简体中文
While the spin-off listing of A-share market listed companies have largely suspended, red chip stocks listed in Hong Kong meet similar difficulties when they are seeking to spin off and return to China’s A-share market. Perceived from the most recent cases of But'one Information Corporation, Xi'an (600455.SH) and Suzhou Yangtze New Materials Co., Ltd. (002652.SZ), which have terminated the reorganization and received a series of inquiries from the regulatory departments, the door for the return of spin-off listing has not yet completely open. In other relevant cases, no progress has been made either.
Nanjing Xinjiekou Department Store Co., Ltd. (600682.SH), But'one Information and Yangtze New Materials have announced on Sept. 1, Sept. 9 and Sept. 10 respectively to terminate major assets reorganization. The three companies seek to return to the A-share market through restructuring after the privatization of US stocks, or spinning off Hong Kong listed red chip stocks. As for the reasons for the termination of reorganization, Nanjing Xinjiekou Department Store and Yangtze New Materials said it is due to the uncertainties of regulatory policy and that the process of the transactions failed to meet each party’s expectation; But'one Information said that to continue the reorganization may result in significant uncertainties from the policy level.
Such reasons provoke people to think: what policy and what major uncertainties? According to the reorganization plan of But'one Information, the company proposed to buy the entire equities of Chinasoft International Technology Services Co., Ltd. and Shanghai Huateng Software Systems Co., Ltd, both are subsidiaries under Chinasoft International Limited, a red chip company, in the way of purchasing assets through share issuance. The total valuation is 6.33 billion yuan. Two obvious features of the plan are: firstly, the valuations of the subject assets are more than two times of the market capitalization of the listed company, which can lead to the change of actual controller and constitute restructuring listing; secondly, this reorganization is the spinning off of business of red chip stock to list on A-share market. Seen from moves of But'one Information before and after the reorganization, the failure of its reorganization may be related to spin-off listing.
On May 5, But'one Information announced that it will continue to suspend trading for major assets reorganization. On Aug. 2, it issued the reorganization plan. But the exposure draft of “administration method of major assets reorganization of listed companies” was published on June 17. That means But'one Information prepared its reorganization plan after two months of the issue of the exposure draft, and might has studied the exposure draft carefully before launching its plan, for it couldn’t have made such efforts supposing there were apparent conflicts in its plan against the exposure draft. At the same time, inquiries from the Shanghai Stock Exchange (SSE) on the company’s reorganization also indicates that the regulator’s focus was on the company’s spinning off and intended return to the A-share market. The SSE’s inquiry letter pointed out that the reorganization involves the return of listed company (business segments) to the A-share market, but the China Securities Regulatory Commission (CSRC) is analyzing and studying the influences that may come along with the return of overseas listed red chip companies to the A-share market, and relevant policy has not yet been published.
While the CSRC expressly stated at a regular news briefing a few month ago that it was studying and analyzing the impacts that may be caused by the return of red chip companies to the A-share market through IPO and M&A, and the work was still in progress. Before the relevant policy was introduced, the existing regulation and policy on such overseas listed companies’ return to the Chinese market will not change. After the CSRC made the above statement, several companies fell over each other to announce their plans to spin off red chip stocks and return to China, in the hope of obtaining approval from the CSRC in advance.
Except But'one Information and Yangtze New Materials, which have terminated the reorganization, and China Yongda Automobiles Services Holdings Limited (03669.HK), a red chip company which intends to split its subsidiary Shanghai Yongda Automobiles for backdoor listing, another case is CRED Holding Co., Ltd. (600890.SH). CRED’s plan is still in progress, and its subject asset is Liaoning Zhongwang Group Co., Ltd., which is split from China Zhongwang Holdings Limited (01333.HK), another red chip company. Different from other companies, Zhongwang Group is a leading enterprise in the high-end aluminum processing and manufacturing industry. As it is the only industrial enterprise in the above enterprises, its valuation is relatively lower. Three days before But'one Information announced to terminate the reorganization, CRED approved at the general meeting the reorganization plan of supporting Zhongwang Group’s backdoor listing, except for the proposal to raise supporting fund was rejected, which was seemingly in compliance with the new rule on reorganization, requiring that restructuring listing (namely backdoor listing) shall not be conducted simultaneously with raising supporting fund. Some investment bankers said that Zhongwang Group is striving towards success. It is learnt that CRED will soon reply relevant inquiry letter and submit application materials.
Through careful study, it can be found that Zhongwang Group’s plan to conduct backdoor listing through CRED was disclose earlier on March 23, before the CSRC made the above statement. In the first inquiry letter issued by the SSE, the SSE pointed out that CRED should apply to the Stock Exchange of Hong Kong limited (SEHK) for the spinning off and obtain related approval, as well as in compliance with existing laws and regulations of China. This to a large extent shows that regulators have allowed Zhongwang Group’s backdoor listing
Some analysts pointed out that different from overseas listed companies that have privatized, the process for the return of Hong Kong listed red chip companies to the A-share market is relatively simple, and it could also contribute to the injection of high quality assets into A-shares. Therefore it is almost impossible to completely close the door for the return. At present, this process might be tightened, and policy uncertainty will also last for a period. For A share companies that have issued reorganization plans involving spinning off and return to A-share market, each company is in different situation, with some terminating their plans, and others continuing to suspend trading, including Zhuhai Winbase International Chemical Tank Terminal Co., Ltd. (002492.SZ), which proposed to provide shell for Shandong Weigao Orthopedic Device Company, a subsidiary of a Hong Kong listed company, Shandong Weigao Group Medical Polymer Company Limited (01066.HK).
(APD/XH FINANCE)
