Per reporter: Huang Xinlei Per editor: Liang Xiao
After nearly 4 months, Changbao Co., Ltd. (002478, sz) finally admitted in its reply to the inquiry letter of the Shenzhen Stock Exchange today (August 19) that jiaxing Yuean Investment Co., Ltd. (hereinafter referred to as Jiaxing Yuean), a shareholding company, could not perform its duties normally and exercise effective control in the case of the acquisition of 51% of the equity of Guangzhou Fuda Medical Co., Ltd. (hereinafter referred to as Fuda Medical).
In February this year, Jiaxing Yue'an applied to the Shanghai International Economic and Trade Arbitration Commission to complete the arbitration. The case, which began on June 9, has not yet been decided.
It is reported that due to the above reasons, during the final review, Fuda Medical failed to cooperate with the implementation of necessary audit procedures such as letters and physical assets inventory, resulting in Changbao Shares' 2019 financial report being issued a qualified opinion. Changbao shares have previously announced that from January 1, 2020, the subsidiary Fuda Medical will no longer be included in the scope of the company's consolidated statements.
On December 21, 2017, Changbao Co., Ltd. announced that it and Shanghai Jiayu Medical Investment Management Co., Ltd. (hereinafter referred to as Jiayu Medical) jointly funded the establishment of Jiaxing Yue'an for the acquisition of 51% of the equity of Fuda Medical. Among them, Changbao shares hold 30%, Jiayu Medical holds 70% of the shares, with a total investment of 372 million yuan and Changbao shares investing 112 million yuan.
Jiayu Medical irrevocably delegated its voting rights to the shareholders' meeting and board of directors in Jiaxing Yue'an to Changbao Shares. According to the relevant agreement, there are 5 directors on the board of directors of Fuda Medical, of which Jiaxing Yuean has the right to nominate 3 directors and other shareholders have the right to nominate 2 directors.
This is also the reason why Changbao shares have control over Jiaxing Yuean and Fuda Medical, and include Fuda Medical in the scope of consolidated statements.
On August 9, 2018, Changbao announced that in order to further optimize the investment structure, jiaxing Yuean's acquisition ratio of Fuda Medical was adjusted from 51% to 41.22% (that is, 9.78% of the difference equity), the total investment amount was reduced to 301 million yuan, and the investment amount of Changbao shares was adjusted to 90.27 million yuan, while the control arrangement and director seat arrangement involved in the previous period remained unchanged.
At the same time, Changbao shares said that the company decided whether to further expand the proportion of equity acquisition of Fuda Medical, make corresponding arrangements for corporate governance, and timely fulfill the obligation of information disclosure based on the operation of Fuda Medical. According to the agreement arrangement, Jiaxing Yuean has the right to repurchase 9.78% of the difference in equity before December 31, 2019.
Although the announcement at the time showed that other shareholders of Fuda Medical agreed that Jiaxing Yuean would maintain control over Fuda Medical, and Fuda Medical would continue to be included in the consolidated statements of Changbao shares, perhaps the hidden dangers were buried at that time.
According to the agreement, starting in November 2019, Jiaxing Yuean formally proposed to the relevant shareholders that the repurchase of a total of 9.78% of the difference in equity could not be successfully delivered. Therefore, Jiaxing Yuean filed an arbitration application with the Shanghai International Economic and Trade Arbitration Commission on the share repurchase matter, and completed the filing on February 24, 2020.
In this regard, Changbao shares said that because the management personnel appointed by Jiaxing Yuean could not perform their duties normally and exercise effective control over Fuda Medical (such as the scope of audit of the listed company's annual report was limited, etc.), and according to the agreement, Jiaxing Yuean did not successfully repurchase the difference in equity, the original shareholders no longer needed to cooperate to take necessary measures to ensure that Jiaxing Yuean maintained control over Fuda Medical and the financial consolidation of Fuda Medical.
The "Daily Economic News" reporter noted that according to the initial announcement of Changbao Shares, the net assets of Fuda Medical in 2015, 2016 and January-July 2017 were 181 million yuan, 163 million yuan and 161 million yuan, respectively; operating income was 240 million yuan, 222 million yuan and 120 million yuan, and net profit was 18.4 million yuan, 6.64 million yuan and 7.54 million yuan, respectively.
On April 29 this year, Changbao Co., Ltd. disclosed in the "Announcement on the Subsidiary Guangzhou Fuda Medical Co., Ltd. No Longer Included in the Scope of the Company's Consolidated Statements" that in 2018, the audited total assets of Fuda Medical were 281 million yuan, accounting for 4.38% of the company's total assets, the operating income was 242 million yuan, accounting for 4.50% of the company's operating income, and the net profit attributable to the shareholders of the listed company was 1.9736 million yuan, accounting for 0.41% of the net profit attributable to the shareholders of the listed company.
In addition, Changbao shares said in the 2019 annual report that from December 2 to December 6, 2019, Changbao shares obtained the financial statements of Fuda Medical for January to October 2019 for pre-audit, and only obtained the electronic account sets for review from November to December at the time of final review. Through the merger, in 2019, the total assets of Fuda Medical were 303 million yuan, accounting for 4.43% of the company's total assets, the operating income was 356 million yuan, accounting for 6.74% of the company's operating income, and the net profit attributable to the shareholders of the listed company was 4.3286 million yuan, accounting for 0.72% of the net profit attributable to the shareholders of the listed company.
However, due to the failure of Fuda Medical to cooperate with the audit institution in implementing the necessary audit procedures such as letters and physical asset inventory, it was impossible to determine whether the data of the above-mentioned consolidated Fuda Medical Report was accurate, resulting in the company's annual report auditor failing to implement adequate and appropriate audit procedures, and the 2019 audit report was issued with a qualified opinion.
In this regard, Changbao shares said in the reply to the inquiry letter that even if the arbitration result has not yet been formed, the company still holds at least 41.22% of the equity and voting rights of Fuda Medical, which can still have a significant impact on Fuda Medical. After the deliberation and approval of the company's board of directors, since January 1, 2020, the company will no longer include Fuda Medical in the scope of the company's consolidated statements, but will adopt the equity method for Fuda Medical, which will not have an important impact on the company's financial indicators and operating results.
As of the close of trading on August 19, the stock price of Changbao shares was reported at 5.24 yuan per share, down 1.32% on the day.
Daily economic news