Perspective of GREE mixed change: who has the final say for GREE electric appliances?

category:Finance
 Perspective of GREE mixed change: who has the final say for GREE electric appliances?


From this point of view, the management of Gree Electric, headed by Dong Mingzhu, is also a big winner of the mixed reform of Gree Electric. Compared with the previous restructuring of MBO and TCL of Midea Group, the mixed reform plan of Gree Electric enables the management to get more decision-making power and income with less capital investment. Of course, strategic investors like Hillhead also become the power to check and balance with them.

The management of Gree Electric (its partnership company is Zhuhai Gezhen), led by Dong Mingzhu, has obtained greater decision-making power of the company, which is mainly reflected in two levels, namely, the board of directors of Zhuhai Yuxiu, the controller of Zhuhai Mingjun, the major shareholder, and the board of directors of Gree Electric.

First of all, Zhuhai Yuxiu, as the executive partner, makes decisions on major issues of Zhuhai Xianying and its investment in Zhuhai Mingjun. Zhuhai Yuxiu board of directors is the highest authority of Zhuhai Mingjun and Zhuhai Xianying. The board of directors of Zhuhai Yuxiu has three seats. Hillhouse capital, Zhuhai Gezhen and Mingzhu Yihui each nominate one director. The resolution of the board of directors can only be passed with the approval of two-thirds or more directors. In other words, the management has one-third of the decision-making power of the major shareholders of Gree Electric.

Secondly, Zhuhai Mingjun, a subsidiary of Hillhouse capital, as a new major shareholder (holding 15%) of Gree Electric, has the right to nominate three directors to the board of directors of Gree Electric. As mentioned above, the major issues of Zhuhai Mingjun shall be decided by Zhuhai Yuxiu, and the resolution of the board of directors of Zhuhai Yuxiu shall be approved only with the approval of two-thirds or more of the directors. To put it another way, suppose that the three directors nominated by the board of directors of Zhuhai Yuxiu are only approved by the representatives of Hillhouse capital and Mingzhu Yihui, but the relevant mixed reform agreement also stipulates that at least two of the three candidates nominated by Zhuhai Mingjun (Zhuhai Yuxiu) are approved by the management of Gree electric. That is to say, two of the three directors nominated by Zhuhai Mingjun will agree with Grees management.

At the same time, the management of Gree Electric, led by Dong Mingzhu, will also obtain more equity and dividend income in the mixed reform, which is reflected in four aspects, because Zhuhai Gezhen is also one of the partners of Zhuhai Mingjun, Zhuhai Xianying and Zhuhai Yuxiu. In addition, after the implementation of the mixed reform, the management and employees of the listed company of Gree Electric will not be more than 4% The equity incentive plan of.

First of all, at the level of Zhuhai Mingjun, the management entity (Zhuhai Gezhen) subscribed 6.3794% of the total contribution of Zhuhai Mingjun with about 1.394 billion yuan; at the same time, Zhuhai Gezhen transferred 4.7236% of the total contribution of Zhuhai Mingjun held by Zhuhai Botao with 1.032 billion yuan. In other words, the management entity (Zhuhai Gezhen) obtained 11.103% of the equity of Zhuhai Mingjun with 2.426 billion yuan, that is, indirectly obtained 1.66545% of the equity of Gree Electric, which can share more dividend income in the development of listed companies of Gree Electric.

Secondly, at the level of Zhuhai Xianying, the executive partner of Zhuhai Mingjun, the management entity (Zhuhai Gezhen) holds 41% of the equity of Zhuhai Xianying. The management fee collected by Zhuhai Mingjun from the investor, the executive partnership remuneration and excess income (collectively referred to as GP income) obtained by Zhuhai Xianying are shared by the management entity (Zhuhai Gezhen). Meanwhile, Zhuhai Gezhen will share the total GP income enjoyed by Zhuhai Gezhen 8% of the revenue is allocated to the management members and employees who have made important contributions to Gree Electric Listed Company in an appropriate way. In other words, the management can also enjoy the additional income of Zhuhai Mingjun, a major shareholder of Gree Electric, and its executive partner.

Third, at the level of Zhuhai Yuxiu, the executive partner of Zhuhai Xianying, the management entity (Zhuhai Gezhen) obtained 41% equity of Zhuhai Yuxiu with 4.305 million yuan, becoming a single major shareholder of Zhuhai Yuxiu. Zhuhai Gaoling, hhmansion (the affiliated party of Gaoling) and Mingzhu Yihui respectively hold 38%, 11% and 10% shares in Zhuhai Yuxiu. In other words, if Zhuhai Yuxiu has profits, the management entities can also share them.

Fourth, Zhuhai Gaoling, hhmansion, Mingzhu Yihui and Zhuhai Gezhen agree that after the completion of the mixed reform, they will promote the equity incentive plan that Gree Electrics listed companies will give management entities (Zhuhai Gezhen) no more than 4% of the total amount of management and key employees recognized by the listed companies. That is to say, Grees management and key employees can also obtain about 4% of the shares of Listed Companies in the future.

At present, Dong Mingzhu holds 0.74% of the equity of Gree appliance. In this mixed change, Dong Mingzhu holds 95.2% of Zhuhai Gezhen and indirectly obtains 1.6655% of the equity of Gree appliance. In the future, the management and key employees of Gree appliance can also obtain about 4% of the equity of the listed company, which together will hold 6.4055% of the equity of Gree appliance. At the same time, Hebei Jinghai guarantee jointly set up by Gree air conditioner dealers has held 8.91% of the equity of Gree Electric, so together, the management, staff team and dealers led by Dong Mingzhu may jointly hold 15.3155% of the equity of Gree Electric in the future, which will exceed the equity ratio of Gree electric held by Hillhouse capital.

There are 9 seats on the board of directors of Gree Electric Appliance, including three nominated by Zhuhai Mingjun, two of which need to be approved by the management; one nominated by Jinghai guarantee; if the management and employees get 4% equity incentive in the future, the possibility of nominating a director cannot be ruled out. That is to say, in the next nine Directors seats of Gree Electric, the management may affect four seats.

From the above point of view, Dong Mingzhus team only invested about 2.43 billion yuan in this mixed reform. In this 41.66 billion yuan mixed reform feast, they won the decision-making power of one third of the major shareholders and the important decision-making power of the listed company of Gree Electric appliances in the future, which can be called four or two thousand catties. The premise is that the future performance of Dong Mingzhu team should meet the conditions of equity incentive. Therefore, Dong Mingzhus team should strive to win the position of large shareholder of Gree Electric in the future.

As a facilitator and a high-level capital that does not seek the control of listed companies, it also gets enough benefits. In the investment cost of 41.66 billion yuan to acquire 15% equity of Gree Electric from Gree Group, Zhuhai Mingjun, a subsidiary of Hillhouse capital, has only provided 21.85 billion yuan of its own capital, while the current book income has reached 13.2 billion yuan; the remaining 22.5 billion yuan of self raised capital has made a syndicated loan to Zhuhai branch of China Merchants Bank, and in terms of the high income of Gree Electrics equity, repayment is not difficult. Therefore, Hillhouse capital is also small and broad, and has obtained the position, equity and earnings of the major shareholders of Gree Electric.

In general, in the hybrid reform of Gree Electric, Hillhouse capital expanded the equity income, and Dong Mingzhus team increased the decision-making power.

Source: First Financial Editor: Guo Chenqi, nbj9931