1. Definition of mergers and acquisitions of listed companies
According to the definition of enterprise mergers in the Company Law, there are two types of business combinations: "merger by absorption" and "merger by absorption", where merger by absorption refers to the dissolution of a company that expands its scale or improves its market position by acquiring the equity or assets of other companies.
2. Types of mergers and acquisitions by listed companies
From the perspective of the identity of the merger party and the merger party, the mergers and acquisitions involved in listed companies are mainly divided into the following three types: the mergers and acquisitions of listed companies are not listed companies;Non-listed companies absorb and merge listed companies;Listed companies absorb and merge listed companies.
1. The absorption of listed companies is not a listed company
This type is mainly used for backdoor listings of the group's overall business, and it is often the case that the A-share listed company absorbs and merges its controlling shareholder. For example, Shuanghui Development absorbed and merged its controlling shareholder Shuanghui Group, Yunnan Baiyao absorbed and merged its controlling shareholder Baiyao Holdings, Wanhua Chemical absorbed and merged its controlling shareholder Wanhua Chemical Wangfujing absorbed and merged its controlling shareholder Wangfujing International, and JAC Automobile absorbed and merged its controlling shareholder Jiangqi Group.
2. Non-listed companies absorb and merge listed companies
This type is mainly used for the listing of the group's overall business, where the merged party loses its listing status, and the merging party obtains the status of a listed company, for example, Midea Group absorbs and merges Midea Electric Appliances, Midea Electric Appliances is delisted, and Midea Group is listed immediately.
3. Listed companies absorb and merge listed companies
If a listed company absorbs and merges a listed company, the merged party will be cancelled and lose its valuable listing status. Therefore, it is commonly found in the business integration within the group and the business integration of state-owned enterprises led by the relevant competent departments. For example, Great Wall Computer absorbed and merged Great Wall Information, BesTV absorbed and merged Oriental Pearl, China South Locomotive absorbed and merged China CNR, Baosteel absorbed and merged Wuhan Iron and Steel Co., Ltd., Jinan Iron and Steel absorbed and merged Laigang Co., Ltd., China Eastern Airlines absorbed and merged Shanghai Airlines, and Guangzhou Pharmaceutical absorbed and merged Baiyunshan.
3. Brief description of the case
On November 23, 2023, Chongqing Department Store Co., Ltd. announced that it intends to absorb and merge Chongqing Commercial Company by issuing shares to all shareholders of Chongqing Commercial Company (Group)**, which has been reviewed and approved by the Mergers and Acquisitions Review Committee of the Shanghai Stock Exchange, and can only be implemented after obtaining the consent of the China Securities Regulatory Commission for registration.
According to the plan, Chongqing Department Store intends to absorb and merge Chongqing Commercial Company by issuing shares to Yufu Capital, Wumei Jinrong, Shenzhen Jiajing, Huilong and Huixing, according to the total transaction price of 47$1.7 billion and issuance **1882 yuan shares, the total number of shares issued in this transaction is about 25.1 billion shares.
After the completion of the transaction, Chongqing Department Store will inherit and undertake all the assets, liabilities, business, personnel and all other rights and obligations of Chongqing Commercial Company, the legal personality of Chongqing Commercial Company will be cancelled, the shares of listed companies held by it will be cancelled, and Yufu Capital, Wumei Jinrong, Shenzhen BBK, Huilong and Huixing will become shareholders of the listed company, with shareholding ratios of41% and 021%。
After the completion of the transaction, the retail business of Chongqing Commercial Company will be listed as a whole, and the main business of Chongqing Department Store, a listed company, will not undergo major changes, which is conducive to enhancing the company's asset scale and independence, enhancing the company's market position in the retail industry, and enhancing the company's core competitiveness.
Fourth, the situation of the counterparty
1. Chongqing Department Store shares***
Chongqing Department Store Co., Ltd. (hereinafter referred to as "Chongqing Department Store"), was reorganized in August 1992 with a registered capital of 40,65284.65 million yuan;Listed on the Shanghai Stock Exchange on July 2, 1996, **600729".
Chongqing Department Store is mainly engaged in retail business operations such as department stores, supermarkets, electrical appliances and automobiles, and owns famous commercial brands such as Chongqing Department Store, New Century Department Store, Commercial Electrical Appliances and Commercial Automobile Trade, among which "Chongbai" and "New Century Department Store" are "well-known trademarks in China". The four major brands have a high reputation and reputation in Chongqing and Sichuan, and are loved and trusted by consumers.
From January to September 2023, the company achieved an operating income of 1477.8 billion yuan, a year-on-year increase of 186%；Achieved net profit attributable to the parent company of 112.8 billion yuan, a year-on-year increase of 3694%。、
2. Chongqing Trading Company (Group)**
Chongqing Trading Company (Group)**hereinafter referred to as "Chongqing Trading Company"), established in September 1996, is the controlling shareholder of Chongqing Department Store, accounting for 51 share capital41%。
4. Trading Arrangements
1. Transaction** and pricing basis
According to the "Chongqing Trading Company Appraisal Report" issued by Zoomlion Appraisal and filed by Yufu Holdings, the valuation value of 100% equity of Chongqing Trading Company using the asset-based method is 485,951690,000 yuan. At the same time, the transaction takes into account the cash dividends of Chongqing Trading Company to each counterparty from the pricing basis date of this transaction to the completion date of the share issuance, and the adjustment formula is: adjusted underlying asset transaction** = Appraisal value of the underlying asset Chongqing Trading Company's cash dividend amount, after adjustment, the subject asset transaction of this transaction** is 4,717,398,90031 yuan.
2. Payment Methods
Chongqing Department Store plans to absorb and merge Chongqing Trading Company by issuing shares to Yufu Capital, Wumei Jinrong, Shenzhen Jiajing, Huilong and Huixing.
3. Issuance plan
According to Article 45 of the Administrative Measures for Reorganization, the number of shares issued by a listed company shall not be less than 90% of the market reference price. The market reference price is one of the average trading prices of the company 20 trading days, 60 trading days or 120 trading days before the announcement date of the board resolution to purchase assets by issuing shares. The formula for calculating the average trading price is as follows: the average trading price of the company on the trading days before the pricing reference date = the total trading volume of the company on the trading days before the pricing reference date and the total trading volume of the company on the trading days before the pricing reference date.
4. Disposal of creditor's rights and debts
After the completion of this transaction, Chongqing Department Store, as the surviving party, will inherit and undertake all the assets, liabilities, business, personnel and all other rights and obligations of Chongqing Trading Company. Chongqing Commercial Company and Chongqing Department Store will respectively obtain the approval of the shareholders' meeting and the general meeting of shareholders of each other in accordance with the provisions of relevant laws, regulations and normative documents to perform the notice and announcement procedures to their respective creditors, and in accordance with the requirements of their respective creditors within the statutory time limit (if any) in accordance with the law, to pay off their debts in advance or provide additional guarantees for them. If the relevant creditors fail to claim early repayment from Chongqing Trading Company or Chongqing Department Store within the aforesaid statutory period, the corresponding unliquidated debts will be borne by Chongqing Department Store after the completion of the transaction from the closing date.
5. Asset delivery
The closing date of this transaction refers to the date on which all the assets, liabilities, business, personnel and all other rights and obligations of Chongqing Trading Company are transferred to the listed company, which is preliminarily determined to be completed within 60 working days from the date of the CSRC's decision on the registration of the transaction plan or other dates determined by the parties through negotiation.
6. Impairment compensation arrangement
The impairment test assets of this transaction are the trading company building, electrical appliance building, Daping 4S store held by Chongqing Trading Company and the Wandong North Road real estate and Kuang Road real estate held by Wansheng Wujiaohua, and the compensation obligors are Yufu Capital, Wumei Jinrong and Shenzhen Jiajing, and the impairment compensation period is three consecutive fiscal years (including the current year on the closing date) from the closing date. If during the impairment compensation period, if the impairment test assets are impaired, that is, the appraised value of the current impairment test assets specified in the impairment test report is less than the appraised value of the impairment test assets, each compensation obligor shall give priority to compensating Chongqing Department Store with consideration shares, and the insufficient part shall be compensated by each compensation obligor in cash.
5. Importance of the transaction
1. Increase the independence of listed companies
Chongqing Trading Co., Ltd., the absorbed party, is a shareholding company, which is not directly engaged in specific production and operation business, but mainly carries out retail business through Chongqing Department Store, and leases its own property to Chongqing Department Store as office space and business premises for department stores, supermarkets, electrical appliances, automobile trade and other formats. This also leads to problems such as related party transactions and overlapping governance institutions between Chongqing Department Store and Chongqing Commercial Company, which is not conducive to the development of listed companies.
The merger by absorption, through the reverse absorption and merger of Chongqing Trading Company, can completely solve the problem of governance structure and decision-making mechanism, realize the direct acquisition of property assets held by shareholders, further optimize the layout of regional outlets and resource allocation, enhance the independence of listed companies, and contribute to the high-quality and long-term development of enterprises in the future.
2. Further strengthen the achievements of mixed reform and set a benchmark for reform
Chongqing Trading Company, established in early 1996, is 100% owned by Chongqing State-owned Assets Supervision and Administration Commission. In 2018, Chongqing Commercial Company started the reform of mixed ownership, and then went through the stages of professional restructuring of Chongqing Commercial Investment Group, public listing and introduction of strategic investors. In March 2020, Wumei Jinrong and Shenzhen Jiajing were successfully introduced to become a mixed-ownership enterprise, which was a pilot enterprise for mixed-ownership reform determined by the state and a "double hundred enterprise" determined by the State-owned Assets Supervision and Administration Commission, and was selected as a successful case in 2022.
After the mixed reform, the competitiveness of Chongqing Commercial Company and its holding Chongqing Department Store has been significantly enhanced, and the shareholder empowerment of the first chain, digital intelligence technology, management efficiency, incentive and restraint mechanism and other aspects have achieved resource sharing, complementary advantages, and obvious industrial synergies, realizing the optimization of the first chain, the acceleration of digital intelligence, the improvement of management efficiency, and the continuous stimulation of vitality. Chongqing Department Store's absorption and merger of Chongqing Commercial Company will help simplify the company's decision-making mechanism and reduce related party transactions. A flatter governance mechanism will help fully stimulate operational vitality, achieve flexible and independent business adjustment, and optimize resource allocation, which will further strengthen the results of mixed ownership reform and set a benchmark for reform.
3. Improve asset quality and provide guarantee for high-quality development in the future
In addition to holding the equity of Chongqing Department Store, the main assets of Chongqing Trading Company include properties such as the Trading Company Building, the Electrical Appliance Building, and the Daping 4S Store, as well as holding 100% of the equity of Wansheng Wujiaohua. These property assets are all located in the core business district of Chongqing, among which the trading company building and electrical appliance building are located in the core area of Jiefangbei "Cross Gold Street", which is strategically located.
Chongqing Department Store is mainly engaged in department stores, supermarkets, electrical appliances and automobiles**, with two "China Well-known Trademark" brands, "Chongbai" and "New Century Department Store", and as of March 31, 2023, it has opened 291 shopping malls in Chongqing, Sichuan, Guizhou and Hubei.
At present, with the help of consumption upgrading, new formats and new models of the retail industry are emerging, and the retail industry is facing the pressure of diversified competition. Through this transaction, Chongqing Department Store can inject high-quality assets such as Chongqing Commercial Company's trading company building and electrical appliance building into Chongqing Department Store, which is conducive to expanding the asset scale, optimizing the asset-liability structure, enhancing the market position in the retail industry, enhancing the company's core competitiveness, and achieving long-term performance boost.