After nearly five months of suspension, the major asset restructuring of Orient (600666, SH) has finally made new progress. According to the company’s announcement on the evening of September 18, the “Framework Agreement on Major Asset Restructuring Transactions†has been signed with the reorganized target company and its shareholders.
Although the specific plan has not yet been announced, it seems that Orient’s restructuring is a significant move. The main assets involved in the restructuring of Hefei Ruicheng Industrial Investment Co., Ltd. include Ampleon, a Dutch company, suggesting that the deal may involve overseas acquisitions. Additionally, data from the National Enterprise Credit Information System shows that Hefei Ruicheng has a registered capital of 6.654 billion yuan, while Orient’s registered capital is only 1.227 billion yuan. This raises questions about how Orient, with significantly smaller capital, can acquire a company several times its size.
It should be noted that Orient has recently been trading at a discount for over a year, and the company held an investor briefing on September 19. The event came as investors were closely watching the progress of the restructuring.
The restructuring appears to follow a "snake swallow" acquisition model. According to the announcement, the current shareholders of Hefei Ruicheng, including Hefei Xinyi Investment Partnership and Beijing Jiaguang Asset Management Center, are transferring shares to the actual controller of Orient. In return, Orient will issue shares and raise funds to support the Hefei Ruicheng project.
This transaction may involve related-party dealings. Earlier this month, Orient mentioned that its controlling shareholders were negotiating with Hefei Ruicheng’s original shareholders to acquire some shares before the official acquisition. While the exact terms are still being finalized, the process is moving forward.
Hefei Ruicheng is no small player. Established in November 2015, the company has a registered capital of 6.653 billion yuan and is based in Hefei. Its legal representative is Fan Yongwu, who also serves as the director and general manager. The company's chairman is Li Bin.
Orient’s semi-annual report shows that its registered capital was adjusted to 1.227 billion yuan after a board and shareholder approval. However, the question remains: how can a company with such a small capital base successfully acquire a firm several times its size? On September 19, a reporter from *Daily Economic News* contacted the company’s secretarial office, and the staff said the acquisition plan is still under review and not yet finalized.
The restructuring could face scrutiny from multiple regulatory bodies. Orient stated that the acquisition aims to expand its industrial chain from semiconductor materials to devices, leveraging advanced technology and market advantages. However, the complexity of the deal—combining a large-scale domestic acquisition with an overseas component—may raise concerns.
Financial commentator Ai Tangming pointed out that the scale of the restructuring could potentially lead to a backdoor listing. Moreover, the involvement of overseas assets raises questions about cross-border capital flows. The issuance of new shares and the associated fundraising efforts are also areas of interest for regulators.
Notably, CITIC Securities appears to have a stake in the restructuring. According to Hefei Ruicheng’s 2016 annual report, Hefei Xinyi Investment Partnership is the largest shareholder, with CITIC M&A Fund Management Co., Ltd.—a subsidiary of CITIC Securities—among its key investors. The legal representative of both Hefei Ruicheng and CITIC M&A Fund Management is Fan Yongwu.
In addition, Orient’s recent stock performance has shown signs of improvement. The amount of funds raised in this round was adjusted from 2.022 billion yuan to 1.695 billion yuan. However, the 12-month validity period of the non-public offering plan approved by the company’s shareholders meeting on September 12 last year has expired. Under regulations from the CSRC and Shanghai Stock Exchange, the share placement will now automatically expire.
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