The cross-border acquisition of A-share garden ecological enterprise Tianyu Eco-Environment Co.Ltd(603717) (hereinafter referred to as ” Tianyu Eco-Environment Co.Ltd(603717) “) has changed.
On March 29, Tianyu Eco-Environment Co.Ltd(603717) issued the announcement on the progress of the company’s foreign investment, which said that the trading scheme was changed by consensus between the two sides of the transaction. The new trading scheme after the change was that the company invested RMB 210 million in the target company in the form of capital increase to obtain 35% equity of the target company.
The “transaction” referred to in the above announcement refers to the announcement on the company’s proposed foreign investment disclosed by Tianyu Eco-Environment Co.Ltd(603717) on February 22 this year. At that time, Tianyu Eco-Environment Co.Ltd(603717) planned to increase the capital of Qinghai juzhiyuan new materials Co., Ltd. (hereinafter referred to as “Qinghai juzhiyuan”), a lithium battery enterprise, with a cash of no more than 610 million yuan. After the capital increase is completed, it will hold 51% of the equity of Qinghai juzhiyuan and obtain its control.
What is behind such a big change in trading in more than one month?
holding to equity participation
Statistics show that Qinghai juzhiyuan is a new energy material enterprise mainly engaged in the R & D, production and sales of lithium hexafluorophosphate, lithium battery anode and cathode materials and lithium battery ternary materials. At present, the product is lithium hexafluorophosphate, which is widely used in the manufacturing field of high-performance lithium batteries. It is revealed that it has been approved by the Management Committee of Qaidam circular economy experimental zone for the construction project of high-end lithium hexafluorophosphate with an annual output of 6000 tons, of which the first phase of the production line with an annual output of 2000 tons of lithium hexafluorophosphate has been completed in the second half of 2021 and approved by Delingha Emergency Management Bureau for trial production, but it has not been officially put into operation at present.
As an ecological environment enterprise mainly engaged in garden ecological engineering, ecological environment treatment and other businesses, Tianyu Eco-Environment Co.Ltd(603717) this acquisition of Qinghai juzhiyuan can be described as a cross-border. In the announcement on foreign investment disclosed on February 22, Tianyu Eco-Environment Co.Ltd(603717) said that the transaction was to realize the strategic layout of listed companies and improve the sustainable profitability of listed companies.
According to the information initially disclosed one month ago, Tianyu Eco-Environment Co.Ltd(603717) plans to increase capital by 610 million yuan to Qinghai juzhiyuan to obtain 51% equity after the capital increase; On March 29, Tianyu Eco-Environment Co.Ltd(603717) disclosed the announcement on the progress of the company’s foreign investment, which changed the transaction into the acquisition of 35% equity of Qinghai juzhiyuan with 210 million yuan. Based on this calculation, after the transaction change, the valuation of 100% equity of Qinghai juzhiyuan decreased by nearly half.
At the same time, the performance commitment of the counterparty to Qinghai juzhiyuan has also been adjusted accordingly.
The counterparty initially promised that Qinghai juzhiyuan would realize the audited net profit of the company not less than 300 million yuan, 400 million yuan and 500 million yuan from 2022 to 2024, and the net profit assessment was 1.2 billion yuan based on the total number of three years; After the adjustment, the performance evaluation index is changed to the audited net profit deducted from non parent company from 2022 to 2024, which is not less than 900 million yuan.
It is revealed that Tianyu Eco-Environment Co.Ltd(603717) has signed the “equity strategic investment agreement” on March 28, and has paid 60 million yuan in advance to the target company, which will be converted into this capital increase. The remaining 150 million yuan of capital increase will be paid to the joint management account of Tianyu Eco-Environment Co.Ltd(603717) and Qinghai juzhiyuan within 15 working days, which will be specially used to repay the due debts of the target company.
“This transaction requires a cash investment of 210 million yuan. The transaction scale is small. The strategic investment Qinghai juzhiyuan can effectively avoid the risk of M & A integration after the holding acquisition and will not have an adverse impact on the existing production and operation of the listed company.” Tianyu Eco-Environment Co.Ltd(603717) indicates.
transaction questioned by Shanghai Stock Exchange
In fact, Tianyu Eco-Environment Co.Ltd(603717) this transaction is not so simple behind such a big change.
The reporter noted that on the day when Tianyu Eco-Environment Co.Ltd(603717) first disclosed the transaction on February 22, it immediately received the inquiry letter on Tianyu Eco-Environment Co.Ltd(603717) foreign investment matters (hereinafter referred to as the inquiry letter) issued by Shanghai Stock Exchange.
In the inquiry letter, the Shanghai Stock Exchange pointed out that Tianyu Eco-Environment Co.Ltd(603717) this capital increase will not exceed 610 million yuan, and the asset appraisal is expected to be completed in mid March 2022. Liu Bingsheng, the shareholder of the subject company, contributed 76.67% of the capital, and the initial equity acquisition was on November 26, 2020. Cai Xianwei, the shareholder, contributed 10% of the capital, and the initial equity acquisition was on March 24, 2021. It is required to supplement and disclose the confirmation basis, calculation process, main calculation methods of the transaction price and the Preliminary Valuation of the target company. At the same time, it is required to explain the background of the shareholders of the target company, the transaction consideration, whether they have been paid in, whether there is a potential relationship or interest arrangement with the listed company and its controlling shareholders, and whether there is interest transmission.
In addition, the Shanghai Stock Exchange also questioned whether Tianyu Eco-Environment Co.Ltd(603717) in this capital increase has sufficient capital sources: “the announcement shows that the company’s capital increase of 610 million yuan is self raised, including but not limited to its own funds and M & A loans. However, the balance of monetary funds of the company at the end of the third quarter of 2021 was only 258 million yuan, and there are 198 million yuan of temporary supplementary raised funds yet to be returned, and another 250 million yuan of bonds will expire in June 2022.” Please explain the specific arrangement and feasibility of the transaction funds in combination with the company’s liquidity and available financing channels.
After an extension, Tianyu Eco-Environment Co.Ltd(603717) replied to some questions of the Shanghai Stock Exchange on March 10. As for the source of funds, Tianyu Eco-Environment Co.Ltd(603717) said that in addition to its own funds, there are asset sales to supplement the company’s cash flow, bank loans, M & A loans, loans from major shareholders, etc.
Although it indicated that the transaction funds were sufficient, Tianyu Eco-Environment Co.Ltd(603717) released the transaction change information on March 29. On the same day, he also replied to the remaining questions in the inquiry letter of Shanghai Stock Exchange Tianyu Eco-Environment Co.Ltd(603717) said that in view of the small number of orders on hand of the target company and the inability to meet the full production capacity in 2022, the asset appraisal institution considered that the valuation basis was not sufficient and could not issue the appraisal report. Therefore, the transaction was the valuation conducted by the listed company itself according to the income method, rather than a professional appraisal institution. Obtain 35% equity of the target company at the transaction price of 210 million yuan, and the transaction price is fair. There is no potential relationship or interest arrangement between the shareholders of the target company and the listed company and its controlling shareholders.
subject company has many risks
It is worth noting that Tianyu Eco-Environment Co.Ltd(603717) the assets to be acquired this time have many risks.
According to the financial report information, the net profit of Qinghai juzhiyuan in 2020 and 2021 was a loss.
From 2020 to 2021, the operating income of Qinghai juzhiyuan was about 0 yuan and 3.8177 million yuan respectively; The corresponding net profits are about -4.6747 million yuan and -280451 million yuan respectively.
It is understood that the phase I production line of juzhiyuan in Qinghai is still in the trial production stage; The phase II production line is still under construction, and there is great uncertainty about the official production time Tianyu Eco-Environment Co.Ltd(603717) pointed out that due to the impact of macroeconomic fluctuations, force majeure, covid-19 epidemic and the availability of production line construction funds, the production line of the target company has the risk of shutdown, the annual production capacity is lower than expected and the performance commitment cannot be completed. The current valuation is based on Tianyu Eco-Environment Co.Ltd(603717) the calculation of the target company’s capacity climbing, full production and full sales. There is a risk that the capacity and sales volume are less than expected.
Although the transaction signed a performance commitment, the listed company and Liu Bingsheng, the actual controller of the target company, agreed that the insufficient profit will be compensated in cash. However, Tianyu Eco-Environment Co.Ltd(603717) said that it was uncertain whether there would be enough cash or other channels to obtain the cash needed to fulfill the compensation commitment.
In addition, Tianyu Eco-Environment Co.Ltd(603717) also admitted, currently there is no business collaboration with the target company : “First, the main product of the target company is lithium hexafluorophosphate, which is a processing enterprise and has no lithium mineral resources at present; second, the target company is currently losing money and may continue to lose money after the completion of this transaction; third, Tianyu Eco-Environment Co.Ltd(603717) itself does not have technical reserves such as equipment, technology and intellectual property rights for the production of lithium hexafluorophosphate, and there is no control over the target enterprise after this capital increase. After the capital increase, the target company and the company are currently losing money There are risks in production, personnel and business that can not be effectively coordinated. “
