China Resources "masters" Changdian Technology, how do the two heroes rejuvenate?

On March 20, JCET announced the suspension of trading. The reason is that it has received a notice from the company's shareholders, the National Integrated Circuit Industry Investment Fund Co., Ltd. and Xindian Semiconductor (Shanghai) Co., Ltd., that they are planning the equity transfer of the company.

For a while, the industry was eagerly waiting, and who would receive Changdian Technology has triggered various speculations and associations in the industry. After 5 trading days were suspended, the equity transfer of Changdian Technology ushered in new progress.

Yesterday evening, Changdian Technology announced that Panshi Hong Kong intends to acquire 22.54% of the equity for 11.658 billion yuan, and the actual controller of the company will be changed to China Resources. The company's former largest shareholder, the large fund, will reduce its shareholding ratio to 3.5%, and the second largest shareholder, Xindian Semiconductor, will no longer hold the equity of the listed company.

China Resources is also the actual controller of the semiconductor giant China Resources Micro, and the "two heroes" of chips belong to the same owner.

01

China Resources 11.6 billion won control, and Xindian Semiconductor withdrew

In this transaction, there are two sellers: Big Fund and Core Semiconductor. One Buyer: Panshi Hong Kong Limited or its affiliates.

The Fund transferred its 174 million shares of the Company (9.74% of the total share capital of the Company) to Panshi Hong Kong or its affiliates, and Silicon Semiconductor also transferred its 229 million shares of the Company (12.79% of the total share capital of the Company) to Panshi Hong Kong or its affiliates. In terms of price, it is 29 yuan per share, which is a premium to 28.25 yuan when Changdian Technology was suspended.

In this transaction, the big fund changed the number of shares held by Changdian Technology from 236.89 million shares to 62.6 million shares, accounting for 3.50% of the company's total share capital, while the previous second largest shareholder, Xindian Semiconductor, no longer holds shares of Changdian Technology (sold out).

This big buyer, Panshi Hong Kong Co., Ltd. or its affiliates, spent about 11.69 billion yuan to acquire a 22.54% stake in JCET.

So what is the origin of this money-sculpting rock Hong Kong limited company or its affiliates?

We can take a look at the equity penetration chart of Panshi Hong Kong.　Panshi Hong Kong Limited was established in mid-December 2023. Judging from the disclosed shareholding structure, China Resources (Group) Co., Ltd. is its controlling shareholder, with a shareholding ratio of 100%.

Therefore, it can also be understood simply and crudely: China Resources has now become the actual controller of Changdian Technology, with this 22.54% stake.

02

There are two major issues that deserve attention

There are two points worth paying attention to: first, the change of the actual controller, and second, the issue of intra-industry competition.

In terms of the change of the actual controller, in fact, before the completion of this share transfer, JCET did not have an actual controller. His previous first and second largest shareholders were the seller this time, Big Fund and Silicon Semiconductor, respectively.

In the disclosure of Changdian Technology's annual report, it is mentioned that the big fund is a national industrial investment fund established to promote the development of the national integrated circuit industry, which operates in the form of equity investment and exits the invested projects at the right time. It promises not to seek a controlling stake in all invested enterprises in the integrated circuit packaging and testing industry, nor to engage in specific operation and management work. In other words, the big fund is not responsible for actual control.

Then look at the second largest shareholder, Xindian Technology, the ultimate controlling shareholder behind this company is SMIC. Previously, a reporter told Changdian Technology as an investor, and the staff said, "(Equity transfer) is a change at the shareholder level, the company is operated independently, and there will be no change in production due to shareholder changes, and there is no impact on production and operation." As for whether there is contact with new investors, the person said: "This is the behavior of shareholders, and (we) may not be able to decide." ”

However, after yesterday's transaction, Changdian Technology has changed the actual controller, that is, China Resources analyzed above.

In fact, China Resources Group is very large. According to the official website of China Resources Group, the group's business covers 6 major fields: large consumption, comprehensive energy, urban construction and operation, big health, industrial finance, science and technology and emerging industries, with 25 business units, two directly affiliated institutions, 3,077 entity enterprises, and about 390,000 employees.

Its subsidiaries include China Resources Land, China Resources Beer, China Resources Vientiane Life and China Resources Power, all of which are well-known companies. For semiconductor people, China Resources Micro, which is most familiar, is also a subsidiary of this group.

China Resources has always been the actual controller of China Resources Micro, another domestic semiconductor giant.

Therefore, it brings up the second problem: intra-industry competition.

CR Micro has always been a leading IDM semiconductor enterprise in China, with a monthly production capacity of more than 70,000 pieces of 8-inch wafers and more than 200,000 pieces of 6-inch wafers in foundry, and large-scale production bases in Wuxi, Shenzhen, Dongguan and Chongqing in terms of packaging and testing.

China Resources Micro Manufacturing Packaging and Testing Base Source: China Resources Micro official website

In last year's financial report, China Resources Micro is expected to achieve revenue of 9.9 billion yuan in 2023, a year-on-year decrease of 1.59%; The net profit attributable to the parent company was 1.48 billion yuan, a year-on-year decrease of 43.45%. In response to investors' questions this year, CR Micro also said that the company's capital expenditure in 2023 will be mainly used for the construction of a 12-inch production line in Shenzhen and an advanced power packaging and testing base in Chongqing. In 2024, the 12-inch production line in Shenzhen will still be in the investment cycle, and the company will continue to increase mergers and acquisitions.

In fact, Changdian Technology's announcement also stated that China Resources Micro, a subsidiary of China Resources, and the company have overlap or potential competition in external packaging and testing business.

At present, in order to solve this problem, China Resources has issued a "Letter of Commitment on Avoiding Intra-industry Competition".

One of the terms is: within 5 years after the completion of this transaction, in accordance with legal procedures, the business overlap and potential competition between the company and the company's controlled enterprises (except JCET and its controlled enterprises) and JCET and its controlled enterprises shall be resolved in accordance with legal procedures, including but not limited to custody, asset restructuring, suspension of relevant business by one party, adjustment of product structure, establishment of joint ventures, etc., so as to meet the regulatory requirements on intra-industry competition issues.

If we look at the problem of competition in the same industry, then it is very likely that China Resources Micro will divest the packaging and testing OEM business and sell it to Changdian Technology in the future.

03

The large fund has cashed out more than 7.6 billion yuan

The big fund invested in JCET for the first time in 2014.

At that time, JCET jointly established an M&A fund with a large fund and a core power semiconductor, of which the large fund invested US$300 million to help JCET complete the acquisition of Singapore's Xingke Jinpeng for US$780 million.

In June 2016, Changdian Technology acquired the equity of the M&A fund held by the large fund through private placement, and after the completion of the share transfer, the large fund held 9.54% of the equity of Changdian, becoming the largest shareholder. The big fund spent 2.602 billion yuan to participate in the private placement of Changdian Technology, and was promoted to the largest shareholder, with a shareholding ratio of 19%.

In April 2021, JCET raised 5 billion yuan through another non-public offering. At that time, the shareholding ratios of large funds and core semiconductor in the company were diluted to 15.31% and 12.86% respectively, but they were still the top two shareholders of the company.

Prior to this, the big fund began to disclose two shareholding reduction plans in August 2020. By mid-November 2021, the big fund had cumulatively reduced its holdings of 67,648,300 shares of Changdian Technology, with a cumulative reduction of about 2.572 billion yuan.

As of the end of 2021, Big Fund and Chiplight Semiconductor held 239 million shares and 229 million shares of Changdian Technology respectively. After the completion of the share transfer, the number of shares held by the big fund in Changdian Technology was changed from 236.89 million shares to 62.6 million shares, and the amount of reduction was 5.054 billion yuan.

In this way, the large fund that still retains 3.5% of the shares has cashed out about 7.626 billion yuan of Changdian Technology.

04

What do industry insiders think?

For China Resources Group to become the actual controller of Changdian Technology, industry insiders analyzed to reporters that the semiconductor industry is an industry with a fine division of labor, close cooperation, a long industrial chain and many links, and the semiconductor industry in China and even the world is constantly developing, and the market growth prospects are considerable, and more high-quality companies are needed to cooperate and win-win. China Resources Group has comprehensive consideration and full judgment of the market, and the layout of different links in the semiconductor industry will help enhance the industrial status of China Resources in the industry and accelerate industrial integration.

"China Resources' acquisition of Changdian Technology can be described as a strong combination. Some semiconductor industry insiders interpret that Changdian Technology is the first semiconductor packaging and testing giant in the mainland and the third in the world, and is an internationally operated semiconductor packaging and testing company; If the two can operate together in terms of production capacity, customers, management and other aspects, it is not only expected to achieve the effect of "1+1>2", but also drive the improvement of the semiconductor packaging and testing technology level of the entire group.

"The deeper background of this transaction is that central enterprises are accelerating their participation in more high-tech industries and are not spectators of the high-tech industry. "Some market participants interpret from the perspective of state-owned assets reform that under the promotion of the State-owned Assets Supervision and Administration Commission of the State Council, central enterprises may accelerate the pace of advancing into the high-tech industry.

However, there is uncertainty as to whether the implementation of the matter will be finalized at this time.

Changdian Technology reminded the risk in the announcement, saying that the transaction still needs to be approved by the board of directors of China Resources (Group) Co., Ltd. again, and it still needs to obtain the review and approval of the competent state-owned assets regulatory authority and other possible approvals or approvals required by relevant laws and regulations, and it is still necessary to obtain the compliance confirmation of the Shanghai Stock Exchange and go through the relevant procedures for the transfer of shares by agreement at the Shanghai Branch of China Securities Depository and Clearing Co., Ltd.