Yongle Film and Television has repeatedly failed to meet performance commitments and the results are unpredictable

this is Yongle's fifth attempt since its four initial public offerings failed in 2013, but it remains to be seen whether Yongle will get what it wants.

original title: why is it difficult for Yongle Film and Television with a valuation of 3 billion to enter the capital market

as many companies take this as their development goal because they can get more capital and resources after landing in the capital market. Recently, Contemporary Oriental, which suspended trading for more than two months due to major asset restructuring, issued a notice that it intends to acquire a 100% stake in Zhejiang Yongle Film and Television production Co., Ltd. (hereinafter referred to as "Yongle Film and Television"). However, this is Yongle's fifth attempt since its four initial public offerings failed in 2013, and it remains to be seen whether Yongle will get what it wants.

< strong > the dream of going public failed four times < / strong >

according to the announcement on March 17th, Contemporary Oriental signed a "letter of intent on the transfer of shares in Zhejiang Yongle Film and Television production Co., Ltd." with Cheng Lidong, the largest shareholder and actual controller of Yongle Film and Television Co., Ltd. on January 18. at present, the two sides are discussing and demonstrating the specific plan of issuing shares and paying cash to buy the shares of the underlying company. According to the letter of intent signed by both parties, the valuation of the underlying assets should not exceed 3 billion yuan (the final evaluation report shall prevail). Contemporary Oriental intends to pay 70% of shares and 30% of cash. The share issue price is 90% of the average price of the company in the 60 trading days before the suspension.

Yongle Film and Television was founded in 2004, focusing on the planning, investment, shooting, production and distribution of TV dramas. It has works such as Zhao Zilong, the Romance of the Sui and Tang dynasties, Operation Sharp Arrow, and the King of Wu on the list of gods. Although the transaction between Yongle Film and Contemporary Oriental has not been formally reached, Yongle Film and Television is already a regular customer of A shares.

as early as the end of 2013, Huayi Brothers announced that it planned to buy a 51% stake in Yongle for 398 million yuan, which was the first time Yongle planned to enter the capital market, but there has been no more progress since the announcement, and the deal was terminated. In May 2015, Kangqiang Electronics planned to plan the reorganization and planned to buy 100% stake in Yongle Film and Television at a price of 2.78 billion yuan, but the deal was not smooth either. In November of the same year, the two sides announced that the reorganization would be terminated.

it is worth noting that between the two transactions, when Zhongchang Shipping was suspended from trading due to restructuring in 2014, there was also news that it was related to Yongle Film and Television, but because the asking price of Yongle Film and Television was too high, the two sides did not reach an agreement on the purchase price, and the reorganization ended three months later. Although many A-share plans were unsuccessful, Yongle Film and Television still did not give up. In May 2016, it was proposed to list HTC's new materials at a price of 3.26 billion yuan, which was only six months after Kangqiang stopped its restructuring, but the deal has not yet been concluded. At this point, Yongle Film and Television's A-share dream has been broken four times, and the transaction with contemporary Oriental has become the fifth attempt of Yongle Film and Television.

< strong > < / strong >

on the road to landing in the capital market, Yongle Film and Television has repeatedly hit a brick wall. Through observation, it can be found that, although it is related to the market environment at that time, it is also closely related to the situation of Yongle Film and Television.

when Yongle Film and Television tried to log on to A shares through Kangqiang Electronics, Zexi Investment, owned by Xu Xiang, became the supporting fund subscriber for this restructuring, and as Xu Xiang was arrested in accordance with the law on suspicion of manipulating the securities market and insider trading crimes, it also had a certain impact on the restructuring. Among them, Kangqiang Electronics said in the announcement that "due to the occurrence of objective events that both sides cannot predict and avoid, there is significant uncertainty in the supporting financing part of this transaction."

but through observation, it can be found that Yongle's own profitability also has an impact on the transaction. According to public data, when Kangqiang planned to acquire Yongle Film and Television, Yongle Film and Television made a performance commitment of no less than 198 million yuan, 261 million yuan, 333 million yuan and 370.8 million yuan respectively from 2015 to 2018, but in fact, the net profit realized by Yongle Film and Television in 2015 was about 180 million yuan.

however, the performance of Yongle Film and Television did not meet its previous promises for a total of three times in the first four transactions. When Huayi Brothers proposed to acquire a 51 per cent stake, Yongle promised no less than 65 million yuan, 84.5 million yuan, 109.85 million yuan and 142.8 million yuan in net profit for 2013-2016, respectively, but Yongle made a net profit of 83.4037 million yuan in 2014. In addition, when HTC decided to end its 100% stake in Yongle, it also said that Yongle's performance commitment was not up to standard. In addition, although many works of Yongle Film and Television have been introduced to the market in recent years and have been recognized by the market, there is a lack of popular style works. In the face of the increasingly fierce competition in the film and television industry and the rapid development of the online drama market, Yongle Film and Television will inevitably bear greater pressure.

< strong > the result of fighting A shares again < / strong >

in view of the fact that Yongle Film and Television has made four previous unsuccessful attempts to land in the capital market, the proposed acquisition of 100% stake in Yongle Film and Television by Contemporary Oriental has attracted a lot of attention, especially under the background of increasingly strict supervision of film and television mergers and acquisitions at this stage. Industry insiders believe that judging from the current situation, contemporary Oriental and Yongle Film and Television are still in the process of negotiation and communication, specific transaction prices and related issues have not yet been formed, and it is not known whether the two sides can finally reach an agreement and pass the examination and approval of the Securities Regulatory Commission, waiting for further observation.

in recent years, in view of the development of the film and television industry, film and television assets have become popular in the eyes of many capitals, and a large number of M & An investments have emerged one after another, although the capital fever at the present stage is gradually becoming more and more rational. but the film and television industry is still considered to have more room for development. Xu Shan, an investment analyst, believes that at present, contemporary Oriental is also actively laying out the film and television industry chain from the upstream of content to the downstream of cinemas, and the planned acquisition of Yongle Film and Television should also hope to consolidate its own business layout. Yongle Film and Television can use this to obtain more resources and funds for the future development of the company.

as for the situation that Yongle Film and Television failed to meet its performance promise for many times, in Xu Shan's view, in the film and television mergers and acquisitions, the situation of failing to meet the promised performance occurred many times, which proved that there was a high risk in the film and television industry. and some time ago, a large number of film and television works were introduced to the market or entered the stage of project preparation, and the annual output of TV dramas alone can reach about 20,000 episodes. What's more, the film and television industry presents a situation where supply exceeds demand, and the market competition is fierce. If Yongle Film and Television wants to improve its profitability, on the one hand, it needs to consolidate its content production ability, and at the same time, it needs to achieve its own innovation and find its own style and role in the industry. Whether this transaction can finally take shape also requires both sides to rationally look at the current market environment and the actual development of the underlying company, so as to form a more reasonable transaction plan.

Edit: nancy