Financial Services Association, January 29 (Reporter Zhang Liangde) The controversial bill for enlightenment pharmaceutical (000590.SZ) to acquire 55% of the shares of Wuhan Mingshi Pharmaceutical Co., Ltd. (abbreviation: Mingshi Pharmaceutical) has passed. In the case of opposition from the second and third largest shareholders and some small to medium investors, the majority shareholders overcame the customs line.

On the same day, Enlightenment Pharmaceutical also responded to the Shenzhen Stock Exchange's inquiry letter on the acquisition bill, responding to questions such as Mingshi Pharmaceutical's main sources of revenue and profit, changes in gross margin, the core competitiveness of major products, and whether they have sustainable profitability.

The “silent majority” voted for the disputed takeover bill and still passed

Since Enlightenment Pharmaceutical's premium rate of acquisition of Mingshi Pharmaceutical reached 400.72%, and the static price-earnings ratio was nearly 20 times. Previously, the China Securities Small and Medium Investors Service Center (“Investment Service Center”) believed that the company's core competitiveness did not match the high premium of this acquisition, questioned the rationality of Enlightenment Pharmaceutical's high-premium acquisition of assets or harmed the interests of small and medium-sized investors, and called on all small and medium-sized investors to actively exercise their rights and participate in this extraordinary shareholders' meeting to vote.

In the past, small and medium shareholders rarely participated in the Enlightenment Pharmaceutical shareholders' meeting vote, but this appeal to submit to the Center attracted the attention of some “silent majority.” According to the shareholders' meeting resolution announcement, the number of shareholders voting this time reached 65, including 62 small and medium-sized shareholders. The shares represented represented 2.5340% of the total shares of the listed company.

Currently, Enlightenment Pharmaceutical's controlling shareholder Enlightenment Technology Service Co., Ltd. (abbreviation: Enlightenment Service) holds 602,169 million shares, accounting for 25.14% of the company's total share capital, while the total number of shares held by Hengyang State-owned Assets, the second and third largest shareholders opposing the bill exceeds 457.573 million shares. If there are enough small and medium shareholders to participate in voting in response to the Submission Center's appeal, in theory, it is possible to sniper and pass the bill at the shareholders' meeting.

However, the voting status of the acquisition bill was: 62,140,447 shares were approved, accounting for 55.4615% of the shares held by all shareholders attending the meeting; 49,902,037 shares were opposed, accounting for 44.5385% of the shares held by all shareholders attending the meeting. More than 50% of the votes approved were passed.

It is worth noting that the majority of small and medium shareholders oppose the voting situation. After deducting the number of shares held by the top three shareholders, shareholders who agreed to the takeover plan held a total of 1,923,500 shares, and the number of shares held by shareholders opposed to the bill reached 4,144,700 shares.

Judging from the above voting results, differences between the top three shareholders still exist. Previously, directors nominated by the second and third largest shareholders, Hengyang State-owned Assets, had already raised objections to the bill at the board of directors. This time, it was still the majority shareholders who voted in favor, and the second largest shareholder voted against.

The inquiry letter from the Shenzhen Stock Exchange concerned the board dispute, and the company's response was in line with the company's strategy

Earlier, the bill was also passed by the company's board of directors involving risk. Out of the company's seven directors, three directors from Hengyang's state-owned management side voted against it.

Directors Ni Xiaoqiao and Tang Ting objected because the target product was lacking, and the core competitiveness of the future market was weak; current investment in companies that mainly produce health products faced high risks; the acquisition price was too high, performance promises were unreasonable, and some terms of the equity transfer agreement were risky. Independent director Lei Zhenhua's objection is that Mingshi Pharmaceutical's current product, which accounts for a significant share of revenue, is an outsourced product. It is not a product with its own intellectual property rights. After the acquisition, it is difficult to control this cooperative mechanism. Its own products lack core competitiveness to a certain extent, and there is some uncertainty about future revenue.

Enlightenment Pharmaceutical received the “Inquiry Letter on Enlightenment Pharmaceutical Group Co., Ltd.” from the Shenzhen Stock Exchange on January 16, 2024, but it is worth noting that Enlightenment Pharmaceutical did not promptly announce that the company had received the inquiry letter.

Today, the company responded to an inquiry letter from the Shenzhen Stock Exchange. The company claims that the acquisition of Mingshi Pharmaceutical is in line with Enlightenment Pharmaceutical's strategic plan of “using proprietary Chinese medicines as the main body, specialty APIs and health consumer products as the two wings”, which can easily enable the company to obtain important strategic resources, enrich the company's product matrix, and accelerate the company's layout in the field of health consumer goods.

According to the announcement, Mingshi Pharmaceutical achieved operating revenue of 96.30.5 million yuan and 67.5889 million yuan from January to August 2023, including health product sales revenue of 94.0848 million yuan and 64.7379 million yuan. The vast majority of the company's revenue comes from the health products line. Judging from the product gross profit table disclosed by the company, the company's main products all have high product gross profit margins. The average gross margin of the top ten products is about 65%. The gross margin of e-commerce and offline sales products is high, and cooperative OEM products can also reach a gross profit margin of 40% or more.

Mingshi Pharmaceutical itself, the target of the acquisition, mainly relies on online sales channels. The three-terminal sales channel represented by primary clinics may rely on its customers to seek medical advice.

The main products of the purchased company are all on a competitive circuit. Their products focus on promoting growth and development, losing weight, moisturizing the intestines, and delaying aging. The response letter also mentioned that according to the data from the State Administration of Market Supervision and Administration, there are more than 6,000, 4000, and 3,000 registered health foods that slow aging, weight loss, and moisturize the intestines, respectively.

The response letter also revealed Mingshi Pharmaceutical's profit situation and performance promises for the next three years. The acquired targets had profits of $13.14 million and $19.17 million in 2022 and $19.17 million; performance promises for 2024 to 2026 were $22 million, $25.3 million and $26.4 million respectively, with net profit growth rates of 14.75%, 15%, and 4.35% respectively.

Since the purchase company's transaction consideration reached 141 million yuan, the company's cash at the end of the third quarter was 150 million yuan, which may have placed a burden on the company's finances. The company said that the transaction company plans to use bank mergers and acquisitions loans and own funds for payment. Of these, it plans to use a loan amount of 60% of the transaction price, or 84.6 million yuan. The remaining capital will be raised by the company itself and paid in two installments.