"Ten Billion Arbitration Case" Fermented!

Pharmaceutical Network, July 15 News On the evening of July 13, Kehua Bio, an established in-vitro diagnostic listed company, issued a major arbitration announcement regarding Peng Niancai, Li Ming, Miao Baogang, and Xi’an Yujing Tongyi Enterprise Management Partnership (Limited Partnership) ( (Referred to as "Four Applicants") and Kehua Biosciences signed on June 8, 2018, "Investment Agreement" Article 10 "further investment" disputes arising from the implementation of arbitration
.
The matters involved in this arbitration originated from the acquisition of Tianlong Technology by Kehua Biology in 2018
.
Due to the outbreak of the new crown epidemic in 2020, the performance of the in vitro diagnostic (IVD) industry has blown out.
Tianlong Technology's net profit in 2020 will exceed 1.
1 billion yuan.
The two parties set "2020 net profit × 25 times" in the previous "Investment Agreement" clause.
As a result of the agreement, the remaining equity commitments involved in this arbitration have already exceeded 10.
5 billion yuan in cash consideration.
However, the total market value of Kehua Biology is only 8 billion yuan
.
The "tens of billions of arbitration cases" stepped on thunder, which further triggered a shock in the stock prices of Shengxiang Bio and Gree Real Estate
.
In May of this year, Shengxiang Bio, Gree Real Estate and Kehua Biological jointly disclosed a major transaction.
Shengxiang Biological intends to acquire the equity of Kehua Biology held by a wholly-owned subsidiary of Gree Real Estate for 1.
95 billion yuan and become the largest shareholder of Kehua Bio.

.
Just after Kehua Biological released the announcement last night, Shengxiang Biological and Gree Real Estate issued an emergency risk warning announcement
.

　　The terms of the agreement triggered multi-party disputes.

As the first listed IVD company , Kehua Biotech was listed on the SME board of the Shenzhen Stock Exchange in July 2004.
It used to be the in-vitro diagnostic company with the largest production volume, the highest market occupancy rate and the most complete categories in China
.
In recent years, in the context of the rapid development of the IVD field, the market competition pattern in sub-sectors has become increasingly fierce, and business extension and industry integration have continued to accelerate
.
After the acquisition of Fangyuan Capital, Kehua Biotechnology adhered to the strategy of "endogenous growth + external expansion" and acquired Xi'an Shenke, Guangdong Xinyou, Nanjing Yuanheng, Guangzhou Kehua, Jiangxi Kerong, Aoran Bio, Tianlong Technology and other upstream and downstream enterprises
.
The source of the contradiction in the "tens of billions of arbitration" dispute occurred in the acquisition of Tianlong Technology by Kehua Biological
.
On May 16, 2018, Kehua Biological issued an announcement that the company signed the "Memorandum of Cooperation on Investment in Xi'an Tianlong Technology Co.
, Ltd.
and Suzhou Tianlong Biological Technology Co.
, Ltd.
" and planned to implement a total investment of 5.
5 in the target company in cash.
100 million yuan, acquired 62% of the shares of Xi'an Tianlong and Suzhou Tianlong.
Peng Niancai, Li Ming and Miao Baogang are all shareholders of Tianlong Technology
.
The "Investment Agreement" signed in this transaction has become the "talkative" for future arbitration disputes
.
According to the "Investment Agreement", the acquisition of all shares of Tianlong Company was completed in two stages.
The first stage is that the aforementioned Kehua Biotechnology obtained 62% of Tianlong Technology at a consideration of 550 million yuan; the second stage , Kehua Bio will complete the acquisition of the remaining 38% equity of Tianlong Technology in 2021 at the stock price calculated according to the net profit of Tianlong Company in 2020, and finally complete the overall acquisition of 100% equity
.
Among them, with regard to the transfer of 38% equity in the second phase, it is agreed by many parties that the overall valuation of Tianlong Technology shall be the higher of the following two: (1) 900 million yuan; or (2) the target company's 2020 audited deduction Net profit after non-recurring gains and losses × 25 times
.
Now, the time node for the transfer of the remaining 38% of the equity has arrived.
The 2020 epidemic has driven the overall hot market in the IVD industry, and has also triggered a huge dispute over the company's valuation between the two parties in this merger and acquisition transaction
.
In fact, according to the information publicly disclosed in 2018, through the announcement of Kehua Company and the report issued by Lixin Certified Public Accountants, Tianlong Technology's operating income for the whole year of 2016 and the first nine months of 2017 were approximately 113 million yuan.
And 86 million yuan, operating profit is about-18 million yuan and-8 million yuan respectively
.
Unexpectedly, the total net profit of Tianlong Technology in 2020 exceeds 1.
1 billion yuan.
If the overall valuation is calculated according to the "net profit × 25 times" stipulated in the "Investment Agreement", the 38% equity consideration will exceed 10.
5 billion yuan.

.
It is not unreasonable for the capital market to react fiercely to the arbitration case.
In the face of the consideration of 10.
5 billion yuan in equity transactions, the total market value of Kehua Biology is only 8.
086 billion yuan, which is undoubtedly an astronomical figure
.
On July 14th, Kehua Bio opened the limit down at 15.
71 yuan, and the stock price was firmly held at the limit down all day
.
The market also has different expectations for the direction of the arbitration
.
Some people think that the contract has legal effect, and "willing to bet and lose" is the final result.
This dispute also sounded a wake-up call to IVD's hot industry integration
.
Another industry voice judged whether the final negotiation result of contract disputes caused by the special period of the epidemic is an unforeseen major change that is not a commercial risk, which is obviously against fairness and may allow the parties in the dispute to renegotiate
.

　　Shengxiang Bio "buy, buy, buy" step on thunder?
Just one hour after Kehua Biological’s announcement last night, Shengxiang Biological immediately issued an announcement.
On the one hand, it explained the relationship between Shengxiang Biological and Kehua Biological, and on the other hand, it made an explanation on the impact of Shengxiang Biological’s acquisition of Kehua Biological.
Reminder: "This arbitration case has not yet opened.
Given the large amount of the underlying assets involved in the lawsuit, and the equity transfer has not made substantial progress so far, there is a risk of greater uncertainty
.
" As the "new crown epidemic performance king" Shengxiang Biotechnology Previously, with its "revenue of 4.
76 billion yuan, a year-on-year increase of 1204%; net profit of 2.
62 billion yuan, a year-on-year increase of 6528%", it became famous in the IVD industry and capital circles
.
In 2018 and 2019 before the new crown epidemic, Shengxiang Bio was just an industry leader that had just turned losses into profits.
The huge variables of the new crown epidemic allowed it to seize the opportunity in a rapid response
.
On January 28, 2020, Shengxiang Biotech announced that it has cooperated with the Institute of Microbiology and Epidemiology of the Military Medical Academy to complete the new crown detection kit, which is second only to BGI and Zhijiang Bio
.
As of the end of the first quarter of last year, Shengxiang Biotech's new crown nucleic acid detection kit has been supplied to nearly 8 million people at home and abroad
.
In March last year, there were more than a dozen domestic IVD companies that have developed COVID-19 nucleic acid detection kits, and the competition is intensifying
.
Once again, Shengxiang Biotechnology responded quickly.
Through the sales and installation of testing instruments, it further promoted the incremental sales of the company's entire line of reagents.
At almost the same time, Shengxiang Biotechnology opened up the international market and obtained emergency use in Brazil, the United States and other places extremely quickly.
And complete the establishment of an international marketing team, through the cooperation system with global distributors and a hierarchical management system, to strengthen overseas sales capabilities
.
In just one year, Shengxiang Biotechnology not only achieved a leap in revenue and profit, but also achieved a surpassing of many industry pioneers, including the "IVD First Share" Kehua Biotechnology
.
Industry experts believe that although the IVD market has many tracks, the "ceiling" of the market is still very obvious in each segment.
Therefore, grasping the right opportunity to expand the market coverage through mergers and acquisitions is important for realizing the leapfrog development of enterprises.
Choose
.
Shengxiang Biological obviously hopes to transform the short-term market dividend of the new crown epidemic into a long-term industrial chain competitive advantage
.
Since its official listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange on August 28, 2020, in less than a year, Shengxiang Biotechnology has quickly started the "buy, buy, buy" model and actively integrate industrial resources
.
At the beginning of 2021, Shengxiang Biotechnology issued an announcement that it intends to acquire 100% of the equity of Hunan Haixing Electric Co.
, Ltd.
, a wholly-owned subsidiary of Hangzhou Haixing Electric Power Technology Co.
, Ltd.
, for 70,015,900 yuan
.
The announcement shows that through the acquisition of 100% equity in Hunan Haixing, a wholly-owned subsidiary of Hangzhou Haixing, the acquisition of the ownership of the 682 Lusong Road, Changsha High-tech Zone and the above-ground buildings held by Hunan Haixing can expand current production and research and development.
The venue helps the company to better manage and develop
.
On May 12, 2021, Shengxiang Biological released an announcement that it plans to acquire 18.
63% of Kehua Biological for 1.
95 billion yuan.
This is the first transaction between listed companies in the history of the IVD industry
.
The announcement shows that Shengxiang Biotech took over the shares from Gree Real Estate, which only became the major shareholder of Kehua Biotech through investment in May last year.

.
Public information shows that Shengxiang Biology has advantages in molecular diagnostic instruments and reagents.
Kehua Biology focuses on biochemistry and immunity (a diagnostic technology); Shengxiang Biology has opened up foreign market channels and cultivated through the market dividend of the new crown epidemic.
The longer Kehua Biology also has great value in international channels
.
The market has high expectations for the complementarity of this transaction.
After the market opened on May 13, Shengxiang Bio and Kehua once triggered their daily limit
.
On June 21, 2021, Shengxiang Biological released an announcement that the company and Zhenmai Biological and its shareholders Shenzhen Zhongkedari Gene Technology Co.
, Ltd.
, Shenzhen Sansto Industrial Co.
, Ltd.
, and Shenzhen Wanlituo Electronic Commerce Technology Co.
, Ltd.
Signed an investment agreement to obtain 14.
77% equity in Zhenmai Biotech through equity transfer and subscription of new registered capital for a total of 255 million yuan
.
The company will complete the transaction with its own funds.
Compared with Zhenmai Bio's audited net assets of 76 million yuan in 2020, the price premium for this equity purchase is about 22 times
.
The transaction has also received regulatory attention from the Shanghai Stock Exchange.
On the evening of June 21, 2021, an inquiry letter was issued to Shengxiang Biotechnology, requesting the company to combine the main financial data of the underlying assets in the past three years to further explain that the transaction price is more than Zhenmai Biotechnology.
The reason and rationality of the higher net asset premium; Explain in detail the market position and competitive advantage of Zhenmai Bio in the sub-industry
.
Just as Shengxiang Bio-Bio just responded to the inquiry letter to the Shanghai Stock Exchange regarding the acquisition of Zhenmai Bio's equity, Kehua Bio's “10 billion arbitration case” instantly detonated a new round of capital market turmoil
.
At the opening of the market on July 14, the stock price of Shengxiang Biotechnology showed a cliff-like dive.
Although the stock price was gradually repaired in all-day trading, the sharp market volatility has already reflected the capital sentiment
.
Running at high speed on the road of "buy, buy and buy", how will Shengxiang Biotechnology cope with the possible "minefield", " Pharmaceutical Economic News" will continue to pay attention to the latest trend of this incident
.