Shanghai Baolong Automotive Corporation(603197) : supplementary announcement on the acquisition of 55.74% equity of Shanghai Longgan Automobile Technology Co., Ltd

Securities code: Shanghai Baolong Automotive Corporation(603197) securities abbreviation: Shanghai Baolong Automotive Corporation(603197) Announcement No.: 2022014 Shanghai Baolong Automotive Corporation(603197)

On the acquisition of 55.74% equity of Shanghai Longgan Automobile Technology Co., Ltd

Supplementary announcement

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.

Risk tips:

After this transaction, the target company still needs to pay 724665 million yuan of cash dividends and 13 million yuan of equity transfer to the original shareholders. Due to the arrangement of the above matters, the financial data in the audit report as of February 28, 2022 has changed significantly compared with the results based on the simulation caliber of the subject company on September 30, 2021, and the net assets have decreased significantly;

According to the audit report issued by the accountant in the company’s annual report, the net assets of the subject company on February 28, 2022 were 1.4171 million yuan. Considering that the original shareholders of the subject company still had to pay 14.985 million yuan of registered capital, the total was 164021 million yuan. The transaction price of 100% equity of the subject company was 309519 million yuan. The transaction price was relatively high, and the net asset premium rate after paying the registered capital was 178707%;

Based on the simulated caliber of the subject company, the valuation of the value of all shareholders’ equity by the appraisal institution on September 30, 2021 was RMB 385.8 million. The appraisal institution uses the income method model to calculate the value of all shareholders’ equity of the target company on February 28, 2022, and the result is 307 million yuan. The above difference is mainly due to the dividend paid by the target company to the original shareholders and the acquisition of Longgan electronics.

The trading company and the target company have not signed performance gambling and compensation terms, and there are no relevant safeguard measures, which can not effectively protect the rights and interests of small and medium-sized investors;

The pricing of this transaction is based on the company’s management’s judgment on the industry for many years and the future expectation of the target company. The performance prediction data of the target company has large-scale growth in different years and the short cycle from fixed-point to mass production of some projects. The existing fixed-point can not cover the growth of operating revenue in the whole prediction period. There is great uncertainty about the actual performance of the target company in the future;

In view of the fact that the trading fund involves the change of use of raised funds, the funds required for this transaction need to be approved by the general meeting of shareholders. At the same time, considering that the net asset premium rate of this transaction is high and the sale of the trading object is not required

The company made a performance commitment. In order to fully protect the interests of the company’s investors, the actual controllers of the company, Chen Hongling and Zhang zuqiu, promised not to attend the general meeting of shareholders and not to exercise the voting right on the proposal on changing the investment projects of raised funds;

The price of this transaction is 172525900 yuan, which is 178707% higher than the net assets. The acquisition cost is greater than the fair value of the identifiable net assets of the corresponding shares of the target company, which will form a large amount of goodwill. If the performance of the target company is less than expected in the future, the company may have the risk of reputation impairment;

According to the equity transfer agreement, the company shall, within ten (10) working days after the effective date of this transaction agreement, pay 51% of the total equity transfer price payable to the account designated by the parties to the transfer of the target company respectively, and agree that the second transfer of the price shall be made after meeting the preconditions that the registered capital of the target company of 15 million yuan has been paid in and the unpaid capital contributions of the parties to the transfer have been made up, The company shall pay 29% of the total transfer price to the account designated by each party of the subject company.

Shanghai Baolong Automotive Corporation(603197) (hereinafter referred to as “the company”) disclosed the announcement of Shanghai Baolong Automotive Corporation(603197) on changing the investment project of raised funds (Announcement No.: 2022004) and the announcement of Shanghai Baolong Automobile Technology Co., Ltd. on the proposed acquisition of 55.74% equity of Shanghai Longgan Automobile Technology Co., Ltd. (announcement No.: 2022006) on the website of Shanghai Stock Exchange on February 24, 2022, The company plans to use the raised funds after the change to acquire 55.74% equity of Shanghai Longgan Automobile Technology Co., Ltd; On March 29, 2022, the company disclosed the progress announcement of Shanghai Baolong Automobile Technology Co., Ltd. on the acquisition of 55.74% equity of Shanghai Longgan Automobile Technology Co., Ltd. (Announcement No.: 2022013). The supplementary disclosure of the relevant contents of the above announcement is as follows:

1、 Timeline of this transaction

Main matters of time

First contact in September 2020

In September 2021, the two sides agreed to enter the stage of substantive adjustment and negotiation

From October to November 2021, accountants and lawyers were entrusted to conduct due diligence and evaluate the asset valuation of the institution

In December 2021, the transaction pricing and transaction scheme were discussed and preliminarily determined

In late January 2022, the target party put forward the dividend demand, and both parties determined the main transaction terms and dividend arrangement

On February 5, 2022, the subsidiary of the subject company held a shareholders’ meeting and agreed to pay dividends

On February 10, 2022, the target company signed an equity transfer agreement with the shareholders of Longgan electronics, agreeing to transfer 100% equity of Longgan electronics, and Longgan Electronics was adjusted to be a wholly-owned subsidiary of the target company

The board of directors and announcement will be held in late February 2022

Transaction documents signed in late March 2022

2、 This transaction

1. Specific transaction scheme

On March 25, 2022, the wholly-owned subsidiary of the company, Shanghai Baolong automobile technology (Anhui) Co., Ltd. (hereinafter referred to as “Hefei Baolong”) and other transferees signed the equity transfer agreement with each shareholder of Shanghai Longgan Automobile Technology Co., Ltd., which agreed that the wholly-owned subsidiary of the company and other transferees would jointly transfer 78% of the equity of the target company, as follows:

The transferor and the transferee transfer the registered capital of Longgan technology corresponding to Longgan technology

Proportion of equity and capital contribution (10000 yuan)

Hefei Baolong 20.24% 303.60

Wu Huijuan 2.00% 30.00

Qiu Kaihua industry hit a record high of 12.93% 193.95

Convinced Huayuan 5.07% 76.05

Dibang industry and trade 2.26% 33.90

Zhou Liangjie Hefei Baolong 4.00% 60.00

Xu Yueer Hefei Baolong 4.00% 60.00

Qili Hefei Baolong 5.00% 75.00

Liu Huijuan Hefei Baolong 7.00% 105.00

Xiang Zhiyin Hefei Baolong 3.00% 45.00

Gao Shengjian Hefei Baolong 5.00% 75.00

Wang Yichen Hefei Baolong 5.00% 75.00

Zhao Haodong Hefei Baolong 1.50% 22.50

Ding Jufang Hefei Baolong 1.00% 15.00

Total — 78% 117000

As shown in the above table, Hefei Baolong, a wholly-owned subsidiary of the company, received 55.74% of the equity of the target company at a price of 172525900 yuan; Other transferees Wu Huijuan, Huaye Gaochuang, Xinxin Huayuan and Dibang industry and trade jointly transferred 22.26% equity of the target company, and the acquisition cost corresponding to each capital contribution is the same as that of the company.

After verification, the lawyer believes that the transferor and transferee of this transaction (except Hefei Baolong) are not affiliated parties of the company and have no affiliated relationship with the company; There is no concerted action or other potential interest arrangement between the company and the transferor and other transferee of this transaction.

2. Dividend arrangement of the target company

(1) Dividend implementation process

After the valuation report is issued, the company and the shareholders of the target company agree through consultation that Longgan Electronics will distribute dividends, and the final transaction price needs to deduct the amount of dividend distribution; On February 5, 2022, according to the resolution of the shareholders’ meeting of Longgan electronics, based on the undistributed profit of 736517 million yuan as of January 31, 2022, Longgan electronics distributed 724665 million yuan to shareholders, and it was agreed that Longgan electronics would pay before August 31, 2022. As of February 28, 2022, the audited book net assets of the subject company according to the consolidated criteria were 1.4171 million yuan. (2) Reasons for dividends

The undistributed profit this time is the early operation accumulation of the target company and belongs to the original shareholders of the target company, which has nothing to do with the company and the transferee shareholders this time.

The company judges that the dividend of the target company will not have a material impact on the business of the target company, and because the final transaction price needs to deduct the dividend amount, the company agrees that Longgan Electronics will pay dividends to the original shareholders.

At the same time, during the negotiation between the company and the shareholders of the target company, the shareholders of the target company consulted relevant institutions to confirm that the dividend is conducive to reasonably reducing the personal income tax burden, and proposed to pay dividends first.

(3) Dividends do not have a significant impact on the daily operation of the target company

Since its establishment in 2014, after years of accumulation, the target company has built a stable production capacity and planned the future plant and production capacity construction plan according to the existing land. After the transfer of equity, the company will help the target company expand financing channels. At the same time, the company can also provide financial support to the target company at the same interest rate and cost of the bank. The company believes that the cash dividend will not have a significant impact on the daily operation of the target company.

3. Longgan technology acquires the equity of Longgan Electronics

On February 10, 2022, Longgan technology transferred 100% equity of Longgan electronics held by Jiyi and Qiu Kai at a price of 13 million yuan. As of February 28, 2022, the equity transfer amount of 13 million yuan has not been paid, and the equity transfer amount is also one of the price adjustment items. Longgan electronics has fully paid the registered capital of 10 million yuan on January 22, 2021.

The registered capital of Longgan technology is 15 million yuan, and the paid in capital in the early stage is 15000 yuan. According to the equity transfer agreement, the original shareholder of Longgan technology can obtain the second equity transfer payment of the company after paying the original contribution of 14.985 million yuan, which is used to pay the above equity transfer payment of 13 million yuan.

4. Valuation and pricing basis

On December 31, 2021, Shanghai Shenwei Assets Appraisal Co., Ltd. (hereinafter referred to as the appraisal institution) issued the valuation report on the value of all shareholders’ equity of the company with simulated caliber involved in Shanghai Baolong Automotive Corporation(603197) planning to understand the market value of Shanghai Longgan Automobile Technology Co., Ltd. (hushenwei Zi [2021] No. 1270). The appraisal institution chose the result of income method as the valuation result, The value of all shareholders’ equity of Shanghai Longgan Automobile Technology Co., Ltd. on September 30, 2021 is estimated to be RMB 385.8 million (RMB 385.8 million).

Referring to the valuation report issued by the appraisal institution, the company and the shareholders of the target company determined that the valuation of the target company was 380 million yuan. At the same time, taking full account of the dividend distribution of Longgan electronics to the original shareholders and the relevant expenses in the restructuring of the target company and its wholly-owned subsidiaries, the transaction price was finally determined to be 309519000 yuan, The specific calculation process is as follows: transaction price = initial valuation of 380 million yuan – dividend payable to original shareholders of 724665 million yuan – transfer price of Longgan technology’s acquisition of Longgan electronic equity of 13 million yuan + registered capital to be paid in by Longgan technology of 14.985 million yuan;

According to the audit report issued by the accountant in the company’s annual report, the net assets of the subject company on February 28, 2022 were 1.4171 million yuan. Considering that the original shareholders of the subject company still had to pay 14.985 million yuan of registered capital, the total was 164021 million yuan. The transaction price was relatively high, and the net asset overflow rate after paying the registered capital in full was 178707%. The company’s pricing of the target company is mainly based on the judgment of the industry and the future expectation of the target company.

assessment

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