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Recently, China National Engineering Corporation (hereinafter referred to as China National Engineering Corporation), a wholly-owned subsidiary of SINOMACH, announced the purchase plan for assets with China Engineering and Agricultural Machinery Import and Export Corporation (hereinafter referred to as Zhongnong Machinery).
“The program has been approved by SINOMACH and it is expected to complete the restructuring of Zhongnong Machinery by November of this year.†Ms. Meng, the office of TIC International’s Board of Directors, told China Industry News on August 19 that the first step of the restructuring is underway. .
The intention of integration is obvious. "We have acquired China Agricultural Machinery, which is also a specific measure for SINOMACH to integrate its assets." Ms. Meng of International Engineering International said.
The registered capital of Zhongnong Machinery is 269 million yuan. Its business scope includes import and export business, overseas engineering contracting business, technical consulting services for engineering machinery, agricultural machinery and power machinery, technical exchange and sales. The company's net profit in 2008 was 222 million yuan, and its net assets were as high as 1.818 billion yuan.
Zhongnongji was the controlling shareholder of CAMCE six months ago. In January of this year, China National Machinery Corporation’s actual controller Guoji Group signed a “share transfer agreement†with Zhongnongji. SINOMACH plans to introduce 62.04% of the shares of CAMCE, which is directly controlled by the wholly-owned subsidiary Zhongnong Machinery, with a total of 118 million. Shares, using the state-owned equity administrative transfer method, were directly held and controlled by SINOMACH.
For the acquisition of CAMCE, some media called it "snake swallow", but Ms. Meng did not agree. She told reporters that China National Engineering International acquired the restructured Chinese agricultural machinery, not the current medium agricultural machinery, and the assets of the restructured Zhongnong Machinery were smaller than that of China National Engineering International. Therefore, the statement of “snake swallowing elephant†is not valid.
As a large-scale central enterprise group with the widest coverage of China's machinery industry, the most complete business chain and the strongest R&D capability, SINOMACH has been coordinating the consolidation of its subordinate assets. The Group will package high-quality assets into its listed companies in the next few years. .
Ren Hongbin, chairman of SINOMACH, previously revealed that the transformation of SINOMACH is from the past “one body and two wings†– with engineering contracting as the main body, research and development and domestic and foreign trade as the two wings, to “three main businesses†(mechanical equipment manufacturing) With the transformation of research and development, engineering contracting, and trade services, the ultimate realization is the equipment manufacturing industry.
Prior to this acquisition, SINOMACH planned to inject a 100% stake in Axis Research Institute in the second half of 2008 through a private placement. In May of this year, SINOMACH was also indirectly controlled by SINOMACH. It is intended to expand the scale of the main business through private placement.
“Zhonggong International is a core subsidiary of SINOMACH and has a high status in the group.†Insiders of SINOMACH said that SINOMACH is accelerating its integration of its business in accordance with the requirements of the central government. The restructuring of China National Machinery Corporation is only a part of the restructuring of SINOMACH.
For the acquisition, a staff member of the China Agricultural Machinery Management Department told reporters on August 19 that the current restructuring work has progressed smoothly, and too many cases are still not disclosed.
Acquisition "two steps"
The acquisition will be divided into two steps.
Since the economic nature of China Agricultural Machinery is a state-owned enterprise and does not have the conditions for direct transfer to a listed company, the first step is that SINOMACH intends to convert Zhongnong Machinery into China Engineering and Agricultural Machinery Import and Export Co., Ltd. (hereinafter referred to as Zhongnong Machinery Co., Ltd.) the company). Literally, it shows the changes from “Import and Export Corporation†to “Import and Export Co., Ltd.â€.
The restructuring of China Agricultural Machinery requires the implementation of procedures such as asset divestiture, property inventory, audit assessment and industrial and commercial registration. The main assets of Zhongnong Machinery Co., Ltd., which was established after the completion of the divestiture and restructuring, are its two subsidiaries, namely Zhongkai International Engineering Co., Ltd., Zhongnong Machinery Co., Ltd. holds 100% of its shares, and Beijing Zhongkaihua International Freight Forwarding Co., Ltd. The company, Zhongnong Machinery Co., Ltd. holds 77% of its equity.
It is reported that the restructured Zhongnong Machinery Co., Ltd. will gradually shift its business focus to the same or related areas as the main business of listed companies (ie international engineering contracting business).
In the second step, CAMCE issued shares to SINOMACH and purchased 100% of the shares of Zhongnong Machinery Co., Ltd. held by SINOMACH. In the above-mentioned restructuring process, the assets to be divested by China Agricultural Machinery mainly include subsidiaries and investments that are not related to the main business of the listed company, some assets with poor profitability, and some assets with unclear ownership.
The result is still "?"
For this restructuring, CAMCE is confident.
“Through reorganization, the core assets of Zhongnong Machinery and related personnel will be injected into the listed company.†Zhonggong International announced that it will absorb and utilize the mature overseas business experience and human resources advantages of Zhongnong Machinery Co., Ltd. to expand its professional advantage areas and improve international engineering. The core competitiveness in the contracting market is positive.
However, since the implementation of the restructuring of the China Agricultural Machinery is a prerequisite for the acquisition, this issue will only be implemented after the completion of the restructuring of the Zhongnong Machinery. Therefore, whether the progress of China's agricultural machinery restructuring can proceed smoothly, and whether it is ultimately important to successfully implement the restructuring is also a major test for SINOMACH.
From the perspective of the business composition of CAMCE, the international engineering contracting business has the characteristics of large capital demand, concentrated capital investment, long project operation cycle, large fluctuations in market demand, and high requirements for coordinated operation of all parties. The projects are generally key projects of the host government, most of which are basic industrial projects, which are directly affected by factors such as the international political situation, the scale and direction of fixed assets investment in various countries, and the international economic situation.
Therefore, due to the imbalance of economic development in various countries, the company's international engineering contracting project needs certain country preferences and cyclical fluctuations. If the company's national market development is insufficient, the operating performance may be subject to fluctuations.
At the same time, due to the international financial crisis, advanced economies such as Europe and the United States have not yet emerged from the recession, and the growth of emerging economies is also weakening and other uncertain factors, many project investors have adopted a tightening and wait-and-see attitude, which has caused certain contracts for the company's new projects. Impact; international financing is more difficult, project owners' ability to pay declines, payments for executing projects may be postponed, and the process of contracted projects may also be affected.
On July 30, CAMCE and SINOMACH signed a Memorandum on Disarming the Cooperation Agreement for the First Phase of the Project of the Northern Luzon Railway of the Philippines. CAMCE said that since the signing of the project cooperation agreement in 2006, since the related work such as the demolition of the owner has not been completed, the project implementation cannot be carried out, and CAMCE is no longer involved in the first phase of the project of the Northern Luzon Railway of the Philippines.
In addition, the main business of the restructured CAMCE is still international engineering contracting, and the contracted projects are mainly distributed in developing countries in transition period. There may be risks of project implementation changes due to political system instability and economic policy changes. Due to the wide distribution of these projects, the business sites are more dispersed. There are certain differences in politics, economy, culture, and geography of various countries. This poses certain difficulties and risks to the company's operation and management, especially project control.
China National Machinery Industry Corporation (hereinafter referred to as SINOMACH) is accelerating the integration of its subsidiaries.