Total consideration nearly 1.1 billion yuan! Weidi Co., Ltd. plans to cross-industry acquire a precision component supplier, with the core target’s premium rate exceeding 400%.

The Daily Economic News Reporter | Wen Duo The Daily Economic News Editors | Zhang Jinhe, Huang Bowen, Xiang Jianglin

On the evening of April 1st, automotive electronic control product supplier Weidi Co., Ltd. (SH603023, stock price 5.36 yuan, market value 2.99B yuan) released the “Major Asset Purchase Report (Draft).” The listed company plans to purchase 100% equity of Jiangsu Zhiyue Tiancheng Enterprise Management Co., Ltd. (hereinafter referred to as “Zhiyue Tiancheng”) and approximately 44.85% equity of Jiangsu Jiuxing Precision Technology Co., Ltd. (hereinafter referred to as “Jiuxing Precision”) with cash, totaling about 1.1B yuan.

This is Weidi Co., Ltd.'s third attempt to achieve business transformation through major asset restructuring after terminating the acquisition of Shanghai Feier Automotive Parts Co., Ltd. in 2022 and Suzhou Baoyouji Technology Co., Ltd. in 2024.

After the completion of this transaction, Weidi Co., Ltd. will directly and indirectly hold a total of 90.97% of Jiuxing Precision through Zhiyue Tiancheng, officially shifting from a single business to a dual-core operation of “automotive electronic control products + precision metal components.”

Commitment: Net profit not less than 360 million yuan for 3 years

In this major asset purchase plan, the transaction targets include 100% equity of Zhiyue Tiancheng and 44.85% equity of Jiuxing Precision. Among them, Zhiyue Tiancheng serves as a holding platform, holding 46.1165% of Jiuxing Precision, with no other actual operating activities.

Jiuxing Precision mainly engages in the research, production, and sales of precision metal components. Its main products include precision slides, precision hinges, PCM (organic coating plate) structural parts, aluminum alloy exterior parts, and lithium battery cell shells. During the reporting period, these products are primarily applied in home appliances and energy storage.

Regarding pricing, the valuation of 100% equity of Jiuxing Precision adopts the income approach as the final valuation conclusion, with an assessed value of 1.2 billion yuan and a premium rate of 423.67%. The valuation of Zhiyue Tiancheng uses the asset-based approach, with an assessed value of 557 million yuan and a premium rate of 2585.75%.

The total transaction price is 1.1B yuan, with Zhiyue Tiancheng’s 100% equity valued at 557 million yuan and Jiuxing Precision’s 44.85% stake valued at 538 million yuan. The payment will be made in six installments via cash, sourced from self-owned and raised funds.

Performance commitments are the core safeguard mechanism for this transaction. The guarantor commits that Jiuxing Precision will achieve non-recurring net profits of no less than 110 million yuan, 120 million yuan, and 130 million yuan in 2026, 2027, and 2028 respectively, with a total non-recurring net profit commitment of no less than 360 million yuan over three years.

If the actual non-recurring net profit falls short of the commitment, the guarantor will compensate the listed company in cash.

Additionally, the listed company will conduct impairment tests on Jiuxing Precision at the end of the performance commitment period. If the impairment amount exceeds the performance compensation amount the guarantor should bear upon the expiry of the performance period, the guarantor will separately bear the asset impairment compensation liability to the listed company.

It is noteworthy that all transferors also commit to using no less than 28% (after tax) of their total transaction proceeds within two years from the effective date of the agreement to purchase Weidi Co., Ltd. stock, which will be voluntarily locked until the performance compensation obligations are fulfilled.

This arrangement deeply links the interests of the transaction counterparties with the long-term development of the listed company.

In terms of transaction nature, this constitutes a major asset restructuring but does not constitute a related-party transaction or a reorganization listing. The effectiveness and completion of this transaction still require approval from the company’s shareholders’ meeting.

Two failed reorganizations, can the third succeed?

Weidi Co., Ltd.'s asset restructuring journey has been full of twists and turns. Before this attempt to acquire Jiuxing Precision, the company had two major restructuring attempts that both ended in failure.

In June 2022, Weidi announced the termination of its major asset restructuring to acquire 100% equity of Shanghai Feier Automotive Parts Co., Ltd.

This transaction was originally planned to be completed through issuing shares, convertible bonds, and cash payments. However, Weidi later stated: “Affected by the COVID-19 pandemic and current market conditions, the conditions for continuing the major asset restructuring are not yet mature.”

In June 2024, Weidi again terminated a major restructuring, this time involving 100% equity of Suzhou Baoyouji Technology Co., Ltd. The original plan was to purchase assets through issuing shares and cash, and to raise supporting funds by issuing shares to Lishui Nancheng New Area Investment Development Co., Ltd. However, Weidi later indicated that since the planning began, market conditions have changed significantly, and there is considerable uncertainty in continuing the restructuring.

According to relevant regulations, Weidi committed not to plan any major asset restructuring within one month from the announcement date.

Now, Weidi’s third attempt at a major asset restructuring differs from the previous two: firstly, it adopts a pure cash purchase method, without issuing shares; secondly, the transaction counterparties have committed to using part of the transaction proceeds to purchase Weidi stock and lock it long-term.

Disclaimer: The content and data of this article are for reference only and do not constitute investment advice. Please verify before use. Operate at your own risk.

Reporter | Wen Duo

Editor | Zhang Jinhe, Huang Bowen, Xiang Jianglin

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