Photo source: Visual China

Blue Whale financial reporter Wang Xiaonan

On May 16, Shenzhen Textile A terminated the purchase of 100% of Hengmei Optoelectronics's shares by issuing shares and paying cash. After going around for almost a year and a half, this “devouring elephant” merger, acquisition and restructuring case has come to an end. Shenzhen Textile A lost the opportunity of its peers to restructure polarizer production capacity by 6 times, and Hengmei Optoelectronics, which had planned an IPO on the Science and Technology Innovation Board, once again missed the opportunity to enter the capital market.

It took about a year and a half, and the restructuring came to an end

After about a year and a half, Shenzhen Textile A's proposed acquisition of 100% of the shares of Hengmei Optoelectronics Co., Ltd. (hereinafter referred to as “Hengmei Optoelectronics”) finally came to an end.

On the evening of May 16, Shenzhen Textile A announced that due to the complexity of the restructuring plan, involving many counterparties, the transaction had not yet completed the approval procedures of all parties involved in the transaction, and the validity period of Hengmei Optoelectronics's financial data had expired, so the company was unable to issue a notice to convene a shareholders' meeting within 6 months after the announcement of the first board resolution to issue shares to purchase assets, that is, before May 17, 2024. After careful verification by the company and negotiations with the parties involved in the transaction, it was decided to terminate the restructuring.

Back in time to the evening of December 18, 2022, Shenzhen Textile A issued an announcement stating that it plans to acquire all of Hengmei Optoelectronics's shares or control and raise supporting capital by issuing shares and paying cash to purchase assets. The main trading partners are Chimei Materials and Haosheng Danyang.

Prior to that, the company's stock price changed several times since August 2022. It was widely rumored in the market that Honor would list Deep Textile A behind the shell, but in the end, the target of the acquisition was someone else.

On the last day of 2022, the Shenzhen Textile A restructuring plan was released. The company plans to acquire 100% of Hengmei Optoelectronics's shares through a combination of issuing shares and paying cash. At the same time, it also plans to raise supporting capital from the non-public offering of shares of no more than 35 specific targets. The issue price of the assets purchased in this issue is 8.93 yuan/share.

However, Hengmei Optoelectronics's shares are scattered, and there is no actual controller. The counterparties in this transaction include 17 companies including Chi Mei Materials and Haosheng Danyang. Shenzhen Textile A said that this transaction constituted a major asset restructuring, but did not constitute a restructuring and listing. After the restructuring, the actual controller of the company was still the Shenzhen State-owned Assets Administration Commission, which directly shattered rumors that Hengmei Optoelectronics was listed under the cover.

When the acquisition progressed to June 2023, Hangzhou Rencheng and Haosheng Danyang, which are shareholders of Hengmei Optoelectronics, respectively signed equity transfer agreements with Kunshan Guochuang. The end result was that Hangzhou Rencheng withdrew from the original shareholder, Haosheng Danyang reduced the shareholding ratio, while Kunshan Guochuang became one of the new shareholders. Kunshan Guochuang became a wholly-owned subsidiary of the Kunshan State-owned Assets Administration Commission.

In principle, the above changes in the transaction object are considered to constitute a major adjustment to the restructuring plan in accordance with relevant regulations. Nearly a year after the restructuring plan was proposed, in November 2023, Shenzhen Textile A held a board of directors to review and approve the revised draft of the relevant transaction plan, etc.

It should be pointed out that the restructuring plan has been planned for nearly a year and a half. Since the audit and evaluation of the transaction has not yet been completed, the estimated valuation and proposed price of Hengmei Optoelectronics have not yet been determined. Furthermore, although eight shareholders, including Chimei Materials, Haosheng Danyang, and Kunshan Guochuang, intend to promise and assume compensation obligations for Hengmei Optoelectronics's performance, they have not signed a clear performance compensation agreement.

Speaking of which, Shenzhen Textile A's restructuring eventually came to an end, which seemed to have been predicted long ago when the subsidiary Shengbo Optoelectronics was in deep litigation.

In July 2022, Shengbo Optoelectronics, a subsidiary holding 60% of Shenzhen Textile A's shares, was sued in court by the original shareholder Jinhang Foundation to disband Shengbo Optoelectronics. The reason is that after the actual controller of the Jinhang Fund was changed to Advantage Ford, there was a disagreement with Shenzhen Textile A on the development ideas and management of Shengbo Optoelectronics.

According to the Tianyancha App, the shareholders behind Ting Lin Kunshan, the second-largest shareholder of Hengmei Optoelectronics, have an advantage. In May 2023, the court handed down a first instance verdict in the above lawsuit, rejecting all lawsuits filed by the plaintiff, Jinhang Foundation. It is worth mentioning that in January 2023, another shareholder of Shengbo Optoelectronics, a subsidiary of Shenzhen Textile A, was changed to Hengmei Optoelectronics, holding 40% of the shares.

Just before Shenzhen Textile A disclosure termination announcement, investors also inquired several times about the progress of the restructuring. The company said it would make every effort to push forward the restructuring matters. It was only a month later that the plan for a restructuring of nearly a year and a half came to an end.

Shenzhen Textile A promised in the announcement that it will not plan major asset restructuring matters within one month from the date of disclosure of the announcement. Regarding whether they are planning to acquire Hengmei Optoelectronics in a month and in the future, Blue Whale Finance called Shenzhen Textile A several times, but no one answered the call.

The new capital story came to an end when the opportunity for a sharp increase in production capacity was lost

The predecessor of Shenzhen Textile A was Shenzhen Textile Industry Co., Ltd., which was founded in 1984. In 1994, Shenzhen Textile A was restructured and launched. Although the company name of Shenzhen Textile A has the word “textile” until now, and the company is still operating in the high-end textile and garment business, its main business has long been mainly polarizers for LCD displays. As of 2023, Shenzhen Textile A's revenue from polarizer sales reached 93.7%, while property leasing and other business revenue accounted for only 6.3%.

As the first domestic industry pioneer to enter the polarizer field, due to the “cold winter” of the downstream panel industry, Shenzhen Textile A's performance in recent years has also been tepid. Although Shenzhen Textile A's revenue rose all the way from 2.09 billion yuan in 2020 to 3.08 billion yuan in 2023, the company's net profit to mother remained around 70 million yuan for many years and failed to exceed 100 million yuan.

In fact, if Shenzhen Textile A wins Hengmei Optoelectronics, this deal would also be considered a “snake devour”. As of the end of September 2023, Hengmei Optoelectronics had total assets of 13.434 billion yuan and net assets of 4.921 billion yuan. During the same period, Shenzhen Textile A had total assets of 5.741 billion yuan and net assets of 2,886 billion yuan.

Shenzhen Textile A and Hengmei Optoelectronics have business synergy. Their main business is polarizer. If the production capacity of Deep Textile A is successfully restructured, the production capacity of Shenzhen Textile A will increase dramatically.

Established in 2014, Hengmei Optoelectronics is mainly engaged in R&D and manufacturing of polarizing plates and optical functional films. BOE, Huaxing Optoelectronics, and Huike Co., Ltd. are all its customers. At present, the company has set up and planned three production bases in Kunshan, Fuzhou and Danyang, with a total annual production capacity of 340 million square meters of polarizers. In addition, construction of the second phase of Hengmei's Kunshan plant began in January 2024, and the annual production capacity of the two lines will reach 120 million square meters after full production.

According to the 2023 annual report, Shenzhen Textile A currently has 7 mass-produced polarizer production lines, with a total planned production capacity of 52.8 million square meters. If this restructuring goes well, Shenzhen Textile A's polarizer production capacity will exceed 300 million square meters, a six-fold increase over its own production capacity.

On the other hand, Hengmei Optoelectronics also missed another chance to enter the capital market. Previously, Hengmei Optoelectronics also planned an IPO on the Science and Technology Innovation Board. According to the information disclosed by the Jiangsu Regulatory Bureau for enterprise counseling and filing, Hengmei Optoelectronics registered for counseling and filing on April 30, 2021. The consulting agency is Haitong Securities.

According to the Tianyancha App, the actual controller of Hengmei Optoelectronics is Chen Rongsheng, who began serving as the company's legal representative and chairman in November 2023. In addition, Chen Rongsheng, born in 1970, currently holds the position of chairman of the listed company Dahua Smart. He holds 5.35% of Dahua Smart's shares. If this transaction succeeds, Chimei Materials and Haosheng Danyang controlled by Chen Rongsheng are expected to hold more than 5% of Shenzhen Textile A.

However, now it has all become a “mirror flower moon”. With the announcement of the end of the restructuring, not only did Shenzhen Textile A lose the opportunity of its peers to rapidly increase its production capacity of restructured polarizers by 6 times, but Chen Rongsheng, the actual controller behind Hengmei Optoelectronics, also lost a new capital story.