In April 26, 2018, the twentieth meeting of the SFCs merger and reorganization committee will be approved through the happy purchase of major assets reorganization. In this transaction, happy buy 11 billion 551 million yuan, purchase happy sunshine, mango mutual entertainment, sky entertainment media, mango video, mango entertainment five targets. Among them, the happy sunshine is the main body of the mango TV. According to the latest 2018 spring report published by QuestMobile, the current comprehensive MAU of mango TV has become the fourth largest video website in China after Tencent video, Youku potato and Iqiyi. After the transaction is completed, mango TV is successfully injected into happiness shopping, and happy purchase will become the only listed company of A shares with well-known video websites. Not only that, the total net profit of nearly 3 billion 500 million in the next three years will also bring about qualitative changes to happiness purchase. How can the mango TV get the approval of the film and TV culture merger? What are the key issues of supervision for mango TV acquisition? Why Tencent video giant is still in the loss, mango TV is the first to achieve profitability, becoming the only profit view. 11 billion 500 million of asset injection In this transaction, happy purchase price of 11 billion 500 million yuan, the acquisition of happy sunshine, mango mutual entertainment, Tianyu entertainment media, mango film five companies 100% stake. Before the transaction, happy purchase of the main business of television shopping, the annual revenue of 2 billion 984 million yuan in 2017, the net profit of 73 million yuan, the actual control of the Hunan platform, the market value of about 8 billion yuan before the release of the plan. Due to the 5 targets of the two sides, happy purchase and happy sunshine, the actual control per capita is Hunan Taiwan, so this is a controlling shareholders asset injection. In the acquisition of Wangs personal column, Xiao Wang bought and updated the latest M & A transactions and summarized the transaction plan. The column contains four columns of frontier observation, fund special, case analysis and case study, of which the plan of buying and buying mango TV is a happy purchase, which has been summed up in the column of case analysis, some of which are as follows: Purchase assets by issuing shares Trading party: Mango media, mango Haitong, Xiamen construction hair, Shanghai state and the new capital, Hunan literature, Guangda new entertainment, Guangzhou Yuexiu, mango Wen Chuang, construction investment Chinese, Shanghai Jun Yong, Zhongnan Ding Yuan, Tibet Tai Fu, central and southern culture, growing culture, Shanghai Hua Wei. The transaction price is 11 billion 550 million 751 thousand and 200 yuan, and the share price is 100%. Among them, happy sunshine is 9 billion 530 million 168 thousand and 100 yuan, mango each other amuse 508 million 326 thousand and 500 yuan, day entertainment media price 503 million 315 thousand and 700 yuan, mango film and television price 540 million 601 thousand yuan, mango entertainment price 468 million 339 thousand and 900 yuan. Issue price: 19.66 yuan / share. The number of shares issued: 587525492 shares. Target assets: happy sunshine 100%% equity, mango mutual entertainment 100% stake, Tianyu media 100% stake, mango film 100% equity interest and mango entertainment 100% equity. Changes in ownership structure before and after the transaction: before the transaction, the controlling shareholder was mango media, its shareholding ratio was 43.12%, and the actual control was Hunan Taiwan. After the completion of this transaction, the mango media will hold 67.88% shares of the listed company, still the controlling shareholder of the company, and the Hunan station is still the actual controller of the company. Raise money: no more than 2 billion yuan. The share subscription ratio of the controlling shareholders: undisclosed participation. Financial use: after deducting the cost of the intermediary agency and related issuance costs, the company will be used for the implementation of the mango TV copyright bank extension project and the cloud storage and multi screen broadcasting platform project. You can see that in these five marks, the price of happy sunshine is 9 billion 530 million yuan, the volume of transaction is the largest, and the happy sunshine is the main body of Mango TV. And the other 4 marks, mango mutual entertainment mainly engaged in the game business, day entertainment media focused on the artist brokerage business, mango entertainment and mango film and television mainly engaged in the content production business. In fact, Hunan station is to take mango TV as the core, from the new media platform to the content production, artist brokers, IP operation of the complete industrial chain into a happy purchase. This will greatly enhance the ability to develop the whole industry chain of happiness. 02 The only profitable video site at present? Mango TV is the core of purchase in this transaction. Lets take a closer look at Mango TV. As we all know, Hunan station in 2014 within the Hunan satellite TV and mango TV dual core driven innovation strategy, jointly launched with Hunan radio and television set up a video platform mango TV. Subsequently, Hunan station poured a large amount of copyright into the TV of mango through the form of shareholders contributions and transactions. Under the support of the Mango alone strategy, mango TV has the high quality rights of a series of Hunan TV, such as happy base, heaven up, where dad goes, I am singer and so on, and has a unique competitive power in content acquisition. The number of users and the number of APP downloads has grown rapidly. What is the performance of mango TV until this transaction? As shown in the following table, the sales revenue of mango TV in 2015, 2016 and 2017 was 961 million yuan, 1 billion 817 million yuan and 3 billion 385 million yuan respectively, and the annual average growth rate was close to 100%. From the profit point of view, mango TV in the past three years in the net profit of -9.40 billion yuan, -6.94 billion yuan, 489 million yuan, net profit loss shrinking, and particularly noteworthy is that mango TV has achieved a profit of close to 500 million yuan in 2017. Mango TV to achieve profitability is actually a very surprising thing, why do I say so? Small partners in the video world know that Tencent video and Iqiyi video giants are still losing money. Although the number of users and the amount of video watching are increasing, the user stays longer, bringing advertising revenue and membership revenue to a higher level. But unfortunately, their content costs are growing faster. In theory, the profit model of a video website should be shown in the following figure. With continuous homemade and procurement content, the content accumulated on the platform will become richer and richer, attracting more and more users to pay. When the number of content increases to a critical point, the number of paid users will explode. After the critical point, although the content cost continues to increase, the growth rate will decline, and the number of subscribers will continue to increase, and the average income of each active user is higher, so the cost and income of the entire video platform can be gradually balanced, and then the profit can be made to fill the content cost of the initial investment. That is to say, when the membership fee income is covered by the copyright amortization cost, it is the key to analyze the profit of the video website. From the current domestic market competition, Iqiyi lost 3 billion 700 million in 2017, 3 billion 388 million yuan in the first quarter of fiscal year 2018, and the Tencent video loss is expected to continue to expand in the middle of the year. These video giants are far away from the critical point. Even in order to increase the barriers, they have increased the input of original content, and the losses have expanded. Mango TV has a big gap between active users, Fu Fei users and ARPU value and the top three giants. With Iqiyi and mango TV as a contrast, Iqiyis mobile terminal MAU is 146% of mango TV; mobile terminal DAU is the mango TV, and the number of paid users is 10 times as much as the happy purchase, and the average amount paid by the paid users is several times the mango TV. Although mango TV is ranked fourth in Chinas video website, it still has a gap with the top three Iqiyi, Youku and Tencent videos. Because of this, Wang @ Wang @ Wang Xin capital said that, in the case of pay users and ARPU values, such as data are not predominant, the mango TV to achieve profit is more astonishing. So, why does mango TV make a profit? 03 The income and cost structure of mango TV Three point one Income: the fast growth of members income Lets dismantle the income and cost structure of mango TV. From the income point of view, the income of mango TV comes from three parts of Internet video, operator service and content operation. The revenue of three parts of the year 2017 is 1 billion 700 million yuan, 600 million yuan and 900 million yuan respectively, accounting for 51%, 18% and 29% respectively. Internet video service refers to charging user fees separately and charging advertisers. For example, the annual fee of mango TV full screen film and television members is 300 yuan, while mango TVs video ads are charged by CPMs actual broadcast times. This is the profit model adopted by ordinary video companies. In the operators business, mango TV, in collaboration with telecom operators / cable operators, provides a variety of payment models, such as single order, channel monthly, package season, and package year members, so as to obtain revenue. Because mango TV has full license including IPTV and OTT, it goes faster in the home set-top box and smart TV. In the last part of the operation, mango TV mainly distributes some homemade and purchased copyrights. The advantage of this model is that income and cash realisation are faster and easier, but will reduce their content barriers. For example, NETFLIX insists on not distributing copyright externally, while reducing copyrights to other platforms to enhance platform attractiveness. The above is the three profit model of mango TV. On the trend, you can see the increase in the sales ratio of mango TVs operators and the sales of copyright sales, up from 30% in 2015 to about 50% in 2017. At the same time, the proportion of membership fee income is also rising, from 3% in 2015 to 11%. Three point two Cost end: network bandwidth purchase cost decline From the end of cost structure, the cost of mango TV mainly includes content cost, network cost, employee compensation and split cost. Figuratively, mango TV first invested in the production of film and television programs, and paid staff salaries in the process. After the production, the film and television programs formed the copyright intangible assets. Copyright assets need to be amortized according to certain rules, and enter into the cost to form the content cost. When broadcasting and distributing programs, it is necessary to purchase network loans and divide them into operators. This is the general operation mode of mango TV. The trend analysis of the cost structure shows that the cost absolute amount of the network bandwidth of mango TV has decreased. According to the disclosure, this is because the optimization of the mango TV technology has reduced the bandwidth consumption. In addition, because of the market fluctuation of mango TV, the cost of the cost reduction is significantly reduced. 04 Adjustment of amortization policy Copyright is the core of all video websites. By the end of 2017, the intangible assets of the mango TVs balance sheet made up of information network communication rights amounted to 1 billion 742 million yuan. The copyright sources included shareholders investment, purchase from shareholders, homemade, purchase and investment. These copyrights are the core assets of mango TV, and mango TV has derived three ways of operation. 1) copyright self use, mainly through the Internet video business advertising revenue and membership income to reflect the value; 2) the combination of copyright self use and copyright distribution: transferring part of the right to use copyright, from exclusive copyright to non exclusive copyright; 3) copyright replacement: after the completion of the replacement, the delivery of copyright and the introduction of copyright become a new copyright collection. In 2016, mango TV re adjusted its amortization policy. According to the original amortization policy, the mango TV variety show network communication right first round straight amortize; belong to the satellite TV synchronization broadcast outside, directly into the current cost; the first round broadcast of the TV play network transmission right in 1 years; belong to the first round of broadcasting, directly into the cost of the current period. After the amortization policy adjustment, the permanent copyright benefit period of mango TV was determined to be 5 years, and the copyright of the film and TV series, which was determined and greater than 3 years (containing) during the beneficiary period, was amortized by the 532 amortization law. If the benefit period was more than 2 years (including) but less than 3 years, the method of apportionment was 55. If the beneficiary period was less than 2 years, it was amortized by the monthly straight line in the beneficiary period. Such amortization policy adjustment makes the amortization period is elongated, affecting the net profit. In 2016, mango TV reduced the main business cost by 495 million yuan, and reduced the main business cost by 595 million yuan in 2017. This led directly to mango TVs profit of 489 million yuan in 2017. In 2018 -2020, the adjustment of amortization policy will affect the net profit of TV13.34 billion, 971 million yuan and 770 million yuan. 05 After the adjustment is still relatively cautious Small Wang @ mergers and acquisitions Wang Xin capital online class, detailed the review of the merger and reorganization of the review of the red line, reversion of the 2017 merger and reorganization of the regulatory trend and all cases of whether or not. In the 24-36 topics, in-depth analysis of the key issues of IPO financial verification and rejected cases is also made. Detailed analysis of the IPO issuing system and recent compliance trend analysis is made. In this transaction, the supervision not only pays attention to the related complaints, related progress and countermeasures, the necessity and rationality of raising the supporting funds, but also concerns the adjustment of the mango TVs accounting policy. In a restructured feedback, the SFC needs to explain the necessity and rationality of the change in the accounting estimate, including the necessity and rationality of the analysis of the changes in the accounting estimates, the comparison of the companies in the same industry, the rational test of the amortization cost of intangible assets, and so on. In comparison, the amortization year of the music network was 10 years, and the storm group was amortized in accordance with the authorized time limit for the purchase of copyright. The amortization policy of NETFLIX in the United States was amortized in a straight line for 4 years. And the amortization period of Iqiyi, especially the amortization period of authorized copyright, is basically concentrated within two years. The revised amortization policy of mango TV is more prudent than the former music network and the storm group amortization policy. In fact, although the amortization policy adjustment may lead to more amortization in a certain year, the amortization of a certain year is less, affecting the net profit on a certain years financial statement. However, from the perspective of the whole life cycle of copyright, the total amount of amortization of a copyright is equal regardless of the amortization policy. From the perspective of life cycle, the adjustment of copyright amortization policy has little effect on the net profit of enterprises. This is also one of the reasons why happy purchase of mango TV is going to be over. 06 Comment on Xiao Wang This transaction is a high-quality asset injection of controlling shareholders. After the acquisition, happy purchase and mastered the complete industrial chain from the new media platform to the content production, the artist broker, IP operation and so on. It is also the listed company of the few A shares to operate the well-known video website in the TV revenue bag of mango. In addition to mango TV, happy purchase in this transaction also acquired mango mutual entertainment and other 4 targets. The total net profit of mango TV and these four targets was 522 million yuan, 875 million yuan, 1 billion 94 million yuan, 1 billion 495 million yuan in 17-20 years, and GAGR was as high as 30.09%. After the acquisition, the performance of happy shopping will be greatly increased. According to the financial statements in 2017, the operating income of the happy purchase will increase to 8 billion 271 million yuan, the net profit increases to 805 million yuan, and the basic earnings per share will increase from 0.18 to 0.82. (happy purchase of the financial statements for the 2017 year) At present, Iqiyi listed on the US stock market is currently about 4.6 times that of PS. Assuming that the mango TV is valued at 4.6 times PS, the valuation of mango TV is about 15 billion. Assuming a happy purchase of the 2018 dynamic price earnings ratio of 30 times after the purchase, the original business performance, performance commitment to achieve all, the expected value of the happy purchase will be close to 28 billion 500 million. Video sites are usually valued by EV/EBITDA, because EV/EBITDA can offset the different amortization policies of different video sites. From the point of view of EV/EBITDA, the current stock price of mango TV100% is 9 billion 530 million yuan, and the total liabilities of 2 billion 575 million yuan are almost all operating liabilities, and the money capital of the account is 522 million yuan. The overall EV value of mango TV is around 9 billion yuan. At the same time, the net profit of mango TV2017 is 315 million yuan, the depreciation plus amortization is about 700 million yuan, and EBITDA is about 1 billion yuan. The overall EV/EBITDA multiplier is about 9 times. Compared with Iqiyi, Youku potatoes and Tencent videos supported by BAT, mango TV has different starting points and tactics. Its characteristics are: 1) have excellent variety self-control ability. Part of mango TVs variety show team comes from Hunan Taiwan, and at the same time, it absorbs the team of external talents in a market-oriented studio. 2) user positioning adolescents: Mango TVs 50 million user portrait is young, female, urban, and has high spending power. 3) full license plate advantage: as the video website of Hunan radio and television, mango TV has full license from IPTV to OTT; 4) symbiotic with Hunan platform network: the symbiotic relationship with Hunan station is the huge advantage of mango TV. At present, mango TV has obtained the copyright of the TV Festival of Hunan satellite to 2020, and is prepared with Hunan Wei. We should take a soft and extensive joint venture to further release the advertising value. At present, Iqiyis EV/EBITDA multiplier is 15.69 times. The EV/EBTIDA multiples of mango TV are lower. But considering the variety advantage of mango TV and the stickiness of the user, especially in the future, the advantages of integrated channel + self-made content are enhanced, perhaps the EV/EBITDA valuation of the mango TV may be improved in the future. The source of this article is M & A Wang responsible editor: Hou Wei Cheng _NT4124 3) full license advantage: as a video website of Hunan radio and television, mango TV has a full license from IPTV to OTT. 4) symbiotic symbiosis with Hunan platform: the symbiotic relationship with Hunan station is the huge advantage of mango TV. At present, the mango TV has obtained the related copyright of the TV program of Hunan satellite to 2020, and is ready to carry out a soft and extensive joint investment with Hunan satellite TV to further release the value of the advertising price. At present, Iqiyis EV/EBITDA multiplier is 15.69 times. The EV/EBTIDA multiples of mango TV are lower. But considering the variety advantage of mango TV and the stickiness of the user, especially in the future, the advantages of integrated channel + self-made content are enhanced, perhaps the EV/EBITDA valuation of the mango TV may be improved in the future.