Jiangzhong Pharmaceutical Intends to Take Control of Hais Pharmaceutical The process of asset securitization of state-owned enterprises is accelerating

Reporter Cao Qi

On September 22, Jiangzhong Pharmaceutical announced that the board of directors of the company deliberated and passed the "Proposal on Acquiring 51% of the Equity of Hais Pharmaceutical by Equity Transfer and Capital Increase", and the Company decided to acquire 36% of the equity of Jincheng Haisi Pharmaceutical Co., Ltd. (hereinafter referred to as "Hais Pharmaceutical") through public delisting; if the delisting is successful, the follow-up plan will increase the proportion of equity held by Hais Pharmaceutical from 36% to 51% through capital increase.

Jiangzhong Pharmaceutical "hand in hand" Hayes Pharmaceutical, what considerations are based on both sides?

Jiangzhong Pharmaceutical is the only intended transferee

According to the announcement, on September 17, 2021, the listing of the "36% Equity Transaction of Jincheng Haisi Pharmaceutical Co., Ltd." was closed, and only one intended transferee of Jiangzhong Pharmaceutical Co., Ltd. registered, and the company will handle the property rights transfer procedures according to the transfer price of 119 million yuan, and increase the capital after the completion of the equity transfer. On September 18, 2021, Jiangzhong Pharmaceutical signed the "Equity Restructuring Agreement on Haisil Pharmaceutical" with Jinneng Holding Equipment Manufacturing Group Co., Ltd., Jincheng Wangtaike Industry and Trade Co., Ltd., the Institute of Infectious Disease Prevention and Control of the Chinese Center for Disease Control and Prevention, and Hais Pharmaceutical.

According to the data, Hayes Pharmaceutical mainly produces bifidobacterium tripartite enteric-coated capsules, cloprucaine hydrochloride injection, rabeprazole sodium intestinal tablets and other drugs at this stage, of which bifidobacterium tripartite enteric-coated capsules are the company's fist products, and the current sales volume is well-known among similar products, and has entered the national 2013 edition of the basic drug catalog.

According to the Asset Valuation Law, as of March 31, 2021, Jincheng Haisi Pharmaceutical Co., Ltd. had a total asset book value of RMB693 million, total liabilities of RMB412 million and a carrying amount of all shareholders' equity of RMB280 million. In 2018, 2019 and 2020, the operating income of Hayes Pharmaceutical was 827 million yuan, 1.025 billion yuan and 799 million yuan, and the net profit was 26.2998 million yuan, 30.6632 million yuan and 28.1605 million yuan, respectively.

Jiangzhong Pharmaceutical intends to obtain 36% of the equity of Hais Pharmaceutical through public delisting, if the delisting is successful, the follow-up plan will increase the proportion of equity held by Hais Pharmaceutical from 36% to 51% through capital increase, calculated according to the appraisal value of Hais Pharmaceutical's listing, and assume that 36% of the equity is traded at the reserve price of the listing, and the amount of capital increase is expected to be 101 million yuan. The total amount of the equity transfer and capital increase price is expected to be 220 million yuan, the source of funds is the company's own funds, and the final transaction price is subject to the actual transaction price.

For the reasons for this cooperation, Jiangzhong Pharmaceutical said that it is mainly to supplement the high-quality varieties in the gastrointestinal field, and to do deep and wide gastrointestinal moats. Previously, Shi Lichen, an expert in pharmaceutical strategic planning, told reporters that Jiangzhong Pharmaceutical has always been an enterprise that emphasizes marketing and light research and development, and the company's own product development in the pharmaceutical field is very slow. Therefore, the acquisition of Hayes Pharmaceutical is an effective way to broaden its product range.

The Haisi Pharmaceutical side said that the cooperation is mainly to fully implement the three-year action plan for the reform of state-owned enterprises and the spirit of deepening the reform of state-owned enterprises by the Shanxi Provincial Party Committee and Provincial Government, and the company intends to carry out restructuring and reform to achieve sustained, healthy and efficient development of the company. From the perspective of the equity transferor, the two enterprises are state-owned background enterprises, of which Jinneng Holding Equipment Manufacturing Group Co., Ltd. transferred 25.7102% of the equity of Hais Pharmaceutical, and Jincheng Wangtaike Industry and Trade Co., Ltd. transferred 10.2898% of the equity of Hais Pharmaceutical.

The securitization rate of state-owned assets has accelerated

According to the data, accelerating the process of asset securitization of state-owned enterprises is an important starting point for deepening the reform of state-owned assets and state-owned enterprises. Since the "13th Five-Year Plan", many provinces have invariably taken the improvement of the level of securitization of state-owned enterprises as the "key play" of this round of state-owned enterprise reform.

Previously, a number of provinces proposed that the state-owned asset securities rate reach more than 50% by the end of 2020. For example, Shanghai, Beijing, Tianjin and other places have proposed that the asset securitization of provincial enterprises reach more than 50%, Shandong has proposed to reach more than 60%, Jiangxi has proposed to reach more than 70%, and Zhejiang has proposed to reach 75%.

Entering the "14th Five-Year Plan" stage, the securitization rate of state-owned assets has been further accelerated. For example, in order to accelerate the pace of state-owned capital securitization, Jiangxi Province has deeply implemented the three-year action plan for the listing of enterprises, promoted the IPO and listing of Jiangyan Shares, Jiangxi Guoke, China Ruilin and other enterprises, supported existing listed companies to actively carry out capital operations, and supported the spin-off and listing of Xingang shares. Solidly carry out the transformation of the company system and joint-stock system of state-owned enterprises, increase the intensity of mergers and acquisitions, and promote the transformation of mixed reform enterprises from equity diversification to listed companies.

Similarly, since the beginning of this year, after comprehensively completing the strategic reorganization of provincial enterprises, the Shanxi Provincial Party Committee and Provincial Government have taken the improvement of the level of enterprise asset securitization as the top priority in promoting the high-quality development of state-owned assets and state-owned enterprises, and have made every effort to promote the comprehensive entry of provincial enterprises into the capital market.

The 9 provincial enterprises that have a listing platform in the province can find out the asset base, and those that can be injected or injected into existing listed companies after cultivation are all injected into listed companies; those that cannot be injected into the existing listed company platform, and those that do not have a listing plan arrangement, are in principle included in the scope of "cage for birds", including continuing to increase the intensity of high-quality asset exchange, and including non-main business and idle inefficient and invalid assets into the scope of exchange, so there is a transfer of Hayes Pharmaceutical.

In this regard, Wu Gangliang, a researcher at the China Enterprise Reform and Development Research Association, told reporters that Shanxi State-owned Assets has made Hais Pharmaceutical an asset of a listed company by selling some of the equity of enterprises, and the future supervision will be more transparent and the liquidity of assets will be enhanced. In addition, the remaining shares may be replaced by shares of listed companies in the future, thereby increasing the securitization rate.

Wu Gangliang said that in order to form a state-owned enterprise supervision method based on capital management, all parts of the country have put forward the goal of securitization rate of state-owned assets, and IPOs and major asset restructuring are important means to improve the securitization rate and an important path for state-owned enterprises to achieve mixed reform. Therefore, it is expected that during the "14th Five-Year Plan" period, the number of state-controlled listed companies will increase significantly, especially state-owned enterprises in the field of full competition.

(Editing by Li Bo, Shangguan Monroe)