Games, film and television mergers and acquisitions are strictly controlled, the exchange is restructured and reviewed, focusing on valuation

The pre-review efforts of exchanges continue to increase. During the week from July 24 to 29 alone, the Shanghai and Shenzhen stock exchanges issued a total of 29 inquiry letters of various types, 9 of which were related to mergers and acquisitions. The reporter's investigation found that as of now, issues such as the basis for the pricing of the acquisition target, rationality of valuation, and transaction details have become the focus of attention of the regulatory authorities.

The pre-review efforts of exchanges continue to increase. During the week from July 24 to 29 alone, the Shanghai and Shenzhen stock exchanges issued a total of 29 inquiry letters of various types, 9 of which were related to mergers and acquisitions.

The reporter's investigation found that as of now, issues such as the basis for the pricing of the acquisition target, rationality of valuation, and transaction details have become the focus of attention of the regulatory authorities.

On July 30, China An Consumer Corporation issued an announcement stating that the company received an inquiry letter from the Shanghai Stock Exchange on July 29, requiring the company to provide further explanations and supplementary disclosures on relevant issues.

Previously, Zhongan Consumer Corporation released a reorganization plan on the evening of July 21. The company plans to purchase 100% equity of Qichuang Zhuoyue (920 million yuan), 100% equity of Huahe Wanrun (360 million yuan) and 100% equity of Zhongke Intelligent (428 million yuan), with a total transaction price of 1.708 billion yuan.

According to performance commitments, Qichuang Excellence's target net profit from 2016 to 2018 is 65 million yuan, 80 million yuan and 96 million yuan respectively. The counterparty promises that its cumulative net profit in the three fiscal years from 2016 to 2018 will not be less than 241 million yuan.

In this regard, the Shanghai Stock Exchange stated in a letter that the draft disclosed that the underlying asset Qichuang Zhuoyue was valued at 650 million yuan at the time of equity transfer in March 2016, and the valuation in this transaction was 920 million yuan, with a huge difference in valuation. The Shanghai Stock Exchange required the company to supplement the disclosure of the reasons and rationality why the price of this transaction was significantly higher than the price of the previous equity transfer.

Similarly, the company's other acquisition target asset, Huahe Wanrun, had net assets of 18.78 million yuan. The transaction price was 360 million yuan, with a value-added rate of 18.17 times, which was a large value-added amount. The Shanghai Stock Exchange also requires specific disclosure of the reasons and reasonableness of the high valuation.

The mergers and acquisitions of games, films and television have attracted close attention from regulatory authorities. For example, Ningbo Fubon received an inquiry letter from the Shanghai Stock Exchange on July 26, questioning whether the company's planned acquisition of Tianxiang Entertainment and Tianxiang Interactive for 3.9 billion yuan involved backdoor borrowing.

Focusing on the rationality of the valuation basis

On July 29, the Shenzhen Stock Exchange issued a reorganization inquiry letter to Sannuo Biotech in response to the asset acquisition plan released by the company on July 15.

In an after-the-fact inquiry, the Shenzhen Stock Exchange stated that the company's acquisition target, Trividia, had suffered losses in the past two years and the first period, while the counterparty, Li Shaobo, promised a cumulative profit of 360 million yuan. The company was required to provide additional disclosure of the reasons for the continued loss and explain whether it complied with the requirements of Article 43 of the Measures for the Management of Material Assets Reorganization of Listed Companies. It also provides additional disclosure of the turnaround measures for Trividia and the guarantee measures for the realization of performance commitments.

In this regard, a person from the company's Securities Department said that as of now, in accordance with the requirements of the above-mentioned letter, the company and relevant intermediaries and parties to the transaction are jointly implementing the relevant issues mentioned in the inquiry letter one by one and actively preparing reply materials.

"The company will disclose in detail the inquiry letter issued by the Shenzhen Stock Exchange on the company's material asset reorganization and the response to related questions in the near future." The person said.

Similarly, regarding the company's overseas acquisitions, some market participants also said that there are not many successful overseas acquisitions of assets. What's more, Sannuo Biotech acquired the assets of overseas companies last year, but its performance in the middle of this year has declined, making investors not optimistic about continuing acquisitions today.

On July 15, the company released an interim results forecast, saying that it expects net profit attributable to shareholders of listed companies from January to June 2016 to be 45.0282 million yuan to 67.5424 million yuan, a year-on-year decrease of 10%-40%.

"In the development process, the company needs to take into account short-term development and long-term planning. This overseas acquisition is in line with the company's development strategy of 'global blood glucose meter experts', and will help improve the company's future competitiveness in domestic and foreign markets." In this regard, the above-mentioned person from the securities department of the company said. "Transaction exchange rate risk and integration work after the completion of this overseas merger and acquisition are among the many challenges facing the company. In the future, the company will explore more synergy points with Trividia and PTS to achieve complementary advantages and resource sharing."

On July 29, Sinopharm also announced that the company had received an inquiry letter from the Shanghai Stock Exchange, which involved the industry development and competition of the underlying assets, the business model of the underlying assets, etc. For the disclosure of the plan, the company used two methods: asset-based method and income method to estimate the four underlying assets, and selected the results of the income method as the estimation conclusion. The total net assets of the four target companies are 1.924 billion yuan, with an estimated value of 6.183 billion yuan, and a value added of 4.259 billion yuan, with a value added rate of 221.34%. The Shanghai Stock Exchange requires the company to provide additional disclosure of the main parameters used in the estimate, including but not limited to revenue, costs, profits, discount rate, etc.

Games, film and television mergers and acquisitions are strictly controlled

. It is worth mentioning that cross-border film, television and game mergers and acquisitions have become the top priority of supervision. On the evening of August 1, Ningbo Fubang recently announced that the company would postpone its reply to the Shanghai Stock Exchange's "Inquiry Letter".

Previously, Ningbo Fubang's acquisition plan stated that after the transaction is completed, the company will transform from a single aluminum profile processing and sales enterprise to a diversified listed company with the traditional aluminum processing industry and mobile online game research and development, distribution, operation and incubation in parallel. The original shareholders of Tianxiang Entertainment promised that the net profits attributable to owners of the parent company achieved by Tianxiang Entertainment in 2016, 2017 and 2018 will not be less than 300 million yuan, 360 million yuan and 432 million yuan.

In the evening of the same day, the company stated that since the replies to some questions in the inquiry letter involved further verification and supplement of some matters and a large amount of data, the relevant work could not be completed before August 1, 2016. The company will continue to actively coordinate with all parties to promote the reply to the "Inquiry Letter". It is expected to submit the reply document to the Shanghai Stock Exchange before August 11, 2016. After the Shanghai Stock Exchange has reviewed and approved it, a reply announcement on the "Inquiry Letter" will be issued, and at the same time apply for the resumption of trading of the company's shares.

Previously, the Shanghai Stock Exchange raised questions in its inquiry letter, saying that its core concern was whether the plan constituted a backdoor listing. The inquiry letter pointed out that the total assets, net assets and other indicators of Tianxiang Mutual Entertainment and Tianxiang Interactive exceeded 100% of the corresponding indicators of listed companies in the same period. The main reason why they did not constitute a backdoor is that the control of the listed company has not changed, and this requires The company and the counterparty provide sufficient and sufficient evidence.

According to the latest regulatory policy of the China Securities Regulatory Commission, the shareholding ratio increased by the actual controller of the listed company through raising matching funds should be deducted when calculating whether it constitutes a reorganization and listing. Therefore, the shareholding ratio of the original actual controller of the listed company after the transaction is completed is 13.6433%. The total shareholding ratio of counterparties He Yunpeng, Chen Chen, Zhang Jin and others is 19.94%. If the above counterparties constitute parties acting in concert, this transaction constitutes a backdoor listing.

In addition, the inquiry letter also stated that the company disclosed that the original controlling shareholder of the underlying assets was Zhang Pu, which was changed to Yueyun Technology in November 2013. In November 2015, Yueyun Technology transferred its shares to He Yunpeng, Chen Chen, etc. He Yunpeng became the controlling shareholder of the underlying assets, and Chen Chen became the second largest shareholder of the underlying assets. After the transaction is completed, Chen Chen holds 7.7% of the company's equity.

At the same time, the plan disclosed that Chen Chen served as executive director and manager of Yueyun Technology from June 2014 to April 2015. In this regard, the exchange required additional disclosure: Yueyun Technology's equity structure and management situation since 2013; the transfer price when Yueyun Technology transferred its equity to He Yunpeng and Chen Chen in November 2015; and explain whether He Yunpeng and Chen Chen had ever had joint investment behavior and whether they constituted concerted action in conjunction with the above situation. If not, please provide evidence to the contrary.

As early as February last year, Tianxiang Interactive had a brief "marriage" with Jinya Technology. At that time, Jinya Technology planned to purchase 100% equity of Tianxiang Interactive for a price of 2.2 billion yuan, with an evaluated value-added rate of 15 times. After more than a year, the latter's valuation has soared by nearly 80%.

According to the reorganization plan released on the evening of July 11, Ningbo Fubon plans to issue 113 million shares at a price of 18.57 yuan/share and pay 1.807 billion yuan in cash, for a total price of 3.9 billion yuan to acquire 100% equity of Tianxiang Mutual Entertainment (priced at 3.75 billion yuan), 100% equity of Tianxiang Interactive (priced at 150 million yuan); at the same time, it plans to raise funds of 18.57 yuan/share of non-public offering shares to not exceed 1.843 billion yuan to pay cash considerations and related expenses, of which the company's controlling shareholder Fubon Holdings and its related parties plan to subscribe for a total of approximately 1 billion yuan.

Among them, the valuations of Tianxiang Mutual Entertainment and Tianxiang Interactive reached 3.75 billion yuan and 150 million yuan respectively. Compared with their respective net assets as of the first quarter of this year, the estimated value-added rates are 604.67% and 9.49% respectively.

Editor: yvette