st Century Huatong was stimulated by the positive approval of Shanda Games with a merger of 29.8 billion yuan. The stock price opened high and closed low yesterday, and finally emerged from a big negative line with a full-day amplitude of 9.75%. As of yesterday's closing, Century Hua reported 22.40 yuan, up only 1.59%, with a turnover of 592 million yuan and a turnover rate of 1.55%.
htmlOn February 20, Century Huatong issued an announcement stating that after the review of the 4th working meeting of the Listed Companies Mergers and Acquisitions Review Committee of the China Securities Regulatory Commission in 2019, Century Huatong's issuance of shares, payment of cash to purchase assets and raise supporting funds and related transactions were conditionally approved.Ten days ago, on February 11, Century Huatong disclosed the "Report on Issuing Shares and Paying Cash to Purchase Assets and Raising Supporting Funds and Related Transactions (Draft) (Revised Draft)" which Century Huatong plans to purchase 100% of the total shares of Shengyue Networks held by Yao Quru and 29 other counterparties by issuing shares and paying cash. The transaction price of the target assets is 29.8 billion yuan, of which 2.929 billion yuan of cash were paid to Ningbo Shengjie and 9.83% of the total shares of Shengyue Networks held by him; to issue 1.413 billion shares to the remaining 28 shareholders of Shengyue Networks except Ningbo Shengjie to purchase 90.17% of the total shares of Shengyue Networks held by him. The financial advisor for this acquisition is Changjiang Securities Underwriting and Sponsoring Co., Ltd.
Century Huatong issued shares to no more than 10 specific targets who meet the conditions through inquiry to raise the supporting funds for this restructuring, with a total amount of no more than 3.1 billion yuan. Among them, the cash consideration used to pay the transaction will not exceed 2.929 billion yuan, and the issuance fees and intermediary fees will not exceed 171 million yuan.
On November 7, 2018, Century Huatong increased the total amount of supporting funds raised by restructuring from 3.1 billion to 6.1 billion yuan in its revised transaction plan, saying that the new supporting funds raised are intended to be used to supplement the working capital of listed companies.
On January 14 this year, Century Huatong once again announced that the amount of funds raised was adjusted back to 3.1 billion yuan. The announcement stated that the company's board of directors reviewed and passed a proposal to adjust the supporting funds raised by major asset restructuring, and the total amount of supporting funds raised was adjusted from no more than 6.1 billion yuan to 3.1 billion yuan.
Shengyue Network has the online game business, main operating assets and core operating team of Shanda Games Limited ( Shanda Games Co., Ltd. ), a former listed company in the United States, Nasdaq (NASDAQ).
The final controller of Shengyue Network Wang Miaotong holds a total of 43% of Shanda Games through Haoding BVI, Dongfang Hongtai and Dongfang Hongzhi controlled by him. On December 30, 2015, Yilishengda Hong Kong entrusted the voting rights of 48.7592 million Class B shares (9.08% of the equity) of Capitalhold held by him to Haoding BVI. So far, Wang Miaotong controlled more than 52.08% of Capitalhold's equity (representing 50.79% of the voting rights) through Haoding BVI, Dongfang Hongtai and Dongfang Hongzhi, and became the actual controller of Capitalhold and Shanda Games, thus gaining control of Shanda Games. The goodwill generated by the above acquisition transaction is 6.779 billion yuan.
Shengyue Network's acquisition of Shanda Games' asset group is a merger under the same control, and the goodwill is to inherit the goodwill book value of Shanda Games' original consolidated financial statements. The goodwill increased at the end of August 2018 compared with 2017, mainly due to the purchase of equity in Wuhan Zhangyou Technology Co., Ltd., Shanghai Daege Culture Communication Co., Ltd. and Shanghai Luling Culture Communication Co., Ltd. in 2018. Wuhan Zhangyou Technology Co., Ltd., Shanghai Daege Culture Communication Co., Ltd. and Shanghai Luling Culture Communication Co., Ltd. have a main business type similar to SDG Group and their businesses are planned to be integrated, so the goodwill generated is collected into SDG Group.
This transaction is a merger of enterprises under the same control. The increase in goodwill for this acquisition is the amount of goodwill already existed in the subject company's own consolidated financial statements. This transaction will not generate new goodwill (excluding the impact of goodwill already exists in the subject company's consolidated financial statements).
As of the evaluation base date, April 30, 2018, the evaluating value under Shengyue Network's 100% shareholder equity income method was 31.029 billion yuan, and the evaluating value under Market Method was 31.003 billion yuan; the evaluation conclusion was evaluating result using the market method, which was 31.003 billion yuan. The evaluation result is 172.13% compared with the book value of the net assets attributable to the parent company's shareholders on the basis date of Shengyue Network's assessment.
Previously, Sina Finance reported that Century Huatong's acquisition of Shanda Games was carried out in two steps. Through the acquisition of controlling shareholders and joint actors, it can not only "avoid" the review standards for backdoor listing, but also successfully "avoid" the huge goodwill of 18.1 billion yuan.
According to reports, Century Huatong's first step is to gradually acquire its shares through its controlling shareholder and its joint actors; the second step is to inject it into the listed company again, and the plan will not cause changes to the actual controller. Therefore, the controller has not changed before and after the transaction. This transaction does not constitute a restructuring and listing, and the difficulty of review is far lowered than the restructuring listing standards. In addition, high goodwill can be avoided through asset restructuring under the same control. If the merger is completed under non-same control, the consideration of 29.8 billion yuan will bring about goodwill of about 18.1 billion yuan. However, this transaction is a merger of enterprises under the same control. According to the relevant provisions of the "Enterprise Accounting Standards", the purchaser shall offset the capital reserve for the difference between the cost of the merger greater than the fair value share of the identifiable net assets obtained by the purchaser in the merger, and the transaction itself will not generate new goodwill.
As of August 31, 2018, the goodwill balance of Century Huatong was 7.47 billion yuan. The basic situation is as follows:
After the completion of this transaction, the goodwill among Century Huatong's non-current assets was 14.829 billion yuan, an increase of 7.359 billion yuan, and the proportion of goodwill to the total assets increased by 3.50 percentage points.
The goodwill of listed companies is currently being criticized. At the end of January 2019, on the last two days of the performance forecast of listed companies, the performance of dozens of listed companies suddenly changed, and intensively released huge performance losses forecasts or significantly revised performance forecasts. This large-scale performance of listed companies has exploded, mainly because a large number of companies have made up for goodwill and caused huge losses. As of January 31, a total of 289 companies in the A-share market mentioned goodwill impairment in their performance forecasts.
The performance commitment of this transaction is that Shanda Games achieves net profit attributable to the parent company after deducting non-operating items in the next three years will be 2.136 billion yuan, 2.494 billion yuan and 2.968 billion yuan, respectively, that is, the total amount will be 7.598 billion yuan in three years. Whether the performance commitment can be fulfilled, Century Huatong’s 29.8 billion acquisition was approved and it also held a landmine of huge goodwill.
Century Huatong's restructuring matter was conditionally approved, while Midea Group's absorption and merger of Little Swan was unconditionally approved. The review opinions of the M&A Reorganization Committee on Century Huatong plan are: Please ask the applicant to supplement the latest progress of the intellectual property disputes involved in the target company, and ask the lawyers and independent financial consultants to verify and express clear opinions; please ask the applicant to supplement the disclosure of the sales revenue of the products related to the intellectual property disputes involved in the target company during the reporting period and during the forecast period, as well as the impact of the above-mentioned dispute resolution results that are not conducive to the target company and therefore the stable operation and sustainable profitability of the target company and related response measures, please ask the lawyers, independent financial consultants, accountants and appraisers to verify and express clear opinions.
The CSRC's reservation attitude was due to media reports before the meeting. According to Global News, Shanda Game, which seems to have returned to the A-share market, has faced major hidden dangers due to the entanglement of multiple copyright lawsuits. As of April 2018, the "Legend of Blood" game, which is plagued by litigation and arbitration, is still an important source of income for Shengyue Network. If the final result of the arbitration is not conducive to Shengyue Network, Shengyue Network may lose an important source of income, which will inevitably affect Shengyue Network's continued profitability in the future. At the same time, the arbitration matters involved in "Legend of Blood" also cause variables in Century Huatong's merger and acquisition process.
This article is from China Economic Network
For more exciting information, please come to the Financial World website (www.jrj.com.cn)
