The detonation of the fuse originated from a suspicious acquisition.
On September 29, Gaolan Holdings held a shareholdersmeeting. Its proposal to buy 51% of Dongguan Silicon Xiang Insulation Material Co., Ltd. (hereinafter referred to as Dongguan Silicon Xiang) in cash and sign an asset purchase agreement with its counterparty was opposed by director Wu Wenwei and supervisor Chen Dezhong.
Even more bizarre is the next trading day when this embarrassing situation arises.
On October 8, Gaolan shares issued four announcements without stopping. Tang Hong, Guan Shengli and Liang Qingli, who hold more than 3% of the companys shareholders, asked for the replacement of director Wu Wenwei to Tang Hong and company supervisor Chen Dezhong to Chen Huijun.
What is the secret behind this fierce struggle?
Investigation on the Disputed Subject of Dongguan Silicon Xiang
Wu Wenwei voted against it because of the high risk of Dongguan Silicon Xiangs operation, the high valuation of its assets, the unclear prospect of its products, the low technical content, and a large number of bad debts. The underlying assets also existed in the past, such as insufficient registered capital, stock ownership, inter-industry competition, the occupancy of the underlying companys funds by affiliated companies, the absence of major terms of major business contracts, and violation of the Social Security Labor Law. Regulations and other non-compliance risks.
All kinds of clues point to this traditional manufacturing enterprise in Dongguan.
On October 10, 21st Century Economic Reporters went to 57 Muyu Road, Shatou Community, Changan Town, Dongguan, which is the main business site of Silicon Xiang, Dongguan, which is the acquisition target.
According to public information, Dongguan Silicon Xiang was established in May 2008, mainly engaged in heating and cooling of new energy automotive power batteries, fire-proof insulation materials, flexible circuit boards and other products, including PTC heaters, FPC flexible circuit boards, integrated bus, fire-proof insulation cotton, cushion pads and so on.
On September 29, Gaolan shares planned to acquire 51% of Dongguan Silicon Xiang for 204 million yuan, and the overall valuation of Dongguan Silicon Xiang is 400 million yuan. However, as of 30 June 2019, the audited net assets of Silicon Xiang in Dongguan were only 97 million yuan, with an assessment value of 391 million yuan and an appreciation rate of 303.51%.
So, is Dongguan Silicon Xiang worth such a high price?
On the big black signboard, the five gold stamping characters of Sixiang Industrial Park are very conspicuous. On the day of the visit, vehicles and personnel can be seen everywhere in the park. The employees are working normally. In front of the park, there are two staff members who set tables for general recruitment.
The brochure posted outside the park points out that the park covers an area of nearly 20,000 square meters and the company has more than 800 people. However, according to Kaixinbao data, in 2018, only 206 people paid for social security in Silicon Xiang, Dongguan.
According to the companys employees, the companys operating and production sites are all leased land.
The 20,000 square meters park is all the production and operation sites of Dongguan Silicon Xiang. Compared with the factories all over Changan Town, the scale of Dongguan Silicon Xiang is not small, but absolutely not large.
According to the 21st Century Economic Reporter, in 2016, in order to expand business, Dongguan Silicon Xiang cooperated with Huijie Science and Technology to establish MES Electronic Intelligent Factory, which is mainly used to produce FPC/PCBA/CCS and other flexible circuit boards and integrated bus.
However, employees of the company told our reporter that the plant is still under construction and has not been put into production formally.
Wu Wenwei believes that Dongguan Silicon Xiangs new energy automobile industry is in a disadvantageous market environment where the production and sales of automobile manufacturers are declining sharply under the state subsidy policy. The market prospects of the companys products are not optimistic. The market capacity of its main products, such as heating film and insulating cotton, is not large, the technical content is not high, and the companys technical strength is weak, which makes it difficult to form a sustainable profitability.
However, in the view of Dongguan Silicon Xiang employees, the companys products are quite competitive. It looks very simple, but there are many industrial components. It has advantages in price and quality. The companys production line is owned by itself. In addition, it has a separate laboratory, which can customize solutions according to the needs of different customers, and the customer base is stable.
According to its introduction, the company has 23 utility model patents, more than a dozen invention patents, and some invention patents are being applied for. BYD, Ningde Times, Guoxuan Technologies, Honeycomb Energy, Yutong Bus and other leading companies of new energy automobiles are the service customers of the company.
Involved in the Lion Science and Technology Crisis
But the 21st century economic reporter found that the financial data of Dongguan Silicon Xiang is not optimistic.
Asset appraisal report shows that from 2016 to the first half of 2019, Dongguan Silicon Xiang achieved business income of 129 million yuan, 160 million yuan, 194 million yuan and 112 million yuan respectively, with net profit of 126.626 million yuan, 316.182 million yuan, 258.844 million yuan and 168.666 million yuan respectively.
Among them, in 2018, Dongguan Silicon Xiangs revenue and net profit increased by 20.47% and - 18.13% compared with the same period last year, which resulted in no increase in revenue.
At the same time, the companys cash flow situation is not optimistic. During the reporting period, the net cash flow generated by Sixiangs business activities in Dongguan was 9.3212 million yuan, - 14.3936 million yuan, - 45.535 million yuan and - 57.7625 million yuan, respectively, with the net outflow expanding.
Overall, in three and a half years, the total net profit of Dongguan Silicon Xiang was only 870.198 million yuan, and the total net cash flow generated by business activities was - 108 million yuan, which is different from each other.
However, Dongguan Silicon Xiangs provision for bad debts is only 12.708 million yuan.
Among them, Dongguan Silicon Xiang charged Henan Guoneng Battery Co., Ltd. 33.563 million yuan (100% deduction), Changshu Huaxing Chuangyi New Energy Technology Co., Ltd. 15.822 million yuan (36.36% deduction ratio) and Shanghai Feixun Data Communication Technology Co., Ltd. 183 million yuan (deduction ratio is 100%).
But this is not the only reason why Sixiang in Dongguan has disputes over sales contracts. According to Qixinbao data, from 2017 to 2018, Dongguan Silicon Xiang also had disputes with Shanghai Baojia New Energy Technology Co., Ltd. and Feixiang Supply Chain Management (Shanghai) Co., Ltd. in terms of sales contracts. Among them, Shanghai Baojia New Energy Technology Co., Ltd. has been listed as the executed person by the court.
Recently, Dongguan Silicon Xiang has been involved in the dangerous situation of Lion Science and Technology.
According to our reporters understanding, in June 2019, Dongguan Silicon Xiang informed Mengshi Science and Technology and its subsidiary Fujian Mengshi New Energy Technology and other cases officially opened.
Up to now, Lion Technologies is insolvent and its net assets are negative.
The old minister voted against it.
Wu Weiwen, the director who voted against this time, and Chen Dezhong, the supervisor, are the senior ministers of Gaolan. Wu Weiwen is the second largest shareholder of Gaolan, one of the actual controllers and the former general manager of Gaolan.
In 2001, Li Qi, Tang Hong and Wu Wenwei jointly established Gaolanshui Technology Co., Ltd., which is the predecessor of Gaolan Stock. In the process of listing Gaolan Stock, the three people jointly control the company as a concerted actor.
However, in February this year, Gaolan shares suddenly announced that they would not renew the Agreement on Concerted Action after its expiration. Three senior executives, Li Qi, Wu Wenwei and Tang Hong, lifted the Agreement on Concerted Action, and Gaolan shares had no actual actors. Li Qi, on the other hand, holds 19.89% of the shares and holds a stable position as a major shareholder.
In addition, since 2005, Wu Wenwei has been serving as general manager of Gaolan Stock Company. However, in March this year, Gaolan Stock Company issued an announcement that, due to the strategic development needs of the company, the position of general manager of the company was adjusted. Li Qi, chairman of the company, was also serving as general manager of the company. Wu Wenwei was no longer serving as general manager of the company, but still serving as director of the company.
In Wu Wenweis view, Dongguan Silicon Xiangs asset quality is not good, and in the short term it can not produce effective synergy with listed companies. At the same time, he also pointed out that the three expansion of Dongguan Silicon Xiang had not completed the environmental protection acceptance formalities, the business site had no ownership certificate, and the normal production and operation of the company had significant risks.
The underlying company once had many irregularities, such as insufficient registered capital, stock ownership, inter-industry competition, the occupancy of the underlying companys funds by affiliated companies, the absence of major terms of major business contracts, violation of social security labor laws and regulations. At the same time, the company does not have a board of directors and supervisory board, weak corporate governance, insufficient awareness of compliance of controlling shareholders, low credibility of its commitments, and low transaction pairs. The weakness of the performance ability of the parties brings unavoidable risks to the interests of listed companies. Wu Wenwei pointed out.
On October 11, 21st Century Economic Reporter called Gaolan Securities and Exchange Department as an investor to ask whether Wu Wenweis negative vote was related to the internal struggle of the companys management. The operator denied the negative vote verbally and expressed that the negative vote belonged to the directors personal opinion on the incident.
Cash acquisition or to circumvent regulation
Gaolan shares disclosed in the announcement that the acquisition of Dongguan Silicon Xiang does not constitute a major asset restructuring, the transaction is conducted in full cash.
As mentioned above, 51% of Dongguan silicon Xiangs shares are priced at 204 million yuan, but Gaolan shares intend to raise a total of 400 million yuan on the basis of the acquisition of Dongguan silicon Xiang twice.
In the Notice on Applying for M&A Loans from Banks released on September 30, Gaolan shares indicated that they intend to apply for M&A Loans not exceeding RMB 130 million from Banks for a period of not more than three years, which will be used for part of the consideration paid for the purchase of Dongguan Silicon Xiang shares.
In the Public Issuance of Convertible Corporate Bonds Plan, Gaolan shares intend to raise no more than 280 million yuan through convertible bonds, of which 204 million yuan will be used to pay the price of the acquisition, and 76 million yuan will be used to supplement liquidity. The total amount of the two proposed funds totaled 410 million yuan, far exceeding the transaction delivery, which is equivalent to the overall valuation of Dongguan Silicon Xiang.
In response to this problem, on October 11, Gaolan Securities Department responded that if the company successfully issued convertible bonds, it would replace bank loans with the raised funds, not to buy Dongguan Silicon Xiang as a whole.
The person also said that if the company had plans to further acquire Silicon Xiang in Dongguan in the future, it would make relevant disclosure.
Another move by Gaolan seems to reveal its intention to circumvent major asset restructuring.
According to the announcement, 60% of the 204 million funds spent by Gaolan to purchase 51% of Dongguan Silicon Xiangs shares (about 122 million yuan) will be placed in the co-management account. With the consent of the listed company, the funds of the co-management account can be used by Yan Ruohong and others (Dongguan Silicon Xiang shareholders) to purchase Gaolans shares by means of agreement transfer, bulk transaction and bidding transaction. Tickets, subscriptions to Gaolan shares convertible bonds or loans to Dongguan Silicon Xiang, etc.
At the same time, Yan Ruohong also promised not to sell Gaolans shares within three years of purchasing Gaolans shares.
It is noteworthy that the existing shareholders of Gaolan Share are continually reducing their holdings.
On September 23, Guangzhou Haihui Growth Venture Capital Center (Limited Partnership), the fourth largest shareholder of Gaolan shares, transferred all of its 9.343 million shares (5.02% of shares) to Shenzhen Jianxin Huaxin Equity Investment Fund Management Co., Ltd. at a transfer price of 10.863 yuan/share, 14.8% lower than the closing price of 12.75 yuan on that day.
Source: Responsible Editor of Economic Report in the 21st Century: Chen Hequn_NB12679