① Nanochip announced that it plans to acquire a total of 79.31% of McGowan's shares in cash, with a total purchase consideration of 793 million yuan. This is also the second merger and acquisition order after the “Eight Rules of the Science and Technology Innovation Board”; ② Based on McGowan's book assets of 148 million yuan, the purchase price premium is about 6.78 times. McGowan's revenue has continued to grow in the past two years, but net profit has declined by more than 30%.
“Science and Technology Innovation Board Daily”, June 23 (Reporter Guo Hui) The second industrial merger and acquisition order has arrived after the “Eight Rules of the Science and Technology Innovation Board”.
Today (June 23), Nanochip announced that it plans to acquire a total of 79.31% of the shares of Shanghai McGone Microelectronics Co., Ltd. (“McGone”) in cash, with a total purchase consideration of 793 million yuan.
Nanxinwei said that the company has been continuously enriching product categories around downstream core application scenarios. This transaction is a merger and acquisition decision made by the company based on focusing on the development of the main business. It is conducive to integrating the products, technology, markets, customers, supply chain and other resources of both parties, and exerting synergistic benefits in the field of magnetic sensors.
The “Science and Technology Innovation Board Daily” reporter noticed that McGowan's revenue has maintained year-on-year growth in the past two years, but net profit has declined. The company was previously acquired by Siritech, which means this is the second time the project has changed hands. Based on McGowan's book assets of 148 million yuan, the purchase price premium is about 6.78 times.
The transaction price was 793 million yuan, and the cash purchase premium was nearly 6.78 times
According to the announcement, prior to this transaction, McGowan's majority shareholder was Silicon Tech, with a shareholding ratio of 62.68%; Shanghai Liuji and Shanghai Lirui employee shareholding platforms held 19.76% and 17.56% of the shares respectively.
Looking at the transaction method, Nanochip plans to transfer 62.68% of McGone's shares directly held by Silicon Technology in cash, and also plans to use cash to transfer 5.60% of McGone's shares indirectly through Shanghai Lirui. In total, it will acquire 68.28% of McGone's shares, with a total transaction consideration of 683 million yuan.
Nanowei will also acquire a total of 11.03% of McGowan's shares through the acquisition of property rights from multiple investors on the Shanghai Lairui and Shanghai Message platforms.
Among them, the investors mentioned above as counterparties include Fang Jun, the current chairman and general manager of McGowan, Zhu Jianyu, R&D director of McGowan, Wei Shizhong, the company's director and sales director, and Jiang Jie, the company's supervisor and director of product development.
According to the investment ratio estimates, many of the McGowan executives mentioned above will still indirectly hold some of McGowan's shares after the transaction is completed.
According to the asset evaluation report, as of the evaluation reference date, according to the income law, the book value of McGowan's owners' equity belonging to the parent company was 148 million yuan, the assessed value was 1 billion yuan, and the assessed value added was 852 million yuan, with a value-added rate of 576.55%.
Through agreement between the parties involved in the transaction, it was determined that the total transaction price corresponding to 79.31% of the shares of the target company McGone was RMB 793 million.
Therefore, based on McGowan's book assets of 148 million yuan, the purchase price premium is about 6.78 times.
This time, Nanowei will acquire all assets in cash. In addition to its own capital, it will also raise some of its own funds. Nanxinwei said it plans to apply for a merger and acquisition loan of no more than 480 million yuan from the bank to pay part of the share transfer price and property share transfer price of this transaction. The loan period is no more than 7 years, and the loan interest rate is between 2.60% and 3.00%.
A number of transferors to this acquisition have also made performance promises. According to the announcement, the performance commitment period for this share transfer is 2024, 2025 and 2026. The transferor promised that the target company's net profit for 2024 will be 39.12 million yuan, 2025 net profit will be 51.54 million yuan, and 2026 net profit will be 75.68 million yuan.
McGowan plans to change hands twice, and net profit fell by more than 30% last year
Established in 2009, McGowan has been focusing on the R&D, production and sales of chips based on magnetoelectric sensing technology and intelligent motion control. Its main products include magnetic switch position detection chips, magnetic current/linear position detection chips, magnetic coding chips, magnetic sensors and related modules.
McGowan products are widely used in consumer electronics fields such as mobile phone terminals, drones, sweepers, and two-wheeled electric vehicles, industrial fields such as robotics, industrial control, and security, and new energy vehicles such as three-electric vehicles, chassis, and BMS. Nanochip said in the announcement that McGowan has established a leading market share advantage in segments such as magnetic coding and magnetic switches.
McGone's core team comes from well-known sensor and semiconductor companies such as Honeywell (Honeywell), MaxLinear (MaxLinear), and Marvell (Marvell). Among them, Fang Jun, the current chairman of McGowan, graduated from Shanghai Jiao Tong University and worked as a sales engineer and sales manager at Honeywell China.
McGowan has now been acquired by Nanochip, which is the company's “second change of hands.”
McGowan's current majority shareholder, Silicon Technology, was founded in 2012. Technology research and development is rooted in the Shanghai Microsystems Institute, and was jointly invested and established by Xinwei Group and Shanghai.
According to Xinwei Group's previous statement, Silicon Tech once faced operational difficulties in 2017 and 2018. It was McGowan that was selected as the target of the merger and acquisition at the time that helped SiSmart establish an “external circulation system for the transformation of technological achievements” and established the subsequent explosion of SiRui's performance.
It is worth noting that SiRui Technology carried out listing guidance and filing with the Securities Regulatory Commission in 2021. The company has 48 non-natural shareholders, and there is no shortage of star venture capital institutions such as Xiaomi Industrial Fund, Xingcheng Capital, Yunfeng Fund, and Langma Peak Venture Capital. Furthermore, the shareholders also have industry players such as Huahong Hongli, Zhaoyi Innovation, and Sany Heavy Industries.
In July 2023, SiRui Technology disclosed a progress report on the listing counseling work, showing that issues such as the company's historical evolution and institutional shareholder penetration are still yet to be verified. Up to now, the company's Science and Technology Innovation Board application has not been accepted.
The rush to sell off its core assets this time may add more variables to Siritech's future listing process.
In a downward cyclical environment for the semiconductor industry, McGowan achieved year-on-year revenue growth in 2023, but net profit declined. Among them, revenue for 2022 and 2023 was 269 million yuan and 300 million yuan respectively, and net profit was 285.934 million yuan and 18.383 million yuan respectively, a year-on-year decrease of 34.11%.
Second merger and acquisition integration after the “Eight Rules of the Science and Technology Innovation Board”
Nanochip focuses on the development and sale of high-performance, high-reliability analog integrated circuits, focusing on the three major product directions of sensors, signal chains, and power management. The products are widely used in the automotive, pan-energy and consumer electronics fields.
Nanochip currently also has magneto-current sensor products, and mass production will be achieved in mid-2022. In 2023, this category's revenue will mainly come from the photovoltaic application market. The company said it is expected to gradually expand to automotive three-electric system applications in 2024 and become an important increase in sensor revenue in 2024.
“McGowan has established a leading market share advantage in segments such as magnetic coding and magnetic switches.” Nanxinwei said that this transaction is a merger and acquisition decision made by the company based on focusing on the development of the main business. It is conducive to integrating the products, technology, markets, customers, supply chain and other resources of both parties, and to exert synergetic benefits in the field of magnetic sensors.
Nanchip has made frequent foreign investments and industrial mergers and acquisitions in recent years. According to the “Science and Technology Innovation Board Daily” reporter, in July 2023, Nanchip announced that it plans to acquire shares in the chip company Quantum Micro in cash; in October 2023, Nanchip also joined forces with Hemai Co., Ltd. to make an industrial investment of nearly 100 million yuan in Zhongrui Hongxin, a silicon carbide device company.
The company's internal industrial investment business is mainly responsible for the company's internal industrial investment business. In 2023, it has set up cooperative funds with well-known investment institutions in the industry such as Yuanhe, Huaye, Suzhou Juyuan, and Xiaomi, and has invested in more than 70 projects related to integrated circuits, semiconductors, and upstream and downstream industries.
Wang Shengyang, chairman and general manager of Naxinwei, said in response to a question from the “Science and Technology Innovation Board Daily” reporter at this month's results conference that the company will continue to seek high-quality mergers and acquisitions through foreign investment layout this year, and looks forward to rapidly expanding product categories and market directions through effective integration of industry resources during the downward window of the industry.
Will welcome more industrial mergers and acquisitions of science and innovation enterprises
According to the “Eight Rules of the Science and Technology Innovation Board” issued by the Securities Regulatory Commission, companies listed on the Science and Technology Innovation Board will be supported to carry out mergers and acquisitions upstream and downstream of the industrial chain; companies listed on the Science and Technology Innovation Board will be supported to focus on improving and strengthening their main business to carry out absorption and mergers.
The General Office of the State Council issued “Certain Policies and Measures to Promote the High-Quality Development of Venture Capital”, which shows that eligible listed companies are supported to raise capital to acquire technology-based enterprises by issuing shares or convertible bonds; study and improve policy regulations on the scope of application, duration, and investment ratio of M&A loans; and expand investment in M&A loans in the field of science and technology innovation.
Nanowei also became the second science and technology innovation board company to announce mergers and acquisitions after the “Eight Rules of the Science and Technology Innovation Board”. On June 21, two days after the release of the “Eight Rules of the Science and Technology Innovation Board,” Xinlian Integrated revealed the restructuring plan.
Unlike Nanowei's current foreign acquisition of the company, VeriLink Integrated plans to acquire the remaining 72.33% of the shares in its subsidiary Xinlian Yuezhou. The two companies have chosen to launch mergers and acquisitions or restructuring plans at this point. Whether they are stepping on the China policy to support dividends and accelerate the subsequent integration process has attracted market attention.
Senior investment bankers said that the “Eight Rules of the Science and Technology Innovation Board” open up a “green channel” for “hard technology” enterprise equity financing, mergers, acquisitions and restructuring to carry out research on key core technologies, reflecting the leniency of regulatory policies. At the same time, it is clear that research on some new innovative mechanisms will give full play to the role of the Science and Technology Innovation Board as a testing ground for capital market reform.
A person responsible for industrial mergers and acquisitions of listed companies told the “Science and Technology Innovation Board Daily” reporter that taking semiconductor projects as an example, the valuations of startups have generally declined in the past two years. What companies need to consider more is when to take action before prices are inflated, and how to actually find high-quality mergers and acquisitions during the industry cycle, and how to integrate real business collaboration after completing mergers and acquisitions.