Before and after listing, Chinese Health frequently acquired assets. This not only helps to expand the company's business scale, but also increases goodwill, forming a certain goodwill impairment risk.
Lv Gong, a researcher at the Investment Times.
Before and after the listing in March this year, Anhui Chinese Health Pharmaceutical Co., Ltd. was hereinafter referred to as Chinese Health, 301408SZ) frequently buys assets, and a recent transaction has also attracted inquiries from the Shenzhen Stock Exchange.
A few days ago, in response to the company's proposed acquisition of 60% of the shares of Zhoushan Liken, the Shenzhen Stock Exchange issued a restructuring inquiry letter to Chinese Health. In the letter, the SZSE requested further explanations on the company's fundraising, performance commitments, or the formation of a high risk of goodwill impairment.
It is reported that Zhoushan Liken is mainly engaged in the pharmaceutical retail chain business, that is, the sales of drugs and health-related products through its own directly operated chain stores. The aforementioned series of businesses are in line with one of the core business segments of Chinese Health. After the completion of this transaction, the retail business of Chinese Health will officially enter the Zhejiang market, further realizing the company's development strategy of "deeply cultivating Anhui, radiating the surrounding areas, focusing on East China, and taking root in the Yangtze River Delta".
Researchers from the Investment Times have learned that this is not the first time that Chinese Health has recently acquired assets. From December last year to September this year, the company has carried out 15 consecutive asset transactions, including 3 capital increases and 12 purchases. If Zhoushan Ricken transactions are added, the total amount of the company's related transactions has reached 84.8 billion yuan.
According to the analysis, the frequent acquisitions of Chinese Health will indeed help the company expand its business scope and improve its regional layout, so as to achieve scale effect and synergy effect and improve the company's market competitiveness. At the same time, it will also enable the company to accumulate a large amount of goodwill, increasing the risk of goodwill impairment. So, how do you weigh the impact of an acquisition on a company?
Regarding the new goodwill in 2023, Chinese Health said in the reply to the inquiry letter, "Since the completion of the acquisition, the target companies have been operating normally, and there have been no major adverse changes in the macro market environment, medical insurance policies, and customer business." The company said, "As of the date of the response announcement, the company has no indication of goodwill impairment." Subsequently, at the end of 2023, the Company will continue to conduct a prudent assessment of all goodwill. If there is an indication of impairment, the company will strictly follow the accounting standards for business enterprises to account for the impairment of goodwill. ”
Inquiries about premium acquisitions
In November this year, the "Report on Major Asset Purchase (Draft)" (hereinafter referred to as the "Report") disclosed by Chinese Health showed that the company planned to acquire 60% of the shares of Zhoushan Liken held by Wang Xiangan and Xueyuan Partners by paying cash. Upon completion of the transaction, Zhoushan Ricken will become a holding subsidiary of Chinese Health.
For the equity valuation of the target company, Zhoushan Ricken, Chinese Health finally used the income method to evaluate the results. As of the appraisal base date, the appraised value of all the equity of Zhoushan Rickon shareholders was 18.8 billion yuan, with an increase of 17.9 billion yuan, with a value-added rate of 221331%。After negotiation between all parties, the transaction price of Chinese Health's acquisition of 60% equity in Zhoushan Liken is 11.2 billion yuan. Both the valuation and the final transaction price of the company are at a high premium for this acquisition.
In addition to 67.2 million yuan of self-owned or self-raised funds, the remaining 45 million yuan comes from the company's change in the use of part of the IPO raised funds.
In February this year, Chinese Health said in its prospectus that the company's IPO "plans to raise 6."0.6 billion yuan, of which 55.6 billion yuan is planned to be invested in the marketing network construction project, and another 50 million yuan will be used to supplement working capital." After deducting the issuance expenses, the actual amount of funds raised by the company was 87.9 billion yuan, over-raised by nearly 27.4 billion yuan. As of October 31, 2023, the company has used a total of 46.7 billion yuan.
In November, Chinese Health deliberated and passed the "Proposal to Change the Use of Fundraising". The company said, "In order to improve the efficiency of fundraising and optimize the allocation of resources, the company decided to change part of the fundraising amount used for the 'marketing network construction project' to the new project 'purchase of 60% equity of Zhoushan Liken', involving an amount of about 45 million yuan." ”
The above changes also caused the Shenzhen Stock Exchange to ask Chinese Health to further explain the reasonableness and compliance of the change in the use of the fundraising. Chinese Health recently replied, "As of October 31 this year, the company's marketing network construction project still needs to invest 39.1 billion yuan, the company is expected to take 2-3 years to complete. The company believes that the efficiency of fundraising and the increase of market share in the aforementioned methods are slightly inferior to those of the merger and acquisition path. ”
At the same time, the Shenzhen Stock Exchange also requires Chinese Health to explain the company's own funds and self-raised funds in combination with the balance of funds, funds required for daily operations, investment and financing arrangements, solvency, and payment arrangements for the equity transfer price, etc., as well as whether there are risks such as failure to complete the raising in time. In this regard, the company said, "After the completion of this transaction, the company's operating scale and profitability will be improved." Through the accumulation of continuing operations and existing bank credit lines, the company can fully protect the monetary funds required for daily operations. ”
In addition, in the letter of inquiry, the Shenzhen Stock Exchange also had doubts about the performance commitments agreed upon at the beginning of the transaction. Researchers from the Investment Times noted that in order to protect the interests of the company, the two parties to the transaction signed a "supplementary agreement" on December 13 to revise the performance commitments of the original agreement. After the revision, the performance commitment period of the target company is changed to 2023, 2024, 2025 and 2026, and the promised net profit for each of the aforementioned years shall not be less than 11.56 million yuan, 12.23 million yuan, 13.09 million yuan and 13.72 million yuan respectively.
Multiple assets have been previously purchased
Prior to the acquisition of Zhoushan Rickon's equity, Chinese Health had already purchased a number of assets in a row. From December 2022 to September 2023, the company has conducted a total of 15 asset purchase transactions, all of which are equity in the company. In terms of transaction amount, if the Zhoushan Ricken transaction is added, Chinese Health has invested a total of 84.8 billion yuan.
Among the above 15 transactions, except for the assets of Jiangsu Shenhua's pharmaceutical industry, the remaining 14 asset purchases of Chinese Health were all acquisitions in the pharmaceutical retail industry. This is the same or similar business scope as the company's Zhoushan Liken transaction, and can be identified as the same or related assets. These 14 transactions are calculated on a consolidated basis with the Zhoushan Ricken transactions, involving a transaction amount of 50.1 billion yuan.
Researchers from the Investment Times noted that on March 1, 2023, Chinese Health, which had just landed in the capital market, continued to acquire assets, aiming to expand its scale and enhance the company's profitability and market competitiveness. As of the end of June this year, the company had a total of 1,332 directly operated chain stores. After the completion of the Zhoushan Liken equity acquisition transaction, the number of directly operated stores of the company will increase, and the company's main business scale, market share and comprehensive competitiveness will also be significantly improved.
However, due to the large-scale acquisition, the company's goodwill continues to rise, which has also become a risk that Chinese health needs to pay special attention to. According to the report, after the completion of the Zhoushan Rickon equity acquisition transaction, the general manager of Zhoushan Rickon will continue to be Wang Xiangan, and the company will be included in the consolidated financial statements of Chinese Health. As a result, Chinese health will add nearly 10.5 billion goodwill.
According to the financial report data, as of the end of the first three quarters of this year, the goodwill of Chinese Health has increased to 60.3 billion yuan. During the same period, the company's net profit attributable to the parent company only achieved 8801730,000 yuan, less than 100 million yuan, far lower than the company's goodwill scale in the same period. As for the reasons for the change in goodwill, Chinese Health explained that it was mainly due to the acquisition of Ma'anshan Guosheng Mandisin, Shenhua Pharmaceutical and other companies.
Why has the company been acquiring related assets so frequently recently?In this regard, Chinese Health mentioned four factors in its reply: first, through the merger and acquisition of assets in the same industry, the scale of the enterprise will be expanded, which can form an effective scale effect, thereby bringing full use and integration of resources;Second, the company can take this opportunity to further promote the strategic development of the retail business segment of "deeply cultivating Anhui, radiating the surrounding areas, focusing on East China, and taking root in the Yangtze River Delta".Third, by holding regional mature chain pharmacies, the company can achieve the purpose of rapid layout;Fourth, the continuous acquisition of related similar assets can effectively enhance the brand awareness of "Chinese Health" and "Guosheng Pharmacy" and increase the added value of the company's business.
At present, the equity acquisition transaction of Zhoushan Liken still needs to be reviewed by the general meeting of shareholders of Chinese Health, and there is uncertainty whether it can finally be approved. The impact of this transaction on the company's operations remains to be seen.
The purchase of assets in the 12 months prior to the restructuring of Chinese Health
Information**: Report on the Company's Material Asset Purchase (Draft).