Produced by |Clear Stream Studio
Author |Zhou Miao, editor-in-chief, Zhao Yan
Recently, due to the acquisition of assets at a premium of more than 20 times, Anhui Chinese Health Pharmaceutical Co., Ltd., a chain pharmacy company, is referred to as "Chinese Health", 301408SZ) has attracted market attention. Previously, the Shenzhen Stock Exchange issued an inquiry letter to Chinese Health for non-permitted restructuring, requiring Chinese Health to further explain the details of the major asset restructuring.
Previously, in July 2023, just 4 months after Chinese Health landed on the GEM, it announced that it would acquire 60% of the equity of Zhoushan Ricken Pharmaceutical Chain *** (hereinafter referred to as "Zhoushan Ricken") by paying cash. According to the announcement, in fact, since the end of 2022, Chinese Health has carried out more than 10 mergers and acquisitions in the field of pharmaceutical retail, all of which are equity acquisitions.
In the past 12 months, Chinese Health has continuously purchased the assets of retail pharmacies, and it is expected that the cumulative transaction amount will account for more than 50% of the company's net assets at the end of the audited consolidated financial accounting report in the most recent fiscal year, which has constituted a major asset restructuring. During this period, in order to complete the merger and acquisition, Chinese Health also changed the use of part of the funds raised from the previous IPO.
Under heavy mergers and acquisitions, the reasonableness of the valuation of the M&A target and the pricing of the transaction have become the core concerns. Qingliu Studio noticed that the above-mentioned multiple M&A targets of Chinese Health had been controlled by the same pharmaceutical chain institution, and some of the targets still had an equity relationship with the company at the time of the merger and acquisition
However, during the merger and acquisition, the pharmaceutical chain has entered bankruptcy reorganization procedures, and its equity in the above-mentioned part of the target has also been subject to judicial auction. From the perspective of the transaction**, compared with the appraisal price when its equity was auctioned by the judiciary, the purchase of Chinese Health** is obviously much higher than the judicial appraisal.
In addition, although Chinese Health claims that the above-mentioned mergers and acquisitions are to enhance business scale and brand awareness, many of the above-mentioned targets have a number of violations and penalties in recent years, and the original controllers of some of the targets have also been involved in bribery cases.
Valuation reasonableness "dispute".
In July 2023, Chinese Health announced that in order to improve its business coverage in Zhejiang Province and expand its scale and competitive advantage, the company will acquire Zhoushan Ricken's equity by paying cash. Founded in 2008, Zhoushan Liken is a pharmaceutical retail chain pharmacy located in Zhoushan City, Zhejiang Province
According to its "Report on Material Asset Purchase (Draft)" and other announcements, Chinese Health intends to take 11.2 billion yuan to purchase 60% of the equity of Zhoushan Liken from natural person Wang Xiangan and Zhejiang Free Trade Zone Xueyuan Project Investment Partnership (Limited Partnership) (held by Wang Xiangan and He Xueyuan), while as of June 30, 2023, Zhoushan Liken's net assets attributable to the parent are only 812690,000;
According to the disclosure, the merger and acquisition was evaluated using the income method and the asset-based method, and if it was evaluated according to the asset-based method, the appraised value of Zhoushan Ricken's book net assets was 5650%, if assessed according to the income method, its appraised value-added rate is 221331%；In the end, Chinese Health chose the income method valuation with an appreciation rate of 22 times as the final evaluation result.
Therefore, the Shenzhen Stock Exchange asked Chinese Health to explain the assessment of value-added. According to the explanation of Chinese Health, the main reason for the large difference between the two valuation methods is that the underlying assets of the restructuring are retail pharmacies, which belong to the asset-light industry, and the book value of net assets is low, which fails to reflect the income brought by factors such as the company's sales channels and industry competitiveness.
In addition, Chinese Health has also attributed the appreciation of the target to the impact of dividends. According to its reply letter to the restructuring inquiry, in the first half of 2023, the target company (Zhoushan Liken) implemented a cash dividend plan of 20 million yuan, and if this dividend is not considered, the assessed value-added rate of the simulation will be significantly reduced to 63951%。
*: Related announcements.
However, Qingliu Studio noticed that Chinese Health previously also said that "the impact of dividends on the valuation has been fully considered", such as in the asset-based method, the cash dividends before the above-mentioned valuation base date have been reflected in the books, and in the income method, Zhoushan Ricken's historical dividends do not affect the expected future cash flow** in the future income, cost and profit and other subjects.
According to the above statement of Chinese Health, dividends should not be the influencing factor in the valuation of the merger and acquisition, so why should Chinese Health use this indicator as the denominator in the calculation formula of the value-added rate when explaining the value-added situation?
In fact, in the M&A and restructuring cases listed by Chinese Health in other markets, such as Jianzhijia's acquisition of Tang Pharmaceutical and Zhongshui Fishery's acquisition of China Fishery Global, the M&A targets Tang Pharmaceutical and China Fishery Global both paid dividends after the valuation base date, and the value of all their shareholders' equity was also deducted from the dividend amount on the basis of the original valuation.
This means that in similar M&A cases, dividends are also not considered as an impactFactors that determine the value-added rate of the M&A target.
In addition, Qingliu Studio also noticed that the financial data of Zhoushan Ricken disclosed by Chinese Health also did not match the annual report data submitted by Zhoushan Ricken to the Industrial and Commercial Bureau
For example, in Zhoushan Ricken's 2021 industrial and commercial annual report, its total assets, total liabilities, owners' equity, net profit, and total profit are 6627960,000 yuan, 5460890,000 yuan, 1167060,000 yuan, 803580,000 yuan, 1050470,000 yuan;
In the "Zhoushan Rickon Audit Report from 2021 to January to June 2023" disclosed by Chinese Health, the above 2021 data are 11.2 billion yuan, 10.3 billion yuan, 950340,000 yuan, 66690,000 yuan, 909870,000 yuan;The difference between the two ranges from one million to ten millionAmong them, the total assets and total liabilities are almost 1 times different.
What is the reason behind such a big difference in the financial data of the target of the merger?
Qingliu Studio also noted that the transaction agreed on performance commitments and compensation arrangements. However, what does not match Zhoushan Ricken's valuation of 22 times is that the two parties agreed on a performance commitment that is "very easy" to complete.
From the perspective of performance, according to the disclosure, in 2021, 2022 and the first half of 2023, Zhoushan Ricken's operating income will be 15.3 billion yuan, 18 billion yuan, 08.4 billion yuan;The net profit was 666900,000 yuan, 1062330,000 yuan, 800010,000 yuan.
According to the agreement, from 2023 to 2025, Zhoushan Liken's net profit deducted from non-attributable to the parent should not be less than 10.71 million yuan, 11.25 million yuan, and 11.81 million yuan. And in the first half of 2023, Zhoushan Rickon has already recorded 734920,000 yuan of net profit deducted from non-attributable to the parent company;
In addition, the increase in the amount of performance commitments made by Zhoushan Ricken in 2024 and 2025 is only. 98%, and in 2022, Zhoushan Ricken's net profit deducted from non-attributable to the parent has increased by 5489%。
The pricing of the M&A target is questionable
In fact, prior to the acquisition of Zhoushan Liken, Chinese Health had already made several acquisitions. According to the announcement, from December 2022 to September 2023, Chinese Health has conducted a total of 15 M&A transactions, all of which are company equity
Among them, except for Jiangsu Shenhua Pharmaceutical*** hereinafter referred to as "Jiangsu Shenhua"), which is a pharmaceutical industry asset, the rest of the purchased assets are acquisitions in the pharmaceutical retail industry, which can be identified as the same or related assets, so they should be combined with this transaction, with a total amount of 50.1 billion yuan.
Qingliu Studio noticed that the underlying assets of the above-mentioned pharmaceutical retail industry, including Zhoushan Liken, were once controlled by another pharmaceutical chain organization, Gansu Zhongyou Health Pharmaceutical Co., Ltd. (hereinafter referred to as "Gansu Zhongyou").
Gansu Zhongyou was originally a pharmaceutical chain located in Gansu Province and had planned to go public. According to relevant reports, in 2016, Gansu Zhongyou, which has a clear listing plan, adopted the "equity + cash" model to complete the merger and acquisition of 5 pharmaceutical chain institutions outside the province, including Zhoushan Liken.
As for the cooperation model between Gansu Zhongyou and the merger and acquisition target, it was mentioned in an exclusive interview with the chairman of the company that after the merger and acquisition, the original (acquired) owner of the enterprise still holds the main executive position in the new company, and Zhongyou manages it through target assessment.
However, according to the announcement of Chinese Health, in August 2021, due to the poor management of Gansu Zhongyou (the adjustment of the listing process), Wang Xiangan and his wife repurchased their 2016 Zeng for 5610000,000** to Gansu Zhongyou's 51% equity in Zhoushan Liken.
In addition to Zhoushan Liken, among the targets of the above-mentioned mergers and acquisitions of Chinese Health, there are also Fujian Yangzu Huimin Pharmaceutical Chain*** hereinafter referred to as "Fujian Yangzu Huimin"), Fujian Haihua Pharmaceutical Chain*** hereinafter referred to as "Fujian Haihua"), Tonglu Yishengtang Pharmacy Chain*** hereinafter referred to as "Tonglu Yishengtang") and other targets have been controlled by Gansu Zhongyou.
As for the rest of the M&A targets, Chinese Health plans to acquire its 499% equity. Different from the above-mentioned situation in Zhoushan, when Chinese Health purchased the equity of the above-mentioned targets such as Fujian Haihua, Fujian Yangzu Huimin and Tonglu Yishengtang, it may not have terminated the equity relationship with Gansu Zhongyou.
According to the announcement of Chinese Health and the change record of industry and commerce, the delivery time of the above-mentioned mergers and acquisitions agreed is April, May and June respectivelyIt is not until September 2023 that Gansu Zhongyou shows its withdrawal from the list of shareholders. However, at that time, Gansu Zhongyou had entered the bankruptcy reorganization procedure.
*: Related announcements.
According to the court announcement, Gansu Zhongyou Health Management Group, the controlling shareholder of Gansu Zhongyou, hereinafter referred to as "Zhongyou Group") and its 30 controlled companies, began to operate in early 2022, with arrears of merchant payments and employee wages and a number of litigation disputes, and entered the bankruptcy reorganization stage in April 2023.
Qingliu Studio noticed that in May 2023, the 51% stake in Fujian Haihua held by Gansu Zhongyou was also auctioned by the judiciary. According to the announcement of the Longyan Municipal Court, the inquiry price of 51% of the equity of Fujian Haihua held by the above-mentioned Gansu Zhongyou is 2741290,000 yuan, the starting price is 19189.03 million yuan.
*: Related announcements.
According to the relevant regulations, the starting price shall be determined by the court with reference to the appraisal price, and the starting price shall not be less than 70% of the appraisal price or market price;The appraisal price is generally determined by the appraisal agency entrusted by the court to comply with the appraisal.
Based on this calculation, the appraised value of the above equity is 2741290,000 yuan;Further calculation, Gansu Zhongyou holds its 4The appraised price of the 99% equity is about 2.68 million yuan. According to the announcement of Chinese Health, its acquisition of Fujian Haihua 4The 99% equity** is 14.27 million yuan, which is much higher than the above appraisal price.
From the perspective of time, the delivery date of the above-mentioned Fujian Haihua equity is April 2023, which is similar to the above-mentioned judicial auction date, and Gansu Zhongyou has entered the bankruptcy reorganization stage at that time. So, why did Chinese Health buy its equity in advance?
In this regard, in the view of Chen Wenming, director of Zhejiang Xiaode Law FirmaboveIt is not normal for a listed company to have a large difference between the appraisal price of the acquisition of the M&A target and the appraisal price of the target at the time of auction in the same period
At the same time, it generally takes a long time for the judicial auction of the court to go from evaluation to formal auction, and listed companies will generally entrust professional institutions to conduct due diligence on the target company when merging and approving the target, and should have some understanding of the judicial auction of the equity of the above-mentioned merger and acquisition targetHowever, it is not excluded that the listed company is indeed unaware or other possibilities.
In addition to Fujian Haihua, are there similar situations with other targets such as Fujian Yangzu Huimin and Tonglu Yishengtang that were bought by Chinese Health during the same time period and had equity relations with the above-mentioned Gansu Zhongyou during the merger and acquisition?
It is worth mentioning that when Chinese Health announced its plan to acquire Zhoushan Liken last year, it also said that it would buy 70% of the shares of another Jiaxing People's Pharmaceutical Retail, which was once controlled by Gansu Zhongyou, hereinafter referred to as "Jiaxing People").
However, in November last year, Chinese Health also said that after several rounds of consultation and communication with the people of Jiaxing, the two parties had disagreements on a number of risk terms in the transaction plan and had not yet reached an agreement, and the parties agreed to terminate the above-mentioned acquisition through negotiation.
A number of targets were fined for violations
In fact, at the previous IPO meeting of Chinese Health, the Shenzhen Stock Exchange had asked questions about its acquisition of retail stores by way of equity acquisitionAccording to Chinese Health, the equity acquisition company mainly values the business scale and business system integrity of the acquireeAfter the acquisition of the controlling stake, the original management team was basically retained.
For example, in the merger and acquisition of Zhoushan Ricken, Chinese Health also said that in terms of personnel, in order to maintain the stability of the management team, business stability, and employee stability, the general manager of Zhoushan Ricken will continue to be served by Wang Xiangan (its original actual controller), and the general manager of Zhoushan Ricken is the legal representative.
However, Qingliu Studio noticed that among the above-mentioned merger and acquisition targets of Chinese Health, many pharmacies have been fined for illegal activities such as selling inferior drugs, expired medical devices, and practicing pharmacists "hanging certificates", and the original controllers of some pharmacies have also been involved in bribery cases. In other words, under the leadership of the original management team of the target of the merger, many pharmacies have a "bad record".
Such as Ma'anshan Mandy New Pharmacy Chain***, hereinafter referred to as "Mandy New Pharmacy");According to the announcement, the merger and acquisition of Mandy New Pharmacy is also one of the more important mergers and acquisitions of Chinese Health, and over-raised funds were also used in the merger and acquisition. In this transaction, Chinese Health acquired 51% of the equity of the new company after the restructuring of the above-mentioned Mandy New Pharmacy, with a transaction amount of about 2$1.9 billion.
According to public information, Feng Denggui, the actual controller of the above-mentioned Mandy New Pharmacy, has been involved in bribery cases in recent yearsIn a second-instance verdict in 2019, it was mentioned that the defendant Qin Xingping was sentenced to 7 years in prison and confiscated 400,000 yuan of property for the crime of **, misappropriation of funds, and embezzlement;And part of the bribes received by Qin Xingping came from the above-mentioned Feng Denggui.
According to the verdict, before the case, Qin Xingping was a department-level manager of Ma'anshan Central Hospital, and was dispatched by Ma'anshan Central Hospital to serve as a director and deputy general manager of Mandi Xinda Pharmacy and other companies under Feng DengguiDuring his tenure, he also proposed to Feng Denggui to embezzle the company's funds for personal investment, some of which were later returned by Feng Denggui with his personal property.
In another *** case, the defendant was also alleged to have illegally accepted property from Feng Denggui, chairman of Mandi New Pharmacy (then), to obtain care in terms of drug delivery, payment for goods, and loan application during his tenure as president of Ma'anshan Maternal and Child Health Hospital and executive director of Ma'anshan People's Hospital from 2009 to 2017.
In addition, the above-mentioned M&A targets themselves have also been subject to administrative penalties, such as the above-mentioned Mandy New Pharmacy was fined for publishing false advertisements in March 2023 and was also fined for improper prize sales in 2022The above-mentioned Zhoushan Liken was fined in August 2023 for selling the inferior drug Wuji Baifeng Pill;
There is also a branch of the pharmacy chain in Mingguang City, which was fined for selling expired "medical cold compresses (pediatric cough patches)" in 2023, and other branches were previously fined for the "hanging certificate" behavior of licensed pharmacists and the failure to purchase drugs from qualified enterprises.
Another example is Jiangsu Shenhua, which was also acquired 100% of the shares, and the company was punished by the customs in 2023 for exporting the export goods subject to statutory inspection without inspection and without authorization;In 2020, he was also included in the list of serious untrustworthy punishments in the field of production safety by relevant departments for an accident involving a worker.
It is not difficult to see that whether it was before or in the year of the merger, the above-mentioned targets had a record of violation penalties, and if, as stated by Chinese Health, it basically used the "original team" of the target during the merger and acquisition, then there will still be compliance risks in the future?And will it have an impact on the listed companies themselves?