Riding M&A Wave: Behind-the-Scenes Asset Juggling in Guangzhi Tech's Acquisition

Under the support of policies, the capital market has witnessed a wave of mergers and acquisitions, with many listed companies issuing announcements to declare a suspension of trading for the planning of significant asset restructuring. Companies that sensed the policy opportunities early on have taken the lead in the path of mergers and acquisitions. Some listed companies, upon resuming trading, have seen their stock prices soar like rockets, hitting the upper limit for several consecutive days.

Individual shareholders take the lead in "lying in wait"

October 14th marked the first day of resumption of trading for Guangzhi Technology Co., Ltd. (stock code: 300489.SZ, hereinafter referred to as "Guangzhi Technology"), with its stock price hitting the daily limit of a 20% increase on that day. As of October 24th, the company's stock price had achieved eight consecutive days of hitting the upper limit, and its market value had already exceeded 14 billion yuan. The day before the company suspended trading, its stock price closed at only 22.78 yuan per share.

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Looking back at the announcement made by Guangzhi Technology on September 29th, the company intends to purchase 44.9% of the shares of Xiandao Electronics held by related party Xiandao Rare Materials through the issuance of A-shares and other means. It also expresses interest in purchasing shares held by other shareholders of Xiandao Electronics, although the transaction intentions of these other shareholders have not yet been determined. The suspension of trading is expected not to exceed ten trading days.

Subsequently, on the evening of October 13th, Guangzhi Technology released another announcement stating its intention to purchase 100% of the shares of Xiandao Electronics through the issuance of shares and payment in cash, including those held by Guangdong Xiandao Rare Materials Co., Ltd. This indicates that the acquisition plan has been further "scaled up," changing from the previously planned purchase of 44.9% of Xiandao Electronics' shares to a one-time purchase of 100% of Xiandao Electronics' shares.

Data platforms show that on September 27th, the last trading day before the company's acquisition announcement, two new individual shareholders, Wang Xueping and Zhang Jianlong, as well as an institutional shareholder, Huatai Securities Credit Guarantee Account, suddenly appeared among the top ten shareholders, holding 1.387 million shares, 925,800 shares, and 889,300 shares, respectively. At the same time, an individual shareholder, Liao Lubin, also increased his holdings by 278,000 shares.

If calculated based on the company's closing price of 22.78 yuan per share on September 27th, and as of the closing price of 97.97 yuan per share on October 23rd, the paper profits for the aforementioned two new individual shareholders and one institutional shareholder would be approximately 104 million yuan, about 69.61 million yuan, and about 66.87 million yuan, respectively. In just one month, a "myth of wealth creation" has been staged, with the two individual shareholders instantly becoming millionaires and billionaires.

Actual controller performs "capital juggling"Additionally, from the information obtained on the Qichacha platform, it is understood that the actual controller of both Guangzhi Technology and Xian Dao Electronics is Zhu Shi Hui, who is known in the industry as the "King of Rare Materials". This restructuring involves related party transactions. According to the preliminary plan for the reorganization, the transaction is expected to constitute a significant asset reorganization but does not constitute a reverse takeover.

It is worth noting that in February of this year, Xian Dao Electronics signed a listing guidance agreement with Guoxin Securities and registered for guidance with the Jiangsu Securities Regulatory Bureau. However, there has been no further information on its IPO process in the following months. After several rounds of guidance from Guoxin Securities, it was unexpectedly acquired instead of going public.

Looking at the timeline of the announcement, Guangzhi Technology originally intended to acquire Xian Dao Electronics step by step. Why did the management consider for half a month and suddenly increase the acquisition of Xian Dao Electronics' equity from 44.9119% to 100%? Perhaps analyzing the business performance of both companies in recent years can reveal some clues.

According to the introduction on Guangzhi Technology's official website, the company's main business includes the research and development, production, and sales of infrared optical devices and high-performance aluminum alloy materials. Historical financial reports show that from 2021 to 2023, the company's operating income was approximately 724 million yuan, 936 million yuan, and 1.011 billion yuan, respectively, while the net profit was about 4 million yuan, -114 million yuan, and -241 million yuan, respectively. Its revenue and net profit showed a divergent trend, indicating that the more revenue it had, the more it lost. However, in the first half of 2024, the company's operating income was about 572 million yuan, and the net profit loss was about 35 million yuan, which was a narrowing of losses compared to the same period of the previous year.

In contrast, Xian Dao Electronics, with its deep cultivation in the field of sputtering targets for vacuum coating, has been focusing on the research and development and manufacturing of sputtering targets and evaporation materials since its establishment in 2017. Its products are widely used in new display, photovoltaic, semiconductor, precision optics, data storage, and special glass fields. It has successfully attracted substantial investments from many industry giants and internationally renowned financial institutions such as Sinopec, CICC Capital, BYD, Matrix Partners, and Morgan Stanley, becoming a hot star enterprise in the primary market. After several rounds of financing, its latest valuation exceeds 20 billion yuan.

According to the financial data disclosed by Xian Dao Electronics, from 2022 to 2023, the company's revenue was 2.186 billion yuan and 2.883 billion yuan, respectively, and the net profit was 466 million yuan and 411 million yuan, respectively. In the first half of 2024, the company's revenue was 1.586 billion yuan, and the net profit was 261 million yuan. It can be seen that Xian Dao Electronics' business performance in the past two years has been excellent. Undoubtedly, Guangzhi Technology's acquisition of such high-quality assets will greatly benefit the company's future performance.

However, the secondary market has already reflected investors' expectations in advance. The day before the suspension, the company's market value was 3.1 billion yuan. After a period of sharp increase in stock prices, its market value has exceeded 14 billion yuan.

Guangzhi Technology's debt ratio is as high as 76.04%.

Obviously, as the actual controller of both companies, Zhu Shi Hui has made "two-handed preparations", on the one hand, continuing the IPO listing guidance work, and on the other hand, preparing to realize an indirect listing by incorporating the company into an existing listed company. On September 24, it was clearly proposed to support the injection of high-quality assets into listed companies and enhance investment value, and to support the absorption and merger between listed companies under the same control. If this acquisition is successfully completed, the biggest beneficiary will be Zhu Shi Hui.However, according to the financial report for the first half of 2024, Guangzhi Technology's net operating cash flow was -158 million yuan, a significant decrease of 460.12% year-on-year; meanwhile, within the reporting period, the company only held 59.116.5 million yuan in cash and cash equivalents, with a debt-to-asset ratio reaching 76.04%. During the reporting period, the company's inventory was 867 million yuan, accounting for 24.67% of total assets. At the end of last year, the inventory was only 677 million yuan, indicating a rapid expansion of inventory scale in a short period. In addition, within the reporting period, Guangzhi Technology's short-term borrowings were 273 million yuan, and non-current liabilities due within one year were 377 million yuan. Faced with such financial pressure, it remains to be seen how Guangzhi Technology will proceed with the acquisition of Xiandao Dianke.

In fact, the control of Guangzhi Technology was also obtained by Zhu Shi through a series of capital operations. Its predecessor, Zhongfei Shares, was a company mainly engaged in the production of materials for nuclear power and nuclear fuel processing equipment.

At that time, Zhu Shi's Xiandao Rare Materials also planned to go public on the Growth Enterprise Market, but ultimately withdrew due to significant uncertainty about its sustained profitability. In 2019, Zhu Shi became the actual controller of Zhongfei Shares through the transfer of shares and the entrustment of voting rights, relying on the business resources of Xiandao Rare Materials to help the company transform and enter the infrared optics field, and changed its name to "Guangzhi Technology."

Subsequently, Zhu Shi also carried out a series of capital maneuvers. On January 6, 2020, Zhongfei Shares announced a joint investment of 500 million yuan with Xiandao Rare Materials to establish a joint venture, in which the listed company intended to subscribe for 70%, and Xiandao Rare Materials intended to subscribe for 30%. The joint venture will focus on the research and development, production, technical services, sales, and import and export business of optical materials and optical components, infrared optical components, etc. Based on this, the holding subsidiary Anhui Zhongfei was established.

Anhui Zhongfei became a wholly-owned subsidiary of the listed company and, together with Chuzhou Langya State-owned Assets, held 55.56% and 44.44% of the equity in Anhui Guangzhi Technology Co., Ltd. (hereinafter referred to as "Anhui Guangzhi"), respectively, while the grandchild company Anhui Guangzhi was responsible for the implementation and operation of the industrialization project of infrared optics and laser devices.

In January 2020, the Shenzhen Stock Exchange sent multiple inquiries about the establishment of Anhui Zhongfei and the business development of Anhui Guangzhi, focusing on related transactions and fund occupation issues. In January 2021, Guangzhi Technology announced that through self-inspection, it was found that the actual controller's controlled related enterprises had occupied the listed company's funds totaling 831 million yuan through related transactions. The company was ordered by the Heilongjiang Securities Regulatory Bureau to take corrective measures, and Zhu Shi and other related parties were also criticized by the Shenzhen Stock Exchange.

This time, Zhu Shi once again performed the "art of capital maneuvering," injecting high-quality assets into the listed company. Whether it can make Guangzhi Technology "come back to life" remains to be seen.