SDIC's new set of 2.8 billion purchase of major shareholders coal assets

The SDIC Xinji that had been suspended for more than three months (601,918, the previous closing price of 5.32 yuan) was finally released today, "issuance of shares to purchase assets and raise matching funds and related transaction plans," the company intends to issue to major shareholders of SDIC In order to purchase 100% of its shares in SDIC Coal Co., Ltd. (hereinafter referred to as SDIC), the estimated value of the underlying assets is approximately RMB 2.8 billion. The company said that this acquisition can solve potential competition in the industry.

The four coal companies received the following announcement. The SDIC Xinji signed an "Agreement on Issuance of Asset Purchase Framework" with SDIC on August 22 and plans to issue shares to SDIC to buy the SDIC it holds. 100% equity in coal. The estimated value of the underlying assets is approximately 2.836 billion yuan. The base price of the issuance is 7.94 yuan per share, which is adjusted to 5.60 yuan per share after the ex-dividend, which is a premium of 5% over the previous closing price. Based on this calculation, the company's non-public offering of shares to SDIC was approximately 506 million shares.

At the same time, SDIC Xinji will also raise matching funds for non-public offerings of not more than 10 qualifying targets other than the target of the transaction, and the total amount will not exceed 25% of the total transaction amount. The issue price is also 5.60. Yuan/shares. The purpose of the raised funds is to supplement the company's liquidity to enhance transaction efficiency.

The company stated that before the transaction, SDIC's Xinji operation was mainly based on the Liuzhuang Coal Mine, and the operating area was also mainly concentrated in Anhui Province. After the completion of the transaction, four subordinate enterprises, including SDIC Datong, SDIC Xiyang, Zhengzhou Energy, and SDIC Xineng (non-controlling), which are held by SDIC Coal, will be included in the SDIC New Settlement. These four companies operate. The scope is mainly located in major coal-producing areas in China, such as Shanxi and Henan. In 2012, the total coal production was approximately 7.5 million tons. After the acquisition is completed, SDIC Xinji will become a national coal mining, processing, and sales enterprise, and its business scale will be significantly improved.

The fall in coal prices has brought about adverse effects on the background of this transaction. SDIC Coal and SDIC Xinji are subsidiaries of SDIC, and SDIC Coal has more coal assets through its many subsidiaries, which may be related to The new set of SDIC constitutes a competitive relationship.

At the time of the listing of SDIC Xinji, the major shareholder of SDIC had promised that SDIC and SDIC will avoid competing with the company now and in the future. SDIC Xinji stated that although there has been no competition and conflicts of interest in the same industry since the IPO, but with the expansion of the scale of company's production and operation, if the company's sales scope is further expanded, there is a risk of competition with SDIC in the same industry.

It is worth noting that the announcement also shows that for SDIC’s controlled assets that are not yet eligible to be injected into the listed company’s coal business, SDIC is committed to adopting timely injection, transfer of control rights, cancellation or sale, etc. The SDIC's control of coal production and operational quality assets were all transferred to SDIC Xinji. At the same time, SDIC Xinji was granted the right to purchase the coal assets from SDIC.

However, coal prices have been “falling and falling”, creating hidden concerns about the profitability of injected assets. SDIC Xintai admitted that the Qinhuangdao Port 5,500 kcal thermal coal closing price has dropped from approximately RMB 800/ton in early 2012 to approximately RMB 560/ton, and the company and the proposed company are mainly engaged in thermal coal mining and In the sales business, the level of income and profit is greatly affected by the fluctuation of coal prices. In the first quarter of 2013, SDIC’s net profit dropped by 82.59%. If the price of coal continues to decline, it will have a significant negative impact on the profitability of SDIC Xinji and the company that has injected the bid this time. In this regard, SDIC has provided a compensation commitment, but the specific issues are still to be disclosed.