After the new preschool education regulations and listed companies in the same industry avoided it, Sanlei Shares "major crime" and promoted the acquisition of early education institution Mei Jim . In order to win over Mejim to enter the early education industry, Sanlei shares chose an all-cash acquisition (3.3 billion yuan) to reduce the risk of approval. Faced with the uncertainty of the new preschool education regulations, we also made a promise that if the policy has an adverse impact on the business, we will compensate according to the agreement. Why is Sanlei Shares so persistent in planning preschool education?
Under the new rules for preschool education, K12 and preschool education institutions have stopped capitalizing, but Sanlei shares, a listed company in A shares, seems to be in defiance of the wind.
On the evening of December 5, Sanlei Co., Ltd. responded to the Shenzhen Stock Exchange's inquiry letter stating that the main business of the target company is authorized to operate by the Mejim Franchise Early Education Center, which does not belong to the prescribed "for-profit kindergarten". The new regulations do not constitute substantial legal obstacles to restructuring. Faced with the uncertainty of the new education regulations, Sanlei Co., Ltd. should be symmetrical and has made a commitment to Mejem's net profit from 2018 to 2020. If the relevant policies have an adverse impact on the business, they will be compensated in accordance with the agreement.
In June this year, Sanlei Co., Ltd. issued an announcement stating that it plans to acquire 100% of Mejim's equity in the form of 3.3 billion yuan in all-cash payment in the future, and at the same time release 30% of its shares to introduce external strategic investors, receiving 990 million yuan of capital increase, and the remaining 2.31 billion will be paid by Sanlei Co., Ltd. in cash.
In order to raise 2.31 billion yuan, Sanlei shares even changed the purpose of 660 million yuan in fundraising and borrowed money from its affiliated party China Overseas Shengrong, with only 50 million yuan in funds. In fact, this is the third time that Zhongzhi Group has taken action in the field of education after taking over Sanlei Co., Ltd. in 2016. In 2017, Sanlei Co., Ltd. entered the education industry by acquiring Kaide Education, and later planned to acquire 351% of the equity of Yuebaoyuan HTML and entered an early education institution, but ended in failure. Sanlei Co., Ltd., which was eager to enter the early education business, then launched a plan to acquire Mejim.
Sanlei shares want to "deal with the wind" after the new education regulations, listed companies in the same industry have clarified and avoided related businesses.
The transformation of Sanlei Co., Ltd.: selling shells and transforming
Sanlei Co., Ltd. was listed on the SME Board in 2011. Its original main business was the research and development, design, production and sales of complete sets of plastic pipeline manufacturing equipment and five-axis high-end machine tools. The actual controllers were Yu Jianmo and Yu Yang. Due to the impact of traditional domestic manufacturing, Sanlei Co., Ltd.'s main business was impacted.
In November 2016, Zhongzhi Group and Zhuhai Rongcheng, controlled by Xiezhikun , obtained control of Sanlei shares through "Agreement Transfer + Voting Right Entrustment" at a premium of up to 60%. Afterwards, Zhuhai Rongcheng successively acquired the corresponding shares of the voting rights entrustment. Until after the share transfer process was completed in January 2018, Zhuhai Rongcheng directly held 97,879,218 shares of Sanlei Shares, accounting for 29% of the total share capital. He is the controlling shareholder and the actual controller is Jie Zhikun.
data shows that the actual controller Xie Zhikun made a fortune in Heilongjiang. He was engaged in the real estate industry in his early years. He is currently a capital tycoon who controls many listed companies such as Meerya and Yushun Electronics. He is also the husband of the well-known singer Mao Amin . In order to acquire Sanlei shares, Zhongzhi Group spent 2.8 billion yuan and paid an extremely high premium when buying shells. Based on today's closing price of 18.75 yuan per share, Zhuhai Rongcheng's floating loss of buying shells exceeded -30%.
After gaining control of Sanlei Shares, he immediately invested in the transformation to the early childhood education industry. In February 2017, Sanlei Shares intends to acquire 100% of Kaide Education's equity with its own funds of 300 million yuan. Although it entered the education industry through acquisition, it has brought 289 million yuan in goodwill. Although the latter completed the performance commitment indicators in 2017, for the first half of this year, Kaide Education's performance in the first half of the year has shown signs of slowing down.
After acquiring Kaide Education, Sanlei shares tried to enter the field of early education and acquired 51% of the equity of another education company Ruiyouming. The transaction ended in failure.
3.3 billion all-cash acquisition of Mejim
However, with the stable cash flow in the education industry and predictable objective investment returns, Sanlei shares immediately turned to acquire Mejim, the world's early education giant. The domestic early education industry has a low market share, while the American early education brand Mejim covers 340 Mejim Early Education Centers in dozens of provinces across the country and is already one of the leading companies in the domestic early education and training industry.
On June 6, 2018, Sanlei Co., Ltd., whose net profit dropped sharply in the first quarter of 2018, issued a major asset purchase plan, intending to acquire 100% of the equity of early education company Mejim at a premium of 3766% compared with the book value through a newly established holding subsidiary.
At the same time, the counterparty made performance commitments, and Mejem's promised net profit from 2018 to 2020 was 180 million yuan, 238 million yuan and 290 million yuan respectively. In order to acquire Mejim, Sanlei shares spent a lot of effort on the trading structure . Sanlei shares chose to acquire Mejem in 100% cash in the form of all-cash acquisition, installment payment, performance commitment, and increased holdings of shares.
Interestingly, Sanlei shares acquire in an all-cash manner, without involving issuing shares, reducing the difficulty of approval. Its consideration of 3.3 billion yuan was split into 5 payments. On the one hand, this move alleviated the financial pressure of the acquirer and also reduced the risk that the target party could not complete the performance bet. It can not only evade approval, but also bind to the interests of the counterparty, which shows that a lot of thought has been spent on the transaction structure. After the transaction is completed, its proportion of its education sector business will climb from 32.08% to 69.44%. The manufacturing sector accounts for only 30.56%.
However, even so, it is still difficult to predict the risks of the policy. The latest "Kindergarten Limit Order" may be the "Sword of Damocles" hanging on Sanlei Shares. Due to the influence of early childhood education incidents such as Honghuanglan and Lan, a month ago, new preschool education regulations were issued, officially blocking the asset securitization path of private kindergartens. The turbulence in the relevant education sectors caused by it is still vivid in my mind. The A-share market opened on November 16, and the preschool education sector fell collectively, and Sanlei shares even hit the limit.
After that, after the issuance of new preschool education regulations, Sanlei shares did not block the acquisition of Mejim. On November 29, Sanlei Co., Ltd., an A-share listed company, issued an announcement stating that Sanlei Co., Ltd. had paid the first equity transfer price of 660 million yuan to five shareholders of Tianjin Meijiem Education Technology Co., Ltd., which means that Sanlei Co., Ltd.'s early education merger and acquisition case was successfully concluded.
However, it attracted the attention of the Shenzhen Stock Exchange at this time. In response, Sanlei Co., Ltd. replied that according to relevant regulations of the Ministry of Education, the new regulations mainly target kindergarten education over the age of 6, and there are no clear regulations on early education for 0-3 years old. The students in the two early childhood education centers of Mejem include children aged 0-6, but are mainly children aged 0-3, which is also different from the preschool children over 3 years old that kindergartens face.
In fact, the dividends of securitization in the education industry are precisely the most important reason why Zhongzhi Group chose to buy shells at a high premium and then promoted Sanlei Shares to transform and acquire the leader in early education. However, under the new rules of preschool education, the operation and development model of early education business will change, and the failure to allow securitization will greatly reduce the interest in investing capital. While listed companies in the same industry have clarified that they are not evading related businesses, Sanlei shares are still "dealing with the wind" and promoting the acquisition of early education institution Meijim. Perhaps there must be a brave man under the "early education dividend"?
