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Is Everbright OK or not?
After 2013 Everbright's own accusation shocked the market, a lawsuit from China Merchants Bank in 2019 once again pushed Everbright Securities to the forefront. China's two major financial giants actually started fighting like this.
What did China Merchants Bank say? China Merchants Bank wants Everbright to pay compensation! How much compensation? 3.5 billion!
You must know that Everbright Securities’ net profit in 2018 was only 103 million yuan.
What's going on behind the scenes?
originated from a big venture in 2016. Everbright partnered with , the darling of capital at the time, and , the storm group, to set up an overseas M&A fund and planned to buy MPS, a European sports copyright company.
This fund has relatively large leverage. Among them, China Merchants Bank is the top priority, with 2.8 billion. The 60 million yuan and 200 million yuan invested by Everbright Capital and Storm Group as LPs respectively are inferior investments.
turned out to be a disaster. The consortium composed of China Merchants Bank, China Everbright, and Baofeng wanted to make a big deal, but they were cut off by the company founded by an Italian.
China Merchants Bank dared to pay so much as 2.8 billion because Everbright issued a shortfall replenishment letter, thinking that Everbright would cover the whole situation. Unexpectedly, Everbright refused to acknowledge the debt.
was affected by this negative news today, and the stock price plummeted 48%, far exceeding the average performance of brokerage stocks today!
China Merchants Bank is angry: Everbright, pay me back
html On June 1, Everbright Securities issued an announcement , one of Shanghai Jinxin Investment Consulting Partnership (Limited Partnership) (referred to as "Jinxin Fund") As the plaintiff, China Merchants Bank, a stakeholder of the priority partner, filed a lawsuit against Everbright Capital due to disputes related to the "Balance Replenishment Letter" mentioned in the aforementioned announcement , requiring Everbright Capital to perform the relevant balance replenishment obligations. The amount of the lawsuit Approximately 3.489 billion yuan.Everbright Securities stated that at present, this case is still in the filing and acceptance stage, and the impact on Everbright Capital cannot be accurately estimated. Everbright Capital is a wholly-owned subsidiary of the company and is mainly engaged in private equity investment fund business. Its operating income accounts for a very small proportion of the company's total operating income.
At present, due to related matters, Everbright Capital and its subsidiaries have discovered through self-inspection that relevant bank accounts, equity and fund shares under their names have been applied for property preservation, involving funds in relevant bank accounts of approximately 577,600 yuan; related investment costs are approximately 43.888 billion. Information from
Tianyancha shows that the equity list of Jinxin Fund includes a total of 14 investors, with a total scale of 5.203 billion yuan. The largest investor among LPs is China Merchants Wealth Asset Management Co., Ltd., a wholly-owned subsidiary of China Merchants Fund, a wealth management platform, with an investment of 2.8 billion yuan. China Merchants Wealth Asset Management is actually the channel party, and the investor is China Merchants Bank. The amount of this lawsuit is approximately 3.489 billion yuan, which should include principal and interest.
"Graded Fund " Cross-border Acquisition
Everyone still remembers Baofeng Video. Baofeng Group was listed on the Shenzhen entrepreneurial board in 2015. Within 40 days of listing, it won 36 daily limit boards. On May 21 of that year, the stock price soared from the issue price of 7.14 yuan to 327.01 yuan, setting a record for the A-share price limit. The market value once exceeded 36 billion yuan, becoming the "demon stock" that attracted the attention of the market that year.
In 2014, driven by the policy of the State Council "No. 46", Chinese capital began to enter the sports market in a large scale overseas. In addition to clubs, it also makes frequent moves in sports copyright and marketing agencies.
Baofeng Technology's 's continuous daily price limit after its listing set off a storm in the capital market, and led to a wave of listings in the film, television, gaming and other industries, and it became extremely prosperous for a while.
Stimulated by the rapid growth of market value, Baofeng Technology has successively carried out a number of capital operations.
Against this background, in 2016, Baofeng Group established Jinxin Fund in conjunction with Everbright Jinhui (a wholly-owned subsidiary of Everbright Capital Investment Co., Ltd.), a subsidiary of Everbright Securities. The purpose of setting up this fund by
is to acquire MP Silva Holdings S.A. (hereinafter referred to as "MPS"), a top international sports media services company.This acquisition was considered by Feng Xin, chairman of Baofeng Technology, as the "last ticket" for Baofeng Technology to enter the sports industry, and its strategic significance is extraordinary.
How much money did Jinxin Fund, Everbright and Baofeng pay out? According to public information, Everbright Capital and Storm Group invested 60 million yuan and 200 million yuan respectively as LPs, both of which were inferior investments. This is a highly leveraged structured fund.
At this time, China Merchants Bank and many institutional investors entered the game.
industrial and commercial registration information shows that the shareholder list of Jinxin Fund includes a total of 14 investors, with a total investment scale of 5.203 billion yuan. Among them, the largest investor is China Merchants Wealth Asset Management Co., Ltd., which invested 2.8 billion yuan; followed by Jiaxing Zhaoyuan Yongjin Equity Investment Fund Partnership (Limited Partnership), which invested 600 million yuan;
Jinxin Fund is a typical Structured funds include preferred investors, intermediate investors and junior investors.
Among them, the investment amount from priority investors is 3.2 billion yuan, including a total investment of 2.8 billion yuan from China Merchants Fortune and its affiliates. China Merchants Wealth Asset Management Co., Ltd. is a wholly-owned subsidiary of China Merchants Fund, and the actual investor this time is China Merchants Bank.
On May 23, 2016, Baofeng and Everbright leveraged 5.2 billion yuan to complete the acquisition of 65% of the equity of MPS, the international sports copyright agency giant. Less than three years after the acquisition of
,
MPS went bankrupt and liquidated. What kind of company is
MPS? Why is Baofeng so keen on acquisitions?
It turns out that back then, in order to further enhance the company's strength and improve the strategic layout of DT Entertainment, Baofeng Group took a fancy to the sports business and MPS.
MPS was founded in 2004 by three Italian businessmen - Andrea Radrizzani, Riccardo Silva and Carlo Pozzali.
's core business is the acquisition, management and distribution of sports event copyrights (broadcasting rights). Under their leadership, MPS has quickly become the largest player in the global sports media rights market, with more than ten titles including the World Cup, Premier League, Serie A, French Ligue 1, F1, French Open, NFL Super Bowl, NBA, etc. The copyright of the world's top events has gradually grown from a little-known player to a pivotal copyright giant.
However, after Shanghai Jinxin took over, MPS went downhill, and the copyrights and contracts with related sports leagues continued to be lost. In October 2017, MPS lost to rival IMG in the bid for Serie A international rights. This was the first time MPS had lost Serie A rights since its establishment. In the same year, BeIN Sports also took away Ligue 1 rights from MPS. Since then, MPS has been losing ground in the sports copyright market, and due to its inability to pay copyright fees, some of the major copyright owners terminated their contracts with MPS early, and some directly took it to court. MPS's production and operation were in dire straits.
The final straw for MPS came from the French Tennis Federation (FFT). On October 17, 2018, upon application by FFT, the British High Court ordered MPS to be placed into bankruptcy liquidation. The reason for FFT's application was that MPS had not paid it £5 million (US$6.6 million) in royalties. It is hard to imagine that a copyright fee of tens of millions of yuan could crush a company valued at 7.2 billion yuan, less than 2 and a half years after it was acquired.
was cut off by three Italians? Why did
html’s 15.2 billion fund, a vigorous cross-border acquisition, fail miserably? The acquisition seemed to be a great value for money, but it laid a landmine in terms of due diligence.According to media analysis, there are the following factors.
. The international sports event copyrights held by MPS at that time actually had limited appeal to the Chinese market - Serie A, French Ligue 1, Scottish Premier League and other leagues had relatively low attention in the domestic market, while MPS's Premier League copyrights were limited to those outside China. outside the Asia-Pacific region. . When it was acquired by Chinese capital, most of the major sports copyrights in the hands of MPS were facing the problem of expiring soon. Among them, the copyrights of Serie A and Ligue 1 are until 2018, while the copyright contracts with the Premier League, Arsenal club and F1 are signed until 2019, and the French Open, which has the longest contract, ends in 2021.The lack of continuity of copyright has also become a major concern after Chinese acquisitions. . After the acquisition, China did not sign a good non-compete agreement with MPS. As a result, after the three founders of MPS received a large amount of cash, they actually ran away from and . As early as August 2015, Radrizzani and Silva had reduced their shareholdings in MPS from controlling to non-controlling. When
was acquired, there were no non-competition provisions for core personnel. The business model of MPS determines that its business development is highly dependent on important figures in the company. For such companies, experienced acquirers will generally impose non-competition provisions on relevant core personnel, such as company executives and core talents, during the acquisition, requiring these people to remain within a certain period of time after the acquisition is completed, such as 3 years or 5 years. During the year, they are not allowed to engage in business in the same industry, or certain rewards, options and other incentives are given to retain key minorities to achieve a smooth transition and safeguard the interests of the company. However, Everbright Capital and Baofeng Technology did not seem to have made corresponding arrangements during the acquisition. Radrizzani, the founder of
MPS, founded Eleven Sports, a sports broadcasting company as early as 2015, which owns the broadcasting rights for Serie A, La Liga, Eredivisie and the Chinese Super League in the UK. After being acquired, Radrizzani bought the English Championship team Leeds United in 2017. Riccardo Silva, another founder of MPS, also bought the American second-level professional football league team Miami FC in 2017, and became a shareholder of the Serie A giant AC Milan club in 2018. The actions of the two founders will obviously have an impact on the production and operations of MPS after the acquisition.
. There is a lack of effective operation and management methods for MPS. After acquiring MPS, Everbright Capital and Baofeng Technology seemed to lack sufficient and effective means and methods on how to operate and manage this industry giant, which led to "disunity" among personnel. When the FFT sued MPS, it received the endorsement of former MPS CEO Jochen Lsch and MPS auditor Grant Thornton; MPS Singapore CEO Seamus Ober Seamus O'Brien joined MPS in January 2018 and resigned after just 7 months. The actions of these senior managers reflect from the side that MPS has fallen into a dilemma in production and operation management, and has many conflicts with shareholders.
Who will pay?
.2 billion was wasted, so who is responsible? Who will foot the bill? Baofeng, China Everbright and China Merchants Bank all started to quarrel. In October 2018, MPS was declared bankrupt and liquidated by the British court, and the company's assets and income will be used to repay creditors. Jinxin Fund failed to exit as planned, which exposed the fund to greater risks.
Tianyancha information shows that in addition to Baofeng Investment, Everbright Capital, and Everbright Jinhui, Jinxin Fund also has 11 LPs. The investors behind it are China Merchants Bank, Huarui Bank , Oriental Assets, Jupai Investment, and Yunnan, Guizhou Province’s state-owned assets are all in trouble.
’s largest investment was China Merchants Fortune, which invested 2.8 billion yuan in financial management funds. Immediately afterwards, Jiaxing Zhaoyuan Yongjin Equity Investment Fund and Aijian Trust invested 600 million yuan and 400 million yuan, of which Aijian Trust was only a channel and the actual investor was Huarui Bank. In addition, seven institutions including Langtaosha Investment, Shenzhen Kehua Investment, and Shanghai Longqian Yingshen Investment invested hundreds of millions.
According to multiple announcements and public information released by Everbright Securities and Baofeng Group this year, the earliest key node was on March 2, 2016, when Baofeng Group, Feng Xin and Everbright Jinhui signed an agreement of intent. "Repurchase Agreement Regarding the Acquisition of Equity Interests in MPSilva Holding S.A."
The specific content of this agreement has not been disclosed in detail, but the general idea is that, under compliance conditions, in principle, within 18 months after the United Fund completes the acquisition of MPS, Storm Group and Feng Xin will complete the acquisition of MPS. Repurchase of this asset. Judging from the environment at the time, this largely meant integrating it into the main body of a listed company. Everbright Capital and Everbright Jinhui stated that Feng Xin issued a "Letter of Commitment" to them at that time.
In other words, according to the original agreement, Baofeng Group and its head, Feng Xin, underwrote Everbright Capital’s investment and promised to inject it into the listed company after the MPS acquisition.However, less than three years after the acquisition, MPS went bankrupt and liquidated. Baofeng Group had already fallen from the altar and was unable to fulfill its promises.
So Baofeng and Everbright started fighting.
html On the evening of May 8, Baofeng Group issued a announcement saying that even if Everbright Jinhui, Shanghai Jinxin andEverbright had Baofeng Group to back them up, they themselves would have to back up China Merchants Bank.
However, Everbright Securities was preparing to "default" in February. The announcement issued at that time said this:
In Jinxin Fund, the stakeholders of the two priority partners each presented a "Difference Replenishment Letter" stamped by Everbright Capital. The main content is that the priority partners cannot When the exit is realized, Everbright Capital will bear the corresponding obligation to make up the difference. However, at present, the validity of the "Balance Replenishment Letter" is controversial, and Everbright Capital's actual legal obligations have yet to be judged.
This wave of operations by Everbright Securities completely angered China Merchants Bank. Why was China Merchants Bank willing to give 2.8 billion at that time? Wang Liang, vice president and secretary of the board of directors of China Merchants Bank, once said that the investment amount of 2.8 billion "is very large." China Merchants Bank invests in priority projects, including multiple safeguards such as equity, stocks, and balance replenishment.
In other words, without the credit endorsement of Everbright's "Balance Replenishment Letter", how could China Merchants Bank dare to enter the game?
However, Wang Liang also said, "We hope that through active communication, all parties will fulfill their contractual obligations, financial funds can be fully protected, and the legitimate rights and interests of investors will be safeguarded. As for what measures will be taken to better resolve risks, we will We will not resort to litigation, specific details, etc. In order to better handle these matters, it is not convenient to disclose them in detail."
Of course, Everbright Securities itself is not having a hard time.
In 2018, Everbright Securities made provision for estimated liabilities of 1.4 billion yuan and other asset impairment provisions of 121 million yuan for this investment, which reduced the company's total consolidated profit in 2018 by approximately 1.521 billion yuan and reduced consolidated net profit by approximately 1.141 billion yuan.
At the same time, Everbright Securities was involved in multiple lawsuits. Among them, a subsidiary of Everbright Securities acted as the plaintiff and sued Baofeng Group for RMB 750 million, while a subsidiary of Everbright Securities acted as a defendant and was sued by China Merchants Bank and Huarui Bank. A case in which Huarui Bank, as a senior partner, claims a claim of 452 million yuan is currently under trial.
In mid-January 2019, Everbright Securities announced important personnel appointments. Yan Jun was appointed as member and secretary of the Party Committee of Everbright Securities, and Xue Feng was removed from his posts as secretary and member of the Party Committee of Everbright Securities. Xue Feng continues to serve as chairman of Everbright Securities.
html On March 18, the Shanghai Securities Regulatory Bureau issued the "Decision on Taking Administrative Supervision Measures for Supervisory Talks against Xue Feng." The "Decision" stated that Everbright Securities had an imperfect management and control mechanism for its subsidiaries and failed to strictly implement the internal decision-making process on major matters. As the then general manager of the company, Xue Feng had leadership and management responsibilities for the above issues, so it took supervisory talks against it. administrative regulatory measures.On December 20, 2016, Xue Feng said at the "Everbright Securities Wealth Management Annual Conference ", "In the first half of this year, we won 65% of the equity of MPS, one of the world's largest sports event companies, and we are very happy. If nothing else happens If so, our great-grandson company will win the right to host the America's Cup, and we are also planning to include the World Tennis Championships in China and so on."
Now, Storm Group has become an outcast in the capital market, and its market value has plummeted. , Feng Xin is also heavily in debt and has too much time to take care of himself. How will this 5.2 billion yuan mess end?
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