Changhong: Turning the Old Man Into a Grandson for Just 300 Million USD!
2006/6/6 21:09:45
This is a continuation of "Acquiring China, Starting from the Baohan Dispute!" Who is Changhong? Even if you've never wandered through the capital markets, even if you've never been contaminated by over a decade of relentless TV ads and media coverage, you should know! So who does Changhong belong to? Certainly not the people — if it belonged to the people, then the people's name is now SASAC. And who does the listed company Changhong belong to? Under China's current environment, it definitely belongs to the controlling shareholder — Sichuan Changhong Electronics Group Co., Ltd., i.e., its "old man" (parent company). The son belongs to the old man — that's perfectly natural in China. But in global capital markets, this has increasingly lost its meaning. The old man can become a grandson overnight — that's the market economy.
After the share reform, this old man is now only a one-third old man. Of Changhong's 1.8 billion shares, Changhong Group holds only 600 million, going from 53% absolute control to 33% relative control overnight. Relative control still makes it the old man — after all, it's still the largest shareholder, and in today's Chinese listed companies, the largest shareholder is the old man while everyone else is a grandson. But to turn the current Changhong "old man into a grandson" would cost only 300 million USD.
Currently, Changhong's somewhat recovered share price is just over 3 yuan RMB. To become the largest shareholder, you'd need just over 600 million shares — roughly around 300 million USD. Setting aside brand value, market channels, talent, and other soft assets, Changhong's current net asset value per share is over 5 yuan RMB, with capital reserves exceeding 500 million USD. Recently, Changhong just acquired Meiling, extending its reach into white goods, and "Young Marshal" Zhao just won a major award for putting Changhong back on a fast growth track. For hunters, this is all good news — the prey is getting fatter and fatter.
What does 300 million USD mean? For a mid-sized foreign fund, 300 million USD is a rounding error of a rounding error. For domestic private equity funds, having 300 million USD doesn't even qualify you as a big player anymore! Capital has never been the issue. And something even less of an issue is this: even 1 billion USD definitely cannot replicate today's Changhong — that's beyond doubt. Buying things is actually quite simple: if 300 million can control something that 1 billion cannot replicate, then this deal is obviously worth doing.
Clearly, in today's market, Changhong is absolutely not a special case — it's quite common. Recently, acquisitions by foreign capital have been appearing continuously, and these acquisitions aren't limited to any single industry — they're systematic. Aren't some people excited about China becoming the world's factory? But the mantis stalking the cicada only knows one thing: becoming the controlling shareholder of the world's factory and controlling it is an even simpler, achievable goal — and one that is being achieved as we speak!