In May of this year, Fenmei Packaging (00468.HK) announced that it received a privatization proposal from Shandong Xin Jufeng (301296.SZ), which holds approximately 26.8% of the company's share capital. The CEO of Fenmei Packaging, Bi Hua, and Executive Director Chang Fuquan recently issued an open letter to the company's shareholders, emphasizing that the offer is a malicious acquisition attempt by Shandong Xin Jufeng against the company, and the result is the merger of two competing companies that are fundamentally incompatible. Therefore, based on strategic, business and financial reasons, they strongly oppose the offer in the most vigorous language and reiterate that the offer is hostile and not welcome by the executive management.

In the open letter, they pointed out that due to geopolitical and other reasons, Fenmei's international customers have been informed that if Fenmei is acquired by its Chinese competitor Shandong Xin Jufeng, customers will switch their business elsewhere, which could significantly and adversely affect Fenmei's financial performance. As Yili is Shandong Xin Jufeng's largest customer, accounting for more than 70% of its revenue, and holding approximately 4.08% of Shandong Xin Jufeng's issued shares, Fenmei's major customers and strategic shareholder Mengniu also expressed serious concerns about the offer, opposing the possibility that Shandong Xin Jufeng may obtain its business secrets and practices.

The letter also pointed out that the business of Shandong Xin Jufeng Group has always been limited to the domestic market in China, and its operating records and experience in overseas markets are limited. If Fenmei and Shandong Xin Jufeng Group merge, the company's international competitiveness is expected to be greatly weakened. Considering that international business accounts for about 43.2% of Fenmei's revenue and about 36% of its gross profit in 2023, they are concerned that the offer will threaten the international business. The letter urges shareholders to hold shares and support the executive management in blocking the acquirer from obtaining control of the Fenmei's board of directors or statutory control. (GC/K)

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