On October 5, the first trading day after the National Day holiday, CIMC (2039.HK) and its listed subsidiary CIMC-TianDa (the “Company”, Stock Code: 0445.HK) issued a voluntary announcement stating that Sharp Vision, a wholly-owned subsidiary of CIMC, and Expedition Holding, as Joint Offerors, made a privatisation proposal to CIMC-TianDa.
According to the announcement, the privatisation price is HK$0.266 per share, a 20.36% premium to the closing price of HK$0.221 on the last trading day. The Joint Offerors and the Joint Offeror Concert Parties hold 77.49% of the issued share capital of CIMC-TianDa while other shareholders hold 22.51%, and the maximum amount of cash consideration required to effect the privatisation proposal will be HK$1,080 million.
On the day when trading resumed, CIMC-TianDa’s shares registered a high of over 13%, and closed with a gain of 8.6%, with a significant increase in trading volume. The trading data shows that with a strong interest in this privatisation deal, a large number of institutions are betting on it, making the vast majority of net buying on the day of trading resumption.
CIMC partners with SDIC, in addition to three financial advisers, a determined effort to close the privatisation deal
As is shown in the announcement, the Joint Offerors and the Joint Offeror Concert Parties have appointed ABCI Capital, Zhongtai Capital and Donvex Capital as their joint financial advisers in connection with the privatisation proposal. Hiring three financial advisers with reputations and credentials that rank high in the industry at one time to “safeguard” the privatisation deal is indeed a rare case, which clearly reveals the determination for successful privatization.
After full conversion of the Convertible Bonds held by Wison Energy and following implementation of the proposal, Sharp Vision and Expedition Holding, as the Joint Offerors of the privatization proposal, will hold 47.56% and 17.51% of CIMC-TianDa respectively, ranking as the first and second largest shareholders of the Company after privatisation.
Sharp Vision is a wholly-owned subsidiary of CIMC, while Expedition Holding is wholly-owned by Macao QiXin Investment Management Limited whose shareholders are CNIC of SDIC, TUS-S&T Service Group, and Tus-Financial Group. These three SOEs are strong shareholders with extensive experience and professional talents in the fields of international investment and M&A, national strategic investment, private equity investment in emerging industries, start-up investment, asset management, and financial investment banking services. The combination of these partners and the three competent financial advisers demonstrates the resolution of CIMC and SDIC in succeeding the privatisation deal.
In fact, CIMC-TianDa had already unveiled the curtain of business restructuring before the privatisation proposal was put forward.
CIMC-TianDa announced in early September the disposal of the automated parking systems business, 75% equity interest of CIMC Automated Parking System Co and 60% equity interest of Tianda Longyan, for a total consideration of nearly RMB 182 million. The Interim Report released earlier shows that struck by the COVID-19, CIMC-TianDa’s businesses almost stagnated in the first half of 2020. The revenue for the six months was RMB 2,173 million, a decrease of 8.2% over the corresponding period last year. The profit for the period attributable to owners of the Company was RMB 72.175 million, an increase of 3.18% over the corresponding period last year, which breaks the momentum of rapid growth in performance achieved since CIMC’s asset injection and restructuring. The sale of assets and equity interest may be an attempt to offset the disadvantages caused by this year’s performance.
The business diversification strategy adopted by CIMC-TianDa has not brought more advantages to its development. Instead, such strategy has increasingly become a burden and drag on the Company’s valuation and performance. The epidemic has only accelerated the process in which the Company needs to adjust its businesses and refocus on core competitiveness.
When divesting the automated parking systems business, CIMC-TianDa will have the opportunity to refocus on its core strengths that are advantageously competitive – firefighting & rescue and Passenger boarding bridge. But as the global aviation industry has been hit hard by the unfinished epidemic, the relevant capital expenditures will be affected for a long time to come. Therefore, it is expected that it will not be easy for CIMC-TianDa’s core business (passenger boarding bridge) – one of the world’s champion products – to make a quick turnaround even if the business begins to recover.
The firefighting & rescue business is also slow to yield returns. On the one hand, its German fire truck brand Ziegler has been adversely affected by the overseas outbreaks of COVID-19 and the government procurement cuts. On the other hand, the domestic fire truck business continues to expand through exogenous mergers, but the actual growth rate is barely tangible after the deduction of merger gains. Since it will take a long time for the merging companies to integrate before synergies come into play and the sustained capability for endogenous growth is further nurtured, it may take longer for the performance to boost. In the meanwhile, the continued implementation of the exogenous M&A strategy consumes the cash needed for the Company’s development in other areas. Once it encounters a counter-cyclical period, the Company is prone to a shortage of funds or an urgent need for refinancing. Since the listing or restructuring, the Company’s stock price and valuation have continued to slide, which makes it difficult to refinance. In addition, the relatively large volume of convertible bonds (CB) resulting from restructuring has made the realisation of refinancing more difficult. Maintaining the status of a publicly listed company in Hong Kong and facing the function of financing at the same time will inevitably exert an adverse impact on the Company’s short-term and even long-term development.
Just as the reasons for privatisation mentioned in CIMC-TianDa’s joint announcement, while CIMC is implementing a series of long-term growth strategies on CIMC-TianDa, the shift towards these long-term strategies may affect the Company’s short-term growth profile and result in the divergence between investors’ views and CIMC and SDIC’s view that the Company’s share price and short-term performance do not take priority for the moment. This viewpoint in the announcement further confirms that the Company is entering a stage of development where businesses are being adjusted and it is difficult to foster stable and rapid growth in performance.
Therefore, the privatisation proposal made by CIMC and SDIC at this time is not necessarily a bad thing for investors. Against a backdrop of the current investment environment with increasingly growing uncertainties, it is undoubtedly a rational choice for investors to take advantage of this rare privatisation opportunity to realise investment with a high premium and agree to a reasonably priced privatisation proposal.
Remarks: According to the Takeovers Code of the Securities and Futures Commission (SFC), in cases of unsuccessful privatisation offers, the SFC will not allow the second time privatization of listed companies within 12 months after offer lapsing.
Over 95% rebound from lows, reasonable privatisation offer, and top-ranking corresponding valuation
Back to the stock price analysis in the secondary market. As CIMC-TianDa gradually restored liquidity since the end of May, its share price bottomed out and began to pick up. Based on the closing price on the last trading day before the privatisation announcement, the cumulative gain has exceeded 95%. With the first day’s rise after the announcement, CIMC-TianDa’s price per share has almost returned to the level in 2019. Taking the dividends into consideration and according to the privatisation offer, investors who bought CIMC-TianDa shares from 2019 onwards will have a chance to recoup their investment and make a smooth exit.
According to relatively detailed data collection and incomplete statistics, among the 28 privatisation cases announced since 2020, CIMC-TianDa’s first-day increase after resumption of trading ranked 20th. The main reason is that its valuation corresponding to the offer of its privatisation proposal is much higher than the mean (or median) figures, which is why its premium rate is not outstanding. Compared with the median of the 28 privatisation cases, the latest PE TTM of CIMC-TianDa is 225% higher than the comparable median, and the PB is about 67% higher than the comparable median. If we look at it the other way, the comparable median premium rate is only about 23% higher than that of CIMC-TianDa (as of the last trading day). Moreover, given that the valuation basis of CIMC-TianDa has a larger performance scale and data that are more reliable and stable, the privatisation is evaluated based on its peak performance. In other words, the offer in the privatisation proposal made by CIMC and SDIC does demonstrate their sincerity and rationality from this perspective.
In terms of the latest valuation corresponding to the privatisation offer, CIMC-TianDa’s proposal can be ranked eighth out of the 28 privatisation cases, that is to say, in the top one-third of all cases. From the perspective of horizontal comparison, there is no doubt that this offer has a significant advantage.
No. / Stock Code / Stock Short Name / First Announcement Day of Privatization / Daily Pricing of Resume Trading / PE-TTM
1. 00494.HK LI & FUNG 2020/3/20 88.00% 81.18
2. 00908.HK ZHUHAI H INV 2020/1/22 0.83% 22.4
3. 01990.HK XINGHUA PORT 2020/7/29 18.10% 19.922
4. 01035.HK BBI LIFE SCI 2020/1/14 10.30% 19.89
5. 01125.HK LAI FUNG HOLD 2020/2/21 -2.36% 18.81
6. 01850.HK WINDMILL GP 2020/2/11 14.29% 17.67
7. 00221.HK EASY ONE FIN 2020/5/5 -7.81% 16.4
8. 00445.HK CIMC-TIANDA 2020/10/4 8.60% 16
9. 00020.HK WHEELOCK 2020/2/27 40.58% 13.94
10. 01151.HK ELEC & ELTEK 2020/4/3 64.73% 13.89
11. 00816.HK HUADIAN FUXIN 2020/6/1 60.26% 10.01
12. 01460.HK ICO GROUP 2020/2/3 30.00% 8.33
13. 02308.HK EVOC 2020/6/23 48.35% 6.567
14. 00595.HK AV CONCEPT HOLD 2020/1/8 17.74% 5.11
15. 00469.HK CAPXON INT’L 2020/6/5 70.15% 4.73
16. 00056.HK ALLIED PPT (HK) 2020/4/20 34.81% 4.47
17. 00733.HK HOPEFLUENT 2020/4/28 14.29% 2.09
18. 00058.HK SUNWAY INT’L 2020/1/8 65.00% -0.28
19. 00905.HK GLOBAL M CAP 2020/5/25 -15.09% -0.69
20. 00653.HK BONJOUR HOLD 2020/2/17 13.71% -2.97
21. 00422.HK VMEP HOLDINGS 2020/6/5 151.46% -2.98
22. 00592.HK BOSSINI INT’L 2020/5/15 98.80% -3.25
23. 00244.HK SINCERE 2020/5/15 7.14% -3.39
24. 00859.HK ZHONGCHANG INTL 2020/4/3 7.84% -5.93
25. 00776.HK IMPERIUM GP 2020/1/24 -7.69% -9.88
26. 01709.HK DL HOLDINGS GP 2020/1/21 2.94% -37.02
27. 00100.HK CLEAR MEDIA 2020/3/31 37.06% -39.78
28. 00801.HK GOLDEN MEDITECH 2020/6/17 10.96% Loss
(Source: wind)
About CIMC-TianDa Holdings Company Limited
CIMC-TianDa Holdings Company Limited, subsidiary of China International Marine Containers (Group) Ltd., is specialized in in Airport Facilities, Firefighting & Rescue, Material Handling System (MHS) and Auto Stereoscopic Parking System businesses. In term of Airport Facilities business, the company is the world’s most competitive market-leading airport equipment core services provider which boarding bridge products cover 300 airports in more than 70 countries. Also, the company is China’s largest and one of the world’s top 5 Firefighting & Rescue solution provider, as well as the first listed company of the industry.
In addition, the company’s Material Handling System and Auto Stereoscopic Parking System businesses are highly regarded with various patents. For more information, please visit http://www.cimc-tianda.com/