Zhaojin Group plans to acquire shares of Hongtao, a listed company, across provinces

Taishan financial reporter Hu Mingzheng

Recently, Hongtao shares (002325. SZ) announced that Liu Nianxin, the actual controller of the company, signed the "Equity Transfer Framework Agreement" with two subsidiaries of Shandong Zhaojin Group Co., Ltd. (hereinafter referred to as "Zhaojin Group"), and Liu Nianxin intends to transfer 4.58% of the company's shares held by him to the latter, and entrust all the voting rights of the remaining company shares held by him to the transferee, and if the agreement is executed, the company's controlling stake will be transferred.

According to the company, if the acquisition can be successfully completed, Zhaojin Group's state-owned enterprise status will help the company expand its business and broaden its financing channels. At the same time, if the acquirer injects high-quality assets into the company, it can form a new main business and growth direction of the company, so that the company can be revitalized.

The actual controller may be changed to Ouyang Yong

Hongtao Co., Ltd. is a veteran construction enterprise from Shenzhen, and it is also one of the few listed companies in the field of architectural decoration. In recent years, the company's business development has been less than expected, facing many difficulties such as a decrease in new orders, difficulties in sales collection, and tight cash flow.

According to the above-mentioned "Equity Transfer Framework Agreement", the transferees of the shares are Shenzhen Zhaojin Metal Network Trading Co., Ltd. (hereinafter referred to as "Shenzhen Zhaojin Metal") and Hainan Oriental Zhaojin Mining Co., Ltd. (hereinafter referred to as "Hainan Zhaojin Mining"), and the shares to be transferred are 80.4051 million shares, and the transfer price is 1.52 yuan per share.

Shenzhen China Merchants Metal and Hainan Zhaojin Mining Co., Ltd. are subsidiaries of Zhaojin Group, of which Shenzhen Zhaojin Metal is the earliest partner of the national financial institutions in industry, agriculture, China and construction, one of the formulators of China's gold standard, and a well-known enterprise in China's gold industry;

Before this transfer, Liu Nianxin held 18.91% of Hongtao's shares, which also means that if this transfer is successfully implemented, the transferee will have 18.91% of the company's voting rights and become the actual controller.

It is worth noting that the actual controller of Shenzhen China Merchants Metal and Hainan Zhaojin Mining is not Zhaojin Group, but Ouyang Yong, a natural person, and if the transaction goes smoothly, the actual controller of Hongtao shares will be changed to Ouyang Yong.

According to media reports, Ouyang Yong started his career in non-ferrous metals trading, was one of the first non-ferrous metal hedge fund managers in China, and was the general manager of Shandong Zhaojin Gold and Silver Refining Co., Ltd. (hereinafter referred to as "Gold and Silver Refining").

Gold and silver refining is now held by Zhaojin Group 80.5% of the equity, Shenzhen Zhaojin holds 19.5% of the equity, Ouyang Yong is one of the directors, gold and silver refining has the terminal retail brand Zhaojin gold store, and also has 60% of the equity of Zhaojin Silver Building, the reporter learned that Zhaojin Silver Building also has financing and listing plans.

Zhaojin Group is also a veteran of capital

Founded in 1974, Zhaojin Group is a large-scale comprehensive group company with the mining chain and deep processing industry chain as the core, and the coordinated development of the financial industry, environmental protection industry and education industry. According to Zhaojin Group, the company has 6 wholly-owned subsidiaries, 10 holding subsidiaries, 12 joint-stock companies, and two listed companies, Zhaojin Mining H-share (1818.HK) and Baoding Technology A-share (002552.SZ), with total assets of more than 60 billion yuan.

In September 2019, Zhaojin Group acquired 116 million shares of Baoding Technology (002552.SZ) at a total cost of 1.17 billion yuan through a negotiated acquisition and a tender offer, thereby gaining control of Baoding Technology.

In March 2022, Zhaojin Group injected Jinbao Electronics, whose main business is the production and sales of copper foil and copper cladding plates, into Baoding Technology, and Zhaojin Group also added 14.1209 million shares of Baoding Technology, and Zhaojin Nonferrous Metals Company, a subsidiary of Zhaojin Group, also obtained 6.24% of the equity of Baoding Technology due to its participation in the private placement.

In June 2023, in order to meet the needs of asset restructuring and integration of municipal state-owned enterprises in Zhaoyuan City, Zhaojin Group transferred its 116 million shares of Baoding Technology to Jindu Guotou Company under the same controller at a price of 18.2 yuan per share, and the transfer price was 2.112 billion yuan, based on this calculation, Zhaojin Group's acquisition of the control of Baoding Technology made a profit of 940 million yuan.

For Zhaojin Group, the acquisition of Baoding Technology not only obtained a capital premium, but also realized the asset securitization of its copper foil sector, which can be described as a win-win situation.

The "Equity Transfer Framework Agreement" signed with Hongtao Co., Ltd. mentioned that in order to jointly create a top brand in the domestic precious metal consumer market, the two parties reached an agreement on the transfer of the controlling stake of the listed company, and the transferee also promised to inject funds and high-quality assets into the listed company. After the announcement of the proposed transfer of controlling stake, the expectation of Zhaojin Group's high-quality assets injected into Hongtao shares continued to rise, and the share price of Hongtao shares closed 4 consecutive daily limits, and the current stock price closed at 1.6 yuan per share.

Suspicious transactions receive a letter of concern

The due diligence time is to enter the market on February 19, and the transferee will complete the due diligence report on the listed company and issue the due diligence report before March 8, 2024.

If the results of the due diligence meet the requirements, the two parties will sign a formal transfer agreement, and the transferee will also undertake to become the largest shareholder of the company within one year by obtaining actual control of the listed company through including but not limited to secondary market increase, share transfer, and directional issuance of shares.

It is worth noting that the company received a letter of concern from the Shenzhen Stock Exchange on the day it announced the signing of the "Equity Transfer Framework Agreement". On February 2, Hongtao shares (002325. SZ) closed at 1.09 yuan/share, while the trading price was 1.52 yuan/share, 39.45% higher than the closing price, and the Shenzhen Stock Exchange required the company to explain the reasonableness of the transaction pricing.

In the reply to the inquiry letter, the company mentioned that according to the agreement between the two parties, the weighted average price of the two trading days before the signing date of the agreement, that is, January 31, 2024, was 1.6895 yuan, from which the transaction price was about 1.52 yuan, and the closing price on the day of the signing of the agreement was 1.33 yuan, and the A-share market fluctuated greatly in February, and the company believes that the transaction price is reasonable and fair.

In addition, Hongtao shares (002325. SZ) was filed for bankruptcy reorganization due to lack of solvency, and whether the transferee has the financial strength and management ability to participate in the company's reorganization was also asked in the letter of concern, which also became the key to the success of the acquisition.