On the evening of December 7, Huamao Shares (000850, SZ) announced that Ningbo Ruiding New Materials Co., Ltd. will acquire 17.28% of Anhui Huamao Group Co., Ltd. at a price of 480 million yuan.
Huamao Group is the controlling shareholder of Huamao Co., Ltd. This equity transfer is also needed for Huamao Group to further promote the mixed ownership reform.
Huamao Co., Ltd. stated that through this mixed ownership reform, Huamao Group has introduced strategic investors in the same textile industry, formed resource matching for the upstream and downstream of the industrial chain with Huamao Group and the company, achieved coordinated industrial development, and transformed the state-owned holding enterprises. The current management system will establish and improve the market-oriented operating mechanism, improve the operational governance level and market competitiveness of Huamao Group and the company, and bring better development prospects to the company.
It is understood that the counterparty of this transaction, Ningbo Ruiding, is a subsidiary of the domestic textile industry OEM giant Shenzhou International (02313, HK). Currently, Shenzhou International’s market value is close to HK$240 billion.
The controlling shareholder’s mixed-ownership reform introduces strategic investors
In September 2021, Huamao Group’s mixed-ownership reform plan was approved by the Anqing Municipal People’s Government.
In accordance with the requirements of the mixed-ownership reform plan, with August 31, 2021 as the base date, after conducting a financial audit and asset evaluation of Huamao Group, the Anqing Municipal Finance Bureau will guide Anqing Urban Construction Investment Development Co., Ltd. in Anhui Changjiang Equity Exchange Co., Ltd. The company publicly listed and transferred part of the equity of Huamao Group and introduced strategic investors. The equity listing price is determined by fine-tuning the base price based on the assessed value of Huamao Group’s net assets per share approved by the Anqing Municipal Finance Bureau. Wuhan Contemporary Technology Industry Group Co., Ltd., a shareholder of Huamao Group, simultaneously transferred its 3.77% equity interest to the same equity transferee. The equity transfer price was consistent with the price of Anqing Urban Investment’s transfer of 17.28% equity.
Huamao Group previously stated that it would introduce strategic investors with industrial synergies that can assist the international development of Huamao Group through public equity listing and transfer, forming a more diversified equity structure and a market-oriented company management system.
According to the plan settings, Huamao Group’s equity structure will also change accordingly after completing the mixed-ownership reform. Among them, Anqing Urban Investment’s shareholding ratio was adjusted from 48.28% to 31.00%. After the mixed-ownership reform, the shareholding ratio of Contemporary Group jumped to the first place, holding 33.00% of the shares of Huamao Group, while the strategic investor’s shareholding ratio after the mixed-ownership reform was 21.05%. .
Image source: Screenshot of Huamao Shares announcement
However, although the largest shareholder of Huamao Group has changed due to changes in the number of shares held, Anqing Urban Investment will continue to control 45.95% of the voting rights of shareholders of Huamao Group after the mixed ownership reform. Anqing Urban Investment can actually control the company’s behavior through its comparative advantage in the voting rights of the company’s shares and the decision-making power of a majority of the board of directors, thereby indirectly controlling and controlling more than 46.40% of the voting shares of the listed company. The actual controller of listed company Huamao Co., Ltd. has not changed.
Shenzhou International subsidiary quietly entered the game
Nearly three months later, on December 7, 2021, after the Yangtze River Exchange publicly listed and solicited interested transferees, Ningbo Ruiding was determined to be the transferee of 17.28% of Huamao Group’s equity in this public listing.
Qixinbao information shows that the shareholder of Ningbo Ruiding is Ningbo Shenzhou Knitting Co., Ltd., which is 100% owned by Yongtai (Hong Kong) Investment Co., Ltd. According to the 2020 annual report of Shenzhou International, Yongtai (Hong Kong) Investment Co., Ltd. is a wholly-owned subsidiary of the listed company, and Ningbo Ruiding is also a subsidiary of Shenzhou International.
Image source: Screenshot of Shenzhou International 2020 Annual Report
According to the official website of Huamao Group, Huamao Group was founded in 1958 and is a large-scale enterprise group with textile industry chains such as spinning, weaving, fabrics, clothing, and non-woven fabrics. The listed company Huamao Co., Ltd. focuses on the production and sales of various blended yarns, fabrics, fabrics, industrial fabrics and clothing; investment management. The company’s products mainly include yarn series products, gray fabric series products, yarn-dyed fabric series products and functional industrial fabric series products.
According to the third quarter report of Huamao Co., Ltd. in 2021, the company’s total revenue in the first three quarters was 2.589 billion yuan, a year-on-year increase of 6.23%, and net profit was 343 million yuan, a year-on-year increase of 35.56%. The performance growth was relatively stable.
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