Incident: On the evening of March 14, 2016, Storm Technology (300431.CH/RMB 95.83, unrated) announced that the company plans to purchase 100% of Ganpu Technology's shares, 60% of Straw Bear Pictures, and 100% of Ridong Technology's shares by issuing shares and paying cash, respectively, and raise 3 billion yuan in supporting capital. Review 1. Description of the transaction: 1. Transaction content: 1) Issuance of shares and payment of assets in cash: The company issued a price of 55.46 yuan, and issued a total of 39.194 million shares. Ganpu Technology's transaction consideration is 1.05 billion yuan, Straw Bear Pictures's transaction consideration is 1.08 billion yuan, and Lidong Technology's transaction consideration is 975 million yuan. 2) Raise supporting capital: The company plans to raise 3 billion yuan of supporting capital through a non-public offering of shares, of which 930 million yuan will be used to pay cash consideration for this restructuring, 440 million yuan for the company's DT core platform upgrade project, 1.2 billion yuan for DT's comprehensive copyright purchase project and 100 million yuan for DT Big Data support platform construction project. 2. Performance commitment: 1) Ganpu Technology promised that 2016 net profit should not be less than 70 million yuan, the cumulative net profit for the 2016-2017 year will not be less than 161 million yuan, and the cumulative net profit for the 2016 - 2018 year will not be less than 274 million yuan; 2) Straw Bear Pictures promised not less than 100 million yuan in 2016, the cumulative net profit for the year 2016 - 2017 will not be less than 240 million yuan, and the cumulative net profit for the year 2016 - 2018 will not be less than 436 million yuan. 3) Lidong Technology promises that the net profit for 2016 will not be less than 65 million yuan, the cumulative net profit for 2016-2017 will not be less than 146 million yuan, and the cumulative net profit for the 2016-2018 year will not be less than 246 million yuan. The cumulative net profit for 2016-2019 was not less than 362 million yuan, and the cumulative net profit for 2016-2020 was not less than 496 million yuan. 2. Situation of the subject matter of the acquisition 1. Straw Bear Pictures: Excellent domestic boutique drama production company 1) Main business: Straw Bear Pictures was established in June 2014, focusing on the production, distribution and derivative business of premium TV series. With the core business team's production and distribution level of movies and TV dramas over the years, the company has rapidly grown into a first-class domestic film and television production company. Since its establishment, the company has invested in the filming of two premium TV series, “The Legend of Sword Man in Shushan” and “Impossible Mission”, and plans to participate in the filming of 12 TV series over the next three years. “The Legend of Sword Man in the Battle of Shushan” is based on a costume fairy. The drama pioneered a new model of broadcasting movies and TV dramas from an online platform to a television platform. Since the show premiered on iQiyi Channel on September 22, 2015, the total number of broadcasts over the four seasons has reached 314 million, 198 million, 186 million, and 128 million, respectively. After the drama aired on Anhui TV on January 16, 2016, the TV's ratings in 52 cities broke the 1 point mark for the first time in nearly a year, ranking second. On January 26, 2016, Jiangxi TV followed for 1.5 rounds and successfully entered the top ten TV list, proving the influence of the original big IP “Battle of Shushan”. “Impossible Mission” is an anti-Japanese spy drama starring Yu Zhen, a well-known veteran anti-war drama actor. Yu Zhen is known as the “King of Espionage” and “Tough Man on the Screen” for his outstanding performance in TV dramas such as “Task Force 5,” “From the South to the South,” and “Down to the South”, as well as his deep grasp of the characters. The series is scheduled to air in September 2016. 2) Straw Bear Pictures has established long-term cooperative relationships with many outstanding directors, actors, and producers in the industry. Judging from the shareholding structure, the company's founder and largest shareholder is Liu Xiaofeng, an outstanding producer. In addition, famous actors Liu Shishi and Zhao Liying are all major shareholders of the company. Judging from the company's management, the famous actor Wu Qilong is the company's artistic director, Hong Kong director Huang Weijie is the company's contract director, and senior screenwriter Ma Yan is the company's contracted screenwriter. The company reached long-term cooperation agreements with Wu Qilong, Zhao Liying, Huang Weijie, Ma Yan, and Niu Jing for about three years. Through long-term cooperation with outstanding TV series industry professionals, we ensure the completion of Straw Bear Film's “production is quality” strategy. 2. Gump Technology: Overseas distribution and operator of mobile online games Gump Technology was established in September 2012. Its main business is overseas distribution and operation of mobile online games. Its business extends from Southeast Asia, such as Thailand and Vietnam, and now covers many countries and regions such as Southeast Asia, Hong Kong, Macao, Taiwan, Europe and the United States, and has gradually established a global game distribution and operation network. The company has successively launched premium mobile games such as “Sailing World” and “Ninja Online” in Thailand and Vietnam. Among them, after “Sailing World” was on the list in Thailand in August 2014, it ranked first in the Thai App Store free list and best seller list that month, and is known as the “game for all” in Thailand. By the end of 2015, the total number of registered users exceeded 3 million, and the average monthly turnover was over 8 million baht. The company recently collaborated with famous game companies such as NetEase to obtain overseas distribution rights for popular games such as “Brawl West”, “Kombat Cyclone”, and “Lord of Ghosts.” 3. Lidong Technology: Mobile terminal online game development and operator Lidong Technology was established in August 2015. Its main business is the development and operation of mobile terminal online games. The company has strong game development and IP adaptation capabilities, and is good at obtaining IP for movies and TV series to adapt them into games. Its popular games include “Song in the Clouds” mobile game, “Interstellar Attack” mobile game, and “The Legend of Tianyu” mobile game. Among them, the mobile game “Song in the Clouds” is an adaptation of the TV drama “Song in the Clouds” starring Liberty Angelababy and Lu Yi. Since the game went live in October 2015, the sales amount in October, November, and December all exceeded 15 million yuan and reached 26 million yuan in December. Excellent IP adaptation capabilities and an appropriate launch time perfectly match the needs of the current TV drama IP audience. 3. DT Big Entertainment Comprehensive Copyright Purchase Project and DT Big Data Platform Construction Project 1) Project Purpose: Improve the company's content resources, enhance traffic monetization channels, enhance user stickiness, expand the company's business scope and marketing channels, and achieve multi-terminal access to online entertainment. 2) Project content: Extend content copyright. The purchase of copyright involves movies, TV series, variety shows, sports, literature, music, comics, animation, etc., and the company will participate in the production of movies and TV dramas to improve the company's product content. 3) Project budget: The estimated investment of the project is RMB 1.2 billion. Among them, 650 million yuan was invested for movies, 200 million yuan for TV dramas, 150 million yuan for variety shows, and 200 million yuan for homemade dramas, animations, comics, and other IP. The planned investment period is two years. 2. DT Big Data Support Platform Construction Project 1) Project purpose: Relying on the business platform under the “DT Entertainment” strategy, it aims to summarize and process data from all businesses of all companies under the Storm ecosystem through relevant technology centered on big data and machine learning. By grasping users' interests and preferences, accurate entertainment recommendations are made according to individual end user needs, thereby improving the entertainment experience of end users. At the same time, accurate advertising targeting individual end user needs can increase the number of potential customers for company advertisers and promote an increase in advertisers' business revenue. 2) Project content: Focus on developing four modules: data management platform (DMP), data analysis platform, precision marketing platform (ADX), algorithm and calculation platform. 3) Project budget: The estimated investment of the project is about RMB 101.428,800, and the planned investment period is two years. 4. A puzzle was added to the DT Pan-Entertainment Strategy, and the international layout is beginning to take shape 1. Complementing the DT Entertainment Strategy Content Division Company has established the “platform+content+data” strategy since its launch in March 2015. In terms of hardware, through years of research and development, the company has successively launched the video playback platform Storm Video, the virtual reality platform Storm Magic Mirror, the home video platform Storm Super TV, and the online interactive live streaming platform Storm Show. Through hardware platform channels, the company has accumulated more than 200 million monthly active online entertainment users, laying a solid traffic foundation for the company to fully enter the pan-entertainment industry. Storm Technology's acquisition of Ganpu Technology, Lidong Technology, and Straw Bear Pictures is the company's layout for upstream content by implementing the “DT Entertainment” strategy. Ganpu Technology and Lidong Technology will enhance the company's game development and distribution capabilities, and Straw Bear Pictures will enhance the company's film and television production and distribution capabilities. By combining content production with the company's strong hardware advantages, we have further established the company's dominant position in the pan-entertainment industry. 2. Film and game linkage to improve traffic monetization capacity 1) Straw Bear Pictures provides high-quality content resources for the company's video broadcasting platform. At the same time, Straw Bear Pictures uses its rich industry experience to enhance the company's effectiveness in purchasing content resources. On the other hand, the company has strong user channel data resources, which can provide a stable audience for movies and TV shows for Straw Bear Pictures. In terms of VR content production, the company has carried out in-depth cooperation with Straw Bear Pictures. Relying on the company's current position in the virtual reality industry, it has further established its leading position in the VR content industry by producing beautiful VR video content or VR movies and TV dramas. 2) Ridong Technology will enhance the company's ability to monetize traffic. As one of the most powerful ways to monetize traffic in the cultural industry, the gaming sector is an indispensable strategic sector for any cultural and entertainment company in the layout of the pan-entertainment industry. The company currently has a monthly active user base of more than 200 million, which can provide a massive audience for LiDong Technology's premium games. Ridong Gaming's rich IP game adaptation capabilities can further commercialize and monetize the company's existing and future IP resources in film and television. The company and Ridong Technology will further cooperate in VR game content production and IP content adaptation to further enhance the company's existing traffic monetization space and pan-entertainment derivative development capabilities through video game interaction. 3. Lay out overseas and establish the company's international content platform The company's big DT strategy will surely move towards a global development path in the future. Through the acquisition of Ganpu Technology, the company will acquire overseas channel resources and rich experience in localized operation that the latter has accumulated over many years. As a technology company based on VR and smart video hardware equipment, it will inevitably need international channels to expand its hardware manufacturing and export scope. The company uses overseas distribution of boutique games as an experiment in the company's content industry internationalization strategy, and then follows up on the global export of movies, TV series and VR content resources, and opens up more overseas content distribution channels, which will help future exchanges and cooperation in the field of multinational film, television, and smart video hardware. 5. Investment proposal After this acquisition transaction, the company will complete the layout of the content soft power sector in the pan-entertainment industry, enhance film and television content production and acquisition capabilities through the acquisition of Straw Bear Pictures, enhance the IP monetization capacity of content resources, and obtain overseas development channels through the acquisition of Ganpu Technology, paving the way for an internationalization strategy. Combined with the company's strong hardware strength in VR, smart devices, etc., the company's big DT strategy will surely achieve longer-term development in the future. According to Wande's unanimous forecast, the company's original business forecast net profit for 2016 was 154 million yuan, and the total net profit of the three target companies acquired in 2016 was 195 million yuan. The company's net profit for the exam preparation in 2016 was 349 million yuan. Based on the suspension price, the current market value of the company is 26.2 billion, corresponding to the market value of 30 billion dollars after additional issuance (not considering raising supporting capital). Investors are advised to pay attention.