Financial Services Association, March 15 (Reporter Wu Chao) Shagang Co., Ltd. (002075.SZ), which has been actively seeking opportunities for expansion and strategic adjustments, is once again planning an asset acquisition. Against the backdrop of declining efficiency in the steel industry in recent years and pressure on the company's performance, it may be possible to expand the industrial layout and increase revenue sources by incorporating this machinery manufacturing company.

According to today's announcement, Shagang Co., Ltd. plans to spend 354 million yuan to acquire 67% of the shares of Shandong Yinglun Machinery Co., Ltd. (“Shandong Yinglun”) held by Northeast Special Steel Group Co., Ltd. (“Dongte Co., Ltd.”) through an agreed transfer agreement. Shagang Co., Ltd. believes that this move will further expand the company's industrial strategic layout, increase asset size, and enhance profitability.

It is worth noting that Shagang Co., Ltd. and Dongte Co., Ltd. are both controlled by the same actual controller, Shen Wenrong. The largest shareholder of Dongte Co., Ltd. is Ningbo Meishan Bonded Port Area Jincheng Shazhou Equity Investment Co., Ltd. (“Jincheng Shazhou”). Jincheng Shazhou is also 70.53% of the shares held by Shen Wenrong, the actual controller of Shagang Co., Ltd. Therefore, this transaction constitutes a related transaction. To ensure the fairness and reasonableness of the transaction, the company's board of directors and supervisors have reviewed and approved the transaction. Furthermore, the transaction still needs to be submitted to the company's shareholders' meeting for review and approval.

The pricing for this transaction was determined based on the evaluation results of the Beijing North Asia Asset Appraisal Office (Special General Partnership) on the total equity value of Shandong Yinglun shareholders. According to the evaluation report, as of December 31, 2023, the total equity value of Shandong Yinglun's assessed shareholders was 529 million yuan, with an added value of 143 million yuan, and a value-added rate of 37.03%. Based on this assessment value, the final price for the acquisition of 67% of Shandong Yinglun's shares was 354 million yuan after negotiations between the two parties.

According to reports, in recent years, due to multiple factors such as domestic and foreign economic conditions, the development of the steel industry has faced severe situations such as weakening downstream demand, continuing falling steel prices, and maintaining high raw fuel costs. As a result, the steel market continues to operate weakly, and the overall efficiency index of the industry is poor.

Shagang Co., Ltd. is also under pressure from a sharp decline in profitability. Since 2022, attributable net profit fell 59.26% year on year to 453 million yuan. The 2023 performance forecast shows that the company's efficiency continues to decline. It is expected to achieve net profit of 188 million yuan to 220 million yuan in 2023, a year-on-year decrease of 51.45% to 58.51%; deducted non-net profit of 2.58 million yuan to 35.58 million yuan, a year-on-year decrease of 89.05% to 99.18% year on year.

In order to cope with industry difficulties and enhance the company's asset scale and profitability, Shagang Co., Ltd. has actively sought external growth opportunities in recent years, including planning to acquire data center operator GS (Global Switch) and large-scale transactions such as the acquisition of Nangang Steel shares (600282.SH) by the controlling shareholder Shagang Group, but none of them have succeeded.

However, Shagang Co., Ltd. did not abandon foreign investment. In February of this year, it was announced that in order to improve the company's profitability, it plans to use 50 million yuan of idle capital to invest in the Hefei Jinsha Xinghe Equity Investment Partnership (limited partnership) controlled by Shanghai Jinsha Equity Investment Fund Management Co., Ltd. (“Jinsha Capital”). Jinsha Capital is the private equity fund manager, and the current investment consists of a joint investment with professional institutions.

Meanwhile, Shandong Yinglun, which was acquired this time, specializes in commercial vehicle gears and other parts products, and is a high-tech enterprise in Shandong Province. According to the asset evaluation report, it has more than 480 sets of gear processing equipment, forming a leading domestic gear production line with the largest amount of equipment and the most competitive in Shandong Province. However, the company's operating performance fluctuated greatly. In 2022 and 2023, Shandong Yinglun achieved net profit of 7.169 million yuan and 47.2011 million yuan respectively.

Industry insiders told the Financial Federation reporter that in the face of the serious situation and market challenges in the steel industry, Shagang Co., Ltd. will obtain its expertise and market channels in the field of machinery manufacturing through the acquisition of Shandong Yinglun, which will help the company further expand related business areas. However, the acquisition of Shandong Yinglun is only the initial stage of its strategic adjustment. In the future, the company will still need to make every effort to integrate resources, improve management efficiency, and expand market channels to ensure that the acquisition can truly bring long-term performance growth and value improvement to the company.