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The”10 billion arbitration case” of Kehua biology was full of fog, and the performance of the acquisition subject increased sharply, causing trouble

Ten billion arbitration disputes between Kehua biology and its subsidiaries are still fermenting

In the storm, Kehua biology and Xi’an Tianlong Technology Co., Ltd. (hereinafter referred to as”Tianlong company”) are not easy. On the one hand, the equity of subsidiaries held by Kehua biology has been frozen, and the equity transfer of major shareholders has been blocked. At the same time, it is also faced with the embarrassing situation that the subsidiaries are out of control, the audit cannot be promoted, and the annual report of listed companies is difficult to give birth. On the other hand, the original founding team of Tianlong company fell into the dilemma of no way to negotiate, suspension of business development and”sale” of controlling shares.

Is it Tianlong’s initiative to provoke disputes due to dissatisfaction with the transaction consideration of the remaining equity, or is there another secret? Where is the dispute between the two sides? Where will the arbitration case go in the future? Recently, the reporter of China Securities Journal gradually peeped into and approached the truth behind the fog of the”10 billion arbitration case” through multiple visits and research.

Mother child opposition:is the 10 billion purchase price reasonable

Looking back three years ago, on June 11, 2018, Kehua biology signed the investment agreement with the founding shareholder of Tianlong company. According to the agreement, Kehua biology acquired the equity of Tianlong company held by Peng niancai, Li Ming and other four parties in a”two-step” way. In the first stage, Kehua biology obtained 62%equity of Tianlong company at a consideration of 554 million yuan; In the second stage, the two sides agreed to dispose of the remaining 38%of the shares in 2021. The listed company can request to acquire the shares according to RMB 1.2 billion or 30 times of the net profit after deducting non profits in 2020, or other target shareholders can request to acquire the shares according to RMB 900 million or 25 times of the net profit after deducting non profits in 2020. Whichever is higher, the acquisition of 100%equity of Tianlong company will be completed.

In this regard, an investment banker said that such a design actually balances the situation of both sides. On the one hand, help Kehua biology avoid the goodwill risk brought by the comprehensive acquisition of Tianlong company; On the other hand, it can also set aside some time for the business development of Tianlong company.

According to the calculation of both parties at that time, after the completion of the package deal, the post investment P/E ratio of Tianlong company will not exceed 10 times. However, affected by the epidemic, Tianlong’s profits have increased explosively since 2020. This makes the PE calculation base of the above acquisition change qualitatively. Whether the transaction consideration of more than 10 billion yuan calculated based on the surge in profits caused by sudden factors is reasonable has become the focus of dispute between the two sides.

Is Tianlong worth so much money? Can it maintain such profits after the end of the epidemic? Kehua biology believes that the performance growth caused by the outbreak of the epidemic has exceeded the normal predictable and predictable range of all parties when signing the investment agreement. If the transaction terms are continued, it will be obviously unfair to the listed company. In its reply, Kehua biology repeatedly invited the counterparty to further negotiate with the company and renegotiate the transaction terms according to law.

The company’s core competitiveness is not affected by the”strong R & D investment”, but the company’s core competitiveness is not affected by the”strong R & D investment”. For the three consecutive years of losses before the acquisition of Kehua biology, insiders of Tianlong explained that the company did not have a penny of loan before 2007, and its operation was in good condition. After South Korea SK group became a shareholder, the company increased its R & D investment, which directly led to losses after 2012. However, if there is no sustained high proportion of R & D investment in the early stage, Tianlong will not have the current performance explosion.

“At the end of 2017, after the former shareholder SK group withdrew, before formal negotiations with Kehua, we met with nearly 100 domestic investment institutions and listed companies, many of which offered higher prices and higher valuations. We believe that at that time, Kehua’s management and controlling shareholders had ideas and strategic planning, were moved by their sincerity, and finally chose to cooperate with them.” A management of Tianlong company told the China Securities Journal that it had participated in the whole process of Kehua biology’s acquisition of Tianlong company.

The above-mentioned persons admitted that the terms made it clear that the second share delivery could also adopt the mode of equity replacement, that is, the listed company issued additional shares to the three founding shareholders of Tianlong company. This is also the core reason why the founding shareholders chose to transfer the controlling right at a low price at that time. They hope to become the core shareholder of the listed company through this transaction and help the enterprise become bigger and stronger, which is an important goal of Tianlong company.

An analyst who asked not to be named said that it would be cost-effective to spend 554 million yuan to buy 62%equity of a company that contributes more than 1 billion yuan a year. The performance of the second stage agreement will certainly increase the cost. When Kehua has mastered the controlling stake, the best choice for Kehua is to maintain the status quo. In other words, Kehua biology has no incentive to buy the remaining equity, let alone the sky high price of 10.5 billion yuan.”In contrast to the founding team of Tianlong, the previous control right was sold cheaply, hoping to become the shareholder of the listed company after the implementation of the second stage plan. Therefore, Tianlong’s demand for negotiation is more urgent than Kehua, and the price is the focus of the game between the two sides.” These people said.

China Securities News reporter learned from various channels that even if it has entered the arbitration procedure, Tianlong still hopes to return to the negotiating table with Kehua biology and make great concessions on the arbitration amount.

In an interview with China Securities News, Kehua biology said that the leaders of the company had held consultations with minority shareholders of Tianlong for many times, and the company had invited the other party to negotiate by written letter for many times since May 2021. The president of the company also put forward negotiation suggestions to the general manager of Tianlong by telephone at the end of 2021, hoping to properly resolve relevant differences, but no positive reply was received from the other party. And stressed that the above facts have been disclosed in the announcement.

Blocking deals:negotiations break down without warning

In May 2020, Kehua changed its ownership. At that time, the largest shareholder LAL company transferred 95.863 million shares (accounting for 18.63%of the total share capital) to Zhuhai Baolian, which is a wholly-owned subsidiary of Gree real estate. Before and after this transaction, the listed company has no actual controller.

With the change of a series of executives, the close partnership between Kehua biology and Tianlong began to become subtle. Especially after Gree real estate took the helm of Kehua biology, the management did not visit Tianlong company, even though Tianlong company had broken out in performance and became the largest profit contributor of listed companies.

Seeing that no one mentioned the subsequent performance of the agreement, the anxious management of Tianlong company began to take the initiative. Insiders of Tianlong company recalled to reporters that at the end of 2020, the person in charge of Tianlong company began to actively contact Kehua, trying to negotiate the follow-up performance details of the Agreement three years ago, and made a special trip to Zhuhai on February 23, 2021 to meet with Lu Junsi, President of Gree real estate, and Zhou Qinqin, chairman of Kehua biology.

“The atmosphere is still very harmonious.” The person commented on the scene of the three people meeting that day. After the other party said that”everything can be discussed”, the person in charge of Tianlong company breathed a sigh of relief and thought that this was a positive signal from the other party. After returning to Xi’an, Tianlong company began to actively promote the negotiation process with the other party, and hired professional institutions to make four basic plans for subsequent performance, but Kehua did not reply.

During this period, we will wait for the news of yikehua to come out again. On May 12, 2021, Kehua biology announced that the company received the notice from the largest shareholder that Zhuhai Baolian, a wholly-owned subsidiary of Gree real estate, signed the share transfer agreement with Shengxiang biology on the same day. Shengxiang biology plans to transfer 95.863 million ordinary shares of Kehua biology held by Zhuhai Baolian at the price of 1.95 billion yuan (equivalent to 20.34 yuan/share), accounting for 18.63%of the total share capital of Kehua biology. The largest shareholder of listed companies will change again.

This made Tianlong company, which was full of confidence in the negotiation, angry and quickly fought back. The founding shareholder of Tianlong filed an arbitration and asked Kehua biology to fulfill the investment agreement, immediately pay the remaining investment price of 10.5 billion yuan, or buy back the shares of Tianlong held by Kehua biology at the corresponding price.

The performance payment of 10.5 billion yuan is undoubtedly an astronomical figure for Kehua biology, whose total market value is only 7 billion yuan. Shortly after the arbitration was initiated, the above-mentioned Kehua change of ownership transaction was quickly aborted. On the evening of August 5, 2021, Shengxiang biology, Gree real estate and Kehua biology collectively announced that Shengxiang biology planned to terminate the acquisition of 18.63%equity of Kehua biology.

For the reason for the arbitration, an insider of Tianlong company admitted to reporters that it is indeed related to the acquisition of Shengxiang biology.”I felt very sudden. At that time, we were discussing the follow-up acquisition with Gree, and the communication was very good. Suddenly, we knew from the announcement that the listed company was going to sell to our competitors.” He said.

Competitors suddenly want to become their own boss, which is unbearable for the founding shareholders of Tianlong company, who have experienced years of hard work and whose performance is in an explosive period.

What makes the management of Tianlong more uneasy is that Tianlong is an important consideration in the acquisition of Shengxiang biology. If the competitor obtains the controlling right of the company, Tianlong company is worried that the later development will be adversely affected. In Tianlong’s view, the initiation of arbitration can set obstacles to the transaction and win more negotiation time.

Shengxiang’s entry into the game:is the meaning of drunken man not wine?

With regard to the purpose of acquiring Kehua biology, Shengxiang biology said in the announcement at that time that the strategic cooperation with Kehua biology would realize the complementary advantages of both sides in the fields of technology platform, product line, channel and market, which would be conducive to further improving the disease solution and whole scene system solution of both sides, and building a more perfect new ecology of in vitro diagnosis application universality and whole scene, It will help promote the construction of the domestic medical and health system.

An insider close to Shengxiang biology told reporters that the acquisition of Kehua biology mainly focuses on the latter’s channels and complements the company’s business. It will be acquired whether there is Tianlong company or not.

However, the reporter’s in-depth investigation found that there were irregularities in the acquisition process, and the relationship between Shengxiang biology and Gree real estate was intriguing.

First, before signing the formal share transfer agreement, Shengxiang biology did not make on-the-spot adjustments to the listed company and its important holding subsidiaries. An insider admitted to reporters that such major equity transfer usually requires more than half a year of contact and detailed adjustment of its assets before signing a formal share transfer agreement.

“From the reaction of Tianlong company, as an important holding subsidiary and profit contributor of listed companies, it has not accepted any adjustment, which makes people feel strange.” These people said.

Secondly, in the case of blocked acquisition and termination of transfer, Shengxiang biology still retains its”irrevocable preemptive right”. On August 5, 2021, Shengxiang biology and Kehua biology both issued an announcement. In addition to announcing the termination of share transfer at this stage, they also added a special agreement, that is,”if the shares of the target company held by the transferor are re transferred, the transferee has the preemptive right under the same conditions, and the priority is irrevocable”.

“When Tianlong company rejects Shengxiang biology, in fact, the best solution for Gree real estate is to find another acquirer, but this clause actually blocks other companies interested in (Kehua Biology) assets. The only explanation is that Gree real estate only wants to sell to specific acquirers.” The above analysis.

Thirdly, after the termination of the acquisition, Kehua biology and Shengxiang biology were not only established了合资公司,科华生物现任高管中还有人被曝出“曾在圣湘生物担任重要职务”。




















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