The unconventional trading behind the innovation of Bo Hui: the Hard money black hole

Sinorama reporter Gokiyan/article in order to create a new blood products business, Watson Biology (300142.SZ) in 2012, 2013, respectively, the only one authorized to carry out plasma collection and blood products production company-Daan pharmaceutical 90% Equity, And to give a large amount of resources, including borrowings, to support it without generating any revenue. But what happens when Daan Pharmaceuticals is about to start making a profit, and Watson gives up controlling power? Special Trading design Watson Biology on October 10 announced that the Daan pharmaceutical 46% stake to 635 million yuan (corresponding to the valuation of 1.38 billion yuan) transferred to the Bo Hui Innovation (300318.SZ) and Neimong (601216.SH) of the actual control Du Jiangtao. November 4, the transaction completed equity delivery and business change registration. In September 2012 and June 2013, Watson's 963 million-yuan valuation of the acquisition of Daan Pharmaceutical 55%, 35% equity (equity transfer is 529 million yuan, 337 million yuan, total 866 million), 46% The corresponding acquisition cost of 443 million yuan, which means that Watson in this transaction to obtain 192 million yuan in investment income, value-added 43.36%. Where has the value of Daan pharmaceuticals grown in the past two years? Watson said that since the acquisition, the company concentrated resources to increase investment, employing the industry's top technical and management experts to form a leadership team, made significant progress. It is noteworthy that Watson's biological support for Daan Pharmaceuticals was borrowed rather than increased. As of October 31, Daan Pharmaceutical total liabilities of 663 million yuan, more than the total assets of more than 208 million yuan, which deal with the Watson Bio-interest of 46 million yuan, to cope with Watson's biological used to supplement the operation of the liquidity required to borrow 538 million yuan, both of which accounted for the total liabilities of 88%. According to the agreement on the transfer of shares with Du Jiangtao, Watson also requested Du Jiangtao to provide 300 million yuan for the initial loan of Daan pharmacy within 35 working days (i.e. before December 23) for the completion of the Daan pharmaceutical Business Change registration, to repay its existing part of the debt, The repayment object and amount of the loan are determined by Watson's biology based on the Daan pharmaceutical debt situation. Since most of Daan's debt is borrowed from Watson's biology, it is estimated that about 264 million of the 300 million yuan will be used to repay Watson's biology, and 300 million yuan is equivalent to 45.28% of all the debt of Daan Pharmaceuticals, close to Du Jiangtao's stake in Daan Pharmaceuticals. June 25, Bo Hui Innovation announced for the planning of major matters suspended; September 25, major events identified as a major asset reorganization; December 9, the reorganization of the plan announced, Bo-hui innovation to 16.27 yuan/share on Du Jiangtao and Lu Xingun issue 40.713 million shares (equity value of about 662 million yuan), The purchase of two people held Daan Pharmaceutical 48% Equity, corresponding to the valuation of 1.38 billion yuan, restructuring plan did not carry out matching financing. And most mergers and acquisitions of the case comparison, Bo-hui innovative scheme is very special: first through the big shareholder fullPay cash to buy the subscript, and then to the major shareholder issue shares, obtain the title of the subject. The more common way is to issue shares of Watson's biology or pay cash to purchase the target, at the same time to the major shareholders to issue shares supporting financing, to pay cash or supplementary liquidity. No more common solutions for Hebohui innovation? Some investors point out that the current plan allows Watson to get cash immediately, without waiting for the restructuring program to be approved by the SFC [Weibo]. Under normal circumstances, from the release of the proposal to the merger and reorganization Committee through the fastest also need for nearly 3 months, plus follow-up process and implementation, the completion of transactions within the year is almost impossible. This suggests that Watson's biology is likely to have a more pressing demand for the timing of the transaction. Second, the current programme under which Watson's biology can avoid making a formal performance commitment to Daan pharmaceuticals. In the agreement signed with Du Jiangtao, Watson biology only to Daan pharmaceutical 2017-2019 years of blood collection to make a commitment, if not to reach the agreed scale, will be held by its own 44% per cent of the shares to the Du Jiangtao for compensation. If Yubohui innovation buys directly, Watson will have to make a commitment to Daan Pharmaceutical's withholding of net profits. Finally, it is hard to imagine if the Yubohui innovation directly buys the target, all in cash to pay the price. Usually, the price of the listed companies ' mergers and acquisitions are mostly paid by shares, and the ratio of cash to price is rarely more than 50%. This means that if Watson's creatures seek to get more cash through trading, Yubohui innovative direct buying is certainly not a good option. Bo-hui Innovation in the bulletin also made an explanation of the existing scheme, confirmed the above part of the analysis: "This transaction is market-oriented transactions ... At present, the domestic blood products industry mergers and acquisitions of scarce, and Daan pharmaceutical bidders more, the original shareholder demand for rapid equity trading and to obtain the price of cash ... Listed companies can not in a short time to raise the acquisition of cash (in order to achieve the acquisition, the actual controller Du Jiangtao and general manager Lu Xingun with their own funds in October to complete the acquisition, and then by the listed companies to issue shares to the two people to purchase). "Is there a prerequisite for the" double win "Watson biology why so urgently transfer Daan Pharmaceutical's controlling power? Wind data show that since the three quarter of 2012, Watson's living business profit has been 9 consecutive quarterly year-on-year decline, the last 7 quarters of the decline in the two-digit or even three digits. In the three quarter of 2013, Watson first recorded a quarterly operating profit loss of 55 million yuan, after 4 quarters of the quarterly operating profit has been at a loss. 2014 years ago three quarters, the cumulative operating profit of 192 million yuan, the cumulative attribution of net profit of 150 million yuan. If nothing is done, Watson will face an annual loss, even if the quarterly earnings of quarterly four are at their best in history. In the announcement of the transfer of Daan pharmaceutical control, Watson acknowledged that it would gain greater investment through the transaction, and said that "the reduction in intangible asset amortization and the reduction of corporate financial costs after the recovery of fundsThe low overall factor will also have a positive impact on the company's performance for 2014 and future years. "At the same time, Watson Biology on August 5 announced the plan, proposed to 29.27 Yuan/unit to include major shareholders and related parties, including 4 investors issued no more than 15.3741 million shares (the lock-up period is 36 months), raise not more than 450 million yuan, the proceeds will be used to repay bank loans and supplementary liquidity. Through the transfer of Daan pharmaceutical control, Watson's 2014 earnings forecast improved, conducive to stable stock prices, escort increase. This is also a "timely" deal for Yubohui innovation. May 2012, the launch of the Bo-Hui innovation in 2015 will usher in the initial stock of the original shareholders of the large-scale lifting of the ban, the number of 99.3587 million shares, accounting for 60.64% of total equity. However, in the past three quarters, the success of the performance of the Bo Hui weak, single quarter operating profit and net profit have shown double-digit decline, 2014 years ago three quarter cumulative net profit of 31.6388 million yuan, a year-on-year decline of 27.17%. The reorganization plan predicts that the net profit of Daan pharmaceutical 2015-2017 is estimated to be 7.7764 million yuan, 47.0421 million yuan and 74.1475 million yuan respectively. According to 48% of the shareholding ratio calculation, Daan pharmaceutical will be the innovation of the net profits of 3.7327 million yuan, 22.5802 million yuan and 35.5908 million yuan, significantly increase the size of the company's profits. If that goes well, the restructuring deal is expected to be completed by 2015, helping to keep the company's share price high. So far, the deal, though two steps away, seems a bit complicated, but it appears to be a win for two of listed companies, only if the profits of Daan Pharmaceuticals are expected to reach expectations, or at least close to expectations, over the next few years. Hard to fill the money black hole reorganization plan disclosed data shows that 2012 Daan pharmaceutical business income is zero, Net profit is-68.2968 million yuan, 2013 respectively is 25.186 million yuan and-31.0506 million yuan, 2014 1-October respectively is 32.9162 million yuan and 39.7293 million yuan. Despite its poor performance, Daan's competitive advantage cannot be denied: since 2001, in order to standardize the blood products industry's disorderly competition, the state has not approved the new blood products enterprises, currently only less than 30 blood products enterprises, And Daan Pharmaceutical is the only one in Hebei province approved by the competent department of the construction and normal operation of the blood products enterprises. However, the industry also has a fatal feature: research and development investment is huge and long cycle, enterprises through research and development of economic benefits can not be reflected in the short term, the general blood products enterprises difficult to withstand long-term huge financial pressure. The question is whether, in the short term, Daan Pharmaceuticals will still be a capital black hole like the past? As you can see, the agency's forecast for its 2015 net profit was less than $8 million; Meanwhile, Watson's bio-trade design avoids the performance-betting, the Du Jiangtao innovation and the performance commitment conditions signed by the Lu Xingun.Also appears to be weak: If the cumulative net profit of Daan from 2015 to 2017 does not meet the sum of the annual promised net profit, Du Jiangtao and Lu Xingun will pay for the shares of the listed companies. In general, Watson's biology should make a commitment to the performance of Daan pharmaceutical every year, if the annual assessment is not met, the difference part of cash for return. Does the low-key performance pledge imply that Watson's biology lacks enough confidence in Daan's earnings forecasts? The reorganization program points out that the future growth of Daan pharmaceutical is largely dependent on new products, especially the successful development and listing of intravenous immunoglobulin. If the product finally fails to register and approve, put into production and achieve the expected output, it will adversely affect the future operating performance and profit level of Daan pharmaceutical. Risk always exists. Since May 2004, to the innovation of the Bo-Hui before the reorganization, Daan Pharmaceutical has carried out 13 equity transfer, before and after the introduction of 22 shareholders have withdrawn 18, the controlling shareholder changed 6 times, the past series of figures for its future prospects cast a haze. Once the new product listing process has been postponed, Daan pharmaceutical profits will be affected, and the volatility of the innovation price of the company, whether it can continue to maintain high investment until the return may be difficult to determine.