Shanghai Shenhua Holdings (600653.SH) intends to acquire 77.90% equity of Shanghai Dongchang Automobile Investment Co., Ltd. by issuing shares and cash. The transaction price is 1.558 billion yuan. Shenhua Holdings has recently made the above announcement. It is reported that after the completion of the transaction, Dongchang Auto Investment will become a wholly-owned subsidiary of Shanghai Shenhua Holdings.
The holder of 77.90% of Dongchang Auto Investment is Shanghai Dongchang Advertising Co., Ltd. (referred to as Dongchang Advertising) and Shanghai Dongchang Investment Development Co., Ltd. (referred to as Dongchang Investment). Shenhua Holdings will be at a price of 3.62 yuan/share. About 371 million shares were issued for the consideration of the transaction, with a total value of about 1.343 billion yuan, and the remaining 215 million yuan was paid in cash.
It is expected that after the transaction, Dongchang Investment and Dongchang Advertising will hold 10.81% and 4.74% of Shenhua Holdings respectively, becoming an important shareholder of Shenhua Holdings.
The announcement also stated that Shenhua Holdings plans to raise trading funds from its controlling shareholder, Huachen Automobile Group Holdings Co., Ltd. (referred to as Brilliance Auto) in a non-public offering of shares. It is estimated that the total amount of funds raised will be 245 million, which will be used to pay for the cash portion of the transaction and related Taxes and fees.
Prior to the transaction, Brilliance Auto held a total of 24.94% of Shenhua Holdings directly or indirectly as its actual controller. After the completion of the transaction and the raised funds, Brilliance Auto still holds 18.72% of the shares of Shenhua Holdings, and the actual controller status remains unchanged.
Brilliance Auto is a wholly state-owned enterprise affiliated to the Liaoning Provincial State-owned Assets Supervision and Administration Commission and the Liaoning Provincial Social Security Fund Council. Its main business is R&D, manufacturing and sales of complete vehicles and components. Brilliance Auto has four listed companies, namely Brilliance China Automotive Holdings Co., Ltd., Shanghai Shenhua Holdings Co., Ltd., Jinbei Automobile Co., Ltd. and Xinchen China Power Holdings Co., Ltd.
After the completion of the transaction, Brilliance Automotive expanded its business scope to the automotive dealer terminal business. The distribution model of the automobile industry is generally authorized by the manufacturer to engage in dealers for terminal sales and after-sales service. Automobile manufacturers rarely engage in this business directly.
Shenhua Holdings said in the announcement that the acquisition of Dongchang Auto Investment is to build a whole industrial chain of automobile consumption. After the transaction is completed, the distribution brand will expand from the original Brilliance Jinbei and Brilliance China to more than 20 such as BMW and Audi. High-end car brand.
According to statistics from the China Automobile Dealers Association, Dongchang Auto Investment has a total of 67 4S stores. In 2015, its revenue exceeded 10 billion yuan. It is one of the 37 auto dealer groups with annual revenues exceeding 10 billion in China.
However, the current profit margin of car sales is usually low, and the average gross profit level is only between 3% and 5%. Li Yanwei, an auto dealer analyst, told Caixin that the auto dealers have generally had low profit margins in recent years and even incurred losses. The acquisition is not necessarily a good business for listed companies.
Dongchang Auto Investment is optimistic about its future earnings forecast. The announcement stated that Dongchang Auto Investment promised a net profit of no less than 95 million yuan, 150 million yuan, 210 million yuan and 255 million yuan in 2016-2019. Previously, Dongchang Auto Investment has been in a state of loss for successive years. The net profit in 2014, 2015 and January-April 2016 was -82.198 million yuan, -6245.19 million yuan and 40.857 million yuan respectively. The profit from January to April this year was due to the increase in capital of the parent company.
Regarding the acquisition, Caixin reporter called Shenhua Holdings, and as of press time, no reply was received.
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