An announcement issued by “the first share of in vitro diagnosis” Shanghai Kehua Bio-Engineering Co.Ltd(002022) threw a “giant thunder” on the market at the end of the year.
On December 27, Shanghai Kehua Bio-Engineering Co.Ltd(002022) announced that its holding subsidiary Tianlong company made it clear that it was unable to cooperate with the company’s pre-trial accounting statements and subsequent audit. For this, Shanghai Kehua Bio-Engineering Co.Ltd(002022) expressed its strongest indignation and condemnation, and planned to take relevant measures.
Affected by this news, at the opening on December 28, Shanghai Kehua Bio-Engineering Co.Ltd(002022) accelerated its decline. As of the closing, its share price closed at 13.89 yuan / share, down 6.46%.
The subsidiary is suspected to be out of control
On the news side, on December 25, Shanghai Kehua Bio-Engineering Co.Ltd(002022) received a reply from Li Ming, director and general manager of the holding subsidiaries Xi’an Tianlong Technology Co., Ltd. and Suzhou Tianlong Biotechnology Co., Ltd. (hereinafter referred to as Xi’an Tianlong and Suzhou Tianlong, collectively referred to as Tianlong company) via e-mail on the audit preliminary review of the group’s annual report.
The reply shows that the arbitration case between Tianlong company and Peng niancai, Li Ming, Miao Baogang and Xi’an Yujing Tongyi enterprise management partnership (limited partnership) with Shanghai Kehua Bio-Engineering Co.Ltd(002022) resulted in the freezing of 62% equity of Tianlong company held by Shanghai Kehua Bio-Engineering Co.Ltd(002022) , and Xi’an Weiyang District People’s court has ruled to prohibit Shanghai Kehua Bio-Engineering Co.Ltd(002022) from exercising all shareholder rights of 62% equity of Xi’an Tianlong, As well as the risk of disclosure of trade secrets in the financial data opened to Shanghai Kehua Bio-Engineering Co.Ltd(002022) , it is clear that it is unable to cooperate with Shanghai Kehua Bio-Engineering Co.Ltd(002022) in the pre-trial accounting statements and subsequent audit.
In this regard, Shanghai Kehua Bio-Engineering Co.Ltd(002022) believes that the so-called “reasons” put forward by Tianlong company in the audit response letter are completely lack of factual and legal basis! The company expresses its strongest indignation and condemnation for the behavior of some directors and senior managers of Tianlong company, such as Li Ming, who ignore the rules of the securities market and the requirements of the company’s standardized operation and ignore the interests of listed companies and their minority shareholders!
From the reply tone and two exclamation marks, we can see Shanghai Kehua Bio-Engineering Co.Ltd(002022) ‘s attitude towards the subsidiary’s refusal to cooperate with the audit. For the “out of control” subsidiary, Shanghai Kehua Bio-Engineering Co.Ltd(002022) also immediately took relevant measures.
On December 22, 2021, Shanghai Kehua Bio-Engineering Co.Ltd(002022) chairman, in his capacity as chairman of Tianlong company, informed that the board meeting of Tianlong company would be held on December 27 to review the annual audit proposal, and planned to instruct the financial department and relevant personnel of Tianlong company to fully cooperate with and support Lixin accountant in the audit of Tianlong company’s financial report in 2021.
On the afternoon of December 24, Li Ming, director and general manager of Tianlong company, proposed to the board of directors of Tianlong company to arrange another time to hold the meeting on the grounds of Xi’an epidemic situation and Tianlong company’s need to undertake the task of anti epidemic support through wechat. On December 25, he made it clear to the chairman, President and chief financial officer of the company by e-mail that Tianlong company was unable to cooperate with Shanghai Kehua Bio-Engineering Co.Ltd(002022) pre-trial accounting statements and subsequent audit.
The scene was still out of control. On December 26, Shanghai Kehua Bio-Engineering Co.Ltd(002022) the president replied to Li Ming, director and general manager of Tianlong company by e-mail, and copied to all directors, supervisors and chief financial officer of Tianlong company, reiterating that Tianlong company must fully cooperate with the audit work of the audit institution entrusted by the company.
However, the email sent by the president of the company to Peng niancai, Li Ming, Miao Baogang, the applicant for arbitration and the directors of Tianlong company, and some relevant personnel of Tianlong company nominated by them were rejected by the system.
The email was returned. The president of Shanghai Kehua Bio-Engineering Co.Ltd(002022) sent a working letter to relevant personnel of Tianlong company through wechat. At the same time, he reiterated to all directors of Tianlong company that Tianlong company must fully cooperate with the audit work of the audit institution entrusted by Shanghai Kehua Bio-Engineering Co.Ltd(002022) and informed the board meeting scheduled for December 27 to be held normally.
On December 27, the board of directors of Xi’an Tianlong and Suzhou Tianlong held a meeting. There were 7 directors who should attend the meeting, 4 actually attended the meeting, and Peng niancai, Li Ming and Miao Baogang, the applicant for arbitration and directors of Tianlong company, were absent from the meeting.
It can be imagined from the results of the meeting that the board of directors of Xi’an Tianlong and Suzhou Tianlong deliberated and adopted the proposal to cooperate with the annual audit of listed companies with more than half of all directors, and decided to instruct the financial department and relevant personnel of Tianlong company to fully cooperate with and support Lixin accountant in the audit of the financial report of Tianlong company in 2021.
In addition, Shanghai Kehua Bio-Engineering Co.Ltd(002022) also plans to take relevant measures to further manage the “out of control” subsidiaries. It said that in order to ensure the legitimate rights and interests of the listed company and all shareholders and promote the proper settlement of the audit of Tianlong’s financial report in 2021, the company will continue to take relevant measures. Including requiring the directors, senior managers, chief financial officer, financial department and relevant parties of Tianlong company to fully implement the resolutions of the board of directors; Continue to actively communicate with competent departments at all levels, obtain the support and help of relevant competent departments, and promote the proper solution of relevant problems as soon as possible.
share price of parent company under pressure
Before Tianlong refused to audit the annual report, Shanghai Kehua Bio-Engineering Co.Ltd(002022) had “fallen out” with Tianlong, and the cause of the matter can be traced back to the lawsuit mentioned in the announcement.
In June 2018, Shanghai Kehua Bio-Engineering Co.Ltd(002022) made a capital increase acquisition in cash from Xi’an Tianlong Technology Co., Ltd. and Suzhou Tianlong Biotechnology Co., Ltd. (collectively referred to as Tianlong company). The counterparties were four shareholders of Tianlong company: Peng niancai, Li Ming, Miao Baogang and Xi’an Yujing Tongyi enterprise management partnership (limited partnership).
The acquisition of all shares of Tianlong company was completed in two stages. In the first stage, Shanghai Kehua Bio-Engineering Co.Ltd(002022) obtained 62% equity of Tianlong company for a consideration of RMB 554 million; In the second stage, Shanghai Kehua Bio-Engineering Co.Ltd(002022) completed the acquisition of the remaining 38% equity of the subject company in 2021 at the equity value calculated according to the net profit of Tianlong company in 2020, and finally completed the overall acquisition of 100% equity of Tianlong company.
The main business of Tianlong company is the production and sales of diagnostic reagents and instruments. Before being acquired by Shanghai Kehua Bio-Engineering Co.Ltd(002022) in 2018, the company, which has been established for 21 years, has not yet achieved profit. According to the data, the operating revenue of Tianlong in 2016 and the first nine months of 2017 were RMB 113 million and 86 million respectively, and the operating profit was also in a loss state.
Who could have expected that the sudden epidemic situation ushered in a “highlight moment” for Tianlong company. According to the data, in 2020, the net profit deducted by Tianlong reached 1.105 billion yuan, and the net profit deducted corresponding to 38% equity was 420 million yuan; In the first half of 2021, Tianlong’s revenue reached 1.214 billion yuan and its net profit reached 569 million yuan, while Shanghai Kehua Bio-Engineering Co.Ltd(002022) the net profit in the first half of 2021 was only 479 million yuan.
Seeing the explosive growth of Tianlong company’s profits, this situation has far exceeded the normal predictable and predictable scope when the parties entered into the investment agreement. If they continue to perform according to the terms of the transaction, it will be obviously unfair to the company.
In July 2021, four shareholders submitted for arbitration. Tianlong technology required Shanghai Kehua Bio-Engineering Co.Ltd(002022) to acquire the remaining 38% equity of Tianlong company at the price of 25 times the net profit in 2020 according to the investment agreement. In addition to liquidated damages, arbitration fees and lawyer fees, Shanghai Kehua Bio-Engineering Co.Ltd(002022) was applied for compensation of up to 10.54 billion yuan. You know, the market value of Shanghai Kehua Bio-Engineering Co.Ltd(002022) at that time was only nearly 8 billion yuan.
In the announcement on December 27, Shanghai Kehua Bio-Engineering Co.Ltd(002022) also disclosed the progress of the arbitration case. According to the announcement, as of the disclosure date of the announcement, the Shanghai International Economic and Trade Arbitration Commission had twice arranged a hearing to hear the arbitration case, which had to be cancelled due to the reasons of the arbitration applicant, resulting in the failure of the hearing of the arbitration case so far.
In addition, Shanghai Kehua Bio-Engineering Co.Ltd(002022) said that on the one hand, the arbitration applicant took advantage of its management of Tianlong company to treat negatively, postpone or even refuse to cooperate with the audit institution entrusted by the listed company in the normal annual audit of Tianlong company, On the one hand, the trial procedure of this arbitration case is delayed on the ground that the financial operation data of Tianlong company is an important fact of this arbitration case yet to be formed. Its essential purpose is to propose that this arbitration case is in a “protracted” state and exert pressure on the company in a disguised form.
As a leading enterprise of in vitro diagnosis, it is also the big brother of IVD. In June 2020, Gree Real Estate Co.Ltd(600185) with state-owned assets background completed the shares held by the acquirer’s source capital and officially became the largest shareholder of Shanghai Kehua Bio-Engineering Co.Ltd(002022) with a share transfer price of 1.726 billion yuan. Shanghai Kehua Bio-Engineering Co.Ltd(002022) became the fourth in vitro diagnostic listed company that changed state-owned assets after Beijing Leadman Biochemistry Co.Ltd(300289) , top nine and Runda.
But at present, the situation of Shanghai Kehua Bio-Engineering Co.Ltd(002022) is also “worrying”. The arbitration case in July this year, coupled with the “Thunderstorm” at the end of this year, the attitude of Shanghai Kehua Bio-Engineering Co.Ltd(002022) secondary market is also very clear. Data show that in May this year, its share price was still at a high level of 19.62 yuan / share. After a dividend distribution of 0.2 yuan / share on July 16, the share price did not fluctuate much, and has been hovering around 13 yuan / share.
The reporter sent an interview letter to the enterprise on the current company’s business and performance. As of press time, no reply has been received from the enterprise.
(International Finance News)
