Jiangsu Sanfangxiang Industrial Co., Ltd. (hereinafter referred to as Sanfangxiang, 600370.SH) decided to continue to acquire Jiangsu Hailun Petrochemical Co., Ltd. (hereinafter referred to as Hailun Petrochemical).
Image source: Visual China
On the evening of May 11, Sanfangxiang announced that the company had received a decision from the China Securities Regulatory Commission today not to approve the company’s application for issuing shares to purchase assets and raise supporting funds.
In April this year, Sanfangxiang planned to purchase 100% of the equity of Hailun Petrochemical held by Sanfangxiang Group, Sanfangxiang International Trade, Shanghai Youchang, and Shanghai Huma through the issuance of shares. The price is 7.65 billion yuan.
While issuing shares to purchase assets, Sanfangxiang also plans to raise supporting funds of no more than 800 million yuan from a non-public issuance of shares from no more than 35 investors. Among them, 400 million yuan is planned to be used for Hailun Petrochemical PTA technical transformation project, 305 million yuan is used to supplement working capital, and the remaining funds are used for intermediaries and other related expenses.
The China Securities Regulatory Commission’s Mergers and Acquisitions and Reorganization Committee believes that, according to the application materials, Sanfangxiang failed to fully explain and disclose that the transaction is conducive to improving the company’s financial status and enhancing sustained profitability, and does not comply with the “Major Assets of Listed Companies” Relevant provisions of Article 43 of the Reorganization Management Measures.
In accordance with the requirements of the China Securities Regulatory Commission, the Sanfangxiang board of directors should make a resolution on whether to modify or terminate the reorganization matter within 10 days from the date of receipt of the above decision.
Sanfangxiang announced that after study by the board of directors, the company decided to continue to promote the restructuring matter.
The company’s board of directors believes that through this reorganization, the company’s main business can be further expanded to the production and sales of bottle-grade polyester chips and PTA, which will help optimize the company’s industrial layout and cultivate New profit growth points will help improve the company’s overall operating efficiency and are in line with the long-term interests of the company and all shareholders.
Sanfangxiang said that if the restructuring can be completed, the company will become a large-scale comprehensive chemical enterprise integrating the production and sales of bottle-grade polyester chips, the production and sales of PTA, and printing, dyeing and finishing.
PTA, or purified terephthalic acid, is one of the terminal petrochemical products of crude oil and a front-end product of chemicals such as polyester. It is widely used in various industries such as clothing, decoration, electronics, and construction.
According to the official website, Hailun Petrochemical is mainly engaged in the production and sales of bottle-grade polyester chips and PTA. The PTA production capacity is now 1.8 million tons. Last year, Hailun Petrochemical invested 4.515 billion yuan and planned to add 3.2 million tons of PTA production capacity, which will enable the company to form a total annual PTA production scale of 5 million tons.
Founder’s mid-term futures research report stated that 2012-2016 was the trough period of the PTA industry; from 2015-2018, PTA production capacity was slowly put into operation, and the industry’s backward production capacity was gradually cleared. In 2019, PTA is still in the boom cycle stage, and the overall production profits of manufacturing enterprises are relatively considerable.
At present, Sanfangxiang mainly operates three major business sectors: textile, chemical industry, and thermoelectricity, and is one of the top ten enterprises in the domestic printing and dyeing industry. Its main products include various types of cotton products, printed and dyed fabrics, polyester-cotton fabrics, yarn-dyed fabrics, etc.
Last year, Sanfangxiang’s revenue was 1.041 billion yuan, a year-on-year decrease of 11.9%; net profit was 55 million yuan, a year-on-year increase of 2.44%.
Sanfangxiang said that the company’s revenue decline last year was mainly due to fierce competition in the textile industry, the sales unit price of dyed and finished cloth fell, and the gross profit margin decreased compared with the previous year.
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