HUAWEI OPPOSED! NOKIA DEMANDED TERMINATION! DONGFANG MATERIALS GAVE UP 2.1 BILLION YUAN TO ACQUIRE TD TECH

12月19日晚间，东方材料发布公告称，该公司审议通过了《关于终止收购 TD TECH HOLDING LIMITED 51%股权的议案》，同意公司与 Nokia Solutions and Networks GmbH& Co.KG（以下简称“诺基亚”）就收购 TD TECH HOLDING LIMITED（以下简称“TD TECH”）51%股权事宜达成和解、终止本次交易，并与其签署《Settlement Agreement》。

On the evening of April 9 this year, Dongfang Materials announced that the company intends to acquire 51% of the equity of TD TECH held by Nokia Solutions and Networks GmbH &Co. KG (hereinafter referred to as "NOKIA"), with a transaction consideration of 212,160.00 yuan. Upon completion of the acquisition, TD TECH will become a holding subsidiary of the publicly traded company. In order to complete the acquisition, Dongfang Materials also intends to issue shares to specific objects, and the total amount of funds to be raised (including issuance costs) does not exceed 2 billion yuan (including the number of funds).

Then, late at night on April 9, Huawei issued a statement saying that as a shareholder of TD TECH, the company agrees with Nokia's sale of shares, but the equity buyer must have the same strategic capabilities to have the basis for continuing the existing cooperation. Huawei does not have any intention or possibility to operate TD TECH as a joint venture with Dongfang Materials.

At the same time, Huawei also said that it is evaluating the relevant situation and has the right to take follow-up measures, including but not limited to exercising the right of first refusal, withdrawing from the sale of all shares, and terminating the relevant technology licenses to TD TECH and its subsidiaries.

However, since Huawei and its subsidiaries are still under US sanctions, if Huawei exercises its right of first refusal to acquire 51% of the shares of TD TECH held by Nokia, TD TECH will become its wholly-owned subsidiary, and the company may also face the threat of sanctions in the future. However, if Dongfang Materials continues to acquire 51% of the equity of TD TECH held by Nokia, Huawei may indeed sell all its shares to withdraw and terminate the relevant technology authorization of TD TECH and its subsidiaries, which will make the acquisition of Dongfang Materials "a bamboo basket of water", after all, TD TECH will inevitably lose its value without Huawei's technical support.

Dongfang Materials also warned in the announcement that if the cooperative relationship between the target company and Huawei changes in the future, it may have an adverse impact on the business development of the target company.

Affected by Huawei's statement against Dongfang Materials' acquisition of TD TECH, on April 10, Dongfang Materials' share price was pressed to the fall limit at the opening, and its market value fell to 8.053 billion yuan.

Now, Dongfang Materials has received a notice from Nokia unilaterally requesting the termination of the "Equity Transfer Agreement", which also means that the transaction may be terminated.

New Oriental New Materials said that it will actively promote the termination of the follow-up matters of this transaction, and take further legal measures as appropriate, and it is expected that the matter will not have a material adverse impact on the company.

On the evening of September 4, Oriental Materials announced that the company received the "Notice of Termination of the SPA" from the counterparty Nokia, which unilaterally requested the termination of the "Equity Transfer Agreement", and the acquisition of 51% of the shares of TD TECH may be terminated. In this regard, Dongfang Materials said that it will actively promote the termination of the follow-up matters of this transaction, and take further legal measures as appropriate, and it is expected that the matter will not have a material adverse impact on the company.

After a lapse of more than three months, Dongfang Materials finally announced that it would abandon the acquisition of a 51% stake in TD TECH.

Who is TD TECH and why is Huawei opposed?

So, what kind of company is TD TECH, and why does Huawei oppose Dongfang Materials' acquisition of TD TECH?

The name TD Tech may be unfamiliar to you, but many people should have heard of the name of TD Tech Technology Co., Ltd. (hereinafter referred to as "TD Tech"), a wholly-owned subsidiary of TD Tech.

According to the data, TD Tech originated from a joint venture established by Huawei and Siemens in March 2005. According to the agreement reached between the two parties, Huawei and Siemens will hold 49% and 51% of the shares respectively, and will invest 200 and 100 employees respectively, with the company's CEO and CFO from Siemens, and the COO from Huawei, and the two parties will jointly explore the TD-SCDMA market in China.

In June 2006, Nokia and Siemens jointly announced the merger of the telecommunications equipment business of the two companies, and each party invested 50% to establish Nokia Siemens Networks (hereinafter referred to as "Nokia"). IN APRIL 2007, SIEMENS SOLD ITS ENTIRE STAKE IN TD TECH TO THE PLATFORM.

In 2011, TD Tech established a wholly-owned subsidiary, TD Tech, Chengdu, to focus on the R&D and promotion of communication solutions for industry customers.

In July 2013, Nokia announced that it would spend 1.7 billion euros to acquire 50% of Nokia Siemens Communications' shares held by Siemens, and renamed the company Nokia Solutions and Networks, that is, Nokia holds a 51% stake in TD TECH.

According to Qichacha data, TD Tech has set up research centers in Beijing, Shanghai and Chengdu, with more than 2,000 employees, 70% of whom are R&D personnel. TD Tech invests 20% of its sales revenue in R&D every year, with a cumulative R&D investment of RMB 10 billion, and is committed to becoming a global leader in industry connectivity solutions.

In terms of management, the current legal representative and general manager of TD Tech is Deng Biao, who has served as Huawei's chief information officer, president of the network product line, and president of a software company, and the chairman of the board is Markus Peter Rodolf Botze (Ma Boze), who is also the president of Nokia Greater China and the CEO of Nokia Bell. In addition, Huawei's rotating chairman, Xu Zhijun, also serves as a director of TD Tech. The announcement released by Dongfang Materials last night also shows that Xu Zhijun is also a director of TD Tech, the parent company of TD Tech.

Although the chairman of TD Tech is appointed by Nokia, Huawei seems to have more of a dominant position in the actual operation.

Especially since 2019, due to the continuous suppression of Huawei by the United States, Huawei's mobile phone and other terminal businesses have suffered heavy losses. Subsequently, Huawei and TD Tech reached a cooperation, with Huawei providing design and technology licenses, and TD Tech Telecom manufacturing and selling its own brand of smartphones.

As early as 2021, TD Tech launched a mobile phone with the model number "TD Tech N8 Pro", which is very similar to Huawei's nova 8 Pro in appearance, and is also equipped with Huawei's self-developed Kirin 985 5G chip. In May 2022, TD Tech released a 5G mobile phone similar to the Huawei Mate 40 - TD Tech M40. Subsequently, a series of mobile phones similar to the Huawei P50 were launched, both of which were also sold in Huawei authorized experience stores as Huawei Zhixuan brands.

According to the announcement released by Dongfang Materials, TD TECH and Huawei have reached a certain cooperative relationship in various business sectors such as wireless products, terminal products, and Internet of Things products in the industry. In terms of technology, some of TD TECH's products are based on Huawei's license, and are developed and optimized on the basis of Huawei's underlying technology or existing products. Based on this, Dongfang Materials also warned that if the partnership between the target company and Huawei changes in the future, it may have an adverse impact on TD TECH's business development.

In terms of financial data, according to the unaudited financial statements of TD TECH, the company's operating income in 2021 and 2022 will be HK $5205.8964 million and HK $8621.9717 million respectively, and the net profit will be HK $52.9732 million and -HK $157.2011 million respectively. According to the announcement, TD TECH's revenue in 2022 increased significantly, and the net profit was a loss, mainly because TD TECH actively expanded the terminal product business and increased the scale of business investment in 2022, resulting in an increase in bank credit and a significant increase in interest expenses;

FROM NOKIA'S POINT OF VIEW, IT'S OUT OF NOKIA'S CONTROL IN RECENT YEARS, ESPECIALLY AFTER HUAWEI WAS SANCTIONED, HD TECH PARTNERED WITH HUAWEI TO BUILD MOBILE PHONES, WHICH SEEMS TO HAVE SPARKED NOKIA'S DISPLEASURE, MAKING NOKIA CONSIDER SELLING ITS 51% STAKE IN TD TECH.

From Huawei's point of view, TD TECH, as its important partner and shareholding company in the field of smart phones, naturally hopes that TD TECH will be controlled by the shareholders in the communication industry or the smartphone industry that it matches, so as to escort the subsequent development of TD TECH, so that TD TECH can continue to become another export of Huawei's mobile phone technology to radiate the mobile phone market. In contrast, Dongfang Materials does not belong to the field of communications/mobile phones, and its main business is the production and sales of flexible packaging inks, composite polyurethane adhesives, PCB electronic inks and other products. This may be why Huawei is against it.

In this regard, Huawei also made it clear in a previous statement that "the company agrees with Nokia's sale of equity, but the buyer must have the same strategic capabilities to have the basis for continuing the existing cooperation." "We look forward to the strategic value of shareholders to support TD TECH's continued growth."

Editor: Xinzhixun-Rogue Sword