Film and game mergers and acquisitions are strictly regulated, and blockchain company mergers and acquisitions are carefully examined

In the past week (July 24 to 29), the Shanghai and Shenzhen stock exchanges issued a total of 29 inquiry letters of various types, of which 9 were related to mergers and acquisitions. The mergers and acquisitions of film and television game companies have always been the focus of supervision, including Ningbo Fubon's acquisition of Tianxiang Interactive Entertainment; Western Resources ' termination of the film, television, sports and cultural reorganization, and received inquiry letters. In addition, hot concepts continue to be the focus of attention, such as Luyitong's acquisition of blockchain concept company Canaan Creative, which received a second inquiry.

Film, TV and game mergers and acquisitions are strictly regulated

Ningbo Fubon, which acquired gaming assets for RMB 3.9 billion, received an inquiry letter last week. The exchange was concerned about whether the plan constituted a reorganization listing (commonly known as "shelling"). The inquiry letter pointed out that the total assets and net assets of Tianxiang Interactive Entertainment and Tianxiang Interactive exceeded 100% of the corresponding indicators of listed companies in the same period. The main reason for not constituting a shelling was that the control of the listed company had not changed. The exchange required the company and the counterparty to provide sufficient evidence.

The restructuring plan shows that Ningbo Fubon plans to issue 113 million shares at 18.57 yuan per share and pay 1.807 billion yuan in cash, with a total price of 3.9 billion yuan to acquire 100% of the equity of Tianxiang Interactive Entertainment and 100% of the equity of Tianxiang Interactive. At the same time, it plans to issue shares privately at 18.57 yuan per share to raise no more than 1.843 billion yuan to pay for cash consideration and related expenses, of which the company's controlling shareholder Fubon Holdings and its affiliates plan to subscribe for a total of approximately 1 billion yuan.

The valuations of Tianxiang Interactive Entertainment and Tianxiang Interactive reached 3.75 billion yuan and 150 million yuan respectively, with estimated appreciation rates of 605% and 9.5% respectively compared to their net assets as of the first quarter of this year. Currently, Tianxiang Interactive Entertainment's main game products include "The Journey of Flower", "The Hot-Blooded Elf King", "Three Kingdoms Power Up Edition" and so on.

Western Resources, whose restructuring plan also involves film, television, and game culture, received an inquiry letter from the Shanghai Stock Exchange on July 27. In response to the company's announcement on the same day to terminate the 2015 private placement plan, terminate the "Memorandum" signed with the controlling shareholder and Changying Group, cancel the established subsidiaries involved in the sports, culture, and film and television industries, adjust and cancel the business scope of the film, television, culture, and sports industries, and the resignation of the company's chairman and senior executives, the exchange required the company to explain in detail the specific reasons for the termination of the above matters and whether the formulation and cancellation of the plan were arbitrary.

Western Resources disclosed a plan for a private placement in October last year, intending to raise 1.87 billion yuan to invest in lithium battery projects. Subsequently, the company announced in November last year that it would make major adjustments to its private placement plan due to the signing of a memorandum of understanding with Changchun Film Group and the planned transformation to engage in film, television, sports, culture and other related businesses. The company also subsequently stated that it planned to adjust its business scope and add film, television, culture and sports industries.

Industry insiders have analyzed that the film and television game industry has not been developed for a long time, the valuation growth rate is fast, the historical performance is far from the promised performance, and the sustainability of profitability has always been the focus of regulatory attention. As can be seen from the recent M&A inquiries on film and television game culture, first, the target's profitability stability is required; second, arbitrage is prevented; and third, the valuation should not be too high.

Luyitong welcomes second inquiry

As one of the hottest investment topics nowadays, A-share companies have "got involved" in the concept of blockchain. Hang Seng Electronics , Yingshisheng , Jinzheng Holdings , Sifang Jingchuang and others have actively participated in the establishment of the blockchain alliance, and Feiteng Chengxin , China Media Capital and others have begun to research and reserve blockchain-related technologies.

Luyitong's acquisition of Canaan Creative for RMB 3 billion is a veritable blockchain company. This M&A transaction received a second inquiry from the Shenzhen Stock Exchange last week. Luyitong intends to purchase 100% of the equity of Hangzhou Canaan Creative Information Technology Co., Ltd. for RMB 3.06 billion by issuing shares and paying cash. Zhang Nangeng is the founder of Canaan Creative. At the end of 2012, he developed the world's first ASIC Bitcoin mining machine, which was also the most powerful mining machine in the world at that time. In April 2013, Zhang Nangeng founded Canaan Creative, which mainly produces blockchain computing equipment with ASIC chips as the core.

In connection with the acquisition of Canaan Creative and its involvement in "blockchain + artificial intelligence", the Shenzhen Stock Exchange's secondary inquiry focused on the details of Canaan Creative's top five customers, especially whether they have any affiliation with the target company. At the same time, the Shenzhen Stock Exchange also paid attention to whether the market demand for Canaan Creative's main product (Bitcoin) "mining machine chips" is sustainable and the rationality of the substantial increase in the target company's main business revenue. In addition, the Shenzhen Stock Exchange required Luyitong to disclose the specific measures that the controlling shareholder and the counterparty intend to take to ensure that the control of the listed company does not change, and to explain whether the transaction is a reorganization listing.

In addition, in response to the recent termination of restructuring by many listed companies, the exchange immediately paid attention to the reasons for termination, risks, etc. Last week, Jinzi Ham and Dayang Electric announced the termination of major asset restructuring. Both companies received inquiry letters from the exchange, asking about the decision-making process, specific reasons, rationality and compliance of the termination of major asset restructuring.