Financial Services Association, March 18 (Reporters Wang Haichun and Li Jie) Due to a 2 billion yuan equity transfer, two powerful local state-owned enterprises, Shenzhen Talent Security Group Co., Ltd. and Shandong Expressway Co., Ltd. (hereinafter referred to as “Shandong Expressway”), have conducted arbitration for more than 2 years. With the arbitration results released, the dispute between the two parties is about to come to an end.

Shandong Express (600350.SH) recently disclosed that the Jinan Changying Jincheng Equity Investment Partnership (Limited Partnership), in which the company invests, has recently received the [2024] China Trade and Beijing Decision No. 0783 from the China International Economic and Trade Arbitration Commission (hereinafter referred to as “MaoZhong”). Changying Jincheng is the applicant in this case.

According to information released by Shandong Expressway, Trade Middle School issued the above “ruling” on March 15, 2024. The ruling in this arbitration was that the respondent paid the principal amount of the share transfer of 2 billion yuan to the applicant, as well as interest on the share transfer payment, late payment penalties, arbitration fees in this case, and other related expenses incurred by the applicant in connection with this case.

According to reports, the respondent in this case is Shenzhen Talent Housing Group Co., Ltd.

According to information published on the official website of Shenzhen Talent Housing Group Co., Ltd., the company was incorporated on June 30, 2016 and put into operation on October 9, with a registered capital of 100 billion yuan. It is a wholly state-owned enterprise and affordable housing franchise agency in Shenzhen. By the end of 2023, Anju Group had total assets of 208.5 billion yuan and net assets of 116.4 billion yuan, achieving a total investment of 169.1 billion yuan.

The claimant who initiated the arbitration was Shandong Express, and its shareholders are also quite strong.

According to Tianyancha information, Shandong Expressway Group Co., Ltd. holds 70.48% of the shares of Shandong Expressway Co., Ltd. and is the latter's controlling shareholder. According to the official website of Shandong Expressway Group, it is a state-owned capital investment company and one of the world's top 500 enterprises in the infrastructure sector in Shandong Province, with a registered capital of 45.9 billion yuan. Up to now, Shandong Expressway Group owns 6 listed companies including Shandong Expressway Co., Ltd.

According to public information, two companies, Anju Group and Shandong Expressway, have a dispute involving matters relating to the transfer of Evergrande's shares. Industry insiders said that the reason for the incident may also have to start with the financing matters initiated by Evergrande many years ago.

In 2017, Evergrande initiated a restructuring with Shenzhen Shenzhen Housing to promote Evergrande Real Estate's A-share listing. To this end, Evergrande launched a series of capital operations and brought in a number of strategic investors. According to media reports, Evergrande Real Estate launched several rounds of intensive capital increases and stock expansion that year, totaling about 130 billion yuan in capital increases, of which Shandong Expressway Group invested about 23 billion yuan.

According to information previously disclosed by Shandong Expressway, in November 2017, after review by the Changying Jincheng Investment Decision Committee, the company agreed to invest in the Evergrande Real Estate project. Changying Jincheng signed the “Capital Increase Agreement on Evergrande Real Estate Group Co., Ltd.” and “Supplementary Agreement” with Guangzhou Kailong Real Estate Group Co., Ltd., and Changying Jincheng pledged 5 billion yuan of additional capital to Evergrande Real Estate. After the capital increase was completed, Changying Jincheng held 1.1759% of Evergrande Real Estate's shares.

However, the restructuring of Evergrande and Shenzhen Housing since then has not progressed smoothly. In November 2020, China Evergrande issued an announcement stating that it decided to terminate the restructuring plan with Shenzhen Housing on November 8, 2020.

After Evergrande terminated the restructuring plan with Shenzhen Housing, Anju Group and Shandong Expressway signed an agreement on the transfer of shares in Evergrande Real Estate in November 2020.

According to information released by Shandong Expressway on November 23, 2020, Changying Jincheng and Talent Security Group, which is invested by Shandong Expressway, signed an equity transfer agreement and equity pledge agreement to transfer 1.1759% of the shares held by Evergrande Real Estate Group Co., Ltd. According to the agreement, Talent Security Group transferred the underlying shares held by Changying Jincheng in consideration of 5 billion yuan.

According to the agreement, the talent is arranged to pay the equity transfer in 3 installments within 12 months of signing the agreement, amounting to 1.5 billion yuan, 1.5 billion yuan and 2 billion yuan respectively. Of this, 1.5 billion yuan was paid on November 20, 2020, 1.5 billion yuan was paid within 6 months after the agreement was signed, and 2 billion yuan was paid within 12 months after the agreement was signed.

According to the equity transfer agreement, the transferee pledges the corresponding shares of Evergrande Real Estate Group to Changying Jincheng as a guarantee and pays the transfer amount in three installments. Interest is paid according to the 1-year loan market quoted interest rate (LPR) of 3.85% from the date the agreement is signed until the actual payment date. The deadline for payment of the third phase of the equity transfer is November 19, 2021.

The agreement also stipulates that if the transferee makes an overdue payment, it shall pay the transferor an overdue payment penalty. The late payment penalty is based on overdue payments, and is calculated at 2 times the LPR from the date of overdue payment until the actual payment date.

According to public information, after the equity transfer agreement came into effect, Changying Jincheng transferred the underlying shares to Talent Security Group in accordance with the agreement; Talent Security Group has already sold the underlying shares to Changying Jincheng as agreed, and paid 3 billion yuan and interest for the first two installments.

However, Shandong Expressway said that after Talent Settlement Group paid the above payment, the latter did not fulfill the obligation to make subsequent payments as agreed in the contract.

“Changying Jincheng's repeated exhortations were to no avail. According to the agreement, they filed arbitration with a request that Anju Group pay 2 billion yuan of the principal amount of the third equity transfer as agreed in the “Equity Transfer Agreement”, as well as interest and penalties.” According to the Shandong Expressway.

According to reports, in February 2022, Trade Mediation accepted the case and notified both the applicant and the respondent to appoint arbitrators. Since then, Trade Mediation has issued several written notices, and the ruling period in this case has been extended accordingly due to arbitration procedures and other requirements.

However, as revealed by Shandong Expressway a few days ago, it has received a ruling issued by a trade brokerage agency, which is an arbitration carried out by the relevant agency on the aforementioned dispute.