Recently, the experience of Shandong Airlines, one of the four major domestic regional airlines and the eighth largest domestic airline in the country, is somewhat sympathetic. Since it was established in the mid-1990s, Shandong Airlines, which is currently in its prime and uprig

Recently, the experience of Shandong Airlines, one of the four major local airlines in China and ranked 8th in the country, Shandong Airlines , which is a long-established local airline in China, is somewhat sympathetic.

Since its establishment in the mid-1990s, Shandong Airlines, which was in its prime and upright youth, has encountered an unprecedented crisis.

1. Why did Air China acquire Shandong Airlines?

Due to continuous losses, by the third quarter of last year, Shandong Airlines was already insolvent.

By the end of the first quarter of 2022, Shandong Airlines:

Total assets 32.35 billion

Total liabilities 34.62 billion

Net assets -2.266 billion

The asset-liability ratio is 10 7.01%

Since the second quarter, civil aviation has suffered losses If the magnitude further intensifies, Shandong Airlines' debt pressure will also further increase.

If it is not rescued in time and its crisis is allowed to intensify, funding problems and debt problems may evolve into other problems.

It is urgent to join forces to save Shandong Airlines.

In fact, in order to save Shandong Airlines, the Shandong local government also made huge concessions.

is to hand over the controlling rights of Shandong Airlines Group and Shandong Airlines Co., Ltd. to Air China.

This is an extremely difficult decision.

Even in the face of the impact, many local governments still have unimaginable enthusiasm for establishing local aviation.

In the past few years:

The local government of Qingdao sold Qingdao Airlines

The local government of Hunan invested in Hongtu Airlines and renamed it Hunan Airlines

The local government of Wuxi sold a controlling stake in Yunnan Ruili Airlines and renamed it Sunan Ruili Airlines.

The local government of Tibet is seeking a controlling stake in Tibet Airlines.

However, Nanjing, Jiangsu Province still diligently regards developing local aviation as a strategic concept.

If Shandong Airlines, which has more than 130 aircraft, is really listed, it is estimated that many places will come to buy them.

Of course, Shandong Airlines is still called Shandong Airlines, but the equity relationship between Air China and the Shandong local government will undergo major changes.

Speaking of which, Shandong is quite interesting.

The local government of Qingdao bought Qingdao Airlines from a private enterprise and took the lead itself.

Shandong Airlines’ dominance will be sold.

2. The steps for Air China to acquire Shandong Airlines

First of all, everyone must distinguish the difference between Shandong Airlines Group and Shandong Airlines shares.

What we usually call Shandong Airlines refers to Shandong Airlines Co., Ltd., the full name is Shandong Airlines Co., Ltd. , this company is a real airline.

Shandong Airlines Group is only the major shareholder of Shandong Airlines Co., Ltd. It has no industrial industry. The most valuable thing in its hands is the equity of Shandong Airlines Co., Ltd. In addition, there is also the equity of Shandong Taikoo Aircraft Engineering Co., Ltd. , which is engaged in aircraft manufacturing. Maintenance.

Because this acquisition is actually the acquisition of Shandong Airlines Group by Air China.

After Air China acquires Shandong Airlines Group, it will hold 64.8% of Shandong Airlines shares, thus triggering a tender offer.

The main plan is as follows:

Step one: Air China acquires 1.41% of Shandong Airlines Group’s equity held by Shandong Iron and Steel Financial Holdings (a state-owned enterprise in Shandong Province), bringing the equity ratio to 50.82%, achieving control of Shandong Airlines Group.

Air China currently holds 49.41% of the shares of Shandong Airlines Group, and Shandong state-owned enterprises hold a total of 50.59% of the shares.

Step two: Air China will increase capital in Shandong Airlines Group, increasing its shareholding ratio to 66%. Shandong holds a total of 34%, maintaining a 1/3 equity ratio, and has veto power on major matters.

The third step: Air China made a tender offer to acquire 35% of the B shares of Shandong Airlines at a price of 320 million yuan, and eventually delisted Shandong Airlines shares from the B shares.

Currently, Shandong Airlines Group holds 42% of Shandong Airlines shares, Air China holds 22.8%, other unlisted tradable shares holders 0.2%, and B-share holders 35%.

Because Air China controls Shandong Airlines Group, it indirectly holds 42.8% of Shandong Airlines’ shares. In addition, Air China itself holds 22% of the shares, holding a total of 64.8% of Shandong Airlines’ shares. According to relevant regulations,

will trigger a tender offer if its shareholding ratio reaches 30%.

Therefore, Air China issued a tender offer to 35% of the B-share shareholders. The offer price of

is calculated at HK$2.62 per share. To acquire 140 million shares, you only need to pay HK$366.8 million, equivalent to RMB 320 million.

35% of Shandong Airlines’ equity is only worth 320 million yuan, so Shandong Airlines’ valuation is only 900 million yuan.

There are two views on the Air China tender offer:

One is that it is a passive acquisition of Air China, because it triggers the tender offer regulations and is a last resort, so it does not matter if the acquisition fails.

Firstly, I think this is due to Air China’s initiative, because the price is low enough. If Air China can realize the acquisition, it will be a great deal. On the other hand, if it wants to increase capital in Shandong Airlines, it will have to delist. Otherwise it will be difficult to increase capital.

Both views are valid.

However, the focus now is how much Shandong Airlines is worth.

Because, after Air China confirmed its tender offer, Shandong Airlines had 10 consecutive daily limits.

Shareholders believe that the price offered by Air China is too low, so they want to join forces to block Air China.

Some people think that Air China is trying to save Shandong Airlines at this time, so don’t ask for too high a price or be greedy enough.

3. How much can Shandong Airlines sell for?

Today, the question we are talking about is: If Shandong Airlines is put up for sale on the market, how much can it sell for?

I have said many times before that in the process of corporate mergers and acquisitions, the main evaluation methods are market method , income method and asset based method evaluation methods.

The market method refers to existing acquisition cases in the market or the price-earnings ratio of listed companies.

The income method is to estimate the possible future income and discount it according to the current interest rate.

The asset-based method refers to an evaluation method that determines the value of an enterprise based on a reasonable assessment of the price of each asset and liabilities of the enterprise.
However, these methods are based on some basic assumptions.

For example, under the asset-based method, how to evaluate the value of license plates, route resources, time resources, and crew resources is a problem. The problem with the

income method is that the prediction of whether it will make money in the future is very unreliable. For example, if there is a huge loss as soon as the epidemic hits, is this company worthless?

The market method does not have exactly the same reference object. In addition, listed companies have strong liquidity, and it is difficult to compare unlisted companies.

There is such a huge gap in market value between Shandong Airlines listed on B shares and listed on A shares , let alone an unlisted company.

In addition, we must also consider the national economic conditions, market liquidity, and of course the industry conditions and the company's specific operating conditions.

At present, airlines are generally in a bleak situation due to the impact of the epidemic. In this case, the prices of acquisitions, mergers and equity transfers between airlines will definitely be greatly affected.

In recent years, there have been many airline equity transfers.

In September 2018, Happy Airlines html transferred 24% of the equity of Happy Okay for 4.504 billion yuan, with the value of Happy Okay being 2.1 billion yuan. Revenue was 400 million, and the fleet at that time was 25 MA-60 aircraft.

At the end of 2018, HNA Holdings acquired Tianjin Airlines 8.55% equity for 1.134 billion yuan, with Tianjin Airlines worth 13.3 billion yuan. Revenue in 2017 was 11.3 billion yuan, with a fleet of 86 A330, A320, and EMB190 aircraft.

At the end of 2018, HNA Holdings acquired a 12.18% stake in Xinhua Airlines for 1.565 billion yuan. Xinhua Airlines was valued at 12.9 billion yuan. Revenue in 2018 was 5.5 billion, with 4 B737-800 aircraft.

In August 2019, Juneyao Airlines acquired 11.90% equity of Jiuyuan Airlines for 180 million yuan. Jiuyuan Airlines was valued at 1.5 billion yuan. Revenue in 2018 was 2.2 billion yuan, and there were 18 B737 series aircraft

In September 2019, Hunan State-owned Assets invested 435 million yuan in 26% of the equity of Hongtu Airlines, with the value of Hongtu Airlines being 1.67 billion yuan. Its size is 12 aircraft.

In October 2019, HNA Aviation Group 6.7 billion acquired 48% of Tianjin Airlines’ equity, with Tianjin Airlines worth 14 billion yuan. Revenue in 2018 was 13 billion yuan and 95 aircraft.

In December 2019, 100% equity of Qingdao Airlines was sold to Qingdao State-owned Assets at a price of 3.127 billion yuan. Qingdao Airlines was valued at 3.127 billion yuan.

At the end of 2020, Jiangsu Aifang finally acquired 98% of the equity of Longjiang Airlines through auction at a price of 770.7 million yuan. Longjiang Airlines was worth 800 million yuan.

In September 2021, Fangda signed a "Reorganization Investment Agreement" with the managers of HNA and its ten subsidiaries, and spent 41 billion yuan to buy HNA and its more than 10 airlines.

In fact, Yige has a very simple calculation method, which is to estimate the airline's fleet size.

Generally speaking, fleet size corresponds to its market position, route resources, human resources, etc.

So Yige prices each aircraft and gives the company a simple valuation.

Of course this is for unlisted companies.

Airlines valuation table Unit: 100 million yuan

Of course, this is purely the words of Brother Yi's family.

Currently, Shandong Airlines has 134 aircraft on its roster.

According to Yi Ge’s valuation method, Shandong Airlines is about 11 billion yuan.

However, this is selling the controlling stake of Shandong Airlines.

We can think of it this way. HNA, which was insolvent at the time, was worth 41 billion yuan, and Shandong Airlines, which was also insolvent, was worth 11 billion yuan. Moreover, Shandong Airlines' related debts and historical problems are definitely not as complicated as HNA's.

Because Air China will own 64.8% of Shandong Airlines, the value of the remaining equity will be greatly reduced.

However, 35% of the shares still have veto power.

If these equity interests are transferred as a whole, the value of 1 billion yuan will definitely be more than 1 billion yuan.

Of course, the B shares traded in the market are affected by many factors. How much the value is depends on the competition between the forces of all parties!

What do you think about this?