â– Reporter Xie Cheng
In the past two years, Baan Water has frequently gone to sea. In 2016 alone, it invested in three overseas companies. However, the profitability of these companies is not optimistic.
The "Securities Daily" reporter found that the German ItN nano-plate ceramic ultrafiltration membrane company, which was heavily purchased by the company, was a company that was on the verge of bankruptcy for seven years, and Baan Water did not disclose the financial data. Wu Fei, a partner of Xingong Consulting, told reporters that in accordance with the format requirements of the Shenzhen Stock Exchange for the announcement of the acquisition of listed companies, the key financial indicators such as the profit of the target company should be fully disclosed. Baan Water has the suspicion of concealing losses and belongs to the letter violation. .
Frequent overseas M&A returns?
Baan Water was listed on the GEM in September 2011. Its main business covers municipal water treatment, industrial water treatment, solid waste treatment, natural gas pressure regulating station and distributed energy, and construction. The main products are used in municipal administration. Engineering, sponge city and desalination.
Since 2016, the pace of internationalization of Baan Water has accelerated significantly, and overseas companies have been acquired almost at a rate of half a year. On April 6, 2016, Baan Water completed the 100% equity transfer of Austrian KWICorporate VerwaltunGS GmbH (hereinafter referred to as KWI) with air-floating solid-liquid separation technology; on August 2, 2016, it announced the acquisition of German ItNNanovationAG (hereinafter referred to as ItN) Nano-plate ceramic ultrafiltration membrane company 67.65% equity; October 26, 2016, announced that it intends to use its own funds to transfer a 21.6% stake in LariveWaterHoldingAG (hereinafter referred to as LW), LW owns 100% equity of Swiss Water, this equity delivery Upon completion, Baan Water will indirectly hold Swiss Water's shares. Swiss Water has low-temperature multi-effect desalination technology and zero-discharge treatment technology for wastewater; ItN and LW have completed equity delivery in 2017; May 12, 2017, the company Once again, it is planned to acquire 100% of DoosanHydroTechnology LLC (hereinafter referred to as DHT) from Doosan Heavy Industries USA Holdings. Baan Water also set up offices in Dubai and other places last year to set up subsidiaries in Singapore and Hong Kong.
However, from the 2016 annual report of Baan Water, only Austria KWI achieved profit: 2016 total assets of 121 million yuan, net assets of 72.606 million yuan, revenue of 68.418 million yuan, operating profit of 3.5857 million yuan, net profit of 4,436,500 yuan.
Compared with Baan Water's 2016 operating income of 1.03 billion and net profit of 141 million yuan, KWI's profit contribution rate is only 3.1%. However, KWI's performance has already been a good performer in Baan Water's overseas acquisition target, and the profitability of the other three companies is not optimistic. Baan Water spent 8 million euros (about 60 million yuan) to acquire a 21.6% stake in LW. According to the announcement, as of December 31, 2015, LW's net assets were negative 146 million yuan and operating income was 14.72 million yuan. The operating profit was a loss of RMB 31.86 million and the net profit was a loss of RMB 41.21 million.
In addition to the negative net worth of LW, the German ItN and the recently announced US$ 3.60 million acquisition of the US DHT are also insolvent. According to the announcement, as of February 24, 2017, the target company's US DHT total assets were US$1999.60 million, total liabilities were US$505.74 million, and the net book value was US$305.151 million. However, Baan Water said that before the equity transfer of the transaction, the original shareholders of the company and its related entities were responsible for cleaning up the short-term loan of 45 million US dollars.
Acquisition of German ItN
It is worth noting that Baan Water was not disclosed in the annual report or the acquisition announcement regarding key financial indicators such as operating income and net profit of DHT in the US and ItN in Germany.
On August 2, 2016, Baan Water stated in the “Main Financial Data of Target Companies†in the German ItN Equity Acquisition Memorandum that the main financial data of the target company will be disclosed after due diligence. However, the data has not been disclosed until the announcement of the completion of the equity delivery.
In this regard, Xinfei Consulting Partner Wu Fei said in an interview that Baan Water’s announcement of the acquisition of ItN in Germany did not meet the guidelines for the announcement of the acquisition of assets, and the announcements were inconsistent, the promised disclosure was not fulfilled, and there was a suspicion of deliberate concealment. It has constituted a violation of information disclosure by listed companies, but it is not a serious case.
According to the disclosure requirements of the information disclosure of the GEM of the Shenzhen Stock Exchange: if the acquisition or sale of the target is the company's equity, it should also include “the total assets, total liabilities, total receivables, and contingent matters of the company in the most recent year and the latest issue. Financial data (including whether audited), such as total amount (including guarantees, litigation and arbitration), net assets, operating income, operating profit, net profit, and net cash flow from operating activities, if the target company’s net profit includes A larger proportion of non-recurring gains and losses should be specified.
The target ItN loses for 7 consecutive years
Why should we avoid talking about the financial situation of ItN in Germany? According to a survey conducted by the Securities Daily reporter, ItN is a private enterprise established in 2000 and listed on the Frankfurt Stock Exchange in Germany in 2006. It is located in Saarbrücken, Germany, and Baan Water called it “Nano-plate ceramic super The leader of membrane technology" will bring business synergies and overseas financing convenience after the completion of the acquisition, which will help to cut into the international water market more quickly and deeply.
Baan Water has therefore transferred a stake of ItN 9,672,861 from the Itt family and Coreo AG, the old shareholders of ItN, at a price of 0.1 Euro per share, accounting for 64.42% of the ItN share capital, while borrowing 500,000 Euros for ItN to supplement daily operations. Sexual cash flow, for the €900,000 buyout of ItN’s creditor Stoll family and creditor SWNBeteiligungsGmbH, which provided a total loan of 17.7 million euros for ItN; in addition the company will contribute 300 Euros/shares by November 2016. 10,000 euros, subscribed for 1,500,000 shares of ItN's targeted issue, accounting for 9.08% of the total issued share capital of 16,515,596 shares. After the completion of the acquisition and capital increase, Baan Water has a total of 67.65% of ItN.
From this calculation, Baan Water's acquisition of the German ItN company total cost of 4,973,300 euros, while providing 500,000 euros of loans, but the cost of more than 40 million yuan is a company that has lost seven years and is close to bankruptcy.
"Securities Daily" reporters checked their official website and found that the 2010-2016 financial report shows that the company has been in a state of loss for the past seven years, the largest loss amount is a net loss of 7.2 million euros in 2011, and the minimum amount of losses is 2013. 4.4 million euros. In 2016, it only completed a turnover of 500,000 Euros, which was more than 50% lower than last year. Earnings before interest, tax, depreciation and amortization (EBITDA) fell by 0.9% to a loss of 3.5 million Euros. A slight improvement in the year fell from a loss of 5.9 million euros to a loss of 5.8 million euros.
Why not disclose the financial situation of ItN in Germany for 7 years without any profit means that its profit model has problems. Whether Baan Water has the ability to turn losses. As of press time, the reporter has not received a reply from the Baan Water Affairs Board Secretary on the above issues.
What is crazy overseas mergers and acquisitions?
Le Guoping, general manager of Baan Water's overseas business department, told the "Securities Daily" reporter at the shareholders' meeting: "The German company ItN has been in the state of R&D investment for several years, and the products are very good but lack market positioning and market development. According to this short Board, we have re-adjusted the company, strengthened the market, and promoted the product layout in China and the world. Now there are several orders in operation."
When talking about the recently acquired US company DHT, Leguo’s problem with DHT is that it has a good technical and talent reserve, but it does not have its own products, but we not only have technical services but also various products, and can also do BOT financing projects. . The acquisition of DHT is in line with Baan Water's global strategy, and we hope to use DHT to open the US market and establish a bridgehead in North America.
When will the profits of overseas companies be improved? Le Guoping believes that there have been significant changes this year, especially for ItN, and there are already projects in the US DHT. According to reports, ITN's flat ceramic ultrafiltration membrane (CFM) has been selected as the filtration process for desalination projects, as a pretreatment of reverse osmosis membrane to ensure the purity of water quality, Baan Water plans to apply it to the "Island of Yingkou Xianren Island" In the desalination project, the total treatment capacity of the first-stage project was 220,000 tons/day. Germany's ItN also predicted that its turnover this year is expected to exceed 10 million euros in March this year. It is expected to achieve the first profit before interest, tax, depreciation and amortization (EBITDA) in 2017, but ultimately depends on Can Chinese orders advance on schedule.
Leguo said that managing overseas companies is extremely challenging. The biggest obstacle is the huge difference between culture and values. But to transform the genes is not a one-off, but to simmer.
The ambition of Baan Water's overseas acquisition is evident from the speech of Chairman Zhang Chunlin: The overseas M&A road is the second venture of Baan, and we will take advantage of the capital market to acquire the international in the next 5-10 years. 20 environmentally friendly water treatment companies with first-class technology, first-class products and first-class brands form a global water treatment product “walmartâ€, which integrates the company's industrial chain. The future goal is to increase overseas business after 3 years. 50%.
The data shows that 80% of mergers and acquisitions ended in failure. How to avoid the failure trap of M&A? Zhang Chunlin believes that the key is to master the market value law of mergers and acquisitions. “M&A companies cannot exceed 10% of our company's market capitalization. If they exceed the market, it is not easy to manage; usually less than 10% of your market value, the damage is relatively small. One of the secrets of Baan's overseas mergers and acquisitions is to find overseas market segments. Invisible champions, such companies are characterized by 'small size, but unique technology'."
However, some investment bankers questioned the motives of Baan Water's overseas mergers and acquisitions. If it is a profit at the time of acquisition but there is a loss after the acquisition, it is understandable. Why is it so intractable to buy a company that is so intensive, and the time of 2016 is very delicate. It coincides with the strong expectation of RMB depreciation and the suspicion of dumping funds.
(Xie Cheng)
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