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central state-owned enterprises are scanning some a-share listed companies.

the "enterprise observer" learned from public data inquiries that as of september 2024, the control rights of more than 20 private listed companies have changed hands, and the new actual controllers have changed from individuals to central enterprises or local state-owned assets. especially in july, the number of such acquisition cases has exceeded 10, and this number continues to grow.

in comparison, in the whole of 2023, there were only 20 such cases.

01

more than 20 private listed companies "dyed red"

"dyeing red" refers to state-owned enterprises making financial investments in private enterprises, or private enterprises actively inviting state-owned enterprises to participate in investment, thus making the presence of state-owned assets appear in the equity structure of private enterprises.

since 2024, more than 20 listed private companies have experienced "redness". these companies include hongda co., ltd., tasly, guangyang co., ltd., ruilian new materials, red star macalline, pailin biotech, qixiang tengda, bbk group, shiyun circuit, xinhu zhongbao, huatie emergency, microport optoelectronics, shanghai yashi, jiuliang shares, aotejia, sanyou chemical, dasheng culture and fengfeng shares, etc.

for example, the former controller of hongda shares is liu canglong. the company’s business covers many fields such as industry, mining, finance, real estate, trade and investment. the former actual controller of tasly is yan kaijing, the former actual controllers of ruilian new materials are liu xiaochun, lu haoping and li jianing, and the former actual controller of pailin biotech is fu shaolan, known as the "iron lady" in the pharmaceutical industry. at present, these companies have completed equity changes, and the actual controllers of more than 20 private listed companies have changed, including: hongda co., ltd. controlled by sichuan state-owned assets, tasly co., ltd. controlled by china resources group, and guangyang co., ltd. controlled by huangshan state-owned assets supervision and administration commission. , ruilian new materials controlled by the qingdao state-owned assets supervision and administration commission, red star macalline controlled by the xiamen state-owned assets supervision and administration commission, pailin biotechnology controlled by the shaanxi provincial state-owned assets supervision and administration commission, qixiang tengda controlled by the shandong provincial state-owned assets supervision and administration commission, and bbk controlled by the xiangtan municipal state-owned assets supervision and administration commission. group, shiyun circuit controlled by foshan shunde district state-owned assets supervision and administration commission, xinhu zhongbao controlled by quzhou city state-owned assets supervision and administration commission, and huatie emergency holding controlled by hainan provincial state-owned assets supervision and administration commission.

among these “red” cases, the performance of hubei provincial state-owned assets supervision and administration commission and tangshan municipal state-owned assets supervision and administration commission is particularly eye-catching. the hubei provincial state-owned assets supervision and administration commission took control of four private companies, microport optoelectronics, shanghai yashi, jiuliang and aotejia, while the tangshan city state-owned assets supervision and administration commission also successfully controlled three private companies: sanyou chemical, dasheng culture and fengfan. private enterprises.

02

target characteristics

in their raids on the a-share market, central state-owned enterprises have a soft spot for certain types of listed companies. these acquired companies have the following characteristics:

first of all, central enterprises and local state-owned enterprises tend to choose “small but beautiful” companies when making mergers and acquisitions. among the acquired listed companies, the market value is generally low, and only one has a market value of more than 20 billion yuan. these companies include tasly with a market value of 20.4 billion yuan, xinhu zhongbao with a market value of 15.4 billion yuan, pailin biotech with a market value of 15 billion yuan, shiyun circuit with a market value of 13.3 billion yuan, qixiang tengda with a market value of 13.1 billion yuan, hongda shares with a market value of 12.3 billion yuan, sanyou chemical with 9.6 billion yuan, red star macalline with 9 billion yuan, huatie emergency with 8.3 billion yuan, aotejia with 7.6 billion yuan, koyo shares with 4 billion yuan, ruilian new materials with 3.2 billion yuan, 6.8 billion yuan bbk is worth rmb 4.2 billion, fengfeng shares are worth rmb 4.2 billion, jiuliang shares are worth rmb 2.6 billion, dasheng culture is worth rmb 2.3 billion, shanghai yashi is worth rmb 1.7 billion, and microport is worth rmb 1 billion.

these companies usually have stable operating income and achieved profitability in the last fiscal year, which shows that state-owned assets tend to choose private enterprises with small market capitalization, high growth potential and strong competitiveness. in the current market environment, it is more likely that state-owned assets will buy a-shares at the bottom and find high-quality assets that are undervalued.

secondly, the hard technological attributes of the acquired company and synergy with local industries are important factors that central state-owned enterprises consider. this round of state-owned m&a targets are more concentrated in strategic emerging industries or areas with high growth potential, such as computers, new energy, and power equipment.

take aotejia as an example. the company was acquired by changjiang industrial investment group co., ltd., a subsidiary of the hubei provincial state-owned assets supervision and administration commission, for 2.1 billion yuan in july. aotejia is the world's leading supplier of automotive air-conditioning system components and ranks among the top in the domestic air-conditioning compressor market. although the company's performance was under pressure from 2019 to 2021, it successfully turned losses into profits in 2022 and 2023, with net profits attributable to the parent company of 89 million yuan and 73 million yuan respectively.

as an important base for the national automobile industry, hubei province has 25 complete vehicle companies and more than 1,600 parts and components companies. for hubei state-owned assets, the acquisition when aotejia’s performance improves and its valuation is reasonable is not only the right time, but also helps the company better integrate into the local automobile industry chain.

there are many similar cases, such as china resources sanjiu's acquisition of tasly, which aims to leverage the synergy between the two parties in the traditional chinese medicine industry chain and enhance the core competitiveness of the entire industry chain. huati's emergency response involving the concept of computing power and low-altitude economy is consistent with the development of the "digital economy" by the hainan state-owned assets supervision and administration commission. fengfan group and tangshan actively deploy the new energy industry and strive to build the largest photovoltaic module production base and intelligent operation and maintenance manufacturing base in the north.

finally, cross-regional acquisitions have become the norm. on august 16, 2024, the "regulations of the state council on regulating the provision of services by intermediaries for companies' public issuance of stocks (draft for comments)" clearly stated that local people's governments at all levels shall not condition the issuer or company on the results of the public issuance and listing of stocks. intermediary incentives. this means that incentives for companies to go public in various places may be cancelled. in this context, off-site acquisition has become a more favored method for local state-owned assets.

03

performance commitment

in a series of recent equity transfer transactions, central enterprises and local state-owned assets have spent "real money". for example, china resources group successfully acquired tasly for 6.212 billion yuan, sichuan state-owned assets purchased hongda shares for 2.853 billion yuan, qingdao state-owned assets acquired ruilian new materials for 815 million yuan, and hainan state-owned assets supervision and administration commission purchased hongda shares for 19.97 yuan. acquired huatie emergency for 100 million yuan.

for central enterprises and local state-owned assets that invest "real money", the biggest risks they face are potential losses and the possible "escape" behavior of shareholders of the original private enterprises.

therefore, in the acquisition, state-owned assets and state-owned enterprises put forward specific performance commitment requirements to the transferor. for example, huatie emergency promised that its operating income from 2024 to 2026 will be no less than 3.2 billion yuan, 4 billion yuan, and 5 billion yuan respectively, and its net profit will be no less than 600 million yuan and 630 million yuan respectively in 2024 and 2025. and the cumulative net profit in the past three years will not be less than 2 billion yuan; fengfan shares promises that the cumulative net profit from 2024 to 2026 will be no less than 300 million yuan; jiuliang shares promises that the net profit of the original business will become positive in 2024.

at the same time, there is also a clear agreement on the reduction of holdings by major shareholders. for example, shanghai yashi promised that within three years from the date of the share transfer, yashi group and the original actual controller sun wangping will maintain their status as the second largest shareholder and will transfer the 10 million shares they hold after the equity transfer is completed. pledged to hubei international trade, the pledge period is three years, as a guarantee for the commitment to reduce holdings.

setting performance commitments and shareholding reduction restrictions on merger and acquisition targets demonstrates a prudent attitude in the process of state-owned asset acquisitions.

04

win-win for all parties

so, are listed private enterprises willing to accept the "red dye" of state-owned assets?

through in-depth analysis of the financial statements of relevant companies, "enterprise observer" found that for private listed companies, they often welcome the takeover of state-owned assets. most private enterprises rely on bank financing, and the intervention of key shareholders with state-owned assets background at critical moments can play a decisive role in boosting corporate financing. for example, companies such as huatie emergency stated in press releases that becoming a controlling shareholder of state-owned assets can help companies improve financing costs and optimize debt structures. for another example, after hubei state-owned assets took over shanghai yashi, hubei international trade provided shanghai yashi with a loan line of no more than 500 million yuan.

obviously, central state-owned enterprises are supporters and partners of private enterprises.

this is the hard reason why private listed companies are willing to accept "red dyeing", and there are also soft reasons. soft reasons refer to the trust and open attitude of state-owned shareholders towards management and employees. at present, there has been no large-scale blood exchange between central enterprises and local state-owned enterprises after they were listed as private enterprises. in the view of internal employees of companies such as jiuliang shares, the transformation of private enterprises into state-owned enterprises will bring them more job stability, so they very much welcome state-owned enterprises to control private enterprises.

"dyeing red" is a win-win situation for all parties.

qiguan state-owned assets is the official wechat account of enterprise observer newspaper. "enterprise observer" is an all-media platform guided by the state-owned assets supervision and administration commission of the state council and hosted by the china enterprise reform and development research association. it is recognized by the state-owned assets supervision and administration commission of the state council as an "own public opinion platform for state-owned assets and state-owned enterprises" and is committed to professionalism, marketization, and focus on reporting on the reform and development of chinese enterprises from an international perspective.

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