A refusal!Ziguang’s 18 billion yuan blockbuster acquisition plan has become a bubble

On June 8, after the resumption of trading, Ziguang Guowei announced that the China Securities Regulatory Commission Mergers and Acquisitions Committee had reviewed the issue of shares to purchase assets and related transactions of Ziguang Guoxin Microelectronics Co., Ltd., but it was not approved. As of the close on June 8, Ziguangguo fell slightly by 9.11% to 66.26 yuan per share, with a total market value of 40.2 billion yuan.

As soon as the news came out, it immediately caused an uproar in the market and the industry. The reason is mainly because this merger and acquisition event is dominated by state-owned enterprises and strongly supported by the state, and the underlying assets are very high-quality, so it should be passed smoothly.

Of course, the recent big news in the chip field is also coming one after another, and in this special period, the discussions are more extensive.

A refusal!Ziguang’s 18 billion yuan blockbuster acquisition plan has become a bubble

Figure: Announcement document

Regarding this merger, the review opinion of the China Securities Regulatory Commission is as follows:

1. The ownership of the underlying assets is defective and does not meet the provisions of Article 11 of the Measures for the Administration of Major Asset Restructuring of Listed Companies.

2. The amount of goodwill of the underlying assets is relatively large, and the applicant fails to fully explain that the transaction is conducive to improving the asset quality of the listed company, which does not meet the provisions of Article 43 of the Measures for the Administration of Major Asset Restructuring of Listed Companies. “

A refusal!Ziguang’s 18 billion yuan blockbuster acquisition plan has become a bubble

01

Asset ownership and high goodwill are the two major concerns behind

The “Administrative Measures for Major Assets Restructuring of Listed Companies” stipulates that the purpose of restructuring is that no unit or individual may use major asset restructuring to damage the legitimate rights and interests of listed companies and their shareholders.

According to the second feedback from the China Securities Regulatory Commission, Linxens has acquired and been acquired many times in history, and Ziguang Liansheng has a large amount of goodwill on the book. At the end of 2019, the amount of goodwill was 14.371 billion yuan, which accounted for the shareholders of the parent company. The proportion of net assets is 67.02%, which explains why the China Securities Regulatory Commission will give a high goodwill opinion.

When the China Securities Regulatory Commission asked the company to supplement the disclosure of the adequacy of the existing goodwill impairment loss and the subsequent goodwill impairment risk of listed companies, Ziguang Guowei responded that the estimated operating income of the goodwill impairment test report was slightly higher. In the “Retrospective Evaluation Report” and the estimated revenue of this evaluation, the main difference is the difference in the predicted operating income of the micro-connector business segment.

In addition, Ziguang Guowei also stated that the current production and operation status of the target company is normal, which is in line with the industry development law. According to the pro forma financial report of the target company, as of the end of the reporting period, the goodwill of the target company has not been impaired, and the provision for impairment of goodwill is sufficient.

According to professional analysis, the goodwill of nearly 14.4 billion yuan, perhaps the China Securities Regulatory Commission did not recognize Ziguang Guowei’s reply to the high goodwill in the second feedback, which eventually led the reviewers to reject the merger and acquisition plan from a cautious point of view.

On the other hand, Ziguang Liansheng’s equity is still pledged, and the goodwill of 14.4 billion yuan accounts for 78.89% of the transaction price of 18 billion yuan. Therefore, the China Securities Regulatory Commission has given the opinion that the asset ownership is flawed.

Note:

Goodwill refers to the potential economic value that can bring excess profits to the operation of the enterprise in the future period, or the capitalized value of an enterprise’s expected profitability exceeding the normal profitability of identifiable assets (such as the social average return on investment). Goodwill is an integral part of the overall value of a business. In a business combination, it is the difference between the investment cost of purchasing the business and the fair value of the net assets of the combined business.

Goodwill impairment refers to the recognition of the corresponding impairment loss after the impairment test is carried out on the goodwill formed in the merger. It is a means for the executives of listed companies to hollow out the listed company. As an asset of the enterprise, goodwill refers to the ability of the enterprise to obtain income above the normal profit level (ie excess income), and is the present value of the excess income realized by the enterprise in the future.

Figure: Contents of Articles 11 and 43 of the Measures for the Administration of Major Asset Restructuring of Listed Companies

02

Looking back, this is not the first time

21ic learned that on June 2 last year, Ziguang Guowei announced that it planned to purchase 100% of Ziguang Liansheng from Ziguang Shencai, Zijin Haikuo, Zijin Haiyue, Hongfeng Capital and Xinhua Investment by issuing shares. Equity, and the price of this standard is 18 billion yuan.

The purpose behind this was to bring France’s Linxens under its command, but unexpectedly, the plan was rejected by the Securities Regulatory Commission.

According to public information, the core asset of Tsinghua Unigroup is Linxens, and the operating entities of Linxens are located in France, Germany, Singapore and Thailand. The main business is the design and production of smart security chip microconnectors, RFID inlays and antennas And ultra-thin flexible LED strips.

Why does Ziguang Guowei insist on injecting Linxens into its assets? On the one hand, Linxens has a high level of technology, and its market share is as high as 80% in the world; on the other hand, Ziguang Liansheng is a holding company of Linxens, and some people have calculated that the stock price may even double after the merger.

It is worth mentioning that Ziguang Guowei and Linxens already have business relations. Ziguang Guowei once stated in the transaction plan that Ziguang Guowei’s main business is integrated circuit chip design, sales and quartz crystal components business, and the smart security chip business in the main business products and the target company’s Linxens smart security chip micro The connector business belongs to the upstream and downstream of the industrial chain and has a strong synergy effect.

Ziguang Guowei is a leading enterprise in the field of security chips in China. The acquisition of Linxens can improve its security chip industry chain, and the listed company will realize the layout of “security chip + intelligent connection”.

Of course, this is not the first time that Ziguang Guowei’s expansion has been blocked:

On the evening of November 5, 2015, Tsinghua Unigroup, whose name is still Tongfang Guoxin, planned to issue shares to the actual controller Tsinghua Holdings and other objects, raising 80 billion yuan to invest in the integrated circuit business.

On February 25, 2016, the “Proposal on the Major Assets Purchase Report of Tongfang Guoxin Electronics Co., Ltd. (Draft)” and its summary was reviewed and approved, and other proposals related to this major asset reorganization were approved. The subsidiary subscribed for the shares issued by Licheng Technology Co., Ltd. and Nanmao Technology Co., Ltd. through private placement.

However, on November 30, 2016, the company signed the “Termination Agreement” with Nanmao Technology, mainly due to the uncertainty of the review of the Investment Review Committee of the Ministry of Economic Affairs of Taiwan and the major changes in the capital market environment.

On January 13, 2017, the company received the “Notice Letter” from Licheng Technology. Since the company failed to obtain the approval of the Taiwan Investment Review Committee within the time limit stipulated in the “Share Subscription Agreement” signed with Licheng Technology, Licheng Technology The technology board of directors has decided not to continue this private equity offering.

On January 23, 2017, with the approval of the thirty-third meeting of the fifth board of directors of the company, the company signed a “termination agreement” with Licheng Technology, and no longer subscribed its shares in this private placement. So far, the major asset restructuring of the private equity subscription of Nanmao Technology Co., Ltd. and Licheng Technology Co., Ltd. in this non-public offering and investment project has been terminated.

On June 3, 2019, this refinancing plan was officially terminated.

03

Internally have different opinions

When I hear the words Ziguang Guowei, I must first focus on the word Ziguang, so what is the relationship between it and Ziguang? The controlling shareholder of Ziguang Group is Tsinghua Holdings, which currently holds 51% of the shares, while Tsinghua Holdings is 100% owned by Tsinghua University, and the actual controller is the Ministry of Education of China.

Beijing Jiankun Investment Group currently holds 49% of the shares, while Zhao Weiguo, chairman of Ziguang Group, holds 70% of Jiankun’s shares.

Tsinghua Unigroup is the largest integrated circuit company in China. The company’s IT and related equipment and service businesses are mainly operated by the listed company Tsinghua Unigroup.

According to previous people familiar with the matter, Ziguang Group has a different idea about the acquisition of Ziguang Liansheng by Ziguang Guowei, and believes that it may be a better way to let Ziguang Liansheng go to the Science and Technology Innovation Board by itself. The increase in time revenue and profit will detract from the valuation of Ziguang Guowei in the long run.

In fact, Ziguang Group has changed its shareholding many times. Even on June 3 this year, Ziguang Group announced that Tsinghua Holdings will introduce Liangjiang Industrial Group or its related parties designated by the Chongqing Liangjiang New Area Management Committee as a new strategy of Ziguang Group. Investors. I don’t know if it’s because I’m not interested in the share reform plan, or because many similar plans have been unsuccessful before. After this announcement was released, the response of Ziguang stocks was flat.

After facing heavy losses, Ziguang Guowei said that the failure of the reorganization application will not affect the operation of Ziguang Guowei. The spokesperson said: “Both parties are subsidiaries of Tsinghua Unigroup and have natural advantages in business cooperation and collaboration. The two parties will continue to explore and deepen relevant cooperation.”

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Author: Yoyokuo