Product: Sina Finance listed Company Research Institute
Author: IPO Refinancing Group / Chen Lu
The progress of Mingjiahui's cross-border acquisition of Aitwei has been slow since December last year. On October 27, Mingjiahui submitted a revised draft of the acquisition plan to the Shenzhen Stock Exchange, raising the underlying equity of this transaction from 52% to 57.49%. The transaction method has been changed from full share payment to 60% share payment and 40% cash payment, while raising matching funds for cash payment and other matters.
The way of reducing the share-based payment ratio has, to some extent, consolidated the control of Cheng Zongyu, the real controller, and prevented the acquisition from forming a restructuring listing. It is worth noting that Aitwei's total assets reached 627 million yuan as of the first half of 2021, and the revised plan says that the evaluation of the underlying assets and transaction valuation has not yet been completed and is expected to constitute a major asset restructuring. If the reorganization leads to a change in the actual controller of the listed company, it will trigger the reorganization of the listing red line.
Mingjiahui has been engaged in the lighting field for a long time, while the target Aitwei is mainly engaged in the design, manufacture and sales of IGBT chips and power semiconductor wafer foundry, so this acquisition constitutes a cross-border acquisition. It is worth noting that the target enterprise has lost money for two years in a row, and the profits of famous foreign exchange have fallen for two years in a row. Can the "marriage" of the two sides enhance their sustainable profitability? According to the relevant provisions of the measures for the Management of Major Asset reorganization of listed companies, the issuance of shares to purchase assets by listed companies should be conducive to improving the asset quality, financial situation and sustainable profitability of listed companies. At present, the impact of Mingjiahui's acquisition on profitability is still uncertain.
Operational capacity is faced with challenges to raise funds for many times to "replenish blood"
The acquisition was accompanied by the raising of matching funds, and according to the revised plan, Mingjiahui intends to raise supporting funds by issuing shares to no more than 35 specific investors, with a total amount of no more than 100% of the transaction price of the proposed shares to purchase assets. And the number of shares issued by raising matching funds shall not exceed 30% of the total share capital of the listed company before issuing shares and paying cash to purchase assets.
The matching funds raised will be used to pay the cash consideration of the transaction, the related expenses of the transaction, the capacity expansion project of the target company, the construction project of the R & D center of the target company, and replenish the liquidity of the listed company, among which the amount of supplementary liquidity shall not exceed 50% of the total funds raised or 25% of the price of this transaction.
In addition to the matching funds raised by this acquisition, Mingjiahui also intends to issue 40.5508 million shares to specific targets through summary procedures in 2021, with plans to raise no more than 255 million yuan. Of this amount, 76.64 million yuan was used to replenish working capital, accounting for 30.2%.
It is worth noting that the operating capacity of Mingjiahui is facing challenges. On the one hand, the net cash flow of operating activities began to turn negative last year, on the other hand, the funds on the account have declined sharply in recent years. As a result, it is not difficult to explain the company's urgent need to replenish working capital, and has raised funds to "replenish blood" many times this year.
From 2019 to 2020 and the third quarter of 2021, the net cash flow of Mingjiahui's operating activities was 46 million yuan,-173 million yuan and-44 million yuan respectively, with a net decrease of 219 million yuan last year. In the same period, the company's account funds were 690 million yuan, 392 million yuan and 56 million yuan respectively, a decrease of 84.49 percent in the third quarter of this year compared with the same period last year. From 2018 to 2020, the turnover days of accounts receivable in Mingjiahui increased from 171days to 895.75 days, with a sharp increase of 178.28% in 2020 compared with the same period last year.
The annual report explained that the decline in Mingjiahui's performance last year was mainly affected by the epidemic, and although Mingjiahui's income recovered somewhat in the third quarter of this year, its losses further intensified, mainly because the gross profit margin on product sales fell sharply from 43.05% to 28.57%, and the gross profit margin decreased by 14.48 percentage points compared with the same period last year.
Mingjiahui focuses on the lighting field, and its main business includes lighting engineering business and related lighting engineering design, lighting product research and development, production, sales and contract energy. Among them, construction is the main source of income, contributing about 90% of the revenue. While China's lighting industry has experienced decades of development, the market structure is generally mature, the overall competition in the industry is fierce, the threat of potential entrants and downstream bargaining power is strong, it is not easy to increase market share in this field.
According to the research report of the forward-looking Industrial Research Institute, Liad is the first in revenue related to lighting engineering in 2020, and the highest gross profit margin is space-time technology. The industry is in the shape of a pyramid, with a small number of large enterprises, but a large market share and a high degree of concentration. There are a large number of small and medium-sized enterprises, but their market share is small.
At present, the domestic market is roughly divided into three echelons. The first echelon is the lighting engineering business revenue of more than 500 million yuan of enterprises, representative enterprises are time and space science and technology, Liad, Zhouming science and technology. The second echelon is the lighting engineering business revenue of 200-500 million, the representative enterprises are Mingjiahui, Huatian Lighting, Debang Lighting. The third echelon is the lighting engineering business revenue of less than 200 million, representative enterprises are Hua Maxin and Zhida Optoelectronics.
Source: forward-looking Industrial Research Institute
Affected by the competition in the industry, the net profit of famous foreign exchange has dropped for two years in a row. From 2018 to 2020, the operating income was 1.307 billion yuan, 1.252 billion yuan and 513 million yuan respectively, up 91.61%,-4.18% and-59.04% over the same period last year. Revenue recovered in the third quarter of this year, up 46.16% from the same period last year. In the same period, the net profit of returning to the mother was 316 million yuan, 148 million yuan and-350 million yuan respectively, up 81.83%,-53.16% and-336.63% year-on-year, and the loss in the third quarter of this year increased by 27.75% compared with the same period last year.
The profitability of the underlying company is uncertain
Celebrities are facing fierce market competition in the lighting engineering industry, and the acquisition of semiconductor company Atwi seems to be a move to expand business and create new revenue growth points. Aitmicro is mainly engaged in IGBT chip design, manufacturing and sales, as well as power semiconductor wafer foundry. IGBT power semiconductors are widely used in photovoltaic new energy, automotive electronics and other markets.
But it is worth noting that the target company Aitwei has continued to lose money in the past two years, and the profitability of the target company is uncertain. The losses in 2019-2020 and the first half of 2021 were 35.6457 million yuan, 20.7869 million yuan and 7.1855 million yuan respectively. Another risk of cross-border acquisition is that the senior managers of listed companies do not accumulate enough experience in the business field of the acquired company, and the acquired company is faced with the risk of personnel mobility, which is easy to have a negative impact on the continuous operation and management of the target company.
As of the date of announcement of the revised version of the acquisition plan, the controlling shareholder of Aite Micro is Zhangjiagang Yuejin Investment Fund, which holds 57.5% of the shares. TRinno Technology Co.,Ltd is the second largest shareholder with a stake of 40.56 per cent. IA,Inc owns 1.94%. Zhangjiagang Yuejin Industrial Investment Fund Partnership (Limited Partnership) is the counterparty of Mingjiahui in this acquisition. However, the pricing of the underlying assets and transactions, the evaluation of the value-added rate, the number of shares issued and the total amount of funds raised are not disclosed in the revised version of the plan.
Source: company announcement
Aitwei has only one subsidiary, Suzhou Tongguan Microelectronics Co., Ltd., which is responsible for undertaking contract manufacturing business. Mainly engaged in low-energy semiconductor power devices production and sales, power semiconductor devices and intelligent power control devices design, research, development, technology transfer, self-management and agent of all kinds of goods and technology import and export.
Aitwei's continued losses also reflect the situation of the industry. Mingjiahui said in the plan that the semiconductor industry has strong cyclical characteristics and is closely related to the overall development of the macro-economy. In recent years, affected by the COVID-19 epidemic, the overall economic situation of the industry has declined. At the same time, international trade frictions continue to escalate, and some countries restrict the import and export of China's semiconductor industry by means of trade protection, which has an objective adverse impact on the development of domestic related industries. It will also have a certain impact on the business performance of semiconductor enterprises, including the target companies.
There is also a certain risk of integration in cross-border acquisitions. After the completion of this transaction, Aitwei will become a holding subsidiary of Mingjiahui. Mingjiahui said in the acquisition plan that the two will operate independently as different operators. However, from the perspective of company operation and resource integration, famous foreign exchange and target companies still need to integrate in corporate culture, organizational model, financial management and internal control, human resources management, technology research and development management, business cooperation and so on. If the integration is not carried out smoothly, it may adversely affect the operation of the target company, which will have a certain impact on the interests of listed companies and shareholders.