“Investors Network” Meng Xing
It is common for listed companies to sell subsidiaries, but it is rare to “displace money” to sell subsidiaries.
On November 12, Shenzhen Infinetuo Technology Co., Ltd. (“Infineon”, 002528.SZ) issued an announcement stating that in order to further integrate the company's resources, optimize the company's business structure, and focus on high-quality main businesses, the company plans to sell 81% of the shares held by Infineon (Hangzhou) Information System Technology Co., Ltd. (hereinafter referred to as “Infineon Systems”), a wholly-owned subsidiary. After the equity sale is completed, the company still holds 19% of Infineon Systems's shares, and Infineon Systems will no longer be included in the scope of the company's consolidated statements.
The equity sale will take the form of a public listing. Using August 31, 2023 as the evaluation benchmark date, the total equity value of shareholders holding 100% of Infineon Systems's shares in the company was 259.1128 million yuan (after considering the completion of the debt-for-equity capital increase). Based on this valuation, the company sold 81% of Infineon Systems's shares at a listing price of 209.96 million yuan.
According to the announcement, in order to optimize the capital structure of the Infineto system to facilitate the execution of the sale of 81% of Infineto's equity transactions, Infineto plans to increase the capital of Infineto Systems by 924.2581 million yuan through debt-for-equity swaps. The debt-for-equity capital increase matters must be reviewed and approved by the company's board of directors and shareholders' meetings, and can only be implemented after the counterparty's delisting.
Debt-for-equity capital increase subsidiary
When Infineto sells a subsidiary this time, the market is most concerned about is that the company will actually increase the capital of the subsidiary through debt-for-equity swaps. Regarding the so-called “debt-for-equity” capital increase, Infineto stated in its announcement that the company plans to convert the principal and interest of the loan of 92425.81 trillion yuan from the Infineto system up to the audit and evaluation benchmark date into investment in it.
Moreover, the announcement shows that after the audit and evaluation benchmark date, Infineto will continue to add 46 million yuan in loan balance to the Infineto system. The company will require the counterparty to return the full amount of the additional loans during the transition period to the company by December 31, 2023 (and no later than the date when 81% of the shares of the Infineto system is transferred to the counterparty or a third party designated by the counterparty). If a repayment deferment is really necessary, the two parties agree and the payment must be made within one year, and the purchaser must provide the company with a valid guarantee approved by the company.
Up to now, Infineto has provided a guarantee balance of RMB 64.75 million for Infineto system bank loans. Furthermore, in order to maintain the normal operation of the Infineto system during the transition period, the company may continue to guarantee the renewal of its maturing bank loans.
The reason why Infineon has spared no effort to sell its subsidiary, Infineto Systems, is mainly because Infineto Systems was already insolvent at the end of 2022.
According to the announcement, as of the end of 2022, the net assets of Infineto Systems were -450 million yuan, and as of the end of August 2023, the company's net assets were 214 million yuan.
Currently, the loss amount of Infineto's system exceeds revenue, and revenue has also declined sharply. In 2022, Infineon Systems achieved revenue of 176 million yuan and net loss of 539 million yuan; from January to August 2023, it achieved revenue of 16 million yuan, net loss of 259 million yuan.
Acquire a second-year subsidiary to transform business
According to data, in 2015, Infineto acquired Infineto Systems by issuing 10.313,300 shares and paying 88.2 million yuan in cash for 210 million yuan. At the time, the company's name was Hangzhou Zangyu Technology Co., Ltd. (hereinafter referred to as “Zangyu Technology”).
Zangyu Technology is a supplier that provides overall video surveillance solutions in the fields of safe cities and intelligent transportation. The company has experience in cooperation with public security and traffic management departments, and can provide customers with customized products and services.
The company's core products include low illumination wide dynamic cameras, high-definition road vehicle capture, road violation forensics, traffic conditions and incident detection systems, etc., which are widely used in public security monitoring and traffic police violation capture; at the same time, the company also provides video surveillance networking systems, massive video storage systems, and incident investigation systems.
The acquisition evaluation report at the time showed that the total equity value of Zangyu Technology's shareholders using the profit method was 2237.698 million yuan. The assessed value increased by 157.514,500 yuan compared to net book assets, with a value-added rate of 237.74%.
Prior to the acquisition, Zangyu Technology's main business revenue from 2012 to 2014 was 63.2915 million yuan, 78.8029 million yuan, and 997.764 million yuan, respectively, and net profit was 12.9183 million yuan, 19.506 million yuan, and 17.123 million yuan, respectively.
At the time, the original shareholders of Zangyu Technology promised that the company's assessed net profit for 2015, 2016, and 2017 would not be less than 23 million yuan, 30 million yuan, and 39 million yuan, respectively.
However, the annual report shows that from 2015 to 2017, Zangyu Technology achieved net profit of RMB 21.7755 million, RMB 2,862,800, and RMB 24.9072 million respectively; the performance target completion rates were 95.55%, 9.54%, and 63.86%, respectively, and the comprehensive completion rate was only 54.07%.
In particular, in 2016, Zangyu Technology achieved only 9.54% of its performance target. Infineto explained that this was due to Zangyu Technology's business transformation.
Infineto pointed out in its annual report that with the intensification of market competition and the further concentration of supply chain resources and sales channels, its subsidiary Zangyu Technology no longer has the conditions to compete positively with domestic first-tier brands in the domestic hardware equipment market. To this end, Zangyu Technology has carried out a strategic transformation, and the company has transformed from a supplier of hardware products related to intelligent transportation and safe city video to a leading provider of integrated solutions for safe cities and intelligent transportation technologies.
Shareholders' shareholding reduction support company
Judging from Infineto's own business conditions, the company has not been optimistic in recent years. The annual report shows that from 2020 to 2022, the company achieved revenue of 5.237 billion yuan, 2,936 billion yuan and 1,837 billion yuan respectively; the company achieved net profit of 87.5 million yuan in 2020. Since then, it has lost money for two consecutive years, with net losses of 1,435 billion yuan and 110 billion yuan respectively.
Regarding the sudden loss of net profit in 2021, Infineto pointed out in its annual report that the company's goodwill was impaired by 715 million yuan.
By the end of 2022, Infineto's total assets were 4.479 billion yuan, down 26.37% year on year, and net assets attributable to shareholders of listed companies were 1,251 billion yuan, down 46.26% year on year.
As of this year, the three-quarter report shows that Infineto's revenue for the first three quarters of 2023 was 987 million yuan, a year-on-year decrease of 23.84%; net profit loss attributable to shareholders of listed companies was 375 million yuan, a year-on-year decrease of 51.58%.
As of the end of the third quarter of 2023, Infineto's total assets were 3,299 million yuan, down 26.33% from the end of the previous year, and shareholders' equity attributable to listed companies was 887 million yuan, down 29.13% from the end of the previous year.
Under the company's current operating conditions, Infineto continues to invest in construction projects and joint ventures. According to the third quarterly report, as of the end of the third quarter, the company's long-term equity investment balance was 5.472 million yuan, up 5372% from the beginning of the year, and the balance of projects under construction was 235 million yuan, up 66.20% from the beginning of the year. The company explained that this was mainly due to new investment joint ventures and increased investment in the Hangzhou Infinetuo building construction project.
In addition, Infineto's credit impairment losses in the first three quarters of this year were 212 million yuan, compared to 44 million yuan in the same period last year. The company explained that this was mainly due to an increase in long-term receivables bad debt preparation for the current period.
With regard to the current situation of the company, shareholders are preparing to reduce their shares and lend capital to the company. In June of this year, Infineto issued an announcement stating that Liu Zhaohuai, the company's chairman and co-general manager, who holds more than 5% of the shares, and his co-actor, JHL INFINITE LLC, plans to reduce their holdings in total by no more than 60 million shares within the next six months, that is, no more than 5.01% of the company's total share capital.
According to the announcement, all of the capital obtained from the reduction in holdings will be loaned to listed companies. The use of funds includes, but is not limited to, daily production and operation, project delivery, debt repayment, etc. Interest rates refer to bank loan interest rates for the same period.
According to Infineto's third quarterly report, as of the end of the third quarter, the company's long-term loan balance was 411 million yuan, up 103.16% from the beginning of the year.
Earlier, investors asked Infineto when the company would be profitable. In response, Infineto said that at present, the company is at a critical stage of transformation and improving the quality of development. It is actively adopting a series of countermeasures such as strengthening independent research and development, introducing cutting-edge technology, and adjusting business models in an effort to mitigate business risks; simultaneously, on the basis of stable business integration and risk management, it grasps development opportunities such as “dual zone” construction, “20+8” industry optimization, and digital economy industry, and implements functional positioning to form a strategic fulcrum for the ecological operation of the park sector. It cultivates new advantages in the digital economy, enhances enterprise value, and achieves sustainable development. (Produced by Thinking Finance) ■