2003: Starting with Foreign Trade

Chapter 543 The Snake Swallows the Elephant Plan

"I really hope this is an April Fool's joke!"

On the afternoon of April 1st, after the market closed, a stock investor with the online name "Two Blocks" posted his daily profits on a stock community forum, expressing his feelings. This sparked numerous comments from other stock investors, who shared their own struggles.

In the comments section, a stock investor with the online name "Dawn" posted: "Don't speculate in stocks, stock speculation is harmful!" This comment received countless likes and comments and quickly rose to the top of the post.

In the second quarter, on the first trading day of April, A-shares dealt a heavy blow to investors, with the Shanghai Composite Index falling 4.13% to close at 3329.16 points, less than 10% away from the 6124-point mark.

The automotive sector continued to suffer the biggest losses today, with overall declines exceeding 7%. Foton Motor plummeted 8.26%, Shuguang Automotive hit its daily limit down, and Changfeng Group also hit its daily limit down.

Shuguang Auto's market value has fallen to 24 billion yuan, and Changfeng Group's stock closed at 9.51 yuan, with its market value falling below 40 billion yuan.

As for BYD, since it is listed on the Hong Kong Stock Exchange, today's 2% drop is not very large, but the share price has still fallen by HK$10. I remember that BYD in Hong Kong fell to around HK$1 or 2, and Buffett was very high-profile in buying the dip at that time.

As for the A-share market, BYD is not yet listed on the A-share market, so it cannot be educated yet.

"The market is falling so fast it's terrifying. You really shouldn't be investing in stocks; you just don't understand this stuff."

Tan Jincheng, who had returned to Ningbo, was in the office of ByteDance's advertising platform, discussing A-shares with Huang Ming and Cheng Linfeng. The opportunity for acquisition had arisen, and the plan for FlashTech to backdoor list could be implemented.

"From the perspective of market value alone, Shuguang Auto is the most suitable. Its current market value is only 24 billion yuan. Calculated after digesting the negative impact of the National III emission standard, it will take at least several more months to fall. Its market value may even be halved."

Cheng Linfeng analyzed the situation from the perspectives of policy and trends, but Tan Jincheng knew that a 50% drop was the minimum, and the stock index would fall to around 1600 points, and could even be 50% lower on top of that.

However, Cheng Linfeng's prediction was not far off. Shuguang Auto does have some merit, and its market value of over 1 billion is indeed quite reasonable. As for Changfeng Group, its market value should be around 1.5 to 1.6 billion.

If the current market value were halved again, it would be roughly the price at which a large institution would acquire it.

Huang Ming nodded in agreement: "Based on 12 billion, buying half of it would be 6 million, plus so many parts and auto licenses. It's like getting a company for free. Shuguang Auto is definitely the most cost-effective option."

"That makes sense, but their company hasn't encountered any operational problems. Although the whole vehicle business has been impacted, the parts business is still doing very well. In addition, the shareholders are too complicated, making the acquisition extremely difficult. Most importantly, it's impossible to keep it a secret."

There was no actual largest shareholder, there were about 10 founders, and with the attention of the local government and the business environment in Northeast China, it was impossible to keep the acquisition secret.

While there are no real secrets to speak of, it is certainly more appropriate for the largest shareholder, such as Changfeng Group, to have an absolute controlling stake. It is much safer to negotiate with one institution than with a dozen individuals individually.

Cheng Linfeng clearly knew the ins and outs: "That's true, it's a bit of a pity, otherwise we could have saved a lot of money."

"That's not entirely true. From the perspective of market value and ByteDance's massive engine, Shuguang Auto is indeed the most suitable. However, from the perspective of the entire group's strategy, Changfeng Group is more suitable."

Shuguang Auto's core business is actually auto parts, and its main vehicle business is buses. Although their Huanghai Auto produces passenger cars, the brand and sales are simply abysmal.

In terms of brand influence, it can't compare to the Changfeng Cheetah series. In addition, Yangzi Pickup has a higher brand awareness than Huanghai Automobile.

In addition to Yongzhou and Xiangcheng, Changfeng Group currently has four vehicle production bases in total, including Chuzhou in Anhui Province and Jingmen in Hubei Province, making it much stronger than Shuguang Auto.

Once a controlling stake is secured and the technical and quality issues are resolved, production can commence immediately.

"Then let's keep our focus on Changfeng Group and make an acquisition plan with a maximum share of 35%."

Currently, Changfeng Group's total share capital has changed to 4.01 million shares, of which 1.79 million shares are normally tradable, and the remaining 2.22 million shares are held by Xiangcheng City Investment. The basis for gaining control is to acquire the shares held by Xiangcheng City Investment.

"To take over Changfeng Group, we first need to acquire at least 1.11 million yuan from Xiangcheng City Investment to reduce their shareholding. Otherwise, even if we acquire all the companies on the market, it won't be of any use."

In addition to these, they also need to acquire nearly 3000 million shares on the market, reducing Xiangcheng City Investment's shareholding while giving themselves 1.4 million shares.

Based on today's closing price, the market value of 1.4 million shares is 13.35 billion yuan. If the acquisition follows the trend of A-shares as I remember, it could be completed for around 7 million yuan.

Of course, this is just an ideal scenario. Even at the current price of 13 billion yuan, buying a shell company for 13 billion yuan is still very cheap.

But the key is that it's not over once you buy it. There are still many things to do after the purchase, such as dealing with the problems left behind by Changfeng.

Even if Changfeng Group faces the risk of bankruptcy, it is still a giant. Even if it goes bankrupt, Changfeng Group's assets are still far greater than those of Shanchi Group. Shanchi's only advantage is that it has a lot of cash on hand.

"How much money do you have in the account right now?" Huang Ming casually replied, "Including your loan, Mr. Tan, and some small profits from this period, the total cash in ByteDance's account is 5.71 million yuan."

Cheng Linfeng chimed in, "It's less than 600 million, still quite a distance away, but funding isn't a big problem."

Based on the current market value difference of around 7 million, this 7 million is actually easy to handle. Bank loans, equity financing, or even pledging are all options. Just by pledging the shares of Orange Technology, Tan Jincheng could easily raise 7 million.

"Yes, funding is not a problem. I'll contact Beicang City Investment to coordinate. Mr. Huang will contact some funds with Mr. Cheng, and we'll also set up some accounts. We'll start building positions in the secondary market gradually."

"Let's not use our own accounts yet, let's use pseudonyms first. Also, keep an eye on Shuguang Auto. If it's really cheap, we can buy some. Anyway, their shares are so dispersed, it's not bad to be a small shareholder and get some shares at the bottom."

Cheng Linfeng, who was in charge of this, said: "Okay, then I'll start building positions in the secondary market. Let's take it slow and buy little by little."

To complete an acquisition, it will definitely require the cooperation of some institutions, such as cooperating with fund companies to buy in the secondary market, signing agreements, and then directly acquiring the shares from them.

Alternatively, Beicang City Investment could establish one or even several new funds, which would be the safest option.

"Okay, I'll go find Mr. Xie now, and you can begin your due diligence."

Tan Jincheng was also decisive; if money wasn't an issue, he would just do it.
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"Changfeng Group? The main body of Cheetah? Is that the company that was rumored to be cooperating with you last time?"

"Yes, that's the one."

"Didn't you deny in the live stream that you had no intention of cooperating?"

Xie Junhong didn't know why Tan Jincheng specifically sought him out to talk about this company. Although Boss Tan liked to talk nonsense in front of the media, he stubbornly refused to admit any problems.

However, when it comes to major investment issues, they rarely make up stories. Since they refuted the rumors in front of so many people during the live broadcast, it must be true.

Tan Jincheng smiled and looked at Xie Junhong: "There is no intention to cooperate. I plan to acquire Changfeng Group and then spin off Changfeng's assets to Weilai Automobile."

"Acquisition? Acquire Changfeng Group? You're not kidding, are you?"

Xie Junhong was stunned, and almost dropped the cup in his hand.

"Of course I'm not kidding. Changfeng is facing a considerable crisis after the National III emission standard is implemented, which is a great opportunity for us."

Xie Junhong gave Tan Jincheng a deep look: "Changfeng Group achieved an industrial output value of 200 billion yuan in 2005 and entered the top 10 of domestic brands. Although they have faced considerable damage to their reputation in the past two years, are you really sure you want to acquire such a company?"

"Are you implying that we're a snake trying to swallow an elephant? But don't you think that's possible? As long as a listed company acquires a sufficient percentage of shares, it's not impossible for a snake to swallow an elephant."

It's difficult to win over Xiangcheng City Investment, but once you do, the plan to "swallow up an elephant" won't be too difficult.

If the negotiations drag on and the market value keeps falling, and Changfeng can't solve the problem of passenger car sales, Xiangcheng City Investment can't just stand by and watch such a company go to waste.

Ultimately, they are just investors. It's already 2008, and it's not a big deal for private enterprises to acquire state-owned enterprises. Cooperation and win-win is in line with the market economy.

"You're amazing, you really dare to think this way. After divesting the assets, you'll put Flash Technology into the existing listed company entity, right?"

After calming down, Xie Junhong understood the reason behind it. Beicang City Investment had studied the several car companies that Flash Motors had contacted. As for why it wasn't the cheaper Shuguang Auto, Xie Junhong didn't even need to ask.

"Just tell me if it's feasible or not. Changfeng's assets are of little use to the listed company, but they are very useful to the newly established Weilai Automobile. This way, our car manufacturing plan can be accelerated."

"The main reason is that FlashTech can go public through a backdoor listing and raise a large amount of money, right?"

"That makes sense. FlashTech is a high-quality asset, and a backdoor listing would also be beneficial for Xiangcheng City Investment. They can transfer some shares and retain others, which would be much better than holding onto a company that is facing bankruptcy."

The acquisition of a large state-owned enterprise and its backdoor listing is quite a lot of information.

"Wait a minute, let me catch my breath. I was wondering why you chased everyone away as soon as you came in."

(End of this chapter)