Policy "East Wind" Boosts Major Restructurings Across Sectors
Since the beginning of this year, policies supporting mergers and acquisitions (M&A) and restructuring have been continuously implemented, with the market environment being continuously optimized. The adaptability and inclusiveness of supporting systems have been continuously strengthened, further enhancing the activity level of the M&A market. According to preliminary statistics by reporters, since May, nearly 50 significant restructuring cases have been disclosed across the market. Trends have emerged, such as listed companies acquiring controlling stakes in companies planning to go public (IPO) and the professional integration of central state-owned enterprises (SOEs), with the logic of industrial mergers and acquisitions becoming increasingly clear.
Several listed companies are acquiring controlling stakes in companies planning to go public.
Currently, some companies planning to go public are leveraging the "east wind" of the M&A and restructuring market to seek a new path for capital expansion. According to statistics from reporters at the Economic Reference Daily, since the beginning of this year, nearly 10 A-share companies have announced the acquisition of controlling stakes in companies that previously planned to go public. For example, Tongwei Co., Ltd. acquired 51% of Runyang Shares through capital increase and agreement acquisition, Yongda Co., Ltd. plans to acquire 51% of Jin Yuan Equipment's shares in cash, and Guibao Technology acquired Jia Hao Shares, among others.
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In August of this year, Tongwei Co., Ltd. announced its intention to sign a "Capital Increase Intention Agreement" with relevant shareholders of Jiangsu Runyang New Energy Technology Co., Ltd. and Jiangsu Yueda Group Co., Ltd. to acquire 51% of Runyang Shares through capital increase and agreement acquisition. The total transaction consideration does not exceed 5 billion yuan. After the transaction is completed, Runyang Shares will become a subsidiary controlled by Tongwei Co., Ltd.
Public information shows that Runyang Shares is a well-known solar energy company mainly engaged in the research and development, production, and sales of high-efficiency solar products, as well as industrial silicon, polycrystalline silicon, silicon wafers, components, and photovoltaic power station businesses. From 2020 to 2022, Runyang Shares ranked in the top three globally in battery shipments for three consecutive years and maintained a top five position in 2023. As the world's fifth-largest battery factory, Runyang Shares once sought a listing on the ChiNext board, submitted an application to the Shenzhen Stock Exchange in 2022, planned to raise 4 billion yuan, but did not continue the listing process after registration took effect.
In July, Yongda Co., Ltd., a listed company on the Shenzhen Stock Exchange, also announced plans to acquire 51% of the shares of Jiangsu Jin Yuan High-end Equipment Co., Ltd. in cash, attracting market attention. Public information shows that as early as November 2009, Jin Yuan Equipment filed for an IPO on the ChiNext board with the China Securities Regulatory Commission (CSRC), withdrew the materials a year later; in May 2011, Jin Yuan Equipment turned to the Small and Medium Board for another IPO application and withdrew the materials again after 10 months; in September 2021, Jin Yuan Equipment reapplied for an IPO on the ChiNext board until it terminated the listing in 2022. Now, Jin Yuan Equipment has chosen to be acquired by a listed company.
In the view of industry insiders, the shift of companies planning to go public to being acquired through mergers and acquisitions is the result of continuous exploration and innovation by companies and the capital market. It also reflects the diversified needs of market entities and the flexibility of capital solutions. On the one hand, it is beneficial to the development of the companies planning to go public, that is, through mergers and acquisitions to obtain the support of the acquirer (i.e., the listed company). On the other hand, it also helps the acquirer to achieve external development, leveraging the good business model that the company planning to go public has established to achieve its own high-quality development.
Looking at the fields and purposes of companies planning to go public being acquired, the logic of industrial mergers and acquisitions is becoming increasingly clear. In July of this year, Guibao Technology disclosed in an announcement that it had completed the first delivery of the acquisition of 100% of the equity of Jiangsu Jia Hao Hot Melt Adhesive Co., Ltd. It is reported that Jiangsu Jia Hao had submitted a listing application to the Shenzhen Stock Exchange in 2021, but proactively withdrew in August 2022. In February 2023, the company then chose to be listed on the New Third Board until this acquisition.
Guibao Technology stated that Jiangsu Jia Hao has synergistic effects with the company in terms of technology, products, market, and region. This acquisition is beneficial for further improving the company's industrial layout, expanding the company's business fields, enriching product categories, and increasing core competitiveness in the field of hot melt pressure-sensitive adhesive research and development, production, and sales.
In addition to A-share listed companies, Hong Kong-listed companies are also very interested in acquiring controlling stakes in companies planning to go public. For example, Qingniao Software, which withdrew its IPO application materials from the Beijing Stock Exchange last year, was announced this year to be acquired by Global Leasing, with the acquirer being a subsidiary of the Hong Kong-listed Global Medical.State-owned Assets Heavyweight M&A Cases Emerge Frequently
The reform of state-owned enterprises (SOEs) has also become one of the important themes in this year's M&A market, with central SOEs continuously advancing professional integration to further enhance industrial synergy. Recently, two significant M&A projects of the State Power Investment Corporation (SPIC) have come to light, successively defining the integration platforms for nuclear power operation assets and domestic hydropower assets.
On September 30th, Electric Power Investment and Finance (EPIF) announced that the company received a notice from its actual controller, SPIC, proposing that the company purchase the controlling stake of SPIC Nuclear Energy Co., Ltd. (referred to as "SPIC Nuclear Energy") through the issuance of shares, while divesting the controlling stake of SPIC Capital Holdings Co., Ltd. (referred to as "SPIC Capital"). After the completion of this transaction, the company will become the nuclear power operation asset integration platform of SPIC.
Public information shows that EPIF's main business includes two major sectors: energy and finance, managed by its wholly-owned subsidiaries, Oriental Green Energy and SPIC Capital Holdings. The proposed acquisition of SPIC Nuclear Energy is the nuclear power investment and operation management platform of SPIC, with total assets exceeding 100 billion yuan and registered capital of about 22.85 billion yuan. It is held 73.24% by State Nuclear Power Technology Co., Ltd. (referred to as "SNPT") and 26.76% by China Life Insurance Co., Ltd. SNPT is a controlled enterprise of SPIC, and this transaction constitutes a related party transaction.
In addition, Yuanda Environmental Protection also announced that the company received a notice from its actual controller, SPIC, preliminarily considering that the company will issue A-shares or issue A-shares and pay cash to purchase the controlling stakes of Wuling Hydropower Co., Ltd. and Guangxi Changzhou Hydropower Development Co., Ltd., which are subsidiaries of China Power, and simultaneously raise supporting funds. After the completion of this transaction, the company will build the domestic hydropower asset integration platform of SPIC and be controlled by China Power, further consolidating China Power's position as a comprehensive clean energy flagship listed platform mainly based on hydropower, wind power, solar power, and high-quality thermal power.
"The above two central enterprise asset integrations reflect the efforts of central enterprises in optimizing resource allocation and improving overall operational efficiency. Through asset integration, central enterprises can achieve upstream and downstream integration of the industrial chain, improve the efficiency of resource utilization, and enhance the competitiveness of enterprises in the market," said Tian Lihui, Dean of the Institute of Financial Development Research at Nankai University.
Previously, the largest absorption merger transaction involving A-share listed companies also occurred in the state-owned assets field, with two "giant ships" with a market value of over 100 billion yuan about to merge. In September this year, China Shipbuilding and China Shipbuilding Heavy Industry announced that China Shipbuilding plans to absorb and merge China Shipbuilding Heavy Industry by issuing A-shares in exchange for shares. China Shipbuilding is the absorbing and merging party, and China Shipbuilding Heavy Industry is the absorbed and merged party. After the completion of the share exchange absorption and merger, China Shipbuilding Heavy Industry will terminate its listing and cancel its legal person status, and China Shipbuilding will inherit and undertake all the assets, liabilities, businesses, personnel, contracts, and other rights and obligations of China Shipbuilding Heavy Industry.
In addition, Salt Lake Co., Ltd. also announced that the actual controller of the company, Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, the controlling shareholder Qinghai State Investment, and China Minmetals and its subsidiaries signed a cooperation agreement. The Qinghai Provincial Government State-owned Assets Supervision and Administration Commission, Qinghai State Investment, and China Minmetals plan to jointly establish China Salt Lake Industry Group Co., Ltd., which means that a "carrier" in the salt lake field may be coming.
Policy Environment Optimization Enhances Activity
From the frequent emergence of M&A cases involving enterprisesæ‹ŸIPO to the continuous emergence of heavyweight M&A in the state-owned assets field, they are all a microcosm of the high enthusiasm in the M&A market this year. In fact, since the introduction of the new "Nine Articles for the State," M&A restructuring support policies have been continuously implemented throughout the year, the market environment has been continuously optimized, and the adaptability and inclusiveness of supporting systems have been continuously improved, further enhancing the activity of the M&A market. Since May this year, nearly 50 significant restructuring cases have been disclosed in the entire market.In February of this year, when the China Securities Regulatory Commission (CSRC) held a symposium to support mergers and acquisitions (M&A) and restructuring of listed companies, it stated that it would scientifically coordinate the relationship between promoting development and strengthening regulation and risk prevention. It would take multiple measures to invigorate the M&A and restructuring market and support the implementation and effectiveness of outstanding and typical cases. Subsequently, the newly introduced "Nine National Articles" and "Eight Articles for the Science and Technology Innovation Board" once again clarified strong support for M&A and restructuring.
On September 24th, the CSRC issued the "Opinions on Deepening the Reform of the Market for Mergers and Acquisitions and Restructuring of Listed Companies," which covers six aspects: supporting listed companies to transform and upgrade in the direction of new quality productive forces, encouraging listed companies to strengthen industrial integration, further improving regulatory tolerance, enhancing the efficiency of reorganization market transactions, improving the service level of intermediary institutions, and strengthening regulation in accordance with the law. At the same time, it also publicly solicited opinions on the "Guidance for Listed Company Regulation No. 10 - Market Value Management (Draft for Comments)," supporting M&A of listed companies through streamlined review processes and increased tolerance, and requiring the lawful and compliant use of M&A and restructuring, equity incentives, cash dividends, investor relations management, information disclosure, and share repurchase, etc., to promote the enhancement of the investment value of listed companies.
"The relevant policies have significantly stimulated the vitality of the M&A and restructuring market," said Tian Lihui, noting that the series of policies introduced since the new "Nine National Articles" have injected new vitality into the M&A and restructuring market. On the one hand, policy support has increased the efficiency and success rate of M&A and reduced the costs of corporate mergers. On the other hand, the directional nature of the policies has also promoted the flow of resources to more promising enterprises, which is conducive to the survival of the fittest in the entire market and the enhancement of the overall quality and efficiency of the capital market.
Looking ahead, experts believe that with the release of policy dividends, the optimization of the market ecosystem, and the improvement of the macro environment, M&A and restructuring in the A-share market are expected to remain active.