The fetter between Zhang Lei and Huang Rulun has been further deepened.

Five months ago, Huang Rulun spent nearly 50 million yuan to buy a "boat ticket" from Zhang Lei. Now, his two sons, with the way of "stock exchange", boarded the ship of Zhang Lei property listing platform.

On the evening of November 21, first Services Holdings issued a rather special acquisition announcement, proposing 163 million yuan (HK $180 million) to acquire an 8 per cent stake in Century Jinyuan Services Group Co., Ltd. (referred to as "Century Jinyuan Services").

What makes this business special is that it is not paid for with real money.

First Services Holdings paid 163 million of the consideration by issuing and allocating a total of 264 million consideration shares to the seller at the issue price of HK $0.68 per consideration share.

According to the announcement, the offering price of HK $0.68 per share represents a premium of about 7.94% over the closing price of HK $0.63 per share on the day of the announcement, while 264 million shares accounted for prior to the issuance of first Service Holdings.Total share capitalThe proportion is 26.4%, accounting for about 20.88% of the enlarged issued share capital.

In other words, first Services Holdings traded 20.88% of the shares for 8% of Century Jinyuan Services. For a moment, there seems to be a subtle exchange of identities between the acquirer and the acquiree.

In the tide of capitalization of property enterprises, Huang Rulun's two sons, Huang Tao and Huang Shiying, also tried their best to promote Century Jinyuan Service to the Hong Kong Stock Exchange. However, on the day the second prospectus was labeled "invalid", Century Jinyuan announced its decision to suspend the listing on January 26 this year.

Although the dream of supervising the first share of the Huang family's "market property enterprise" has been temporarily dashed, after the completion of the deal, the Huang brothers will be the second largest shareholder in first Service Holdings.

The Wong family took this opportunity to land on the first ship of the "Green Technology property" of the Hong Kong Stock Exchange. Not only that, Century Jinyuan also dispatched troops to the board of directors of the first Service as a non-executive director.

For Zhang Lei's first Services Holdings, acquiring an 8 per cent stake in Century Jinyuan Services creates an opportunity to expand its portfolio of high-quality assets, unleash potential business synergies and create greater value for shareholders.

The day after the deal was announced, first Services Holdings closed at HK $0.61 per share, up 1.67 per cent, with a total market capitalization of about HK $610 million.

20.88% share swap 8%

According to the announcement, the 264 million consideration shares paid by first Service Holdings will be issued and allotted to Platinum Vision and Jingzhi, the two major shareholders of Century Golden Source Services, to receive 158.4 million shares and 105.6 million shares respectively.

After the relevant consideration shares are issued and allotted, Platinum Vision and Jingzhi hold a total of 20.88% of the shares of first Service Holdings. According to the information, the beneficiaries of Platinum wish are Huang Tao and his family trust, and the beneficiaries of Jingzhi are Huang Shiying and his family trust.

The shareholdings of the original controlling shareholders of first Service Holdings, Zhang Lei's wholly-owned company Shijia Group and Zhang Peng's wholly-owned company Hao Feng, were diluted from 33.49% to 26.50% and from 17.08% to 13.51% respectively.

In addition, the shares held by Shanghai CDH Yaojia Venture Capital Center (limited partnership) and other shareholders have also been diluted from 8.64% to 6.84% and from 40.79% to 32.27% respectively.

On the other hand, after the completion of the transaction, Century Jinyuan will hold 44.88% and 29.92% respectively from Platinum Vision and Jingjing, while first Service Holdings and former reputation Co., Ltd. will hold 8% respectively. Huang Tao's wholly-owned company Leader and Huang Shiying's wholly-owned company Source hold 5.52% and 3.68% respectively.

In order to conclude the deal, both sides are in good faith. First Service Holdings and Platinum Vision and Jingzhi grant subscription options to each other free of charge.

Accordingly, Platinum Vision and Jingzhi have the right to exercise the call option within three years after the completion of the transaction, requiring first Services to sell all the sales shares to the seller at a total option exercise price of RMB0.68 per sale share at a total option exercise price of RMB0.68 per share. At the same time, even if the share price falls below HK $0.68 within three years, first Service can ask Platinum Vision and Jingzhi to buy it at an agreed price.

In addition, after the completion of the transaction, Platinum Vision and Jingzhi will jointly send a non-executive director named Su Peiwen to first Service Holdings.

According to the introduction, Su Peiwen, 36, is a professional business English lecturer and business translator with more than 15 years of experience. He has worked in English training institutions run by Tudou Education, 51TalkOnlineEducationGroup, and New Oriental Education & Technology Group.

In February this year, Su Peiwen joined Century Jinyuan Investment Group Co., Ltd as president and assistant to the chief executive.

The difference of six times the price

In fact, at the time of Century Jinyuan Service IPO, Huang Tao and Huang Shiying also introduced strategic investors and Ma Tao, the ultimate shareholder of former reputation Co., Ltd., for Century Jinyuan Service with an 8 per cent stake.

According to the prospectus, Ma Tao has many years of experience in China's real estate, agriculture and health care industries, holds important positions in a number of companies at home and abroad, and has established an extensive network of business resources in different industries. Its investment for an 8 per cent stake in Century Capital Services at the end of 2020 was about HK $25.525 million.

By contrast, the price for first Services Holdings to acquire an 8 per cent stake in Century Jinyuan Services was about HK $180 million, seven times that of Ma Tao at the time.

In fact, after the acquisition of 8% stake in Century Jinyuan Services, first Services Holdings will not consolidate its financial performance, but will record it at fair value as a financial asset in the accounting account.

In a non-typical way of "stock exchange" to reach cooperation, first Service Holdings and Century Jinyuan Service are not only the "present" of each other, but also the future.

According to the announcement, from 2019 to 2021, the revenue of Century Golden Source Service is about 1.058 billion yuan, 1.289 billion yuan and 1.8 billion yuan respectively, and the net profit during the corresponding period is about 181 million yuan, 249 million yuan and 288 million yuan respectively.

In terms of management area, according to its second prospectus, as of April 30, 2021, Century Golden Source Services has an area of 70.2 million square meters under management and a contract area of 77.9 million square meters. The service format of Century Golden Source Service is mainly divided into residential property and non-residential property, in which non-residential property includes commercial property, office building and public construction property.

In the past two years, first Service Holdings has also been further increasing the business concentration in non-residential areas. Last year, it successively acquired 80 per cent of Dalian AirAsia property and 100 per cent of Qingdao Luohang. After the acquisition of these two acquisitions, the area of first Service Holdings in public property, commercial and other properties has increased significantly, and the layout of the original residential-based format has been adjusted to be more diversified.

Data show that as of June 30, 2022, the contract construction area of first Service Holdings is about 72.994 million square meters, and the construction area under management is about 53.202 million square meters.

A new way of merger and acquisition

It is not the first time in the property management industry that first Service Holdings and Century Jinyuan Services have reached acquisition cooperation by way of stock exchange.

In early August last year, Wanyuyun issued an additional 4.8 per cent of shares to all shareholders of Sunshine Zhibo on the basis of that time, and acquired 100 per cent of Sunshine Zhibo, a property company owned by Sunshine City.

At that time, the framework agreement between the two sides, in addition to the exchange of shares, but also signed a new joint venture company, brand and service guarantee and other strategic cooperation.

At the end of December last year, Sunshine cashed out 1.155 million shares with a total consideration of 115 million yuan per share. With the current price of HK $41.55 per share, Sunshine Zhibo's operation can be regarded as the "leek" of everything Cloud.

In addition, in the first half of this year, Country Garden Services Holdings acquired 93.76% of Zhongliang Baiyue Zhijia's shares, which not only agreed on a total consideration of no more than 3.129 billion yuan, but also involved equivalent shares to be exchanged.

According to the announcement at that time, the major shareholder sellers of Zhongliang Baiyue Zhijia included Yang Jian, founder of Zhongliang, and Mr. Yung, an independent third-party investor, of which Yang Jian held 81.51% of the shares and 1.87% of which was held by Mr. Yung. The minority shareholders are two senior executives of Zhongliang Holdings, one is Li Jiacheng, director of the chairman's office, and the other is senior vice president Ma Fei, with the former holding 7.97% and the latter 2.34%.

At that time, Country Garden Services Holdings revealed in the announcement that the first part of the consideration payment terms had been met, and it had issued 80 per cent of the equivalent shares in the consideration to Li Jiacheng and Ma Fei, the minority shareholders of the seller.

According to the announcement, the total number of consideration shares issued is capped at about 45.984 million shares, equivalent to about 1.37 per cent of Country Garden Services Holdings's issued share capital at the date of the announcement.

Among them, the maximum number of consideration shares managed by the seller's minority shareholders and 2.1015 million shares in transit is respectively about 2.1825 million and 2.1015 million shares; the total number of consideration shares of the seller's major shareholders shall not exceed 41.7 million shares, and the major shareholders' consideration shares shall not have a lock-up period.

According to the announcement, Country Garden Services Holdings paid consideration shares to minority shareholders of Baiyue Zhijia at about HK $46.17 per share, a premium of 40.34 per cent over the closing price of the day before the announcement and 30.07 per cent over the average closing price of the five consecutive trading days before the announcement.

As of November 22, Country Garden Services Holdings closed at HK $15.72 per share, about 65.95 per cent lower than the consideration share price at that time.