There is a "Management Measures for Major Assets Restructuring of Listed Companies", and Baobian Electric gave up the acquisition of Yunchang Electric.

On January 13, Baobian Electric announced that it would abandon the acquisition of Yunchang Electric, leaving only the controlling shareholder Bingzhuang Group to raise funds to repay the loan and replenish a “pure” fixed-income transaction. The change of Baobian Electric's acquisition of Yunchang Electric ended in failure.

The reasons behind the four revisions and the two changes in the acquisition ratio are not the reasons behind the decision of Baozheng Electric. It should be the valuation method adopted by the supervisory layer for the company’s acquisition of Yunchang Electric, and the sustainable profitability of the underlying assets in the fierce competition of the industry. The strong questioning has made this M&A case that is contrary to the spirit of the “Management Measures for Major Assets Restructuring of Listed Companies” difficult to retreat.

The Measures for the Administration of Major Asset Restructuring of Listed Companies are clear, and the reorganization should be beneficial to the listed companies to enhance their ability to continue to operate and to promote the continuous improvement of the quality of listed companies. However, Baoding Electric's plan to acquire Yunchang Electric is the opposite.

The first disclosure plan shows that Baobian Electric intends to issue shares to the Bingzhuang Group, raises 1.125 billion yuan of funds, and simultaneously issues shares to Shanghai Changwei and Southern Assets to acquire 79.97% shares of Yunchang Electric. In the third revision, Baobian Electric adjusted the acquisition plan and proportion, and only issued shares to Shanghai Changwei, and acquired 54.97% of its shares in Yunchang Electric. The 100% equity of Yunchang Electric was valued at 593 million yuan, and the final transaction price of 54.97% of the shares involved in the transaction was 326 million yuan.

The reduction in the proportion of acquisitions has not reduced the obstacles. In the eyes of the industry, the core issue of Baobian Electric's long-delayed solution is still the use of the cloud-changing electrical valuation method.

From the assessment results, regardless of future business risks, the seemingly more equitable asset-based approach assessment value is 601 million yuan, much higher than the 511 million yuan assessed by the income approach. This means that Baobian Electric knows that there are no small risks in its future operations, but it is directly ignored and still acquired at a higher price.

At this time, the situation of Yunchang Electric has begun to deteriorate. In terms of revenue, from 2014 to 2016, Yunchang Electric's revenue was 663 million yuan, 747 million yuan and 603 million yuan respectively, with year-on-year growth rates of 29.38%, 12.67% and -19.32%, respectively. It is shrinking to 2.02 billion yuan. In terms of profitability, in 2015, 2016 and the first half of 2017, Yunzhi Electric's net profit attributable to owners of the parent company was 31.278 million yuan, 34.937 million yuan and 5.198 million yuan respectively. Yunchang Electric said frankly that the decline in performance in 2017 was due to the cyclical fluctuations in the upstream and downstream industries, resulting in shrinking profit margins and lower operating income. It is estimated that the annual revenue will fall 16.89% year-on-year, while the rising trend of raw materials will result in a net profit of only 1500. Ten thousand yuan, down 66.9% year-on-year.

Equally embarrassing, there is also a vague description of the development prospects of Yunchang Electric. Returning to the focus on power transmission and transformation business, it is “a familiar ride” for Baobian Electric. However, in the past ten years, it has spent a lot of energy on the new energy business, which has greatly reduced the competitive advantage of the company and its proposed assets. At the same time, the growth of the industry is not as good as before, and its subsequent development prospects are optimistic.

In the face of regulatory doubts, there are inconsistencies in the multiple responses of Baobian Electric. For example, in the first feedback explanation, the company proposed that “the traction transformer production enterprises generally face greater revenue pressure due to the lower-than-expected progress of downstream investment in the industry”, but in the second feedback explanation, the company believes that “Yunchang Electric” The market demand for railway traction transformers is gradually increasing."

Therefore, in the latest revision disclosed in the day before, Baobian Electric directly cut off the acquisition plan for Yunchang Electric, and still retained the fixed use of fundraising for repayment and replenishment. Since the company did not abandon the refinancing claim together, there are still variables in how the follow-up company works.