There has been a new development in the battle for control of aseptic packaging faucets. On the evening of May 12, three days after New Jufeng announced its offer to acquire all the issued shares of Greatview, Greatview made an announcement in accordance with Rule 3.8 of the Hong Kong Code on Takeovers and Mergers (Takeovers Code), which was regarded by the industry as Greatview Packaging's resistance to the acquisition.
The relevant matters involved in the tender offer of Xinjufeng still need to be reviewed and approved by the general meeting of shareholders of the listed company. At the same time, there is uncertainty as to whether the above-mentioned approvals can be obtained, as well as the timing of obtaining the relevant approvals.
On 12 May, Greatview made an announcement in accordance with Rule 3.8 of the Hong Kong Code on Takeovers and Mergers (Takeovers Code), which is reproduced in full in Note 11 to Rule 22 of the Takeovers Code, which states that "Stockbrokers, banks and other intermediaries have a general duty to ensure that, to the extent of their means, the Client is aware of the disclosure obligations of the Offeror or the Offeree Company's associates and other persons under Rule 22. and the willingness of these customers to fulfill these responsibilities. The intermediary must cooperate with the executive's enquiries in relation to the transaction".
There is no doubt that the announcement made by Greatview Packaging is aimed at the major asset purchase plan disclosed by Xinjufeng on May 9. According to the plan, Jingfeng Holdings, a subsidiary of Xinjufeng, issued a voluntary general offer to all shareholders of Greatview Packaging to acquire all the issued shares of Greatview Packaging in cash. The cash offer price was HK$2.65 per share, a premium of 26.19% to the closing price of HK$2.1 on the day.
The relevant person in charge of Greatview Packaging told the Beijing Business Daily reporter, "The company has hired a professional consultant to deal with it, and the company will deal with and respond in accordance with relevant laws and regulations, please see the announcement issued by the company later for details." The company will not make any comments at this time".
Both Xinjufeng and Greatview are engaged in the aseptic packaging industry, which is mainly used for filling food or beverages. According to the announcement issued by Xinjufeng, the main products are roll-type aseptic packaging, and a diversified product system of "pillow bag", "brick bag", "diamond bag" and "metal bag" has been established, of which "pillow bag" is the main product. In addition to "pillow bags", Greatview packaging products have more product specifications and types than Xinjufeng, "brick bags", "diamond bags" and "metal bags". At the same time, Xinjufeng has not yet been involved in the packaging and filling solution business of filling machines, accessories, technical services and other businesses engaged in by Greatview Packaging. Greatview also has a certain layout in foreign markets, with factories, R&D centers and operating institutions in Switzerland, Germany and other countries.
Prior to this transaction, Xinjufeng had become the largest shareholder of Greatview Packaging, and by further acquiring a controlling stake in Greatview Packaging, it intended to "expand overseas markets and expand the influence of Chinese aseptic packaging brands in the international market".
In January 2023, Xinjufeng announced the acquisition of a 28.22% stake in Greatview Packaging from JSH Venture Holdings Limited (JSH) for a consideration of approximately RMB864 million. In October, Xinjufeng completed the acquisition of 377 million shares of Greatview Packaging through an agreement transfer. By holding 28.22% of its shares, Xinjufeng is the largest shareholder of Greatview Packaging, but does not form control. At that time, the purchase price per share of Xinjufeng was consistent with the tender offer, which was HK$2.65 per share, and the total transfer price was HK$999 million.
The market has given mixed feedback on both sides of the transaction. On May 10, Greatview Packaging rose 20.48% to a closing price of HK$2.53 per share, approaching the tender offer price given by Xinjufeng. On May 13, Xinjufeng fell 3.58% intraday, closing at 8.8 yuan per share.
Xinjufeng's acquisition of Greatview seems to be a competition for aseptic packaging leaders, and to a certain extent, it is also an extension of the competition between Yili and Mengniu.
As an upstream enterprise in the dairy industry, Xinjufeng is deeply bound to the dairy giant Yili. According to the 2023 annual report, the revenue scale of Xinjufeng is about 1.737 billion yuan, a year-on-year increase of 8.05%; The net profit attributable to the parent company was about 170 million yuan, a slight increase of 0.39%. Among them, the top five customers contributed 88.76% of the revenue to Xinjufeng, and Yili, as the largest customer, contributed 71.99% of the total revenue. Yili also became a shareholder of Xinjufeng in 2015.
Greatview Packaging is bound to another major dairy giant, Mengniu. According to the 2023 annual report, Greatview Packaging achieved revenue of about 3.817 billion yuan, a year-on-year decrease of 3.1%; The net profit was about 244 million yuan, a year-on-year increase of 33.9%. Among them, the total revenue of the largest customer and the top five customers accounted for approximately 27.9% and 48.7% of the Group's total revenue for the year, respectively. Mengniu, through its subsidiary Xueyu Investment, holds a 5.01% stake in Greatview Packaging. Among the senior executives of Greatview Packaging, there is also a non-executive director from Mengniu.
Previously, Xinjufeng's entry into Greatview was met with fierce resistance from the board of directors of Greatview Packaging. In March 2023, Bi Hua, then Executive Director and Chief Executive Officer of Greatview Packaging, and Hong Gang, Non-Executive Director and Chairman of the Board of Directors, filed an anti-monopoly report with the Anti-Monopoly Bureau of the State Administration for Market Regulation as indirect shareholders holding a total of 15.5% of the shares.
Song Liang, a senior dairy analyst, said that in the current market, there is all-round competition between enterprises. In the supply chain system, packaging is an important position, and only by controlling the packaging materials can we achieve parity. If the acquisition of Greatview by Xinjufeng is finally realized, it will definitely be unfavorable for individual enterprises.
Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said that in the long run, the deal may be beneficial to Xinjufeng, which can gain more market share and customer resources through the acquisition of Greatview, which will help improve its market position and competitiveness. Greatview has a high level of technology and production capacity in the aseptic packaging industry, which will help Xinjufeng improve its product quality and technical level.
Greatview was listed on the Hong Kong Stock Exchange in 2011, and Xinjufeng only landed on the GEM of the Shenzhen Stock Exchange in 2022. As of the end of 2023, the net assets of Xinjufeng are about 2.226 billion yuan, and the net assets of Greatview Packaging are about 2.901 billion yuan, which is about 1.3 times that of Xinjufeng. Therefore, whether in terms of revenue or asset scale, this "A eats H" is considered to be a "snake swallowing elephant" type acquisition.
Wanlian Securities Investment Consultant Qu Fang said that for Greatview, there is resistance to the acquisition of Xinjufeng, which is smaller than itself, and the market competition relationship and attitude of its large customers have increased the willingness to resist the acquisition. In the past, there have been successful cases of "snake swallowing elephant" acquisitions, but they are often carried out when both the acquisition and the acquired are willing. If the founder of the company does not have the intention of being acquired, but acquires the company's own market behavior, this will promote a long-term game between the two parties in future acquisitions. And if the company's shareholding is dispersed, the attitude of other shareholders may also affect the final outcome of the acquisition.
As of May 9, 2024, Xinjufeng held shares in Greatview Packaging through Jingfeng Holdings, accounting for 26.80% of the total issued shares of Greatview Packaging. According to the acquisition plan thrown out by Xinjufeng, assuming that the offer is fully accepted, Xinjufeng needs to pay about 2.729 billion Hong Kong dollars in cash, equivalent to about 2.524 billion yuan. Xinjufeng said that it will pay the relevant consideration through merger and acquisition loans, and its subsidiary Jingfeng Holdings intends to sign a loan agreement with China Merchants Wing Lung to apply for a loan of 2.81 billion Hong Kong dollars (about 2.551 billion yuan) from China Merchants Wing Lung for this transaction.
Shen Meng, executive director of Xiangsong Capital, said, "Too high a premium may be detrimental to the acquirer, which is also reflected in the decline in the acquirer's stock price, but whether it is really cost-effective depends on the integration effect of the two parties after the acquisition." Successful acquisitions tend to be won by the efficient party over the inefficient party, and are not highly correlated with the size of the asset."
However, Shen Meng believes that "the board of directors is supposed to represent the interests of all shareholders, but in China, it is often alienated to represent the interests of some shareholders or even some business stakeholders, as a premium acquisition, it also shows that under the leadership of the existing board of directors, shareholder value has not been maximized." Therefore, the board of directors can fight back from the perspective that the purchase price does not reflect the reasonable value of the company, but any company is more willing to pursue a monopoly position and the profits it brings, and the market has also given a signal of support."
Song Liang believes that China's dairy packaging market is very concentrated, mainly concentrated in the hands of 4, Tetra Pak accounts for 50%-60%, SIG accounts for about 10%, Greatview and Xinjufeng come from behind, forming a good balance for Tetra Pak, and the cost of packaging materials for SIG, Greatview and Xinjufeng is lower, which is also one of the important reasons why Yili and Mengniu have invested in shares. According to China's current policy orientation, it is generally reluctant to concentrate too much among enterprises, preferring to generate full competition in these areas.
Regarding whether the premium is too high, the existence of competition among large customers, and whether it can pass the anti-monopoly and other issues, a reporter from Beijing Business Daily sent an interview letter to Xinjufeng by email, but did not receive a reply before press time.
Beijing Business Daily reporter |
Edited by Topol