Takeover of Jiakai City Control

On June 21, 2021, Jiakai City announced that it had received a notice from the controlling shareholder Guangzhou Kailong Real Estate Co., Ltd. (hereinafter referred to as “Guangzhou Kailong”) that Guangzhou Kailong has resolved the issue of horizontal competition with listed companies. It is proposed to transfer the control of the listed company by agreement, and has signed a “Share Transfer Framework Agreement” with Shenzhen Huajian Holdings Co., Ltd. (hereinafter referred to as “Huajian Holdings”).

Up to now, Guangzhou Kailong holds a total of 57.75% of the shares of Jiakai City. In this transaction, Guangzhou Kailong intends to transfer 29.90% of the shares to Huajian Holdings. After the transaction is completed, Guangzhou Kailong will also hold 27.85% of the shares of Jiakai City and will voluntarily waive the voting rights of the above shares.

Guangzhou Kailong is the parent company of Evergrande Real Estate, while Huajian Holdings is a company currently 100% controlled by Wang Zhongming. He is a person who has a lot of intersection with Xu Jiayin. Huajian Holdings is also a company affiliated with Evergrande. A company with deep roots. Xu Jiayin’s “old friends” once again extended a helping hand.

Wang Zhongming takes over Xu Jiayin

It should be noted that the transfer of control of Jiakai City by Evergrande is only in the preliminary stage and there are still uncertainties.

In the announcement, Jiakai City also emphasized that the “Share Transfer Framework Agreement” signed this time is only a preliminary agreement between the parties to the transaction. If the foregoing transactions proceed smoothly, the company’s control rights will be changed. Matters related to this transaction still need to be reviewed by the State Administration for Market Supervision and Administration for the concentration of operators.

Evergrande intends to transfer control of Jiakai City this time. The industry’s interpretation is Evergrande’s initiative to solve the problem of horizontal competition.

“Evergrande has been working hard to resolve the issue of horizontal competition between the two companies since it entered Jiakai City in 2016, and promised to resolve it before July 31, 2021. In order to protect the interests of small and medium shareholders, Evergrande’s transfer of Jiakai City 29.9 After% equity, Jiakai City can continue to engage in its main business to enhance its ability to continue operations, and Evergrande can also withdraw funds to further replenish its cash flow.” Industry analysts said.

If you carefully figure out the counterparty of Evergrande in this transaction, this seems to be another story worth remembering. According to the Jiakaicheng announcement, the counterparty of this transaction, Huajian Holdings, is mainly engaged in equity investment business, and the actual controller is Mr. Wang Zhongming.

According to Qixinbao, Huajian Holdings also holds shares in Evergrande Real Estate. According to China Evergrande’s announcement on January 2, 2017, the company’s wholly-owned subsidiaries, Kailong Real Estate and Evergrande Real Estate, have entered into an investment agreement with investors on December 30, 2016. The investor will invest 30 billion yuan to obtain Evergrande Real Estate. 13.16% of the enlarged equity.

The announcement revealed that the first batch of investors introduced by Evergrande this time was eight, among which CITIC Juheng, Guangtian Investment, and Huajian Holdings each subscribed for 5 billion yuan-Huajian Holdings, once a strategic investor of Evergrande Real Estate .

One detail worthy of attention is that, according to Qixinbao, on June 11, 2021, the controlling shareholder of Huajian Holdings was changed from Shenzhen Cuilin Investment Group Co., Ltd. (hereinafter referred to as “Cuilin Holdings”) to Wang Zhongming. And Wang Zhongming is not a person without a story.

On January 24, 2021, the Cuilin investment actually controlled by Wang Zhongming appeared in the list of Hengda Automobile’s 26 billion Hong Kong dollar strategic investors. At that time, the Hengda Automobile announcement introduced him as Wang Zhongming as the current Shenzhen Cuilin Investment Co., Ltd. Chairman of Lin Investment Holding Group Co., Ltd. According to “Viewpoint New Media”, Wang Zhongming also served as the chairman of Evergrande Group Shenzhen Branch, the chairman of Evergrande Bingquan, the vice president of Evergrande Real Estate Group, and the chairman of Evergrande Agriculture and Animal Husbandry Group.

According to previous reports from the Securities Times, Cuilin Investment has a close relationship with Evergrande, and has taken over Evergrande’s agriculture and animal husbandry related businesses such as Evergrande Bingquan. At the performance meeting of China Evergrande this year, Xu Jiayin also announced that he would buy back 49% of Evergrande’s Bingquan business.

The past of Jiakai City and Evergrande

Evergrande became a shareholder of Jiakai City in 2016.

On April 13, 2016, Jiakai City issued an announcement stating that its state-owned shareholders intend to transfer a total of 52.78% of the shares held. Subsequently, Evergrande Real Estate issued an announcement, announcing that it will acquire approximately 952 million shares of Jiakai City from Zheshang Group, Hangzhou Iron and Steel Group, and Guoda Group at 3.79 yuan per share, with a total amount of approximately 3.61 billion, accounting for 52.78% of the total share capital, and becoming Jiakai. City’s controlling shareholder.

Jiakai City was once regarded as one of Evergrande’s backdoor options for returning to A, but after the transaction between Evergrande and Shenshenfang A surfaced, this path was no longer possible.

And because Jiakai City’s main business is also real estate development, since Evergrande entered the ownership, the problem of competition with Evergrande has always existed, and Evergrande has also made a lot of efforts in the past.

After Evergrande became the owner, Jiakai City and Xu Jiayin respectively issued the “Letter of Commitment to Avoid Horizontal Competition”, promising that within one year after the successful equity transfer, Jiakai City’s real estate-based business model will not change. The problem of horizontal competition will be resolved within 3 years. Calculated by time, Kakai City will complete the issue of horizontal competition in September 2019 at the latest.

On February 6, 2017, Kakai City announced that Evergrande Real Estate had transferred its shares in Kakai City to its parent company, Guangzhou Kailong Real Estate. At that time, Evergrande said that Jiakai City and its own side have competition in the real estate business, which is one of the steps to solve the problem.

In September 2018, Jiakai City spent nearly 600 million yuan to acquire 100% equity of Beijing Star Times Cinema Investment Co., Ltd. and Aimee (Beijing) Cinema Investment Co., Ltd., and entered the cinema industry. This is also regarded as Evergrande. Measures to resolve horizontal competition.

However, Evergrande’s efforts have not succeeded in solving the problem of Jiakai City’s competition in the same industry. On July 29, 2019, before the “Letter of Commitment” was about to expire, Kakai City announced that, as of now, the controlling shareholder and also the controlling shareholder of Evergrande Group Kailong Real Estate and the company have not fully fulfilled part of their commitments to resolve horizontal competition. . Jiakai City also announced that it will postpone for two years to resolve the competition with Evergrande Real Estate.

Unexpectedly, Xu Jiayin’s solution was the same as before. When another expiration date was approaching, he still chose his most trusted old friend, his former business partner as the counterparty.

In the years since becoming a company of Evergrande, the performance of Jiakai City has been sluggish with the weakness of its main business. According to Jiakai City’s 2020 performance report, its operating income in 2020 was 1 billion yuan, a year-on-year decrease of 39.47%; in addition, Jiakai City’s 2020 net profit loss attributable to the owners of the parent company was 1.261 billion yuan, up The net profit for the same period of the year was 114 million yuan, which turned from profit to loss.

In the first quarter of 2021, Jiakai City’s performance remains unchanged. The performance report shows that the operating income of Jiakai City in the first quarter of this year was 360 million yuan, an increase of 130.1% year-on-year; the net profit loss attributable to shareholders of listed companies was 159 million yuan, an increase of 48.97% year-on-year; the net profit loss after non-deduction was 102 million yuan, a year-on-year increase An increase of 60.27%.

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