Less than 48 hours apart, C&D issued two announcements, one to acquire equity, and the other to cancel the aforementioned transactions, which attracted the curiosity of the market even more.
On December 25, C&D Co., Ltd. announced that due to external factors, the company held the 37th interim meeting of the ninth board of directors in 2023 and decided to terminate the transaction and start it when the time is ripe.
This hastily concluded related party transaction, that is, C&D intends to acquire 8% of the equity of C&D Real Estate held by C&D Group, and the purchase price is the corresponding appraisal value of 8% equity of the target company of 2.751 billion yuan.
According to Guandian New Media, through this acquisition, C&D Co., Ltd.'s shareholding ratio of C&D real estate will increase from 54.654% to 62.654%, and C&D Group's shareholding ratio will be reduced accordingly. Before and after the completion of this transaction, C&D Real Estate was a subsidiary within the scope of C&D Co., Ltd.'s consolidated statements.
C&D Co., Ltd. said that this transaction is conducive to enhancing the company's profitability and promoting C&D Group to gradually fulfill its historical commitment to transfer a minority stake in C&D real estate to the company. Upon completion of this transaction, the company's profitability will be further enhanced.
The promise that had been in the dust for 14 years seems to have faded out of everyone's mind.
In January 2009, C&D Co., Ltd. announced that in order to improve asset quality and profitability, it would replace 95% of the equity of Xiamen International Convention and Exhibition Group Co., Ltd. with 44.65% of the equity of C&D Real Estate Group Co., Ltd., the controlling shareholder.
At the same time, the two parties agreed to use the 1.682 billion yuan of the appraised net assets of the Convention and Exhibition Group and C&D Real Estate as of June 30, 2008 as the basis for replacement pricing. C&D Co., Ltd. decided to purchase 10% of the equity of C&D Real Estate held by C&D Group for 377 million yuan in cash to obtain a controlling stake in C&D Real Estate.
As early as 1999, C&D Co., Ltd. acquired 75% of the shares of Xiamen Lianfa Group and began to lay out the real estate development business.
C&D Co., Ltd. controlled C&D Real Estate through equity replacement and cash purchase, holding 54.654% of its equity, but at that time, due to financial constraints, C&D Real Estate did not fully inject C&D shares, and C&D Group made a commitment to transfer 45.346% of the equity of C&D Real Estate to C&D Co., Ltd. at the right time.
With the rapid development of the domestic real estate market, the total assets of C&D real estate have increased nearly 100 times.
Data source: enterprise announcement
In terms of transaction price, the arithmetic average of the weighted average price of the 30 trading days before December 8, 2023 calculates the equity value of the subordinate holding listed company, and the appraised value of all shareholders' equity of C&D Real Estate after deducting perpetual bonds is 34.388 billion yuan, which is 27.31% compared with the book value of the equity attributable to the parent company after deducting perpetual bonds in the consolidated statements.
Since the disclosure of the acquisition of Red Star Macalline in January 2023, the share price and valuation of C&D Co., Ltd. have declined, and the above-mentioned value-added rate has also decreased significantly from 155.74% in 2008.
If calculated according to the closing price of C&D shares on December 22 at 9.62 yuan per share, the corresponding price of 8% equity is 2.312 billion yuan, which is lower than the purchase price of 2.751 billion yuan.
The research report of China Securities Construction Investment pointed out that the PB multiple of this acquisition is about 1.27x, while the PB multiples of C&D International Group, C&D Property and C&D Hecheng, the three listed companies of C&D Real Estate, are 1.45x, 2.94x and 3.05x respectively, and the valuation of this acquisition is less than the valuation of the three listed companies, and the pricing is more fair.
There are risk warnings in the research reports of Guojin Securities and China Securities Construction Investment that the acquisition has not yet been completed, and there is a risk that the equity transfer cannot be carried out smoothly. But what I didn't expect was that this risk was realized so quickly.
There are six reasons for the termination of the acquisition transaction, including the failure of the parties to the transaction to reach an agreement, the impact of changes in the macroeconomic or market environment, the inability to complete the intermediary work such as audit due diligence in a timely manner, the adjustment of the plan or the change of transaction method, the existence of problems with the underlying assets, the failure to approve the plan or the company's own reasons.
According to the statistics of the opinion index, from January to November, C&D real estate equity sales were 122.043 billion yuan, ranking seventh, and a year-on-year increase of 17.9%, which was significantly better than the -25.3% of the equity sales amount realized by the top 20 real estate enterprises in November.
According to the performance data of the first three quarters, the net profit attributable to the parent company corresponding to the 8% equity of C&D Real Estate is 120 million yuan, accounting for 4.2% of the performance of C&D shares (excluding the restructuring income of Red Star Macalline in the base), and the completion of the acquisition will improve profitability.
The announcement of the cancellation of related party transactions emphasized that "C&D shares are currently operating normally, and C&D real estate is in good profitability", indicating that there is not a problem with the underlying assets, and the plan has also passed the temporary meeting of the board of directors, and the intermediary work such as audit due diligence is not high for related party transactions.
It is understood that the nature of related-party transactions is neutral, and normal related-party transactions can reduce transaction costs, reduce transaction risks, optimize capital structure, and enhance the competitiveness of the entire interest group compared with non-related-party transactions, which has a positive effect on enterprises; on the other hand, related-party transactions will cause information asymmetry between related-party parties and other market participants.
"Changes in the macroeconomic and market environment" was one of the main reasons for the termination of the equity transaction, and C&D also pointed out that external factors affected the termination of the transaction.
The research report mentioned that the real estate policy relaxation is less than expected in the background, the inflection point of real estate sales has not appeared, although C&D real estate is located in the core area of the core city, and has achieved excellent sales results in the past, but this does not represent the future.
On December 25, the first trading day of the cancellation of equity trading, the A-share real estate development sector fluctuated, and the overall trend declined, with C&D shares falling 1.98% to 9.43 yuan per share, with a turnover of 213 million yuan and a total market value of 28.328 billion yuan.
Francis Bacon wrote in On Timing, "Lucky timing is like a transaction in the market, if you delay the slightest time, it will fall in price." "C&D shares choose the opportunity to start the acquisition of equity, now or next time will be a better time?
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This article is from Viewpoint.com