Nikko Fashion (603196.SH), which once saw its stock price exit the “nine connected board” market due to a shell exchange announcement, eventually failed across borders.

On November 5, Nikko Fashion issued an announcement stating that it has decided to terminate the asset exchange of 100% of the shares of Shanghai Jinyuansheng New Energy Materials Co., Ltd. (“Jinyuansheng”). On the same day, the Japanese broadcaster also received a supervisory working letter on matters relating to the termination of the restructuring.

In May of this year, Nikko Fashion announced the suspension of trading, stating that the controlling shareholder Shanghai Nippon Investment Holdings Co., Ltd. (“Nikko Investment”) intends to transfer some of its shares through an agreement transfer, and that Nikko Fashion plans to acquire Jin Yuansheng, which mainly engages in lithium battery cathode materials, through asset exchange and share issuance, forming a backshell listing.

In terms of revenue volume in 2022 alone, Jin Yuansheng is more than three times that of Japanese fashion.

After the announcement was issued, Nikko Fashion closed with gains and stops for 9 consecutive trading days, and hit a new high of 28.68 yuan/share since the stock price was listed on May 29. However, as Nichiba Fashion's asset exchange process stalled, its stock price also entered a volatile downward channel.

In the end, after nearly half a year of planning, Nikko Fashion's cross-border journey ended in failure.

On November 6, the Japanese broadcast fashion harvest fell to a standstill, and was reported at 14.43 yuan/share. Compared with the historical high, which is already close to the bottom, the market capitalization is only 3.4 billion yuan.

The asset exchange deal was terminated, but a change in the actual controller of Nippon Broadcasting Fashion has already occurred. The long-sleeved and kind dance Jin Yuansheng's actual controller, Liang Fengjing, is in capital management, and he also actually controls Putailai (603659.SH), a leading lithium battery anode material leader.

At the investor briefing held on November 8, TradeWind01 (ID: TradeWind01) asked whether Chairman Liang Feng of Nikko Fashion would adjust the asset restructuring method in the future. The other party only replied, “Wait until all parties meet the conditions before proceeding with the negotiations on whether to continue advancing the restructuring-related matters and specific restructuring methods.”

Reorganization failed

There are actually signs that Japanese fashion will eventually cross borders.

On May 15 of this year, Nikko Fashion completed the change of actual controller of the company. The original controller Wang Weidong and Nikko Holdings transferred 29.75%, 8.3%, 5.77%, and 5.96% of shares to Liang Feng and his controlled Kuoyuan Enterprise Management (Shanghai) Co., Ltd. (“Shanghai Kuoyuan”), Whale Asset Management (Shanghai) Co., Ltd. (hereinafter referred to as “Whale Domain Asset Management), natural person Hu Bojun, and Shanghai Daixi Investment Management Co., Ltd. (“Shanghai Daixi”) respectively.

The transfer transaction price is 10.89 yuan/share, which is discounted compared to the closing price of 11.09 yuan/share on the trading day before the transaction.

As a result, the actual controller of Nikko Fashion was changed to Liang Feng, and founder Wang Weidong was able to cash out 1,294 billion yuan. Wang Weidong and his co-actors still hold a total of 21.08% of the shares, leaving as the second largest shareholder of Nikko Fashion.

On the same day that the transaction was completed, the Japanese broadcast announced plans for major asset exchanges and additional capital raising.

According to the content plan, Nikko Fashion plans to replace 100% of Jin Yuansheng's shares held by Shanghai Kuoyuan with all assets of the listed company. The difference in exchange between the two is purchased by Nikko Fashion by issuing shares to counterparties such as Liang Feng. Liang Feng is the actual controller of Shanghai Kuoyuan, so this asset exchange transaction is also a related transaction.

It is worth mentioning that the issue price of the Nikko Fashion Plan is only 6.97 yuan (adjusted to 6.89 yuan/share after interest), which is 80% of the average stock trading price for the first 60 trading days, which is about the price after 40% off the stock price on the day before the announcement.

On May 16, Nikko Fashion began a wave of 9 consecutive markets, which became out of control.

On May 23, the Shanghai Stock Exchange quickly issued an inquiry letter to Nikko Fashion, referring to the situation where there is no control premium on the transfer price of Wang Weidong and Nikko Holdings to Liang Feng and Shanghai Kuoyuan, and that the fixed price increase is lower, and requested that Nikko Fashion explain whether the actual controller of the company and the counterparty in this transaction have potential agreements or interest arrangements involving the valuation of assets placed and placed, stock issuance prices, control of transfer prices, etc., whether it harms the interests of listed companies and small and medium-sized investors.

The Shanghai Stock Exchange also requires the Japanese broadcast to explain whether the transfer of control matters and the restructuring and listing transaction are essentially conditional on each other or are part of a package transaction, taking into account the remaining consideration and payment terms of the transfer of control.

It was only on June 21 that Nichiba Fashion made a partial response to inquiries from the Shanghai Stock Exchange after being postponed several times.

In response to questions about the package deal, the Japanese broadcast style stated that the transaction will not be completed by placing assets in exchange as a precondition for payment. If the restructuring and listing transaction is not completed, the parties will still negotiate and determine the payment arrangement for the final payment of the share transfer.

Therefore, the Japanese broadcaster believes that the transfer of control and the restructuring and listing transaction are not mutually conditional or a package deal.

On the other hand, Jin Yuansheng, who plans to incorporate Japanese fashion plans, had intensive financing in 2022, raising a total of 2.17 billion yuan in January and July.

In May of this year, after completing the eighth capital increase, Jin Yuansheng's pre-investment valuation reached 19.6 billion yuan. Prior to the two rounds of financing in January and July of last year, Jin Yuansheng's pre-investment valuations were only 12.16 billion yuan and 15.825 billion yuan, respectively.

The Shanghai Stock Exchange requested the Japanese broadcast to explain whether the valuation price of Jin Yuansheng's recent equity change was significantly different from the estimated value of this transaction, as well as the reasons and rationality, and whether there were any valuation adjustments.

The Japanese broadcaster said that the audit and evaluation of the assets to be purchased has not yet been completed, and the estimated value of the assets to be placed has not yet been determined. The final transaction price will be determined by negotiation between the parties to the transaction based on the evaluation results issued by the asset evaluation agency.

By the end of 2022, Jinyuansheng's net assets were about 5.329 billion yuan. According to its comparable companies Huayou Cobalt (603799.SH), Hanrui Cobalt (300618.SZ), and Tengyuan Cobalt (301219.SZ), and Tengyuan Cobalt (301219.SZ), Jinyuansheng's valuation could reach 20 billion yuan, adding more than 4 billion yuan compared to its previous capital increase of 15.825 billion yuan.

In the revised version of the transaction plan, the Japanese broadcast style indicated that the previous valuation differences of the target company were due to the increase in valuation due to the improvement in the development expectations of the target company, and that it was determined through joint negotiations between the target company and the parties involved in the changes in equity. There were no major changes in the short term, so there were no major changes in the short term, and there was rationality.

Expectations of restructuring are still strong

According to the announcement, Jin Yuansheng's main business is research, development and manufacturing business integrating new energy battery cathode precursor materials and upstream key mineral resources. About 80% of its fixed assets, such as metal mineral resources and some smelting and processing assets, are distributed overseas, and about 90% of its revenue comes from overseas.

The main reason for the termination of the asset exchange of Jin Yuansheng by Nikko is that Jin Yuansheng's due diligence, audit and evaluation of metal mineral resource development and smelting and processing assets in the Democratic Republic of the Congo (DRC) and Indonesia involved a lot of communication and coordination with project partners and relevant local government agencies. It is expected that it will be difficult to issue a notice to hold a shareholders' meeting within 6 months after the announcement of the Board of Directors of this transaction, so it was decided to terminate this major asset restructuring matter.

Jin Yuansheng's main products include cobalt tetroxide and ternary precursors, which are mainstream cathode precursor materials for new energy batteries, as well as crude cobalt hydroxide and crude nickel hydroxide for deep-processing products of upstream key metals such as copper, cobalt, and nickel.

Since it is in the middle of the industrial chain, Jin Yuansheng's performance fluctuates with changes in the prices of upstream commodity raw materials copper, cobalt, and nickel, and is closely related to downstream battery shipments. In 2022, it achieved revenue of 3,044 billion yuan, a year-on-year increase of 59.87%, and a net profit of 757.471 million yuan, a year-on-year decrease of 64.49%. There was a clear increase in revenue without an increase in profit, which is in line with the changing trends of peers such as Huayou Cobalt.

Putailai, another listed company controlled by Liang Feng, is mainly engaged in battery anode materials and diaphragms. However, judging from the fundamentals of the business, there is not much collaboration between Putailai and Jin Yuansheng. An East China Electric Power Renewable Energy Broker Analyst told TradeWind01 (ID: TradeWind01), “Because superior raw materials, including processes and equipment, are all different.”

At the same time, the above analyst also stated that the customer groups of the two are the same, and “they definitely have an impact on customer recognition and customer relationships.”

However, another risk that Jin Yuansheng needs to pay attention to in the merger and acquisition of Nikko Fashion is that there is currently an overcapacity problem in the lithium battery industry chain. The above analyst told TradeWind01 (ID: TradeWind01) that although the price of lithium carbonate has dropped 400,000/ton, it is difficult for manufacturers to take advantage of the positive profit margin of falling costs. Overcapacity is compounded by the impact of industry price wars, and in the end, the costs of downstream automakers have dropped a lot.

At the investor briefing held on November 8, TradeWind01 (ID: TradeWind01) asked about the business prospects of Nikko Fashion Chairman Liang Feng Jin Yuansheng, and the other party said, “Although the industry is currently 'removing inventory' in the short term, the market prospects for the new energy industry are broad in the long run. Based on the upstream mineral resource smelting end, Jin Yuansheng has built advantages in the upstream supply chain, and at the same time lays out downstream precursors to build its own competitive advantage through its own new product development and process innovation differentiation, and build comprehensive competitiveness in an integrated industrial chain.”

Despite the failure of this restructuring, Nikko Fashion may still have to find a new way out. After all, the womenswear business is already in decline.

In the first three quarters of this year, Nikko Fashion achieved revenue of 699 million yuan, an increase of only 0.4% over the previous year; it recorded a net profit of 15.52 million yuan, a decrease of 27.14% over the previous year.

Looking at it from a long-term perspective, the Japanese broadcast fashion has already hit the ceiling of growth. After its revenue reached 1,132 billion yuan in 2018, it was difficult to break through, and it did not increase but fell. Last year, the full year's revenue was only 952 million yuan.

It has long been nothing new for garment companies to cross borders. In September of this year, ST Guiren (603555.SH) announced that it would optimize and adjust its business, using the grain business as the company's main business direction in the future; earlier on Saturday, when MCN's main footwear business was transformed, it gradually abandoned the footwear business through the acquisition of MCN Yuanwang Technology (002291.SZ).

In the announcement of the termination of asset restructuring at the time of the Japanese broadcast, it indicated the risk that “there is great uncertainty about whether to proceed with the restructuring-related matters after all conditions are met, and there is great uncertainty in related matters”, and expectations of asset restructuring are still strong.

TradeWind01 (ID: TradeWind01) asked if the chairman of Nikko Fashion, Liang Feng, would adjust the asset restructuring method in the future. The other party only replied, “We will wait until all parties meet the conditions before proceeding with the negotiations on whether to proceed with the restructuring-related matters and specific restructuring methods.”