"Buy Shell" Shredder Mystery Settled Behind Jingwei's 3 Billion Yuan Acquisition of "Soap Bubble" Shattered

On May 8, the Ministry of Industry and Information Technology released "Specially Publicized Vehicle Production Enterprises (3rd Batch)", announcing that according to the auto industry's exit mechanism, a total of 66 motor vehicle enterprises entered the two-year delisting publicity period. It is worth noting that, compared with the list issued by the China Motor Vehicles Technical Service Center (abbreviated as "China Machine Center") that has not yet been submitted to the Ministry of Industry and Information Technology for approval on April 9, the number of passenger car companies has been reduced from seven to five, except for old cars. Qi Hafei, Jiangsu Kawei, which is in the process of being acquired, has also successfully “escaped”.

But dramatically, on May 2 of the week before the list was announced, Beijing Weiwei (002662.SZ) announced that it had terminated Jiangsu Kawei (ie “Jiangsu Kawei Automotive Industry Group Co., Ltd.”). The purchase proposal. The reason is that "in terms of performance commitment, after repeated communication and negotiation, the two parties have not reached an agreement." Jingwei shares did not disclose the performance promise given by Jiangsu Kawei, but apparently cannot match the purchase price of RMB 3 billion. As the merger and acquisition case, the valuation of the purchase price is based on performance forecast, therefore, the performance commitment can not reach an agreement, the acquisition transaction can not be reached naturally.

The termination of the acquisition means that Jingwei’s plan to “buy a shell” is stranded. Beijing Weiwei Co., Ltd., which started with auto parts, is also one of the most active equity acquisition companies in the field of new energy vehicles. Starting in 2015 in the field of new energy vehicles, Jingwei has successively held orders with Jiangsu Kawei, Shenzhen Wuzhoulong, and Changchun New Energy. Companies in the new energy industry chain such as automobiles have conducted intensive share purchases. However, the sad reminder was that Jingwei had just finished buying Wuzhou Dragon, and the latter had been maliciously “covered” and had not only punished the huge amount of money but also caused the stock price fluctuation of Jingwei Shares. In February of this year, Jingwei Co., Ltd. announced that it is planning to acquire the remaining 65% of Jiangsu Kawei at a price of 3 billion yuan. After the acquisition is completed, Jiangsu Kawei will become a wholly-owned subsidiary of Jingwei. For this reason, Jingwei shares have been suspended from February 1st.

The acquisition of vehicle production qualification through the acquisition of Jiangsu Kawei is the key to the transformation of Jingwei Group into a new energy vehicle company. However, the "soap bubble" with a valuation of 3 billion yuan was quickly punctured. In April, Jiangsu Cardway appeared on the qualification warning list of the Central Computer Center. This means that Jiangsu Cardway has been unable to maintain normal operations. This is obviously related to Beijing. Wei Wei’s claim that “the Hong Kong IPO plan is also steadily being implemented” is completely different from that of Jiangsu Cardwell, and entering the publicity list means that Jiangsu Cardwell cannot declare new products within two years.

Although the acquisition of Jingwei Group was considered to ultimately help Jiangsu Cardwell to get out of the list, Jiangsu Cardwell, which is at the edge of the delisting, apparently has been unable to make the promise of Beijing Weiwei for the performance after the acquisition. After two consecutive losses in Jiangsu Cardwell, Jingwei shares also joined losses. On April 24th, Beijing Weiwei Co., Ltd. released its first-quarter financial report, with a net profit loss of 27.04 million yuan and negative cash flow. The two car companies, which are also competing in the same way as new energy vehicles, will once again be full of uncertainties.

3 billion acquisition of "zombie" card Wei?

“Special publicity is mainly aimed at solving the problem of zero-yield or near-zero-yield enterprises still occupying production qualifications. If companies do nothing during the publicity period, they will eventually be removed from the industry access list.” The relevant person in charge of the center told the Economic Observer reporter that these companies are also known as “zombie enterprises”. Once they become “zombie enterprises” on the special public notice list of the Ministry of Industry and Information Technology, they will only save themselves during the transitional period of two years.

Jiangsu Kawei did not appear on the final list of the Ministry of Industry and Information Technology, which made Jingwei shares somehow saved some face. Because in the special publicity list of the center on April 9th, in addition to Jiangsu Kawei, there is also a new energy car company - Shenyang Wuzhou Longxin Energy Automotive Co., Ltd. has also been alerted, and both companies and Beijing Wei Kawei Auto Parts Co., Ltd. (referred to as "Jingwei") is related. Jingwei Co., Ltd. acquired a 48% stake in Shenzhen Wuzhoulong Automobile Co., Ltd., the parent company of Shenyang Wuzhoulong, for RMB 550 million in December 2015; in June 2016, Jingwei bought Jiangsu again for RMB 1.05 billion. Kawei has a 35% stake. These two acquisitions were used as a strategic sample of Jingwei’s rapid new energy deployment in the form of equity acquisitions.

However, Jiangsu Kawei and Shenyang Wuzhoulong appeared in the list of warning delistings at the same time. This “accident” made Beijing Jingwei’s equity investment perspective questionable. The Jingwei’s comprehensive acquisition of Jiangsu Cardwell in February this year transformed Jingwei’s ambiguity into a new risk: if Jingwei’s strategy is to take advantage of the delisting crisis in Jiangsu Cardwell, it will take a low point and turn losses into losses. To gain profits and obtain qualifications, this kind of operation is indisputable. However, there have been different voices for the current status of Jiangsu Cardwell and expectations for restructuring.

In addition to the qualification of the fuel vehicle, Jiangsu Kawei has successively obtained the production qualification of pure electric and hybrid vehicles. Until last year, Jiangsu Kawei was still a high-profile role in the field of new energy vehicles, and it has been moving in the past two years. Before cooperating with Jingwei, Jiangsu Cardwell's own expansion in new energy has already taken a toll. In 2016 alone, there were several major projects signed by Jiangsu Kawei: including 100,000 new energy vehicles and parts and components projects in Linyi, Shandong Province, which plan to invest 10 billion yuan, and plans to invest 12 billion yuan in Mengjin, Luoyang, Henan Province. 10,000 new energy vehicle projects; and 150,000 new energy base projects planned to invest RMB 6 billion in Yinchuan.

According to the official website, Jiangsu Cards has a total of six new energy models, ranging in price from 30,000 yuan to 220,000 yuan, including Hummer, including three new energy vehicles. There is a SUV with a price of between RMB 70,000 and RMB 100,000 for a fuel truck belonging to the passenger vehicle category, but there is almost no relevant information in the market. According to the previous announcement of the China Machine Center, enterprises listed in the “special public notice” are vehicle enterprises that cannot maintain normal production and operation for two consecutive years in 2016 and 2017. In the case of passenger vehicles, “cannot maintain normal production and operation” means that the sales volume is less than 1,000 units for two consecutive years.

And how many cars did Jiangsu Kawei sell? Nobody knows. In 2015, Jiangsu Kawei once said in an interview that it received orders for 1,000 new energy vehicles in half a year. However, in the "2017 Passenger Vehicle Dual-Integration Form" recently announced by the Ministry of Industry and Information Technology, Jiangsu Kawei's total vehicle production in 2017 was only 110 units. In October 2017, employees of the Jiangsu Cardwell Group posted on the Internet that after the wage arrears in 2015, Jiangsu Cardwell had not paid salaries for many months in 2017, and a large number of employees resigned and left.

Termination of acquisition: Beijing Weiwei shares stop loss in time?

In addition to the qualification crisis of Jiangsu Kawei, even more puzzling is the value of Jiangsu Kawei in this acquisition. Through a series of complicated transactions, Jingwei Co., Ltd. carried out a major asset restructuring in February. It issued a 65% stake in Jiangsu Cardwell, which is owned by Cardwell Specialist and Hebei Wen'an. In accordance with the stock transaction price at that time, Jiangsu Kawei was valued at RMB 4.5 billion.

In June 2016, when Beijing Jingwei Co., Ltd. took a stake of 35% of Jiangsu Kaiwei with a share of RMB 1.05 billion, Jiangsu Kaiwei had a valuation of RMB 3 billion, which rose by 50% in less than two years. Whether or not Hebei Wen'an had to buy and sell for two weeks prior to the intention of pushing up the selling price of Jiangsu Kawei, the industry said it was suspicious. At this time, Jiangsu Kawei has suffered losses for two consecutive years, including a loss of over 100 million yuan in 2017, and the output was low.

However, Beijing Weiwei Co., Ltd. does not seem to be aware of this risk. For Jingwei Co., Ltd., which has been in the new energy industry for three years, and continues to “buy, buy, and buy,” qualification is its “East Wind” with all the urgent needs of the company. It is also the key to determining whether all its investments can be rewarded.

With the Ministry of Industry and Information Technology retiring "zombie" companies, the increasingly scarce vehicle qualification is becoming the most scarce resource in the automotive industry. At the same time as the acquisition of Cardwell, Jingwei has continued to invest heavily in production capacity. In March 2018, it announced that it will invest 16 billion yuan to build a 300,000-unit production base for new energy vehicles in Qinhuangdao and set up a wholly-owned subsidiary. "Qinhuangdao Delong Automobile Co., Ltd." to implement the project. DeLong is the name of the vehicle company Jingwei established in Germany in 2017.

In addition to Jiangsu Caway’s large-scale foreign investment and loss status, the announcement that “the Jiangsu Kawei intends to issue shares on the Hong Kong Stock Exchange and its listing is steadily advancing” is also questioned. Judging from the performance, Wuzhou Long and Cardwell are currently losing money. Wuxi Xingyi’s profit in 2016 was only a few million yuan. It is impossible to list in one or two years.

In fact, although the company has implemented equity investments in seven companies in new energy vehicles and key technology areas, Jingwei is not a successful investor. In the same day that Jingwei announced 16 billion yuan in the Qinhuangdao new energy project, the Shenzhen Stock Exchange issued an inquiry letter to Jingwei, requesting Beijing Weiwei to make losses on Shenzhen Wuzhoulong, Jiangsu Cardwell, and Changchun New Energy that shareholdings. Explanation. Some analysts pointed out that while the new energy auto industry is still in the initial development stage, and the subsidy retreat is obvious, Jingwei’s intensive investment has become an overwhelming burden.

Therefore, it is difficult to determine whether to stop Jiangsu Kawei in a timely manner or miss a good opportunity. According to Jingwei’s plan, Delong Motors Co., Ltd., a multi-billion-dollar company established in Germany one year ago, and a high-end electric vehicle base will produce new energy vehicles exclusively for Germany, while China’s locals Depot production Delong brand new energy vehicles.

However, Jingwei currently faces double constraints of qualification and cash. In addition to the failure of the acquisition of Cardwell, over 25 billion yuan of investment in the past three years have begun to erode profits. On April 24th, Jingwei Group released its first quarter results and achieved attributable The net profit of the parent company's shareholders was -27.04 million yuan, a decrease of 136.34% from the same period of last year. The cash flow is negative 8.36 million yuan. Jingwei shares explained that the loss was due to the increase in financing costs and compensation for the relocation of the Beijing base. It is expected that it will lose 150 million yuan to 250 million yuan in the first half of 2018.

At the same time, in the past two months, Jingwei has experienced many crises, such as the failure of financing plans, the withdrawal of Ningbo New Energy Vehicle project, and the division of the two major shareholders. After the failure of the acquisition of Cardiff, how to take the next step? Jingwei shares still need a breakthrough.