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Perspective of GREE mixed change: who has the final say for GREE electric appliances?

via:CnBeta     time:2019/12/4 7:00:44     readed:14

After mixed reform and no more than 4% equity incentive in the future, the management and dealers led by Dong Mingzhu and other relevant concerted actors will jointly hold more than 15% equity of Gree Electric in the future. The mixed reform plan of 41.66 billion yuan was finalized, and Gree Electric (000651. SZ) resumed trading on March 3, with its share price rising 5.35% to 60.8 yuan.Gaoling capital, which is about to "take over" and obtain 15% equity of Gree Electric, has achieved 13.2 billion yuan in book income only. From the eighth shareholder to the first shareholder, Hillhouse capital has greatly expanded its equity and dividend income from the reform of Gree, which is the apparent winner.

After the mixed reform, Gree Electric will take off the cap of "state-owned assets control" and become an enterprise without actual controller. So who has the final say? The first financial reporter carefully read the mixed reform plan of Gree and found that after the mixed reform and no more than 4% equity incentive in the future, the management and dealers led by Dong Mingzhu and other relevant concerted actors will jointly hold more than 15% equity of Gree Electric in the future, improving the real power of the company's decision-making.

The management of Gree Electric (its partnership company is Zhuhai Gezhen), led by Dong Mingzhu, has obtained greater decision-making power of the company, which is mainly reflected in two levels, namely, the board of directors of Zhuhai Yuxiu, the controller of Zhuhai Mingjun, the major shareholder, and the board of directors of Gree Electric.

First of all, Zhuhai Yuxiu, as the executive partner, makes decisions on major issues of Zhuhai Xianying and its investment in Zhuhai Mingjun. Zhuhai Yuxiu board of directors is the highest authority of Zhuhai Mingjun and Zhuhai Xianying. The board of directors of Zhuhai Yuxiu has three seats. Hillhouse capital, Zhuhai Gezhen and Mingzhu Yihui each nominate one director. The resolution of the board of directors can only be passed with the approval of two-thirds or more directors. If the opinions of Hillhouse capital and Zhuhai Gezhen (Management) are different, the vote of Mingzhu Yihui is very important. Mingzhu Yihui is 100% owned by Cao Junsheng. Although on the surface, there are no related persons among the high-level capital, management and Mingzhu Yihui, the company name of Mingzhu Yihui contains Dong Mingzhu's name, and it was established in August this year on the eve of the announcement of the mixed reform plan of Gree.

Secondly, Zhuhai Mingjun, a subsidiary of Hillhouse capital, as a new major shareholder (holding 15%) of Gree Electric, has the right to nominate three directors to the board of directors of Gree Electric. As mentioned above, the major issues of Zhuhai Mingjun shall be decided by Zhuhai Yuxiu, and the resolution of the board of directors of Zhuhai Yuxiu shall be approved only with the approval of two-thirds or more of the directors. To put it another way, suppose that the three directors nominated by the board of directors of Zhuhai Yuxiu are only approved by the representatives of Hillhouse capital and Mingzhu Yihui, but the relevant mixed reform agreement also stipulates that at least two of the three candidates nominated by Zhuhai Mingjun (Zhuhai Yuxiu) for directors of Gree Electric are recognized by the management of Gree Electric. That is to say, two of the three directors nominated by Zhuhai Mingjun will agree with Gree's management.

At the same time, the management of Gree Electric, led by Dong Mingzhu, will also obtain more equity and dividend income in the mixed reform, which is reflected in four aspects, because Zhuhai Gezhen is also one of the partners of Zhuhai Mingjun, Zhuhai Xianying and Zhuhai Yuxiu. In addition, after the implementation of the mixed reform, the management and employees of the listed company of Gree Electric will not be more than 4% Equity incentive plan.

First of all, at the level of Zhuhai Mingjun, the management entity (Zhuhai Gezhen) subscribed 6.3794% of the total contribution of Zhuhai Mingjun with about 1.394 billion yuan; at the same time, Zhuhai Gezhen transferred 4.7236% of the total contribution of Zhuhai Mingjun held by Zhuhai Botao with 1.032 billion yuan. In other words, the management entity (Zhuhai Gezhen) obtained 11.103% of the equity of Zhuhai Mingjun with 2.426 billion yuan, that is, indirectly obtained 1.66545% of the equity of Gree Electric, which can share more dividend income in the development of listed companies of Gree Electric.

Secondly, at the level of Zhuhai Xianying, the executive partner of Zhuhai Mingjun, the management entity (Zhuhai Gezhen) holds 41% of the equity of Zhuhai Xianying. The management fee collected by Zhuhai Mingjun from the investor, the executive partnership remuneration and excess income (collectively referred to as "GP income") obtained by Zhuhai Xianying are shared by the management entity (Zhuhai Gezhen). Meanwhile, Zhuhai Gezhen will share the total GP income enjoyed by Zhuhai Gezhen 8% of the revenue is allocated to the management members and employees who have made important contributions to Gree Electric Listed Company in an appropriate way. In other words, the management can also enjoy the additional income of Zhuhai Mingjun, a major shareholder of Gree Electric, and its executive partner.

Third, at the level of Zhuhai Yuxiu, the executive partner of Zhuhai Xianying, the management entity (Zhuhai Gezhen) obtained 41% equity of Zhuhai Yuxiu with 4.305 million yuan, becoming a single major shareholder of Zhuhai Yuxiu. Zhuhai Gaoling, HH mansion and Mingzhu Yihui hold 38%, 11% and 10% shares respectively in Zhuhai Yuxiu. In other words, if Zhuhai Yuxiu has profits, the management entities can also share them.

Fourth, Zhuhai Gaoling, HH mansion, Mingzhu Yihui and Zhuhai Gezhen agree that after the completion of the mixed reform, they will promote the equity incentive plan that Gree Electric's listed company level will give the management and key employees recognized by the management entity (Zhuhai Gezhen) no more than 4% of the total shares of the listed company. That is to say, Gree's management and key employees can also obtain about 4% of the shares of Listed Companies in the future.

There are 9 seats on the board of directors of Gree Electric Appliance, including three nominated by Zhuhai Mingjun, two of which need to be recognized by the management; one nominated by Jinghai guarantee, which is regarded as the person acting in concert with the management; in the future, if the management and employees get 4% equity incentive, it is expected that they can also nominate a director. That is to say, in the next nine Directors' seats of Gree Electric, the management will probably affect four seats.

It seems that Dong Mingzhu's team only invested about 2.43 billion yuan in this mixed reform. In this 41.66 billion yuan "mixed reform" feast, they won the decision-making power of one third of the major shareholders and the important decision-making power of the listed company of Gree Electric in the future, which can be called "four or two thousand catties". The premise is that the future performance of Dong Mingzhu team should meet the conditions of equity incentive. Therefore, Dong Mingzhu's team should work hard and "jump" to win the position of large shareholder of Gree Electric in the future.

As a "facilitator" and a high-level capital that does not seek the control of listed companies, it also gets enough benefits. In the investment cost of 41.66 billion yuan to acquire 15% equity of Gree Electric from Gree Group, Zhuhai Mingjun, a subsidiary of Hillhouse capital, has only provided 21.85 billion yuan of its own capital, while the current book income has reached 13.2 billion yuan; the remaining 22.5 billion yuan of self raised capital has made a syndicated loan to Zhuhai branch of China Merchants Bank, and in terms of the high income of Gree Electric's equity, repayment is not difficult. Therefore, Hillhouse capital is also "small and broad", and has obtained the position, equity and earnings of the major shareholders of Gree Electric.

In general, in the hybrid reform of Gree Electric, Hillhouse capital expanded the equity income, and Dong Mingzhu's team increased the decision-making power.

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