Buddha-Plastic shares: 7 years of MBO towards the end

Buddha-Plastic shares (000973, closing price of 7.72 Yuan), 2002 by Rich Acer Trust Investment company to "Snake Swallow Elephant" way to complete MBO (management buyout). However, after MBO, the company's performance declined year after decade, however, the company has four consecutive years of generous dividends, until 2006 a large loss, no points.　　In the inability to obtain a huge dividend, rich Acer began to sell a large amount of the lifting of the ban shares, as of March 19, 2009, Rich Acer Letter has been reduced by 82.2221 million shares of Buddha-plastic.　　At present, the company's major shareholders have been seeking to withdraw, the future of the restructuring of the company is uncertain, and the Buddha-plastic shares on the market has become a successful MBO, enterprises have failed to the case.　　Key words: MBO was set up to buy 100 million shares August 1, 2002, the Buddha-plastic shares published an outside called "Snake Swallow Elephant" announcement. The announcement said, the Buddha-plastic shares 22 management personnel to set up the Foushanfu Investment Co., Ltd., to acquire the original two shareholders Foshan plastic leather industry cooperatives holding 110.0244 million shares (accounting for the company's total share capital 29.46%), the transfer price of 2.95 yuan/share, Less than 3.18 yuan per share of net assets. In this transfer, Fu Shuo-Hong has paid 324.572 million yuan in cash. For the huge funding shortfall required to complete the acquisition, the company issued a notice saying: "It is intended to be financed by shareholders or financed by financial institutions," and further notes that "the continued acquisition of shares will be subject to the circumstances".　　At that time, the action of this "snake Swallow Elephant" was regarded as the classic case of MBO by the market. FOUSHANFU Investment Co., Ltd. was established on June 19, 2002, the registered capital of 41.3295 million yuan. Company registration Business Scope is to manufacturing, business, service industry investment and investment, business management consulting. Fu Shuo Acer's first two shareholders for the Buddha-plastic shares of the legal representative Feng, and vice chairman and president of the general manager of Wu Yue Ming, the two individuals contributed 1.475 million yuan and 1.416 million yuan, accounting for 6.596% and 6.332% of registered capital. Zhang Fubei, Promotin, Li Manli, Rohan, Lusen and so on, the amount of investment is 1.18 million yuan, each accounted for 5.277% of the registered capital. They are directors of the Buddha-plastic shares, including Rohan, Lusen, and the Secretary of the board and Finance manager of the Buddha-plastic shares. The legal representative of Fu Shuo Hong Xin Shing The supervisor of the stock of the Buddha-plastic.　　Obviously, the purpose of establishing the rich Acer letter is to acquire the equity of listed companies.　　Analysts pointed out that, because the transfer of corporate shares, without the approval of the Ministry of Finance, the proportion of the acquisition of equity is not more than 30%, there is no need to apply for an offer exemption to the SFC. For the implementation of MBO in the stock of Buddha-plastic, although the Buddha-plastic side has repeatedly stressed the role of equity incentives in corporate governance structure and improve business performance, but there are still many investors feel unfair, on the one hand, for the lack of equal access to equity opportunities, on the other hand, the company's future expressed concern, hope that the company's managementis real strategic investment rather than short-term speculation. Key words: Performance for many years in the same industry companies but to disappoint investors, MBO success, the performance of the Buddha-plastic shares decline year by year. In the just completion of MBO in 2002 and 2003, the net profit of the Buddha-plastic shares reached 116 million yuan and 118 million yuan, and in the following 2004, the company's net profit fell to 67.4564 million yuan, down 42.74%　　2005 was reduced to 4.1871 million yuan, a decrease of 93.8%, 2006, the company loss of 91.5737 million Yuan, 2007 years after the loss, 2008 again burst losses 196 million yuan.　　The performance of the Buddha-plastic shares has changed dramatically, is it caused by the fluctuation of the industry cycle, or is the company operating a problem? The main business of the company is thin film products, since 2002, the product accounted for the main business income ratio has been more than 60%. An unnamed plastic industry analyst told The Daily Economic news reporter, the film industry began to expand capacity in 2002, on the one hand, the international crude oil prices continue to rise, on the other hand, thin film products due to adequate supply, the price limit, resulting in a decline in the level of industry gross margin.　　Due to the international financial crisis in 2008, the demand of thin film products was seriously hit. So does this explain the whole reason for the company's performance changes? The analyst told reporters that the answer is clearly in the negative. Through comparison can be found, first in the same industry listed companies, the main products of the company's gross profit margin for many years are poor; second, the company blindly expand its subsidiaries, not only to bring benefits to the company, but a serious drag on the company's performance;　　and management despite the company's capital is still greedy dividends. Detailed analysis of the company's annual report can also be seen in 2005, the company's net profit fell 63.2693 million yuan, of which the main business profit fell 27.915 million yuan, and investment income fell 31.5584 million yuan, financial costs increased by 24.0244 million yuan. 2006, the company's net profit fell 95.7609 million yuan Year-on-year, resulting in a sharp decline in corporate performance is the management costs increased by 50.9622 million yuan, financial costs increased by 14.3494 million yuan. As for the substantial increase in management costs, the company explained that "the amount of bad debt prepared by the company for the current period is increased by $13.2974 million compared with the previous period, and the corresponding administrative expenses are increased by the incorporation of the new subsidiaries."　　"In 2008, the net profit loss of 196 million yuan was attributable to the parent company, in which the parent company's operating income fell by 178 million yuan, while the operating income of the merged subsidiaries fell to 340 million, the interest expenditure increased by more than 27 million, and the inventory price was increased by more than 24 million." Visible merger subsidiary, not only greatly increased the company management costs, but also increased business income decline. Oddly enough, the company's previous annual report repeatedly mentions industry overcapacity, raw material prices continue to rise, the gross profit margin, but why in such a context, but also continue to absorb these inefficient subsidiaries, thereby dragging down the performance of listed companies? The daily economic news has been the company's phone call as an investor, for the reporter's question, the company said: "2005, 2006, at that time the company wanted to do in different parts of the country layout, such as in North China and other areas to set up product base, although the industry environment is not good, but the risk is always with opportunities, so the company wants to expand." "But for the expansion effect, the company itself admits:" The effect is general. "Key words: Dividend rich Acer letter four years to obtain nearly billion although the performance of the year slipped, but the Buddha-plastic shares are still years of dividends.　　In particular, in 2005, the net profit of only 4.1871 million yuan, and after deducting the non-recurrent profit and loss, the company also lost 12.437 million yuan, still dividend 4.0837 million yuan. According to wind Statistics, 2002, 2003, the company for two consecutive years, the dividend of 0.21 yuan per share, 2004, the company's net profit fell nearly 50% year-on-year, but still dividends of 0.138 yuan per share. Between 2002 and 2005, the company's net profit from 116 million yuan to 4.1871 million yuan, but the company accumulated dividends up to 344 million, and rich Acer letter so the cash amounted to 99.9022 million yuan, more than the total amount of one-fourth dividends. According to after-tax calculation, rich Acer letter due to dividends accumulated cash 81.5501 million yuan.　　2006, the company loss of 91.5737 million yuan, the distribution of profit has become-43.6611 million yuan, the Buddha-plastic shares finally can not be divided. In fact, since 2004, the company's financial costs have increased every year, and the company's performance has caused a significant drag.　　Why is the company still paying dividends while the financial costs are growing? Company staff told the Daily Economic news Reporter: "The increase in financial costs is mainly since 2005, the country has been raising interest rates, and the expansion of companies need to borrow money from banks, so more interest spending."　　"And that the cumulative dividend of 344 million yuan from 2002 to 2005 did not affect the financial situation of the company."　　Key words: Sales of rich Shuo Acer sold 80 million shares in the company can not obtain huge dividends, rich Acer began to reduce holdings of the Buddha-plastic shares. June 6, 2006, the Buddha-plastic shares per 10 shares to increase 5 shares, after the increase of the total number of shares to 613 million shares, the corresponding rich Acer shares also increased to 146 million shares. Rich Acer's shares will be lifted on January 16, 2007, respectively, the lifting of 30.6277 million shares, January 16, 2008 lifted 30.6277 million shares, January 16, 2009 lifted 85.0118 million shares. The lifting conditions stipulate that, within 12 months after the expiry of the ban, the proportion of the shares of the original Non-tradable shares sold through the Shenzhen Stock Exchange is not more than 5% in the total number of shares, not exceeding in 24 months.Over 10%. The 2007 release date, the Buddha-plastic shares on the issue of the announcement, since January 16, 2007, Rich Acer letter through the Shenzhen Stock Exchange will be held in the unlimited sale of the conditions of the circulation of shares to reduce, as of March 22, 2007, Rich Acer Letter sold the company unlimited conditions of circulation 25.3997 million shares, accounting for the company's total share capital of 4.15%. The 2008 ban period, from January 29, 2008 to March 5, the accumulation of rich Shuo Acer reduce 24.4996 million shares, accounting for 4% of total equity. As at the end of 2008, the rich Acer letter has been reduced by up to 8.5%. The basic annual reduction limit is not far from the stipulated reduction limit.　　As of March 19, 2009, the rich-Shuo Hong letter has been reduced by 82.2221 million shares, accounting for the total share of the Buddha-plastic shares of 13.42%. Over the same period, the company's major shareholders have been reducing the shares of the Buddha-plastic shares, and seek to exit. The company's recent announcement, approved by the Guangdong Provincial Sasac, the company's controlling shareholder Foshan Plastics Industry and trade group to transfer the holding of the company's 20.78% state-owned shares by public solicitation.　　As at May 12, received by Guangdong New Foreign Trade Group Co., Ltd. submitted by the submission of the intention of the document, industry and trade group will be on the proposed units to be audited, and comprehensive consideration of various factors based on the final decision.　　News link the malpractice of MBO in fact, the industry has been widely discussed on the malpractice of MBO of listed companies. A market person in the "Daily economic news" reporter interviewed said that MBO involves management, large shareholders and small and medium shareholders, involved in the structure of equity changes, insiders may use insider information to infringe the interests of small and medium-sized shareholders. A typical operation is that, due to asymmetric information, management will have the potential to do the first loss of the company, small net worth, and then at a very low price to achieve the purpose of the acquisition. If the local government does not agree, then continue to manipulate profits to expand the book losses until the listed companies are St, PT after the purchase of a lower price.　　Once the MBO is completed, the senior managers can make the hidden profits appear legitimately by adjusting the accounts, so as to realize the large amount of cash dividend at the end of the year to relieve the huge financial pressure from the management financing acquisition. Second, MBO need to spend a lot of money, management buyout after the pressure to repay the funds, in the absence of equity transfer channels, it is necessary to bear this pressure through dividends, so that management may take excessive large proportion of dividends, which is detrimental to the continued operation of listed companies. According to the disclosure in the annual report, the high school is closely linked with MBO.　　It is possible for the management to increase the dividend strength in order to accelerate the repayment of debts, thereby reducing the cash flow of listed companies and aggravating the business risks. After the implementation of MBO, the manager will become a major shareholder of the Enterprise, the lifeblood of the enterprise is completely in the hands of one or several people, if the supervision is weak, large shareholders through a variety of ways to abuse the interests of small and medium-sized shareholders will be more convenient, and the benefits obtained more straightPick。 Because of this, the state at the end of 2004 basically stopped the large state-owned enterprises MBO. However, to the listed companies that have completed MBO, how to prevent the management to embezzle the interests of small shareholders, still deserves attention.