On January 8, Financial Associated Press reported (Reporter Wu Weiling) that the road for New Hope Liuhe (301296.SZ) to 'swallow an elephant' in its 'A eats Hong Kong' strategy has been full of ups and downs. The target company, GAPACK (00468.HK), after filing an administrative reconsideration against the market regulatory authority's anti-monopoly bureau regarding the acquisition review, the Board of Directors spoke out again on the 7th, advising Shareholders to reject the acquisition offer. Regarding GAPACK's announcement yesterday, a staff member from the securities department of New Hope Liuhe stated today, 'We are proceeding normally.'

On January 7, GAPACK announced that regarding the voluntary conditional full cash offer for acquisition proposed by the subsidiary of New Hope Liuhe, Jingfeng Holdings, both the independent financial advisor and the independent board committee believe that the terms of the offer are 'unfair and unreasonable' to independent Shareholders, and the independent board committee recommended that independent Shareholders reject the offer.

Liu Junhai, a professor at the Law School of Renmin University of China, stated in an interview with Financial Associated Press on the evening of the 7th that the acquisition of GAPACK by New Hope Liuhe is valuable for observation, and it is essential to fully comply with the basic rules including information disclosure on the basis of 'openness, fairness, and justice.'

The Board of Directors of GAPACK: recommends rejecting the offer.

The Board of Directors of GAPACK on the 7th recommended that independent Shareholders refuse to accept the offer, stating that the offer's terms are 'unfair and unreasonable' to independent Shareholders.

In fact, the previous open letter to Shareholders from the Board of Directors of GAPACK stated that New Hope Liuhe represents a 'hostile takeover' and expressed, 'We believe that these two companies are fundamentally incompatible.'

The company’s Board of Directors stated that based on potential customer loss, potential legal litigation, and the differing management styles of the group compared to ShanDong New Hope Liuhe, they believe that the terms of the acquisition offer do not align with the best interests of the company and should be rejected.

As peers in the field of sterile packaging for liquid milk, GAPACK and New Giant have been among the top five in China's liquid milk sterile packaging market since 2020, and are both listed on the Hong Kong Stock Exchange and A-shares respectively. However, the size of GAPACK is significantly larger than that of New Giant, and unlike the latter, whose market is almost entirely domestic, a considerable proportion of GAPACK's revenue comes from international markets.

GAPACK was listed on the Hong Kong Stock Exchange as early as 2010, while New Giant went public 12 years later, launching on the GEM of the Shenzhen Stock Exchange in 2022. In the domestic market, New Giant is deeply tied to Yili, and its official website states that its clientele also includes New Hope Liuhe, San Yuan, Wang Lao Ji, Eurasia, and others.

Mengniu is an important client of GAPACK. GAPACK's official website states that its sterile packaging materials have consistently sold over 10 billion packages annually for several years, making it the third largest supplier of sterile packaging materials in the liquid food industry. The company has factories, R&D centers, and operational institutions in China, Swiss Franc, and Germany.

Data shows that GAPACK's revenue in 2021, 2022, and 2023 was 3.464 billion yuan (RMB, the same below), 3.937 billion yuan, and 3.817 billion yuan respectively; net income was 0.285 billion yuan, 0.182 billion yuan, and 0.244 billion yuan. Meanwhile, New Giant's revenue in 2021, 2022, and 2023 was 1.242 billion yuan, 1.608 billion yuan, and 1.737 billion yuan, with net incomes of 0.157 billion yuan, 0.17 billion yuan, and 0.17 billion yuan.

It is not hard to see that there are significant differences between the two in terms of revenue scale and business composition. This acquisition initiated by New Giant in early 2023 was initially called "the snake swallowing the elephant" in the industry, which also laid the groundwork for subsequent disputes.

In January 2023, barely half a year after listing on the GEM, New Giant announced a major asset purchase plan, proposing to acquire 0.377 billion shares held by GAPACK's largest shareholder JSH (a subsidiary of JMH USD) through a negotiated transfer, accounting for about 28.22% of the total share capital. The transaction price was 2.65 HKD per share, corresponding to a transfer price for the target asset of approximately 0.999 billion HKD.

At that time, JSH, the largest shareholder of GAPACK, played a role as a financial investor, and its decision to sell was likely based more on financial considerations.

However, this acquisition plan immediately encountered opposition from the management of GAPACK. In March 2023, GAPACK's Board of Directors publicly declared their "opposition" and filed for regulatory review of the acquisition. GAPACK officially submitted an antitrust declaration regarding this acquisition to the National Market Regulation Administration's Antitrust Bureau in the same month.

In September 2023, the Antitrust Bureau made a decision not to prohibit this. In October of the same year, New Hope Liuhe announced that it had completed the acquisition of 28.22% of the shares of GAPACK from JSH, making the company the largest shareholder of GAPACK.

A fierce battle of offense and defense.

However, the competition between the two is far from over.

In November 2023, a subsidiary of New Hope Liuhe, Jingfeng Holdings, required GAPACK to hold a special shareholders' meeting to appoint five company Directors. However, this matter faced strong opposition from the Board of Directors of GAPACK, which advised all shareholders to vote against it. The nominations from New Hope Liuhe for Directors were ultimately not approved.

On May 9, 2024, New Hope Liuhe announced that through its subsidiary Jingfeng Holdings, it initiated a comprehensive tender offer to all shareholders of GAPACK, with a total price of approximately 2.729 billion Hong Kong dollars. It is worth mentioning that the offer price proposed by Jingfeng Holdings was 2.65 HKD per share, which is 31.84% higher than the closing price of GAPACK at 2.01 HKD per share the day before the announcement.

In fact, this amount is not a small sum for New Hope Liuhe. As of the end of the third quarter of 2024, New Hope Liuhe's Cash / Money Market amounted to only 0.332 billion yuan, and Trading Financial Assets amounted to 0.111 billion yuan, totaling less than 0.45 billion yuan.

New Hope Liuhe mentioned that on the date of signing the acquisition plan, it had signed a loan agreement with Banks, intended to pay for the transaction price and related transaction costs. Clearly, New Hope Liuhe's strategy of 'fighting big with small' shows strong determination.

This move still faced strong opposition from the Board of Directors of GAPACK. In a public letter, the Board claimed that the tender offer had a 'hostile nature', was not welcomed by the management, and strongly recommended that shareholders Hold their shares to block the success of the tender offer.

On December 27, 2024, GAPACK announced that an administrative reconsideration has been filed regarding the review of the full acquisition through New Giant Peak. In yesterday's announcement, GAPACK reiterated its opposition to the acquisition.

This acquisition between peers, known as "A eating the port," has gone through more than 700 days and nights, but its future direction still seems to be uncertain.