The Whole Story Of HNA Technology'S Discount Sale Of "Yingmai International": The Buyer And The Seller Disclosed The Transaction Price Difference Of $1.3 Billion

On the evening of June 10, HNA technology announced that it would postpone the holding date of the "first extraordinary general meeting of shareholders in 2021" to June 24, which added variables to the suspicious sale plan of Yingmai international.

According to the official website data of platinum equity (hereinafter referred to as "platinum capital"), the 21st century economic report found that its purchase price of Yingmai international was US $7.2 billion, which was more than US $1.3 billion different from the purchase price disclosed by HNA technology.

On June 11, HNA technology Securities Department responded that it was due to different accounting standards and different calculation modes.

However, since the determination of the buyer and the sale plan at the end of last year, there has been constant controversy over this large-scale asset "sale" in the past six months.

In the past four years, more than 90% of the revenue and net assets of HNA technology have been contributed by Yingmai international. Seeing that the latter's performance has gradually stabilized and become the most core asset in the listed company, HNA technology has been sold at a discount in the "harvest period", which has triggered endless speculation in the market. On the other hand, after the loss making Yanjing Hotel was stopped, HNA technology did not give an answer on what to do after selling Yingmai.

Behind this series of controversial actions, can HNA technology be sold?

What is the intention of selling core assets?

As the main listing platform of HNA logistics, Tianhai investment (the predecessor of HNA Technology) began to plan a "gorgeous turn" due to the continuous downturn of the shipping market.

On December 5, 2016, Tianhai investment completed the acquisition of 100% equity of Yingmai international, a leading American it supply chain, through its overseas subsidiary GCL acquisition, Inc., in the form of cash payment. After the acquisition, Yingmai international withdrew from the New York Stock Exchange and became a holding subsidiary of HNA technology.

In this acquisition, Tianhai investment paid a total of about US $5.982 billion in total. The sources of funds for the acquisition included the company's own funds, joint investment and bank loans. Among them, the company's own capital was 8.7 billion yuan, and the joint investor Guohua life insurance investment was 4 billion yuan. The rest was bank loans.

However, less than five years later, the high capital cost has become the "fuse" for HNA technology to sell Yingmai international.

From 2017 to 2020, the financial expenses of HNA science and technology will reach 1.188 billion yuan, 3.727 billion yuan, 3.903 billion yuan and 2.221 billion yuan respectively.

According to HNA technology, as Yingmai International's dividend amount is not enough to cover the repayment of the principal and interest of the M & a loan, the listed company provides funds to gclim mainly to repay the M & a loan and its interest.

HNA technology believes that due to the large amount of bank loans, the asset liability ratio has increased significantly, and it needs to bear higher financial expenses, and the company's overall liquidity pressure is greater.

According to the information released, GCL failed to repay the principal of the first phase of loan on December 5, 2017 as agreed in the syndicated loan agreement, amounting to US $400 million. This M & a loan was only paid $450 million on March 2, 2018.

In addition to the US $450 million already repaid, the company has four loans to repay from 2020 to 2023, which are US $600 million, US $600 million, US $800 million and US $800 million respectively. According to the latest Abstract draft of HNA technology, the principal of the $1.35 billion syndicated loan to be repaid by May 5, 2021 has not been repaid, and the further extension is still in progress.

"A very important reason for the company to sell Yingmai is that the company has a large number of M & A loans and can not repay the principal. If this problem is not solved, the company will face great risks." On June 10, a person from the Securities Department of HNA science and technology told the reporter of the 21st century economic report who called as an investor.

Despite the high debt pressure, as the core asset of HNA technology, selling Yingmai international is not the best way for small and medium investors.

As one of the world's largest IT distributors, inMay International's main business includes providing customers with global IT product distribution and technology solutions, mobile devices and life cycle management, e-commerce supply chain solutions and cloud services. Under the influence of the new crown epidemic in 2020, cloud services will be more widely used. Yingmai international, which relies on global IT expenditure, still maintains a stable profit growth and performance level.

In 2017, 2018, 2019 and 2020, the operating revenue of Ingram international was US $46.675 billion, US $50.437 billion, US $47.197 billion and US $49.120 billion respectively; The net profits were US $199 million, US $352 million, US $505 million and US $644 million respectively.

During the same period, the operating revenue of HNA technology was 315.460 billion yuan, 336.472 billion yuan, 327.153 billion yuan and 336.694 billion yuan respectively. Yingmai supports the revenue of HNA technology with its own strength, which is the core asset and performance source of the company.

Disputed transaction price

At the heart of another dispute about the sale is the transaction price.

As mentioned above, the cost price of HNA technology to buy Yingmai international was US $5.982 billion. However, after four years, the sales price of inMay International announced by HNA science and technology did not rise, but fell instead.

According to the sale plan, the total estimated value of gclim is about US $1453 million, and the total estimated value of its 100% equity of Ingram international is about US $5.826 billion, which is US $156 million lower than the cost price.

HNA technology pointed out: "in the composition of the total price of about US $5982 million in 2016, US $5.832 billion is the value of all common shares of Ingram international, and about US $150 million is the payment consideration of the equity incentive plan. The estimated value of 100% equity of inMay international in this transaction is about $5.826 billion, which is smaller than the acquisition price in 2016. "

But it is difficult to convince opponents.

Zhu Yingfeng explained the reason why he voted against it when replying to the reporter of the 21st century economic report that "the listed companies ignore the fact that the profits of Yingmai international have increased by 3-4 times in recent years, and continue to be eager to sell Yingmai at such a low price without considering the loss caused by the interest of M & A loans formed in recent five years. Therefore, it is not wise and rational to sell Yingmai

In fact, the complexity of the deal goes far beyond that.

The consideration for the sale of HNA technology includes cash payment consideration and additional payment consideration on the delivery date. Among them, the cash consideration paid on the delivery date is US $5.9 billion, but the estimated value impairment amount (dividends distributed by inmar International), transaction costs, principal and interest of debt to be paid, etc. shall be deducted.

According to the preliminary forecast of HNA technology, the adjusted EBITDA of Yingmai international from 2021 to 2023 will be about 1.204 billion US dollars, 1.211 billion US dollars and 1.225 billion US dollars respectively.

HNA technology frankly said that "the $1.35 billion EBITDA only sets the financial upper limit for such incentive mechanism, and does not imply any predictability and realizability." there is great uncertainty in the future for the full amount of additional payment consideration.

On June 10, 21st century economic reporter also expressed doubts to the Securities Department of the company. However, the operator did not respond positively to the problem of "low pricing", but repeatedly stressed that the company was trying to alleviate the debt pressure.

Where is the buyer sacred?

HNA's process of confirming trading partners is also one of the reasons why shareholders are rather worried.

"Yingmai international is one of the world's top 500 enterprises. As a whole, its target of acquisition and transfer is heavyweight all over the world. Even if it is necessary to sell for any consideration, it is reasonable to set up a special committee first, which is composed of representatives of major shareholders of listed companies, representative members of the board of directors, management members and external experts, and employ international investment banks to solicit transferees in public, so as to maximize the value of Ingram international. " HNA technology's second largest shareholder Guohua life said.

Earlier, the 21st century economic reporter learned from people familiar with the matter that in the early stage of the transaction, some large international sovereign funds wanted to participate in the bidding for Yingmai international, but the major shareholders of HNA technology and the listed companies did not give the opportunity to negotiate.

The information has not been confirmed by HNA technology, and the personage of HNA technology pointed out that "the company has not published relevant information, and the announcement shall prevail".

On December 25, 2018, HNA technology said that "after comprehensively considering the changes in external market environment and focusing on the main business and other strategic factors, the company is currently negotiating with relevant parties on the possibility of selling Yingmai international or cooperation".

After more than two years of planning, HNA technology has finally disclosed its "buyer" identity. According to the solicitation plan, the acquirer "Imola Acquisition Corporation" is a company specially established for this transaction, which is a subsidiary company indirectly wholly owned by Imola JV holdings, L.P., and its general partner is a private equity fund named platinum equity, LLC.

The reporter found that the fund was disclosed in June this year that it intends to take over 100% equity of urbaser, an environmental protection asset of China Tianying. The bid price is also the initial price of urbaser purchased by China Tianying - 1.5 billion euro (about 11.7 billion yuan).

In addition, platinum equity took over the Lifescan business of J & J in 2018, and acquired cabinetworks, a leading American cabinet manufacturer, in April this year.

Where will HNA technology go?

Under the initial decision of the acquisition plan, another big doubt placed in front of investors is undoubtedly, where will HNA technology go after it is completed?

In 2020, the main business income of inMay international accounts for 100% of the revenue of HNA science and technology. However, after Yingmai international is set up, the main assets of HNA technology will only be cash, without specific main business.

According to the above-mentioned HNA technology personage, the company's controlling shareholder, actual controller, directors, supervisors and senior executives have promised that the listed company (or assisting the listed company) will place qualified assets into the listed company no later than December 31, 2021. The company will make good use of the return funds from sales, actively layout new business and earnestly fulfill relevant commitments, focus on transformation and development, and continuously improve the ability of sustainable operation.

Whether this promise can be fulfilled or not is as follows.

The reporter noted that before issuing the announcement of Yingmai international, HNA technology had announced that it planned to purchase 100% equity of Yanjing Hotel and two dry bulk carriers by means of asset replacement and cash respectively, with a total transaction price of about 2.3 billion yuan.

According to the acquisition plan, HNA intends to sign the equity replacement agreement with Haichuang Baichuan, replacing the 100% equity of Zhiru Technology (as the put out equity) and the 100% equity of Yanjing Hotel held by Haichuang Baichuan (as the placement equity), and Haichuang Baichuan and HNA technology are the same actual controllers.

In the view of some small and medium shareholders, the quality of this asset is really poor.

In the assets replacement, the book value of the net assets of Yanjing Hotel on the base date of appraisal is -869 million yuan, but the appraisal value is 2.130 billion yuan, and the value-added value is as high as 2.999 billion yuan.

In addition, Yanjing Hotel has three mortgage guarantees for the loans of HNA Group and its related party HNA tourism group with its own houses and land use rights, with a total amount of about 2 billion yuan. Among them, due to the default of HNA Group, Beiyin Financial Leasing Co., Ltd. seized the self owned house and corresponding land use right of Yanjing Hotel in 2019. Both parties agree to release the mortgage guarantee and seal up before the delivery of assets. At the same time, Yanjing Hotel also has many transactions with related parties.

"From the perspective of financial data, Yanjing Hotel is also an industry with a lot of debts, lawsuits and low profitability. It is also an industry with no future, and it is not helpful to improve the quality of listed companies. This is not in line with the spirit of the Central Committee and the China Securities Regulatory Commission (CSRC) in promoting the quality of Listed Companies in recent years." Zhu Yingfeng said.

In the face of opposition, HNA eventually cancelled the transaction of placing 100% equity in Yanjing Hotel and submitted it to the general meeting of shareholders of the company for deliberation. As for the purchase of two dry bulk carriers with cash of about 290 million, it does not need to be submitted to the general meeting of shareholders because it accounts for less than 5% of the absolute value of the company's latest audited net assets.