Taking control of Cofco Packaging also means sitting on the throne of the metal packaging head. In this capital war without gunpowder, China Baowu and Org Technology have long been jealous. In 2023, the company's overall sales volume was 18,000 kiloliters, a year-on-year increase of 28.10%. In terms of product structure, the operating income of 10-30 billion yuan products were 401/1288/60 million yuan respectively.

On June 12, under the stimulus of the tender offer from both sides, the stock price of Cofco Packaging continued to rise, closing at HKD 7.1 per share in the secondary market. The market rallied and the stock price continued to rise. The control price of Cofco Packaging continued to rise, which also tested the financial strength of both parties.

As early as 2016, Org Technology, which was investing and expanding overseas, became the second largest shareholder of Cofco Packaging, and Zhou Yuan, the son of the actual controller Zhou Yunjie, and Shen Tao, the general manager of Org Technology, were sent to sit on the board of directors and participate in its operation and management.

Seven years later, in 2023, China Baowu launched an attack, targeting the 29.7% stake held by Cofco Group, the largest shareholder of Cofco Packaging, and issued a tender offer to privatize Cofco Packaging. Subsequently, Org Technology also announced a comprehensive tender offer as a counterattack. Half a year later, the offer price given by Org Technology was 5% higher than that offered by China Baowu. However, for Org Technology, the acquisition was slightly difficult based on its current asset situation, and it may need to use loans to pay some of the tender offer price in addition to its own funds.

Org Technology doubled down and the soaring stock price tested its financial strength.

On the evening of June 7th, Org Technology formally proposed a tender offer plan.

Org Technology uses its overseas subsidiary belonging to Huarui Fengquan as the offeror, and the tender offer price is HKD 7.21 per share. The offer will purchase all the other issued shares of Cofco Packaging except those held by Org Technology itself. At the price of HKD 7.21 per share, in order to purchase all the other shares of Cofco Packaging, Org Technology will need to pay up to HKD 6.1 billion, approximately CNY 5.5 billion. On June 11th, Cofco Packaging rose 2.47% and closed at HKD 7.04 per share.

It should be noted that Zhang Wei, a natural person shareholder of Cofco Packaging, holds 245 million shares, accounting for 22.01% of the total share capital of Cofco Packaging. On June 6th, Org Technology and Zhang Wei signed an irrevocable commitment. During this tender offer period, Org Technology will acquire all the shares of Cofco Packaging held by Zhang Wei. At the tender offer price of HKD 7.21 per share, Org Technology will pay HKD 1.766 billion, approximately CNY 1.641 billion, for the shares held by Zhang Wei.

At present, Cofco Packaging does not have an actual controller. Org Technology holds 24.4% of the shares of Cofco Packaging through its subsidiary Org Development and Hubei Org Technology. After acquiring the shares held by Zhang Wei, Org Technology's shareholding ratio will increase to 46.41%. After the tender offer is completed, Org Technology will obtain control of Cofco Packaging, and Zhou Yunjie, the actual controller of the company, will also become the actual controller of Cofco Packaging.

Cofco Packaging and Org Technology are both leaders in the metal packaging industry. Cofco Packaging mainly produces packaging products such as two-piece cans and single-piece cans, covering the packaging market of beverages, beer, dairy products, and other products. The company's business overlaps to a large extent with Org Technology.

Before this, Cofco Group held a 29.7% stake in Cofco Packaging, making it its largest shareholder. In June 2023, Cofco Group first announced plans to sell its stake in Cofco Packaging and had preliminary talks with a third-party buyer. As subsequent events showed, this third-party buyer was China Baowu Iron and Steel Group Co., Ltd. (hereinafter referred to as 'China Baowu'), which is wholly owned by the State-owned Assets Supervision and Administration Commission.

In September 2023, China Baowu invited the National New-type Urbanization Plan Company to join as a joint tender offeror, jointly invested in Changhai Industries holding 61.54% and 38.46% respectively, and used Changhai Industries as the offeror to jointly promote the acquisition of the control of Cofco Packaging.

Baosteel Packaging (601968.SH), a listed company engaged in metal packaging business under China Baowu, holds similar business. By the end of 2023, subsidiaries of China Baowu held 60.51% equity of Baosteel Packaging, making it the controlling shareholder. In terms of scale, Baosteel is the third largest industry leader after Org Technology and COFCO Packaging. Investors have repeatedly asked Baosteel Packaging whether the company will merge after China Baowu acquired COFCO Packaging, but Baosteel Packaging has not made a positive confirmation. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

However, China Baowu is determined not to give up the opportunity to become the leader in the industry. On December 6 of the same year, China Baowu formally announced its intention to privatize COFCO Packaging. The tender offer price offered by China Baowu is HKD 6.87 per share, with a maximum acquisition price of approximately HKD 7.649 billion, or approximately RMB 7 billion at the exchange rate of the day. At that time, China Foods, the actual holding entity of COFCO Group, signed an irrevocable commitment with China Baowu that when the tender offer is completed, China Baowu will acquire the 29.7% stake in COFCO Packaging held by China Foods.

Just six days after China Baowu issued the tender offer, ORG Technology, COFCO Packaging's second largest shareholder, also announced its intention to make a comprehensive tender offer to acquire control of COFCO Packaging.

In February of this year, the scheme of China Foods selling equity to China Baowu was approved by the State-owned Assets Supervision and Administration Commission. Also in the same month, ORG Technology had a substantive move. The company partnered with old friend Huabin Investment's private equity fund Xiamen Ruibin to establish a subsidiary, Huarui Fengquan, which is specifically used to implement the tender offer acquisition of COFCO Packaging. ORG Technology also increased its capital to Huarui Fengquan by approximately RMB 3.092 billion. On June 7th, ORG Technology officially made a tender offer to COFCO Packaging through a foreign subsidiary of Huarui Fengquan, with the price 5% higher than that of China Baowu.

However, given the current asset situation of ORG Technology, completing the tender offer acquisition of COFCO Packaging is not easy. As of March 30, ORG Technology had approximately RMB 1.427 billion in monetary funds. At the same time, ORG Technology also had interest-bearing liabilities such as RMB 3.087 billion in short-term debts and RMB 545 million in long-term loans. The company's own funds are not enough to cover its short-term debts, nor are they sufficient to pay the consideration for the acquisition of Zhang Wei's shareholding.

In the latest plan, ORG Technology stated that it will complete the payment with its own funds and self-raised funds. For this purpose, Huarui Fengquan has applied for a total credit limit of no more than RMB 11 billion from Shanghai Pudong Development Bank.

In the year that China Baowu and ORG Technology compete for control, the stock price of COFCO Packaging has risen by nearly 80%, reaching the highest level in nearly a decade, and its market value has increased by approximately HKD 3.5 billion. As of the close on June 12, the stock price of COFCO Packaging was HKD 7.1 per share, with a total market value of HKD 7.905 billion. With the obvious upward trend of the stock price, the financial pressure on both China Baowu and ORG Technology will continue to increase.

ORG Technology started with Red Bull and expanded through acquisitions

In the current duopoly market structure, the market share of ORG Technology, COFCO Packaging, and Baosteel Packaging is 20%, 18%, and 17%, respectively. For ORG Technology and China Baowu, whoever wins control of COFCO Packaging will naturally occupy the top two positions in the industry.

ORG Technology was established in 1997 and has been engaged in the production and sale of food and beverage metal packaging products. Currently, Shanghai Yuanlong holds a 32.67% stake in ORG Technology and is its controlling shareholder. Yuanlong's actual controller, Zhou Yunjie, is also the actual controller of ORG Technology. In addition to Shanghai Yuanlong, Zhou Yunjie also holds 0.68% of the shares of ORG Technology through his controlled Beijing 21 Brothers.

In the early years when the business was just starting, ORG Technology met Red Bull, which had just entered the Chinese market, and the fate between ORG Technology and Huabin Group, the operator of Red Bull China, began from here. Therefore, ORG Technology directly opened factories at Red Bull's doorstep, which is what ORG Technology calls the "follow-up" production layout mode. Before 2004, ORG Technology and Red Bull were basically in a performance-bound state, and ORG Technology was once the sole supplier of Red Bull cans and contributed almost all of ORG Technology's revenue.

In 2010, when ORG Technology was restructured, Yan Bin, the actual controller of Red Bull, held 8% of ORG Technology's shares through his controlled Honghao Group and became the company's third largest shareholder. In 2012, ORG Technology was listed on the Shenzhen Stock Exchange as the "first stock in metal packaging." Last year before listing, ORG Technology's revenue was concentrated from the top five customers. Red Bull's sales accounted for 70.56% of ORG Technology's revenue.

At that time, ORG Technology's revenue mainly came from the sales of two major products, Red Bull and Jiaduobao. Later, Huabin Group became involved in a dispute over the Red Bull brand with Thai T.C. Pharmaceutical Industries Co., Ltd., and Jiaduobao also faced a trademark dispute between Guangzhou Pharmaceutical Holdings Limited and Hongdao Group. Soon after listing, ORG Technology's performance was also affected, and the company began to try to get rid of its dependence on Red Bull through capital operations. By 2023, ORG Technology's sales proportion to its top five customers had dropped to 56.09%, and the proportion of sales to its largest customer was about 33.65%.

Around 2015, ORG Technology invested in companies in the same industry. In just over a month in 2015, ORG Technology and its concerted action persons made four rounds of share purchases of Huangshan Novel Materials Co., Ltd. (002014.SZ), which is a listed company under the Huangshan City State-owned Assets Supervision and Administration Commission. Its main products include color printing composite soft packaging materials, and its core downstream customers include Yili, Nestle, Procter & Gamble, etc. By 2019, ORG Technology had acquired 24% of Huangshan Novel's shares and is still its second largest shareholder.

A year later, ORG Technology expanded its investment layout to the second largest player in the metal packaging industry. In 2016, ORG Technology participated in the mixed ownership reform of a Cofco Packaging Corporation under China National Cereals, Oils and Foodstuffs Corporation, and acquired 27% of Cofco Packaging's shares, realizing a strategic investment in Cofco Packaging. Similarly, ORG Technology is still the second largest shareholder of Cofco Packaging. After major shareholding, ORG Technology entered the boards of directors of Huangshan Novel and Cofco Packaging and participated in their business decision-making. Currently, Zhou Yuan, son of ORG Technology's actual controller Zhou Yunjie, serves as Vice Chairman of the Board of Huangshan Novel, and Shen Tao, ORG Technology's General Manager, serves as a director, and both of them also serve as non-executive directors of Cofco Packaging.

In addition, in 2018, ORG Technology targeted Ball Corporation, the world's largest metal packaging company, and acquired its packaging business in China. The following year, ORG Technology issued convertible bonds and completed the acquisition of Ball's related business for $205 million, integrating the beer industry's major customer resources of Budweiser, Tsingtao Brewery, and others. In 2021, ORG Technology also completed the acquisition of Invesco in Hong Kong and indirectly acquired its subsidiary's food can packaging and aluminum aerosol can packaging businesses in Australia and New Zealand. ORG Technology gradually reduced its dependence on Red Bull.

In addition, in the second half of 2021, ORG Technology introduced China Resources-related shareholders, and the Zhuhai Rungui Changqing Equity Investment Fund (Limited Partnership) under CR Capital Partners became ORG Technology's second largest shareholder, and Qin Feng, director and general manager of CR Capital Partners, became an independent director of ORG Technology. After frequent investments in companies in the same industry, ORG Technology temporarily took the lead in the metal packaging industry. By 2023, ORG Technology achieved revenue of about 13.8 billion yuan, and Cofco Packaging's revenue was about 10.3 billion yuan. They are the only two companies in the metal packaging industry with revenue exceeding 10 billion yuan. Since listing, ORG Technology's net income has totaled nearly 8.6 billion yuan, but under its continuous external expansion through mergers and acquisitions, its liquidity is not good, and now ORG Technology still faces financial pressure to fully acquire Cofco Packaging.

In addition, ORG Technology expanded its capital landscape to include industries such as own brand beverages, pre-cooked food, ice hockey, football, and new energy through investments.

After frequent investment layouts and acquisitions of companies in the same industry, ORG Technology temporarily took the throne of the metal packaging industry leader. By 2023, ORG Technology achieved revenue of approximately 13.8 billion yuan, and Cofco Packaging's revenue was approximately 10.3 billion yuan. They are the only two companies in the metal packaging industry with revenue exceeding 10 billion yuan. Since listing, ORG Technology's net income has totaled nearly 8.6 billion yuan, but under its continuous external expansion through mergers and acquisitions, its liquidity is not good. Currently, ORG Technology still faces financial pressure to fully acquire Cofco Packaging.