Ding Zuyu, CEO of E-House, launched a "manager acquisition" to acquire 65% of the shares of CRIC for 520 million yuan

Reporter Guo Yangchen and Zhang Jiazhen report from Shanghai

(Ding Zuyu, CEO and Executive Director of E-House.) E-House Enterprise Group/Photo)

The city gate caught fire, affecting the fish in the pond. In the context of the downward adjustment of the domestic real estate industry, E-House (China) Enterprise Holdings Co., Ltd. (hereinafter referred to as "E-House", 02048. HK) has also attracted much attention in its debt restructuring.

A few days ago, the team of Ding Zuyu, CEO and executive director of E-House, launched a "manager acquisition", planning to acquire 65% of the shares of CRIC for 520 million yuan, hoping to promote the debt restructuring of E-House. At the same time, Ding Zuyu will resign as the CEO of E-House Enterprise Group, and will devote all his energy to the operation and management of CRIC in the future.

The reporter of "China Business Daily" learned that previously, E-House had decided to transfer 65% of the shares of CRIC to TM Home, a joint venture between E-House and Ali Investment. But because CRIC provided a guarantee for E-House, the plan was opposed by a Chinese bank.

In response to the progress of the above-mentioned equity acquisition and debt restructuring of E-House's team, the relevant person in charge of E-House said that the information disclosed in the announcement shall prevail. Zhou Xin, chairman of the board of directors and executive director of E-House, once said that if E-House's debt restructuring can be successful, the company must no longer pursue scale, but pursue project quality, good cash flow, accounts receivable and aging, and try to resolve risks in the operation process as much as possible.

The CEO "takes over" a controlling stake

On April 2, E-House announced that the board of directors received a letter of intent, in which Ding Zuyu, on behalf of himself and a consortium of investors, indicated his intention to acquire a controlling stake in the company's indirect subsidiaries CRIC Holdings Co., Ltd. and Shanghai CRIC Information Technology Co., Ltd. (hereinafter collectively referred to as "CRIC"), involving 65% of the interest, with an offer price of 520 million yuan.

According to reports, CRIC is the industry's leading provider of China's real estate big data application and consulting services, with information services covering 387 cities. Relying on a strong professional research strength and consulting team, CRIC serves more than 95% of the top 100 real estate enterprises, and provides comprehensive solutions for the government, enterprises and home buyers with online and offline real estate information services.

At the same time, the board of directors of E-House announced that Ding Zuyu resigned as CEO of E-House due to his stated intention to acquire a controlling stake in CRIC and focus on its management, but will still serve as the chairman of CRIC and an executive director of the board of directors of EC. Zhou Xin will also serve as CEO.

The reporter learned that after graduating from university, Ding Zuyu became attached to E-House and CRIC, and was promoted from an intern to the president of CRUI and has been working so far. In the fifth year of work, Ding Zuyu was appreciated by Zhou Xin, and thus entered the management of E-House as vice president, and was also the youngest of the six partners of E-House at that time. In 2006, Ding Zuyu took the lead in building the CRIC database and achieved success. In a sense, Zhou Xinzhi is not only a work partner for Ding Zuyu, but also a guide.

Ding Zuyu said that in view of the takeover offer for CRIC, he will focus on the CRUI business segment. "I am very confident to lead the founding team of CRIC to continue to give full play to its professional advantages, deepen and intensively cultivate the industry market, and go all out to build a real estate big data platform. ”

Zhou Xin said that he believes that under the leadership of Ding Zuyu and his founding team, CRIC's business will achieve greater achievements in the future and contribute more positive energy to the real estate industry, which is facing huge challenges.

It is reported that at present, CRIC has formed two parallel lines of real estate development and real estate operation. In terms of real estate development, CRIC will continue to focus on core businesses such as residential development, and use intelligent technologies such as AI to improve development efficiency, while in terms of real estate operation, CRIC will focus on expanding the digital development of six scenarios: commercial office, industrial park, property, leasing, health care, and cultural tourism, and provide comprehensive solutions.

At the same time, CRIC's transformation has also achieved certain results. In 2022, CRIC rotated its main customers, and at present, nearly 70% of its market share comes from state-owned enterprises and platform enterprises.

Debt restructuring has been full of twists and turns

In fact, since 2023, E-House has begun to promote debt restructuring, and the acquisition of 65% of CRIC's equity by Ding Zuyu's team is just a "Plan B".

The reporter combed and found that on April 3, 2023, E-House announced the disclosure of the overseas debt restructuring plan, which mainly includes two parts: cash payment and equity for debt.

On July 26, 2023, E-House said that the restructuring plan had been supported by 75.6% of the plan creditors, on August 2, E-House announced that the restructuring plan was supported by 82.04% of the plan creditors, and on November 28, E-House announced that the restructuring plan had been approved by the court, and the effective date of the restructuring is expected to be March 31, 2024 or earlier.

On December 11, 2023, E-House announced the progress of the restructuring: as part of the internal restructuring, E-House was required to transfer CRIC to TM Home, so that after the effective date of the restructuring, the scheme creditors would effectively hold a 65% interest in CRIC due to their ownership of 65% of TM Home.

However, this plan did not go ahead. E-House revealed in the announcement that a Chinese bank informed the company that it would not agree to release CRIC's guarantee liability because the bank held a loan of 436 million yuan from E-House, of which CRUI provided a guarantee for 200 million yuan. In the end, after more than three months of discussions, the bank still did not agree, and CR's "Plan A" of "selling" TM Home finally fell through.

On the same day that Ding Zuyu's team announced the acquisition of part of CRIC's shares, on April 2, E-House also released a new debt restructuring plan.

According to the announcement, E-House will pay cash to creditors for senior notes due 2022, senior notes due 2023 and convertible notes, specifically US$90 for every US$1,000 (or equivalent Hong Kong dollars) of registered debt. At the same time, E-House will pay a restructuring guidance fee of 0.5% of the total principal amount to creditors who vote in favor of the plan within the agreed time.

Based on the revised debt restructuring plan, E-House will actively seek the support of creditors under the relevant legal process. According to the announcement, E-House has held discussions with Alibaba, the holder of convertible bonds, and Alibaba has confirmed that it supports the new restructuring in principle.

According to the financial report data, in 2023, E-House's total sales revenue will decrease by 11.7% year-on-year. Among them, the revenue of first-hand real estate agency services decreased by 62.6%. Revenue from real estate data and consulting services decreased by 20.7%, revenue from real estate brokerage network services decreased by 4.2%, and revenue from digital marketing services decreased by 1.6%. As of the end of 2023, E-House incurred a loss of approximately RMB1,525 million, net current liabilities and net liabilities of approximately RMB8,426 million and RMB6,562.3 million, respectively.

"The lesson is very, very painful, it turns out that asset-light is also risky. In response to the liquidity crisis faced by E-House, Zhou Xin previously said that if you blindly pursue scale and do not grasp the company's risk control, aging and accounts receivable, when the real estate industry declines again or the storm comes, whether it is light assets or heavy assets will face great risks. At the same time, since 2007, E-House has not solved the problem of excessive concentration of real estate customers, and the concentration of head customers is very high, which has a huge impact on the industry downturn.

(Editor: Zhang Jiazhen Review: Tong Haihua Proofreader: Yan Jingning)