2003: Starting with Foreign Trade

Chapter 555 The Bottom Line of the Acquisition

"Judging from Mr. Li's attitude, he seems to have agreed. Now it's up to us to make a quote."

Zhang Yong went to Yongzhou with Xie Junhong, while Huang Ming and Tan Jincheng led the team. After drinking tea, Tan Jincheng told Huang Ming about the analysis they had discussed in the tea room.

"It seems they intend to sell, but they can't get over their psychological barrier yet, and there's also the issue of price."

Yangzi Automobile was once very popular in Anhui Province. They originally manufactured electric fans and refrigerators. Older people in Anhui Province should still remember Yangzi electric fans.

However, like many local state-owned enterprises, it eventually succumbed to market competition and gradually declined.

Before Changfeng acquired Yangzi Automobile, Yangzi Automobile had already undergone a restructuring, which involved cooperation with Hong Kong Bank of China. Unfortunately, it also failed to save the company.

"Yangtze Motors was initially priced at 4 million, but that was three years ago. What do you think would be a suitable price for us now?"

In other words, Changfeng Group actually spent 2.2 million yuan in cash at the time. It would have been best if they could have directly acquired the 55% stake held by Changfeng Group, which would have eliminated the need to negotiate with Xinhua Lian.

Huang Ming was also having a headache. He had spent 2.2 million yuan three years ago, so there had to be a premium. Otherwise, even if the other party agreed to sell, they would still be unhappy, which would affect the subsequent acquisition of shares in Changfeng Group.

However, judging from the boss's attitude, he doesn't want to offer too much, so negotiating a lower offer will be a major challenge for the team.

The boss can be really stingy sometimes, especially when it comes to acquisitions. He knows this all too well and always says things like, "If we can save 100 million, we should save 100 million to pay everyone's salaries."

After thinking for a moment, Huang Ming said, "I can't give you an answer right now. I'll go back and work on a plan and think about it."

If we want to lower the price, it seems we need to work on the secondary market and coordinate with the hype surrounding Changfeng Group to drive up their stock price. There might be some opportunities there. Huang Ming has experience in this area.

“Okay, let’s talk about it in a few days. We’re not in a rush. If necessary, I can go to Yongzhou. I’ll leave this place to you.”

Go to Yongzhou and see what the investment environment is like there. Mineral resources are money as soon as they're dug out of the ground. If the business environment isn't good, there's really nothing you can do. You also need the cooperation of local bigwigs.

Although Changfeng Group has moved its headquarters to Xiangcheng, it is still quite easy to talk to in Yongzhou. With such a big name, it is somewhat useful.

"Okay, but it's better if you don't get involved in discussing specific prices, boss. I'm sure Mr. Li won't get involved either."

The price the boss quotes is the final price; he reveals his hand upfront, so if you're not satisfied, there's no room for negotiation.

"By the way, boss, I have another question. Since you're going to make cars, why not choose JAC? You have more connections in Anhui Province, and JAC isn't selling cars well right now."

JAC's three main products—Refine, light trucks, and bus chassis—have all experienced poor sales for two consecutive years, with the first quarter of this year being particularly disastrous. According to its financial report, JAC has seen a significant decline in both profit and revenue for two consecutive fiscal years.

Major institutions generally predict that JAC Motors may experience its first loss since its listing this year, which could be an opportunity for the company's owners.

Tan Jincheng shook his head: "Forget about that. First, the cost is too high. Second, you're not from Anhui Province, so you don't understand the importance of Jianghuai. It's the lifeblood of the province, and it's impossible for us to sell it."

More than a decade later, people in Anhui Province had this joke: "Anhui Province cannot tolerate a third local brand." Although this statement is somewhat of a joke, it is not an exaggeration when looking at the entire history of Anhui's automobile industry.

Chery, backed by Wuhu, enjoys absolute local support. Coupled with its geographical advantages and its own hard work, it has managed to carve out its own niche.

In other cities, such as the Andar brand, Yangzi was not so lucky. Due to insufficient support from the local government and the province, coupled with its own operational problems, it either went bankrupt or was acquired.

The only company that received strong support was JAC Motors, and this attitude has remained consistent.

"What do you mean?"

Huang Ming was somewhat puzzled. To be honest, compared to Changfeng Group, JAC had bigger problems. While the national automobile market continued to grow, JAC's revenue and profits declined year after year, and all its products were underperforming.

Changfeng Group still has the off-road vehicle procurement contract with ZF, which can reliably guarantee that the Cheetah series can sell 2 vehicles every year. This procurement contract of 2 vehicles is also a guarantee of Changfeng's profits.

Since they dared to swallow Changfeng Group like a snake trying to take on an elephant, why can't they take on Jianghuai, which is also a listed company? The cost is much higher, but the returns are also much greater. Jianghuai's scale is much larger than Changfeng's.

Tan Jincheng curled his lip: "It's not about the money, it's about whether you would sell your son."

Tan Jincheng's plan involves acquiring approximately 10 to 12 billion yuan to complete the acquisition of Changfeng Group's equity. If Jianghuai acquires 30% of the shares, it can also become the controlling shareholder, which is something they can easily scrape together.

But look at how many people from Anhui Province and Luzhou are among his top ten shareholders. This isn't about shareholding at all. You could say that if Tan Jincheng dared to mess with Jianghuai, the power battery project wouldn't even need to be done in Luzhou; he'd be guaranteed to lose everything.

"Uh, is that really a saying?" Huang Ming didn't really understand this aspect.

"We can't mess with him. We can talk about that. Also, let me tell you my bottom line for acquiring Changfeng. It's between 10 billion and 12 billion yuan. If you want to acquire it in parts, you can decide what to do."

Orange Technology is about to go public. Once it goes public, Tan Jincheng can directly go through the pledge process. With the help of ByteDance's advertising platform, raising 10 billion yuan will be no problem at all.

Of course, it's impossible to empty the entire assets of ByteDance. He also needs to buy shares in other car companies, such as second-tier brands like Shuguang Auto. Tan Jincheng wants to buy shares in any listed company that has the opportunity.

JAC Motors is also a good investment opportunity. You could buy a small stake (one or two percent) in the second half of the year to become a minority shareholder, and maybe even make some money in the stock market while pursuing future collaborations.

It shouldn't be a problem for prices to increase two or three times.

Other companies also face the risk of bankruptcy. If you were to ask Tan Jincheng which domestic car company has the lowest risk of bankruptcy, it would definitely be JAC Motors, whose benefits are so good that they would make all other car factories envious.

"10 to 12 billion? Okay, I understand. I'll go and work on the splitting plan right away." Huang Ming breathed a sigh of relief, a weight finally lifted from his shoulders.

This boss is great in every way. He has an exceptional talent for business, a clear investment strategy, and even a forward-thinking mindset. He's also incredibly lucky; every time he decides to gamble, he wins.

The only thing that Huang Ming and his colleagues with formal training found difficult to get used to was that their boss's thinking was too unpredictable. He often did whatever he wanted without any concrete plan. After so many days of negotiations, he still hadn't revealed the bottom line for the acquisition price.

This might be the way of thinking of someone who works unconventionally, since the boss hasn't learned much professional management knowledge.

"As usual, whoever gets the lowest price will receive an additional bonus for their entourage. It's up to you how you do it."

"Haha, I see."

ByteDance's cash reserves alone are nearly 6 million yuan. Apart from a portion used for secondary market equity transfers, there are still a lot of funds remaining. In addition, the boss has previously stated that he will pledge some of the shares after Orange Technology is officially listed.

The acquisition price is almost one-third of Changfeng Group's current market value. The acquisition is not a problem and will not have a significant impact on the company's cash flow.

"Alright, you guys go and get ready. I'll contact General Manager Li and I'll also go to Yongzhou to take a look."

During the day, Tan Jincheng and Li Jianxin talked a lot, not just about the acquisition of Yangzi Automobile. Through this exchange, both sides gained a deeper understanding.

Li Jianxin could sense Tan Jincheng's ambition and his seriousness about car manufacturing, which he could see from Tan Jincheng's attitude towards technological research and development.

"Changfeng Group's technology research and development center is very good, but in my opinion, the investment in research and development is still insufficient. If it were my company, I would increase the cost of technology research and development to at least 5% of the operating revenue."

What ambitious goals! Changfeng's current 3% R&D spending is already very high in China. You should know that many car companies only spend about 1% on R&D.

Take SAIC, a market leader and a Fortune Global 500 company, for example; their R&D expenditure as a percentage of revenue last year was not that high.

Seeing that Li Jianxin was somewhat skeptical, Tan Jincheng explained, "There's nothing strange about it. Although the outside world has always portrayed me as a marketing-oriented boss, our company's R&D ratio has always been quite high."

"Electric vehicle? Or clothing?"

"Yes, both. Electric vehicles need to research new technologies, and clothing needs to research new fabrics, etc. Moreover, I have always believed that the core of marketing is to sell good products, not just to fool people."

"Is the core of marketing selling good products?" Li Jianxin said thoughtfully.

"Yes, so Mr. Li, please sell Yangzi Automobile to me. I also want to make better products and have a place in the market, just like Flash Technology's electric vehicles."

Yes, the core of marketing is to sell good products, not to deceive people as everyone thinks. Changfeng Group's current problem is that its products for the civilian market are not good enough and there are too many problems.

How can a product like this continue to be marketed? The negative word-of-mouth is making it impossible for him to keep going. It has to be changed.

"I didn't expect to be lectured by a young man like you; alright, I agree in principle to Flash Group's plan to acquire Yangtze Automobile. I will convene a board meeting when I get back and I will persuade the shareholders."

"Thank you very much, Mr. Li, for your support of us juniors. Rest assured, we will treat Yangzi Motors well and will also have a deeper cooperation with Changfeng."

(End of this chapter)