After the failure of the previous cross-border military business, Fengfan shares (601700) wants to sell again. On April 7, Fengfan shares announced that the company plans to spend 470 million yuan to acquire 100% equity of Beijing aofengyuan Technology Co., Ltd. (hereinafter referred to as “aofengyuan”). After the completion of the transaction, the company will enter the field of military business. It is worth mentioning that as early as 2019, Fengfan stock had planned to acquire aofengyuan, but the reorganization was rejected by the merger and reorganization committee in September 2020. In addition, the reporter from Beijing Business Daily found that compared with the previous report, the value of the target aofengyuan has decreased by 56 million yuan, and the performance forecast in 2021 and 2022 is lower than the previous commitment.
The price of the target decreased by 56 million yuan
Compared with the previous acquisition, the value of the target aofengyuan decreased by 56 million yuan.
On April 7, Fengfan shares disclosed that the company plans to purchase 100% shares of aofengyuan held by 17 counterparties, including Wang Xiaomei, Meng Jian and Wang Bo, by cash payment. The total book net assets of the underlying assets are 151 million yuan, the appraisal value under the asset-based method is 362 million yuan, and the appraisal value under the income method is 470 million yuan. This time, the appraisal result of income method is selected as the appraisal conclusion of the total equity value of the target company’s shareholders. The appraisal value is 319 million yuan, and the appreciation rate is 210.68%. Through negotiation of all parties, the total transaction price of the underlying assets is set at 470 million yuan.
According to the data, aofengyuan was established in 2004. It is committed to the R & D and production of military electronic information business such as microwave RF products, mainly including high-power transmitter, RF front-end, receiver and other microwave RF products. It is widely used in airborne, vehicle, shipboard systems and other military electronic fields. It is a leading enterprise in the field of military electronics in China.
In fact, this is not the first time that Fengfan shares has sought to acquire 100% equity of aofengyuan, but the previous acquisition was rejected by the M & a committee in September 2020.
Specifically, in December 2019, Fengfan shares disclosed the issues of issuing shares and paying cash to purchase assets and raise supporting funds, and then the target company, namely aofengyuan, revealed the mystery. After more than nine months of planning, Fengfan shares’ proposed purchase of aofengyuan will be held on September 24, 2020, but it has not been passed.
At that time, the merger and reorganization committee held that Fengfan shares did not fully explain the core competitiveness of the underlying assets and the rationality of the transaction valuation, and did not fully disclose that the transaction was conducive to improving the asset quality of listed companies, which was not in line with the provisions of Article 43 of the administrative measures for major asset restructuring of listed companies.
Beijing Business Daily reporter noted that compared with the previous acquisition, aofengyuan’s current value has shrunk. According to the restructuring draft disclosed by Fengfan shares in 2020, the price of aofengyuan at that time was 526 million yuan, 470 million yuan, 56 million yuan less than 526 million yuan.
The performance forecast is lower than the previous one
This acquisition, the other side of the transaction also made performance commitments, but compared with the previous decline.
In 2020, the operating revenue of aofengyuan is about 78044900 yuan, the corresponding net profit is about 34973200 yuan, and the corresponding net profit after deduction is about 34053900 yuan. According to the assets appraisal report, the predicted net profits of aofengyuan in 2021 and 2022 are 41.1939 million yuan and 49.8523 million yuan respectively.
In the previous acquisition planning, the counterparties of aofengyuan also made performance commitments. At that time, they promised that the net profits of aofengyuan from 2020 to 2022 would be 34 million yuan, 41.5 million yuan and 51 million yuan respectively. It can be seen from the comparison that the actual performance of aofengyuan in 2020 has just crossed the line by 34 million yuan, while the predicted net profits in 2021 and 2022 are lower than the previous performance commitment.
In response to relevant issues, Beijing Business Daily reporter called the Secretary Office of Fengfan shares for an interview, but the other party’s phone call showed that “the user is busy”.
In addition to the decline of net profit forecast, the forecast of underlying operating income also declined. Specifically, the operating revenue of aofengyuan in 2021 and 2022 is predicted to be about 98.9302 million yuan and 120 million yuan, while the previous forecast is about 105 million yuan and 125 million yuan respectively.
The trading market showed that Fengfan shares opened 6.21% higher on April 7, but after the opening, under the influence of several large sales orders, the stock price of Fengfan shares fell rapidly and turned green. As of the close of the day, the stock price of Fengfan shares was 4.94 yuan / share, down 4.08%, with a total market value of 5.598 billion yuan.
Cross border integration effect to be examined
It is worth mentioning that the business of Fengfan shares does not have synergy with aofengyuan, which makes the integration effect of this cross-border acquisition to be examined.
It is understood that Fengfan Co., Ltd. is mainly engaged in the R & D, production and sales of angle towers, steel tube composite towers, various pipelines, substation structures and supports for all kinds of EHV transmission lines of 1000kV and below. For this acquisition, Fengfan shares also said frankly that through this transaction, the company will realize the layout of military industry and enrich the business structure of listed companies.
On March 31, Fengfan shares disclosed its annual report for 2020, and the company’s performance during the reporting period was excellent. Among them, the net profit attributable to the company was about 219 million yuan, up 178.31% year on year; the net profit attributable to the company after non deduction was about 172 million yuan, up 149.26% year on year. In addition, Fengfan shares plans to distribute cash dividends of 1 yuan (including tax) per 10 shares to all shareholders based on the total capital stock of 1.133 billion shares by the end of 2020, with a total cash dividend of 113 million yuan.
According to Xu Xiaoheng, an investment and financing expert, there are many uncertain risks in cross-border M & A. when listed companies enter industries with low correlation, management, talent, technology and knowledge will become the short board for enterprise development. There will be more problems in actual operation than expected. It is very important to integrate successfully. In addition, an investment banker also held the same view when interviewed by Beijing business daily. He said that compared with industrial M & A, cross-border M & A is more difficult. First of all, M & A is not familiar with the assets in the field, and the value judgment is not necessarily accurate. “At the same time, we should rely on the original management team in the integration, and the integration is more difficult.” So said the investment bank.
Wang Chikun, an independent economist, also said that cross-border M & A firstly faces the problem of industrial background gap, which is likely to be lack of industry experience; secondly, it faces the problem of integration and management, especially in the field of M & A which is not good at.
Beijing Business Daily reporter Dong Liangma
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