Juli Culture licks the wounds of cross-border alone

Zebra consumption Fan Jian

Juli Culture tries its best to get rid of "culture", but it has never been able to completely get rid of the pain caused by cross-border entertainment.

The tug-of-war lawsuit with Beijing Tencent, peace talks, and huge compensation have torn the company's freshly scabbed wounds again and again.

In 2016, the company acquired Meishengyuan Information for a consideration of 3.4 billion yuan, which once brought about a soaring performance from the traditional manufacturing industry to the game industry.

However, the company has also jumped into the abyss of financial fraud, becoming a typical case of cross-border transformation failure.

Inexhaustible peace talks

Cohesion Culture(002247. SZ) tried its best to get rid of "culture", but found that it couldn't get rid of it.

The long-term litigation, compensation and peace talks with Beijing Tencent Culture Media Co., Ltd. (hereinafter referred to as Beijing Tencent) have made it impossible for the company to completely extricate itself from the pain of failed cross-border transformation.

Things have to start from 5 years ago.

Tianjin Dianwo, the original grandson of Juli Culture, signed the "Tencent Advertising Service Provider Cooperation Agreement" with Beijing Tencent, agreeing to place advertisements and pay advertising fees through Tencent's advertising service platform.

Later, according to Beijing Tencent's accounting, from May to August 2019, Tianjin Dianwo incurred a total of 260 million yuan in advertising through Tencent's advertising service platform, but it was not paid on time.

As a result, Beijing Tencent filed a lawsuit against Tianjin Dianwo and demanded that Meishengyuan Information (the shareholder of Tianjin Dianwo, Juli Culture Atomic Company) and Juli Culture bear joint and several liability.

Tianjin Dianwo and Meishengyuan Information have no property to enforce, and the liability for compensation naturally falls on Juli Culture.

In order to get rid of this huge compensation, Juli Culture has worked hard and all parties have been maneuvering. Later, the Shenzhen Intermediate People's Court and the Guangdong High People's Court ruled in favor of Beijing Tencent's claim.

In October 2023, the Shenzhen Intermediate People's Court ruled to force the auction and sale of 100% of the shares of Dilong New Materials and other companies held by Juli Culture to pay off debts. These are the core assets of listed companies.

In desperation, in February this year, Juli Culture signed a peace negotiation agreement with Beijing Tencent and paid 30 million yuan for execution, agreeing that the peace talks will be tentatively scheduled until May 15, 2024, during which the principal amount of 261 million yuan and the interest of 38 million yuan will be limited to the peace talks.

On May 16, Juli Culture disclosed that the company's peace talks with Beijing Tencent were still under negotiation.

As of the end of March this year, Juli Culture had monetary funds of 354 million yuan and net assets of 402 million yuan. It is difficult to bear the huge compensation to Beijing Tencent.

Failed crossovers

Juli Culture, formerly known as Dilong New Materials, is mainly engaged in the research and development, production and sales of medium and high-end decorative veneer materials. The company was listed on the main board of the Shenzhen Stock Exchange as early as 2008.

As a traditional manufacturing enterprise, after the company was listed, its business development was relatively stable, but its growth was insufficient and the market attention was not high.

At this time, the cross-border transformation of traditional enterprises is rising, and the asset-light pan-cultural assets have become the target of many A-share companies competing for acquisition.

Dilong sees the potential of the game industry and hopes to achieve transformation through mergers and acquisitions to improve the company's profitability.

In 2016, the company acquired 100% equity of Meishengyuan Information at a consideration of 3.4 billion yuan and an appreciation rate of 1924.01%, and entered the game industry as desired. At that time, Meishengyuan Information had only been established for more than two years and had just achieved profitability.

The counterparty promised that from 2015 to 2017, Meishengyuan Information achieved net profits of no less than 180 million yuan, 320 million yuan and 468 million yuan respectively. Once the commitment is met, the performance of the listed company will achieve rapid growth.

In order to highlight the determination of transformation and business attributes, the company changed its name from Dilong New Materials to Juli Culture.

The game industry does have extraordinary growth, and during the performance commitment period, Meishengyuan Information has exceeded its performance targets.

However, a "Notice of Investigation" from the regulatory authorities completely uncovered this beautiful lie.

After investigation, from 2016 to 2018, Meishengyuan Information confirmed the income from dozens of companies without actually carrying out business, and realized the flow of funds through a number of third-party companies. During the period, there was an inflated increase in huge revenues, profits and accounts receivable, resulting in false disclosure of relevant financial reports and information of listed companies. For this reason, more than 20 former directors, supervisors and senior executives of Juli Culture were punished.

After retrospective verification, from 2015 to 2017, the actual net profit of Meishengyuan Information was 185 million yuan, 236 million yuan and 206 million yuan respectively, and failed to fulfill the performance commitment. According to the agreement, Yu Haifeng, Juli Huying and other performance commitment parties need to compensate the listed company nearly 1.2 billion yuan.

However, until now, the performance compensation of the relevant parties to the listed company is still in a state of overdue and unfulfilled, there is no property to be executed, and the shares of the listed company held by the relevant parties have also been frozen, pledged and auctioned.

The cross-border transformation of cohesive culture finally ended up in a mess.

Difficult return

Affected by factors such as the game business not meeting expectations and the huge goodwill impairment of Meishengyuan Information, in 2018, Juli Culture suffered a huge loss of 2.995 billion yuan in one fell swoop.

In the following year, the company's entertainment business continued to lose money, and a large amount of impairment was provided, and the listed company continued to lose 1.583 billion yuan for the whole year. At the end of 2019, Juli Culture's cultural and entertainment businesses were basically at a standstill. If it continues to be maintained like this, it will inevitably lead to long-term pressure on the performance of listed companies.

In June 2020, the company transferred 100% of the equity of Dilong Culture, the main body of the cultural and entertainment business, to a third party at a consideration of 1 yuan, completely divesting the entertainment business. At that time, the company's net assets were -480 million yuan (at the end of March 2020).

The focus is back on the business they are familiar with, and the culture of cohesion is still familiar. In 2021, the company's traditional business achieved restorative growth. Operating income increased by 16.72% year-on-year to 1.164 billion yuan, and non-net profit increased by 295.59% year-on-year to 78.04 million yuan.

However, in the following two years, affected by the market environment, the company's performance once again showed an overall downward trend. In 2023, it will achieve operating income of 947 million yuan and deduct non-net profit of 67.21 million yuan.

Juli Culture cut the flesh and got rid of the heavy burden of the entertainment business, thinking that it could return to the original point and travel lightly.

Unexpectedly, the subsidiary's historical debts would eventually have to be borne by themselves. In 2023, the company will provide for a loss of 416 million yuan in the lawsuit with Beijing Tencent, which directly led to another large loss of 336 million yuan in the company's net profit attributable to the parent company in that year.