Zoomlion Heavy Industry Science and Technology Co., Ltd. (01157.HK; 000157.SZ), a pioneer in mixed ownership reform, conducted the reform again with the focus on its subsidiary in the environmental sector. It is disclosed that Zoomlion Heavy Industry Science and Technology has mulled the matter for nearly 10 months with major environmental companies involved. He Jianfeng, the son of the actual control of Midea Group Co., Ltd. (000333.SZ), and Wang Guobin, a former senior manager of Orient Securities Asset Management Co., Ltd. participated in the reform.
Based on the announcement, Zoomlion Heavy Industry Science and Technology proposes to transfer 80 percent equities of Changsha Zoomlion Environment Industry, a wholly-owned subsidiary, to four buyers at 11.6 billion yuan and Zoomlion Heavy Industry Science and Technology will retain the remaining 20 percent equities. The subsidiary is engaged in environmental businesses. Environmental industry, project machinery and agricultural machinery have become three main businesses of Zoomlion Heavy Industry Science and Technology since its transformation in 2013. Changsha Zoomlion Environment Industry contributed 5.6 billion yuan of business revenue and 755 million yuan of profit in 2016.
Despite the high price, the buyers are also important figures.
Specifically, among the 80 percent equities to be transferred, 51 percent equities will be bought by Infore Investment at a consideration of 7,395 million yuan. Its annual report shows that Infore Investment holds 32.23 percent equities of Infore Environment Technology Group Co., Ltd. (000967.SZ) as its biggest shareholder. The actual controller of Infore Environment Technology is He Jianfeng, the only son of the chairman of Midea Group. He Jianfeng and his father ranked 10th the Hurun Rich List 2016 with 78 billion yuan.
Infore Environment Technology indicated in its annual report that it is actively developing environmental businesses. It is currently engaged in environmental monitoring, environmental treatment and the manufacturing of high-end equipment.
21.5517 percent equity of Changsha Zoomlion Environment Industry was transferred to Chongchuang (Shenzhen) Investment Center (Limited Partnership) at a consideration of 3.125 billion yuan, which is an important participant in the first round of mixed ownership reform of Zoomlion Heavy Industry Science and Technology.
Besides, 4 percent equity was transferred to Guangzhou Yuemintou Yinglian Investment Partnership at a consideration of 580 million yuan, and 3.4483 percent equity was transferred to Shanghai Lvlian Junhe Industry Merger & Acquisition Equity Investment Fund Partnership at a consideration of 500 million yuan.
Relevant officials of Zoomlion Heavy Industry Science and Technology indicated that transferring 80 percent of its subsidiary engaged in environment sector aims to give play to its advantages and avoid its weakness.
Zoomlion Heavy Industry Science and Technology indicated that it has become the biggest environmental sanitation equipment manufacturer in China and market share of its core product is more than 60 percent. But this kind of equipment is only a small part involved in the big environment industry. The company lacks talent and operation experience if it wants to rapidly transform from an environmental sanitation equipment manufacturer to a provider of overall solution to environmental governance and operator.
It is still full of imagination after Zoomlion Heavy Industry Science and Technology sells its environmental subsidiary. Officials from Zoomlion Heavy Industry Science and Technology said that the transfer price of the equity is higher than the valuation with average 17 times of PE ratio of H shares. There’s 20 percent equity left and the company’s future prospect is promising. If environment business is included in a platform which will go public, the 20 percent equity will bring another 3-5 billion yuan.
Zoomlion Heavy Industry Science and Technology remarked that after selling the subsidiary, it will focus more on the development of business of engineering machinery and agricultural machinery, which will further facilitate the development of engineering machinery and agricultural machinery and gradually realize globalized development strategy.
Translated by Star Zhang and Vanessa Chen
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