01 Market Statistics In September, the domestic M&A market completed 188 domestic M&A transactions and 25 cross-border M&A transactions. The total domestic M&A transaction volume was 131 billion yuan, a month-on-month increase of 93%. The average transaction value per transaction

1 market statistics

html In September, the domestic M&A market completed 188 domestic M&A transactions and 25 cross-border M&A transactions. The total domestic M&A transaction volume was 131 billion yuan, a month-on-month increase of 93%. The average transaction value per transaction was 700 million yuan. Domestic M&A market transactions Prosperity is back to highs.

html In September, transaction concentration in the domestic M&A market was still high, with the top ten transactions accounting for 71% of the total transaction value.

In terms of industries, the top three domestic M&A transactions since the beginning of the year are still traditional industries, but new economic industries such as information communications, media and the Internet are at the forefront with a cumulative transaction volume of more than 50 billion and a number of transactions of more than 100, reflecting the M&A activity in new economic markets.

2 Regulatory News

Committee on Foreign Investment in the United States: Expanding the scope of mandatory reporting transactions

html On September 17, the new proposal of the Committee on Foreign Investment in the United States (CFIUS) added new regulations to expand the scope of mandatory reporting transactions. The previous regulations required U.S. companies involving critical technologies to have mandatory reporting obligations only when conducting transactions involving 27 specific industries. CFIUS now proposes to add a new category of mandatory reporting transactions: investors who are not directly or indirectly held by the U.S. government to hold more than 49% of the equity. , if more than 25% of the voting rights of a US company involving critical technology, critical infrastructure or sensitive personal data are obtained, the transaction requires mandatory notification.

China Securities Regulatory Commission: Proposed "12 Articles" of Capital Market Reform

html From September 9th to 10th, the China Securities Regulatory Commission held a symposium on comprehensively deepening the capital market reform and proposed "12 Articles" of capital market reform. Yi Huiman, Secretary and Chairman of the Party Committee of the China Securities Regulatory Commission Speaking at the symposium. The focus of the reform includes promoting the reform of the GEM and accelerating the reform of the New Third Board; significantly increasing the cost of illegal activities such as providing false certificates by intermediaries; steadily implementing the registration system and improving the basic market system.

Li Chao, Vice Chairman of the China Securities Regulatory Commission: Steadily advancing the reform of the futures market

html On September 2, Li Chao, Vice Chairman of the China Securities Regulatory Commission, said at the China International Futures Forum that he will steadily advance the reform of the futures market from five aspects: First, increase Variety supply; second, improve operational quality; third, expand market opening and deepen international cooperation at all levels; fourth, improve market legal systems; fifth, strengthen risk prevention and control. 03 Popular transaction comments

The Hong Kong Stock Exchange gave up its acquisition of the London Stock Exchange

Recently, the Hong Kong Stock Exchange announced that it would not proceed with its acquisition offer for the London Stock Exchange. Since the Hong Kong Stock Exchange proposed a merger offer for the London Stock Exchange on September 11, and the London Stock Exchange's board of directors rejected the offer on September 13, the market has paid great attention to the transaction. Li Xiaojia, President of the Hong Kong Exchange, expressed his regret for abandoning the transaction in his blog, and said that he will continue to actively promote strategic planning from three directions: based in China, connecting to the world, and embracing technology.

Hanergy Comments: The Hong Kong Stock Exchange has continued to innovate in recent years to attract a wider group of investors and companies, such as allowing different rights for the same shares, unprofitable biotechnology companies to list in Hong Kong, and opening the "Shanghai-Hong Kong Stock Connect" and "Hong Kong Stock Connect". Shenzhen-Hong Kong Stock Connect" and so on. If the "marriage" with the London Stock Exchange comes to fruition, it will be an important move to open a new chapter in the reform of the Hong Kong Stock Exchange. However, the difficulties of major cross-border transactions are also reflected in this transaction, such as: (1) communication and transaction strategies with the counterparty’s board of directors, shareholders and other relevant parties; (2) selection of valuation and payment methods, that is, the proposed The attractiveness of the transaction; (3) Other considerations such as supervision and corresponding risk allocation and delivery arrangements. In particular, this transaction also involves the London Stock Exchange's consideration of another alternative transaction, which further increases the difficulty of the transaction.

Suning.com completed the acquisition of Carrefour China's controlling stake

html On September 27, Suning.com announced that it had completed the acquisition of 80% of Carrefour China's equity. The transaction consideration is 4.8 billion yuan equivalent in euros, which corresponds to Carrefour China's overall valuation of 6 billion yuan. Compared with its operating income of approximately 30 billion yuan in 2018, it is approximately 0.2 times P/S. Carrefour China was still at a loss in 2018, but its EBITDA was 516 million yuan.

Hanergy Comments: In the context of online and offline integration of the retail industry, this merger is an important transaction for China's leading retail company to integrate foreign retail entities.From a business logic point of view, it can help Suning.com expand its categories and improve its customer base, and it can also further strengthen its competitiveness in stores, supply chains, warehousing, etc. From the perspective of transaction logic, both the buyer and the target are mainly engaged in domestic operations. Therefore, although it is a cross-border transaction in form, it will be relatively difficult in terms of transaction judgment, transaction promotion and subsequent integration. On the other hand, the lock-up period restricts transfers to third parties and arranges sale options and purchase options, laying a good foundation for stable cooperation and potential follow-up transactions between the two parties.

Quan Tong Education terminates its acquisition of Ba Jiuling

html On September 27, Quan Tong Education announced the termination of its acquisition of Ba Jiuling. Ba Jiuling is actually controlled by Wu Xiaobo. Its main business is pan-financial knowledge dissemination, Entrepreneur Academy, New Craftsman Academy and knowledge payment. The knowledge payment business is mainly through the WeChat public account of "Wu Xiaobo Channel" as well as Himalaya, Migu Wait for the mobile carrier to be developed. After Quantong Education announced its intention to conduct the acquisition at the end of March, the Shenzhen Stock Exchange issued a letter of inquiry to the listed company. The questions involved the purpose of the transaction, transaction synergy, business independence, business sustainability and stability, and related enterprises. situation and many other aspects.

Hanergy Comments: In recent years, the overall review of A-share mergers and acquisitions has maintained a tightening situation, and with the gradual manifestation of historical issues in past mergers and acquisitions, it can be expected that this trend will continue within a certain period of time. At present, inquiry letters from exchanges have become an important regulatory tool, and various issues that cause important concerns are often raised in the early to mid-stage of a transaction. In addition, media attention has become another important means of supervision. For example, media briefings that need to be held in situations such as restructuring and listing will also explore and raise issues of concern from a professional perspective. Therefore, both parties to the transaction need to refer to similar or recent transactions before the transaction to predict possible regulatory concerns in order to make preparations or adjust arrangements in advance.

Huacan Optoelectronics plans to sell Harmony Optoelectronics

html On September 24, Huacan Optoelectronics issued an indicative announcement that it plans to sell 100% of the equity of Harmony Optoelectronics, with an estimated valuation of approximately 1.96 billion yuan. Huacan Optoelectronics completed the acquisition of Harmony Optoelectronics with an overall valuation of 1.65 billion yuan in 2018, just over a year before the proposed sale. Harmony Optoelectronics is an SPV that indirectly holds shares in MEMSIC ( USIC Semiconductor), and the privatization, restructuring and sale of MEMSIC Semiconductor to Huacan Optoelectronics was a joint effort by IDG USD Fund, IDG RMB Fund, Everbright and other parties A successful cross-border capital operation.

Hanergy Comments: The previous acquisition transaction has attracted widespread market attention, and its characteristics are: (1) IDG USD Fund led the privatization of MEMSIC Semiconductor and divested part of its business; (2) Everbright, IDG RMB Fund, and IDG USD funds and management teams that are willing to participate in transactions of listed companies have joined forces with each other to receive the target equity first; (3) Huacan Optoelectronics will issue shares for acquisition. Among them, IDG USD Fund is an important shareholder of Huacan Optoelectronics . The characteristics of this proposed sale transaction are: (1) it is still within the performance commitment period of the previous acquisition; (2) the financing and equity structure of the counterparty have not yet been determined, etc., which deserves continued attention.

Tianxiaxiu's backdoor transaction ST Huiqiu was approved by the China Securities Regulatory Commission

html On September 12, ST Huiqiu 's merger with Tianxiaxiu was approved by the China Securities Regulatory Commission, marking a major milestone in Tianxiaxiu's backdoor merger. Tianxiaxiu is jointly controlled by Sina Group and Li Meng. Its main business is new media marketing services. Sina Weibo has authorized it to be the operating company of "micro-task" products. The transaction level can be divided into three parts: (1) Tianxiaxiu acquired 11.66% of the shares of ST Huiqiu for 570 million yuan, thus becoming its new controlling shareholder. The transaction was completed in January 2019; (2 )ST Huiqiu absorbed and merged with Tianxiaxiu to realize the reorganization and listing of Tianxiaxiu; (3) divestment of the original loss-making business.

Hanergy Comments: ST Huiqiu has gradually transformed into a "shell" due to historical factors such as weak main business, various violations, and unclear transformation direction. After taking control of the market, Tianxiaxiu achieved the goal of revitalizing shell resources and successfully securitizing in less than a year, which has good reference significance.The characteristics of this transaction are: (1) controlling the "shell" first through equity participation; (2) effectively avoiding the formation of circular shareholdings through mergers and acquisitions, a relatively rare method; (3) divesting the original business to facilitate Reflect the capital market value and realize the appreciation of shareholders' holdings.

Sansheng Education acquires 51% stake in Zhongyu Bella

html On September 19, Sansheng Education announced that it would acquire 51% of the equity of Zhongyu Bella, an international high school cooperative education business provider, for 123 million in cash, corresponding to its overall valuation of 247 million yuan. After this acquisition, the Chinese Online Industry Fund will all withdraw, while the founder will partially withdraw, and the founder's shareholding platform will hold the remaining 49% of the equity. The founder of Zhongyu Bella needs to use no less than 20% of the cash received from this transaction to purchase the shares of Sansheng Education, and the lock-up and other arrangements for these shares are related to performance commitments, compensation and other arrangements. Agreements were also made on excess performance rewards, collection of receivables, buybacks, corporate governance and other matters.

Hanergy Comments: Although the amount involved in this transaction is relatively small, there are many things worth learning from in the transaction arrangement. For example: (1) The target company is in the process of turning from losses to profits, and by first acquiring 51% of the controlling stake , which is conducive to both parties reaching an agreement on valuation and other aspects. Moreover, the founder’s shareholding platform still holds shares and can also be used for equity team incentive purposes in the future, which is conducive to achieving a win-win situation; (2) Acquisition in pure cash and requiring founders to increase their holdings of listed company stocks avoids the issuance of shares. The CSRC review process for acquisitions not only binds the interests of buyers and sellers, but also helps control the transaction schedule; (3) further binds the interests of buyers and sellers through performance commitments, excess performance rewards, etc., and targets the recovery of receivables , compliance operations and other transaction-specific matters have been made in more detail; (4) In terms of corporate governance, while reflecting the power of major shareholders, it also gives sufficient space to founders.

Xinding acquired the controlling stake of Ziguang Holdings

html On September 26, Xinding completed the acquisition of 67.82% of the shares of Ziguang for a consideration of HK$990 million, and triggered a mandatory unconditional cash offer for it. Judging from the upper-level equity structure of Xinding, Ziguang Group still occupies a relatively important stake, and has introduced the National Integrated Circuit Fund, Shanghai Semiconductor Equipment Materials Fund, Henan Zhanxing Fund, etc. Therefore, overall, the transaction is an adjustment to the ownership structure and corporate governance of Ziguang Holdings .

Hanergy Comments: Unisplendour Holdings is an important Hong Kong listing platform of Unisoc Group, but Unisplendour Holdings ’s performance in recent years cannot be said to be optimistic. From 2016 to 2018, operating income dropped from more than 600 million yuan to less than 100 million yuan. Yuan, and it was in the red in 2 of the 3 years. In the context of school-enterprise reform, introducing indirect shareholders from all parties behind the new controlling shareholder will help business expansion and cooperation. In addition, through the sorting out of business, board of directors and other aspects, it is expected to have a certain positive impact on the improvement of main business performance. 04 More transactions

html Domestic hot M&A transactions in September top10

html International hot M&A transactions in September top10

* "China's New Economy M&A Market Monthly Report" is summarized and released by the M&A team of Hanergy Investment Group. It aims to interpret monthly data, summarize the latest developments, and provide cutting-edge information. Insights promote wisdom sharing.

Source: 36Kr

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