25%
600515. Sh * ST foundation 2.597 1536.22%13.6019. 04%
600225. Sh * ST Songjiang 1.001 6460.98%3.3529. 85%
002323. SZ * ST Yabo 1.073 6829.00%4.9121. 79%
000980. SZ * ST Zhongtai 0.995 3718.44%9.949. 96%
002175. SZ * ST East grid 0.602 9620.27%3.0519. 67%
600734. Sh * ST Shida 0.582 7121.40%4.1314. 04%
Data source: the above data comes from the reorganization plan (Draft) disclosed by relevant companies.
2. Since the audited net assets of Shida group attributable to the shareholders of the listed company in 2020 are negative, according to the stock listing rules of Shanghai Stock Exchange (revised in December 2020) (hereinafter referred to as the “Listing Rules”), the company’s shares have been continuously warned of delisting risk after the disclosure of the 2020 annual report
On November 26, 2021, the company was ruled by the court to enter the bankruptcy and reorganization proceedings. However, due to the late entry of the company into the bankruptcy and reorganization proceedings and the deep operation and debt crisis, the company is still faced with the major risk of failure of reorganization or termination of listing due to the financial compulsory delisting index in the 2021 annual report. Therefore, restructuring investors need to bear greater investment risks to participate in the restructuring investment of Shida group.
3. As a condition for the transfer of converted shares, in addition to paying the corresponding consideration, The industrial investor Fujian big data Co., Ltd. (hereinafter referred to as “Fujian big data”) also promises that after the implementation of the reorganization plan, the high-quality assets legally owned or managed by it or other high-quality assets recognized by the general meeting of shareholders of Shida group will be approved by the securities regulatory authority (if necessary) inject into Shida group; in addition, in order to maintain the stability of the governance structure after the reorganization of the company, Fujian big data promises that the transferred shares will not be reduced in any form within 36 months from the date of registration under its name; and Quzhou dongkun Technology Service Center (Limited partnership) (hereinafter referred to as “Quzhou dongkun”) ）And other 11 financial investors promised that the transferred shares would not be reduced in any form within 12 months from the date of registration to their names. Therefore, in addition to paying the consideration, restructuring investors also bear other responsibilities and obligations such as asset injection and / or share locking, which is quite different from the short-term reduction and arbitrage of ordinary investors.
Before this reorganization, Shida group was insolvent and faced severe bankruptcy liquidation and delisting risks. Once Shida group was bankrupt and liquidated, the rights and interests of investors would return to zero, the company’s shares would be directly terminated from listing, and small and medium-sized shareholders would face heavy losses; Since the restructuring value of Shida group is closely related to the completion time of the company’s restructuring, only when the restructuring plan is implemented before December 31, 2021 and the company’s net assets are regularized in 2021 can it be possible to fundamentally resolve the company’s debt crisis and delisting risk, and protect the interests of listed companies and minority shareholders to the greatest extent.
The consideration paid by the investors in this reorganization is a part of the company’s reorganization plan. The company’s reorganization plan is formulated under the supervision and guidance of the court and the manager, taking into account the interests of creditors, the company and the original shareholders of the company, and will be implemented after being approved by the court. The restructuring of Shida group aims to resolve the debt risk of the company and achieve the sound development of the company. The consideration paid by the restructuring investors for the transfer of shares will be used to pay bankruptcy expenses, mutual benefit debts, pay off bankruptcy claims and supplement the working capital of the listed company. Through this reorganization, the heavy debt burden of the company has been resolved, the asset liability structure has been optimized and the capital strength has been enhanced. After reorganization, Fujian Shusheng investment partnership (limited partnership) controlled by Fujian big data will become the new controlling shareholder of the company, and the actual controller will be changed to the state owned assets supervision and Administration Commission of Fujian Provincial People’s Government (hereinafter referred to as “Fujian SASAC”) ）。 Through the support provided by industrial investors for the company’s business development, Shida group is expected to gradually restore its sustainable operation ability and profitability and return to the benign development track. With the improvement of the company’s fundamentals, the shares of Shida group held by all shareholders are expected to become truly valuable assets.
The successful implementation of Shida group’s reorganization will help to resolve the company’s heavy debt burden, get rid of the historical burden, safeguard the status of listed companies and the interests of minority shareholders.
2、 Special opinions
The financial advisor believes that the difference between the consideration of the shares transferred by the investors in the reorganization of Shida group and the transaction price in the secondary market is within the range of comparable listed companies. The consideration paid by restructuring investors for the transfer of converted shares is part of the restructuring plan of Shida group. The restructuring plan will be implemented after the approval of the court. The implementation of the restructuring plan is conducive to promoting the company to resolve debt risks, maintain the listing status and safeguard the interests of minority shareholders. (2) Fully disclose the ex rights of the company’s shares according to the company’s reorganization plan and comparable cases in Shanghai stock market;
1、 Ex rights of the company’s shares
According to the relevant provisions of article 4.3.2 of the trading rules of Shanghai Stock Exchange (hereinafter referred to as the rules of Shanghai Stock Exchange): “the calculation formula of ex right (interest) reference price is:
Ex right (interest) reference price = [(previous closing price – cash dividend) + share allocation (New) price × Change proportion of tradable shares] ÷ (1 + change proportion of tradable shares).
If the securities issuer considers it necessary to adjust the above calculation formula, it may apply to the bourse for adjustment and explain the reasons.
The exchange may decide to adjust the ex right according to the application (interest) refer to the price calculation formula and publish it. “The company believes that the conversion of capital reserve to share capital of Shida group is different from the simple issuance of shares for the purpose of dividend in a general sense. The conversion of capital reserve to share capital is implemented after the court’s ruling and approval, and all of it is used to introduce restructuring strategic investors; after the conversion, the company’s debt scale is significantly reduced and The owner’s rights and interests have increased significantly; The number of shares held by the original shareholders of the company has not changed, and the actual value of the enterprise represented by each share (calculated by net assets per share) has increased significantly compared with that before the reorganization, which is essentially different from the general situation that the owner’s equity of the company remains unchanged before and after the increase and the stock price needs to be adjusted by ex rights.
Therefore, the company plans to adjust the calculation formula of ex right reference price in combination with the actual situation of the reorganization plan. In recent years, Shanghai Stock Exchange has applied cash to pay off ordinary creditor’s rights. For example, the ex right formula applied by * ST Lianhua (600186. SH) is: “ex right (interest) reference price = [(previous closing price – cash dividend) + the price of shares transferred from capital reserve to reorganization investors × Proportion of change in tradable shares caused by the transfer of capital reserve to shares by reorganization investors] ÷ (1 + proportion of change in tradable shares caused by the transfer of capital reserve to shares by reorganization investors) “.
Assuming that the ex right reference price after the conversion of Shida group’s capital reserve into share capital is calculated according to the above formula, since it does not involve cash dividend, stock dividend and allotment, the cash dividend in the formula is 0, the price of the converted shares of capital reserve transferred by the restructuring investor is 0.578431 yuan / share, and the number of shares subscribed by the restructuring investor is 1555930790 shares, The current total share capital of Shida group is 622372316 shares, and the corresponding converted shares are subscribed by restructuring investors, resulting in a change ratio of circulating shares of 1555930790 / 622372316. According to the above formula, if the closing price before the ex right and ex interest date is 3.5 yuan / share, the ex right (interest) reference price of the company is 1.41 yuan / share; if the closing price before the ex right and ex interest date is 3 yuan / share, the ex right (interest) reference price of the company is 1.27 yuan / share; if the closing price before the ex right and ex interest date is 2.5 yuan / share, the ex right (interest) reference price of the company is 1.13 yuan / share.
The company will timely submit an application for adjusting the ex right formula to Shanghai Stock Exchange and perform the obligation of information disclosure according to law.
2、 Special opinions
In the opinion of the financial adviser, the conversion of capital reserve to share capital of Shida group is part of the reorganization plan, which is obviously different from the conversion of capital reserve to share capital or allotment of shares of listed companies under normal circumstances. The calculation formula of the original ex right reference price is not in line with the actual situation of the conversion of capital reserve to share capital of Shida group, It is reasonable to adjust the ex right reference price according to the above ex right formula according to the actual situation of the company.
(3) The share price of restructuring investors is low, which may lead to the risk of loss for minority shareholders.
1、 Investors may face losses due to the delisting of the company’s shares
The ex right reference price of the shares after the implementation of the conversion of the company’s capital reserve into share capital will be used as the opening reference price on the ex right and ex dividend date, if it is in accordance with the “reply to question 1” of this inquiry letter
