Under the “Third Arrow”, Gree Real Estate restarted tax-free asset restructuring

06/12/2022

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After nearly two years of interruption, Gree Real Estate decided to put the plan of absorbing Zhuhai Duty Free Group back on the agenda.

In 2015, Gree Real Estate announced the layout of “Internet + real industry + innovative finance” to carry out diversified exploration. However, cross-border operations have been lukewarm for many years, and it has been difficult to balance the development of the main business and sideline business for a long time.

In 2020, the duty-free retail war is about to break out. The merger with Zhuhai Duty Free Group was once regarded as the most important step for Gree Real Estate to transform and upgrade, optimize the industrial structure, and achieve high-quality development of the enterprise.

However, as Lu Junsi, the company’s top leader, fell into the whirlpool of crimes, this important work came to a standstill. The capital market is confused. After Lu Junsi left, will the tax-free business pursued by Gree Real Estate start again or give up?

Today, Gree Real Estate has given a clear answer to this question.

On December 2, the company announced that Gree Real Estate would continue to promote the major asset reorganization and adjust the plan accordingly in view of the elimination of the reasons that previously led to the suspension of the company’s major asset reorganization. Gree Real Estate plans to purchase 100% of the equity of Duty Free Group held by all shareholders of Zhuhai Duty Free Enterprise Group Co., Ltd. by issuing shares and paying cash. At the same time, it plans to raise supporting funds through non-public issuance of stocks from no more than 35 investors.

Reorganize and restart

The asset restructuring between Gree Real Estate and Zhuhai Duty Free Group began in May 2020. At that time, it was in the start-up period of the “Three-Year State-owned Enterprise Reform Action”, and after the end of the first wave of the epidemic, the consumption rebounded rapidly due to the return of overseas luxury goods purchase demand, and Gree Real Estate was about to move.

According to the plan disclosed in the acquisition report at that time, Gree Real Estate will purchase 100% equity of Zhuhai Duty Free Group from Zhuhai State-owned Assets Supervision and Administration Commission and Zhuhai Urban Construction Group by issuing shares and paying cash, and will issue shares to the central enterprise general investment to raise supporting funds funds.

The transaction was priced at 12.215 billion yuan, of which 11.415 billion yuan was paid by issuing shares, accounting for 93.45% of the transaction consideration, and 800 million yuan was paid in cash, accounting for 6.55% of the transaction consideration.

Under the impetus of Zhuhai SASAC, the reorganization has been advanced rapidly. In May 2020, the preliminary intention of the transaction was disclosed, and the audit and evaluation of the underlying assets were completed 4 months later, and the review of the restructuring plan and report was completed in October and November. In order to cooperate with this reorganization, Gree Real Estate has successively won a number of duty-free business plots in Zhuhai, Haikou and other places.

At the regulatory level, the green light was given all the way, because before the reorganization was announced to be suspended, Gree Real Estate had obtained the “Decision on No Further Review of Concentration of Operators in the Anti-Monopoly Review” issued by the State Administration for Market Regulation, which means that the merger of Zhuhai’s tax exemption is about to enter a substantive stage .

However, Lu Junsi, the former chairman and president of Gree Real Estate, happened in December of the same year. In the “Investigation Notice” issued by the China Securities Regulatory Commission (No.: Shanghai Zhengzhuan Investigation Zi No. 2020066), Lu Junsi was considered “suspected of illegal acts of insider trading in the securities market”. In November, the Shanghai Stock Exchange also issued two notification documents to criticize Lu Junsi.

Subsequently, Lu Junsi was immediately investigated. Affected by this, Gree Real Estate had no choice but to announce the suspension of major asset restructuring in February 2021.

Until now, the Lu Junsi incident has been settled. According to a report from Gree Real Estate, the case involving the former chairman Lu Jun was identified as a “personal matter”. Lu Junsi himself was also dismissed from relevant positions, and at the same time in mid-June this year, the Shangrao City Public Security Bureau took criminal coercive measures.

“In view of the fact that Mr. Lu Junsi no longer holds the position of director, supervisor or senior management of the company, the reason for the suspension of the company’s major asset restructuring has been eliminated.” Gree Real Estate stated in the latest announcement on December 2 that it will immediately restart the tax exemption for Zhuhai. Group restructuring, while adjusting the relevant programs.

Timing issue

At present, the adjusted restructuring plan has not been disclosed. However, it can be determined that the most basic transaction method of the original plan, “purchasing 100% of the equity of Duty Free Group held by all shareholders of Zhuhai Duty Free Enterprise Group Co., Ltd. by issuing shares and paying cash” has not changed.

And “to raise supporting funds through non-public issuance of shares from General Investment” will become “planning to raise supporting funds from non-public issuance of stocks to no more than 35 investors.”

This is the judgment made by Gree Real Estate based on the latest “third arrow” policy for the real estate industry. Earlier on the evening of November 28, the China Securities Regulatory Commission announced the adjustment and optimization of five measures to support the stable and healthy development of the real estate market, which was interpreted by the industry as the “third arrow” to support the liquidity of the real estate industry.

Among them, the “third arrow” measures include resuming mergers and acquisitions and supporting financing of listed real estate companies; resuming refinancing of listed real estate companies and listed real estate companies; adjusting and improving the listing policies of real estate companies in overseas markets; The role of stock assets of enterprises; actively play the role of private equity investment funds.

At the same time, the fixed number of people increased from 1 to 35. According to the analysis, Gree Real Estate does not rule out increasing the amount of cash payment. According to the data, of the 12.215 billion yuan transaction consideration according to the original plan, 11.415 billion yuan was paid by issuing shares, accounting for 93.45% of the transaction consideration, while 800 million yuan was paid in cash, accounting for only 6.55% of the transaction consideration.

The A-share real estate sector, which has seen frequent positives, has recently ushered in a surge, and it is not surprising that individual stocks have a daily limit. Although it has not yet obtained credit and financing related support, Gree Real Estate’s stock price has risen a lot since the end of October.

On the other hand, after more than two years of fermentation, the situation of the duty-free sector is quite different. Haiqi Group , which held the same concept of “state-owned enterprise reform + tax-free business injection” in May this year, announced at the end of May that it would reorganize with Hainan Duty -Free, and its stock price soared .

Gree Real Estate may be able to obtain a higher issue price in terms of fixed increase and issuance of shares to purchase assets this time. According to the original acquisition report, Gree Real Estate finally determined that the issuance price of the shares for issuing shares to purchase assets was 4.30 yuan per share.

The charm of duty-free business is unstoppable, but the barriers to entry of the domestic duty-free industry are relatively high. It is understood that engaging in tax-free business must be approved by the State Council or its authorized government department.

Up to now, there are mainly 10 tax-free licenses in the country, which belong to China CDFG , Rishang Group, Hainan Duty-free, Shenzhen Duty-free, Zhuhai Duty-free, Zhongchu Service Company, Zhongqiao Group, Hainan Tourism Investment, Haifa Holding Group, Wangfujing group. Many of these enterprises have not yet entered the embrace of the capital market, and the local government also intends to promote them, so they have become “meat and potatoes” that everyone is vying for.

2022 is coming to an end, and it has come to the end of the “Three-Year State-owned Enterprise Reform Action”. Gree Real Estate restarts the unfinished business at this time, can it seize the tail of the dividend to promote the success of the reorganization? I believe the answer will emerge soon.

This article is from the WeChat public account “Viewpoint” (ID: guandianweixin) , author: Viewpoint New Media, 36 Krypton is authorized to publish.

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