Investor net Wu Wei.

The introduction of the "Six Mergers and Acquisitions Rules" has triggered the restructuring $ merge transactions in the A-share market, with many listed companies recently announcing merger intentions. However, under strict supervision, regulatory authorities still highly emphasize the quality of merger transactions and information disclosure during the merger. Recently, Infotmic Co., Ltd (000670.SZ) was forced to terminate its merger transaction due to a leak of insider information.

Taking advantage of the favorable policies, recently Suzhou Jin Hong Shun Auto Parts (603922.SH) announced another merger plan, intending to acquire the controlling rights of New Thinking Electric Machine Co., Ltd. held by Shenzhen Hezheng Industrial Investment Co., Ltd. and Cai Rongjun through issuing shares and paying cash.

This is not the first time that Suzhou Jin Hong Shun Auto Parts has planned a merger transaction. In 2020, 2022, and 2023, the company planned to acquire other assets, but all these merger plans ended in failure. In 2021, without planning any merger transactions, the former controlling shareholders of Suzhou Jin Hong Shun Auto Parts, Hong Jiancang, and Hong Weihan, transferred the control to the actual controller Liu Xu.

It should be noted that since September 18, when the company's stock price hit bottom and rebounded, until October 22 when the stock was suspended due to the merger plan, Jin Hong Shun's stock price has risen by about 70%. During the same period, the sector and the SSE Composite Index where Jin Hong Shun is listed have only risen by about 20%.

After multiple unsuccessful mergers and an abnormal increase in stock price, can Jin Hong Shun successfully acquire the controlling rights of New Thinking this time?

Mergers and acquisitions of assets lead to abnormal stock price increases

Suzhou Jin Hong Shun Auto Parts mainly engages in new energy automobiles and traditional component businesses, with products covering automobile body parts, chassis components, battery packs, and other fields. Despite the rapid growth of the domestic new energy automobile industry, Jin Hong Shun has not benefited from the market boom. Comparing the revenue of 1.042 billion yuan in the company's first year of listing in 2017, by 2023, Jin Hong Shun's annual revenue had dropped to only 0.472 billion yuan.

Faced with the situation of declining company income, starting from 2020, Suzhou Jin Hong Shun Auto Parts has been frequently planning restructuring $ merge. On October 23rd, with the support of the "six guidelines for mergers and acquisitions", Suzhou Jin Hong Shun Auto Parts once again released an announcement, intending to acquire the controlling rights of New Thinking through the issuance of shares and payment of cash. Currently, the main trading partners are Hezheng Industry and Cai Rongjun.

Tianyancha shows that New Thinking was founded by Cai Zhenpeng in 2014. The company is a high-tech enterprise that designs, develops, manufactures, and sells micro automatic focusing voice coil motors, piezoelectric motors, stepper motors, and fan motors. Its end customers include companies such as Huawei, Xiaomi, Vivo, OPPO, Lenovo, DJI, and Hikvision.

Founder Cai Zhenpeng has experience working in a related company of ofilm group co., ltd (002456.SX). The actual controller of ofilm group co., ltd, Cai Rongjun, also holds shares of New Thinking and is the main trading partner in this restructuring $ merge. ofilm group co., ltd's 2023 annual report shows that in that year, the company purchased 0.324 billion yuan worth of products from New Thinking.

Acquiring suppliers and related assets of ofilm group co., ltd is undoubtedly a significant bullish move for Suzhou Jin Hong Shun Auto Parts. In the current situation where regulatory authorities focus on the quality of information disclosure by listed companies, this transaction news should be strictly managed according to relevant procedures.

It is worth noting that since September 18th, when the company's stock price started to rebound from the bottom, until October 22nd when the stock was suspended from trading due to the merger preparation day, the stock price of Suzhou Jin Hong Shun Auto Parts has risen by about 70%. During the same period, the sectors where Suzhou Jin Hong Shun Auto Parts operates and the sse composite index have only risen by about 20%. From September 18th to October 23rd, apart from the semi-annual performance briefing and business information changes, Suzhou Jin Hong Shun Auto Parts has not made any major bullish announcements.

Specifically, on September 27th and 30th, when the index saw a significant increase and thousands of stocks hit the limit up, the stock price of Suzhou Jin Hong Shun Auto Parts only rose by 3.4% and 8.41% respectively. On October 21st, with the sse composite index rising by only 0.2%, the stock of Suzhou Jin Hong Shun Auto Parts hit the limit up shortly after opening. On October 22nd, the stock price of Suzhou Jin Hong Shun Auto Parts reached a high of 24.77 yuan per share, with little difference compared to the historical high of 26.19 yuan per share.

Although regulatory authorities encourage listed companies to engage in mergers and acquisitions, strict supervision of companies has not been relaxed. Recently, Infotmic Co., Ltd (000670.SZ) had to terminate its acquisition transaction due to leaks of insider information, leading to severe criticism from the market.

Frequent planning and repeated failures in the company's battles.

Suzhou Jin Hong Shun Auto Parts, which completed its initial public offering in October 2017, has experienced many waves in the capital markets since the company started to incur losses in 2019. In 2020, Suzhou Jin Hong Shun Auto Parts planned to acquire 100% equity of Huaibote Cloud Technology Co., Ltd., but the transaction was ultimately terminated due to failure to reach a consensus among the parties.

In 2021, Hong Jiancang and Hong Weihan, the former controlling shareholders who were disheartened, began to plan the sale of the controlling rights of the listed company. In September 2021, Suzhou Jin Hong Shun Auto Parts announced that its original controlling shareholder, Jinhe Group, planned to transfer part of the company's equity to Zhongde Technology. In April 2022, after the completion of the transaction, Zhongde Technology held 29.99% of the listed company's shares, and Liu Xu successfully replaced the Hong's relatives as the actual controller of the listed company.

In 2022, when Liu Xu gained control of the listed company, he announced that the wholly-owned subsidiary of Suzhou Jin Hong Shun Auto Parts, Suzhou Jin Hong Shun New Energy Technology Co., Ltd. (referred to as "Jin Hong Shun New Energy"), planned to acquire 100% equity of Drayson (Langfang) Technology Co., Ltd., a target company engaged in the research, development, production, and sales of photovoltaic electric performance I-V testing equipment. After the acquisition was completed, Jin Hong Shun Auto Parts planned to enter the photovoltaic field. However, a few months later, Suzhou Jin Hong Shun Auto Parts terminated the transaction.

In 2023, a subsidiary of Jin Hong Shun Auto Parts, Jin Hong Shun New Energy, planned to acquire 40% of the equity of Fengfa Recycling Resources Co., Ltd. (referred to as "Fengfa Recycling Resources"), an enterprise engaged in the recycling and utilization of waste batteries, as well as the research and development of technologies for recycling and dismantling of scrapped vehicles. At the end of 2023, Suzhou Jin Hong Shun Auto Parts once again announced the termination of the equity acquisition plan.

Why did Suzhou Jin Hong Shun Auto Parts, which went public only a few years ago, frequently plan merger and acquisition transactions? This may be related to the poor profitability of the company. In October 2017, Suzhou Jin Hong Shun Auto Parts just completed its initial public offering, but only two years later in 2019, the company had already incurred substantial losses, with a current net income attributable to shareholders being a loss of 89.14 million yuan, and even more losses of 94.23 million yuan after deducting non-recurring gains or losses.

Although the company achieved slight profits in 2020, 2021, and 2023 supported by non-recurring income such as disposal income from non-current assets, the company has incurred millions of yuan in losses each year since 2019, after deducting non-recurring gains or losses.

Facing the ongoing financial losses, selling high-quality assets is undoubtedly one of the best choices for Suzhou Jin Hong Shun Auto Parts. However, with several failed merger and acquisition transactions and the abnormal increase in the company's stock price prior to the announcement of the merger plan, can this acquisition succeed? (Produced by Thinking Finance) ■