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Hillhouse capital is over 40 billion yuan, and Dong Mingzhu's team takes the C position in three steps

via:CnBeta     time:2019/12/4 7:01:00     readed:20

On the evening of December 2, the 8-month equity transfer of Gree Electric finally came to an end. According to the announcement issued by Gree Electric,With a price of 41.662 billion yuan, Zhuhai Mingjun obtained 15% of the total share capital of Gree Electric appliances and became the largest shareholder. Zhuhai Mingjun behind the Hillhouse capital finally into the main Gree appliances. At present, it is not known what kind of changes will be brought to the future of Gree Electric by the introduction of Hillhouse capital.

However, the effectiveness of the transfer agreement will bring two most direct impacts: one is that Gree Electric will be changed into a company without controlling shareholders and actual controllers, and the other is that the management of Gree Electric, with Dong Mingzhu as the core, has a substantial increase in the company's voice.

Step 1: have the right to vote on Gree's largest shareholder

On September 26, the management of Gree Electric set up Gezhen investment company, which was held by Dong Mingzhu (95.2%), and 17 executives of Gree Electric, such as Wang Jingdong and Huang Hui, jointly held 4.8%. As the management entity of Gree appliances (hereinafter referred to as the management entity), Gezhen investment plays an important role in this equity transaction.

On the evening of December 2, after the equity transfer agreement between Gree Electric and Zhuhai Mingjun was officially signed, Zhuhai Mingjun will hold 15% of the total equity of Gree Electric and become the largest shareholder of the company. Behind the company, there are two companies, Zhuhai Xianying and Zhuhai Yuxiu.

According to relevant agreements, the exclusive and exclusive executive power of Zhuhai Mingjun affairs is owned by Zhuhai Xianying. Behind Zhuhai Xianying, the board of directors of Zhuhai Yuxiu and Zhuhai Yuxiu is the final decision-making body of Zhuhai Xianying. In other words, Zhuhai Yuxiu is the ultimate control subject of Zhuhai Mingjun.

According to the cooperation agreement signed by the management entity and the upper level equity holders of Zhuhai Mingjun. The management entity obtained 41% of the equity ratio of Zhuhai Yuxiu and Zhuhai Xianying through equity transfer, and obtained the board seats of Zhuhai Yuxiu.

Equity structure of Zhuhai Mingjun, picture from equity change report of Gree Electric

According to the articles of association of Zhuhai Yuxiu, the board of directors of Zhuhai Yuxiu is its highest authority and decides all major issues of Zhuhai Yuxiu. The board of directors of Zhuhai Yuxiu is composed of three members, of which Zhuhai Gaoling and HH mansion have the right to jointly appoint one director, pearl brilliance has the right to appoint one director, and the management entity has the right to appoint one director.

The articles of association also shows that the resolutions of the board of directors of Zhuhai Yuxiu include the exercise of the rights enjoyed by the shareholders of the listed company on behalf of Zhuhai Mingjun. That is to say, the management entity has one-third of the decision-making power over Zhuhai Mingjun, the largest shareholder of Gree Electric, by joining Yuxiu.

Step 2: purchase Gree as a partner

According to the announcement of equity transfer agreement of controlling shareholders disclosed by Gree Electric, Zhuhai Mingjun will transfer 902 million shares of Gree Electric held by Gree Group (accounting for 15% of the total equity of Gree Electric) at a price of 46.17 yuan / share, with a total transfer price of 41.662 billion yuan. Zhuhai Mingjun's capital comes from its own funds and self raised funds, with a ratio of about 1:1. Among them, the self owned funds are subscribed by five partners of Mingjun, Zhuhai, totaling 21.85 billion yuan, while the self raised funds are from bank loans.

According to the announcement, the management entity of Gree Electric will, as a limited partner, make a capital contribution of RMB 1.394 billion, accounting for about 6.38% of the total subscribed capital contribution of Zhuhai Mingjun.

At the same time, the management entity signed the partnership share transfer agreement with Zhuhai Botao and Zhuhai Xianying, and Zhuhai Botao transferred the subscribed capital of RMB 1.032 billion (accounting for 4.72% of the total subscribed capital of Zhuhai Mingjun) held by Zhuhai Botao to the management entity.

The picture of Zhuhai Mingjun's partners is from the equity change report of Gree Electric Co., Ltd

In other words, the total amount subscribed by the management entities accounted for 11.10% of the total amount of equity transfer. It is worth mentioning that Zhuhai Mingjun's partners include one general partner, Zhuhai Xianying, and four limited partners. Generally speaking, limited partners do not carry out the specific affairs of the company, but they can obtain corresponding operating profits according to their share of capital contribution.

In the announcement, Zhuhai Mingjun said that in order to protect the interests of creditors, he promised to actively exercise the voting rights of shareholders in the shareholders' meeting of the listed company involving dividend or to urge the directors nominated by him to exercise the voting rights in the board of directors, so as to try his best to make the annual net profit dividend ratio of the listed company not less than 50%.

Step 3: promote equity incentive or increase management shares

It is worth mentioning that the announcement also shows that Zhuhai Gaoling, HH mansion, pearl brilliance and Gezhen investment have agreed that they should promote the equity incentive plan of Gree Electric appliances that the total amount of management and key employees recognized by the management entity should not exceed 4% of Gree Electric Appliance shares after the completion and closing of this transaction.

In fact, after this equity change, the top four shareholders of Gree Electric are Zhuhai Mingjun (holding 15.00%), Hong Kong Central Clearing Co., Ltd. (Lu Yutong), Hebei Jinghai (holding 8.91%) and Gree Group (holding 3.22%).

Excluding the land shares of Beishang capital, the shareholding ratio of the first largest shareholder, Zhuhai Mingjun, and the actual second largest shareholder, Hebei Jinghai, is only 6.09%. It is understood that Hebei Jinghai is set up by Gree Electric appliance dealers. It seems that the company and Dong Mingzhu have always maintained a close relationship.

Some insiders pointed out that, considering the 8.91% shares held by Shanghe beijinghai and 0.74% shares held by Dong Mingzhu in Gree Electric, as well as the 4% equity incentive plan that may be promoted in the future, even if the indirect shareholding and decision-making influence of the management entity on the first largest shareholder, Zhuhai Mingjun, are ignored, the management of Gree Electric, with Dong Mingzhu as the core, can still influence the highest proportion of 1 3.65% of Gree's shares, which is not far from the 15% of shares held by Zhuhai Mingjun, the largest shareholder.

Industry: the improvement of management's influence helps Gree's development

In the view of many securities companies, the impact of the management of Gree Electric after the implementation of the mixed reform may be conducive to the company's future business development.

Everbright Securities said that in the past, the original equity structure of Gree Electric was relatively single, SASAC was the largest shareholder, and it had the decision-making power in the company's operation and personnel appointment, while the management's shareholding ratio was relatively low, so there was a certain principal-agent problem between the two.

The organization believes that after the mixed reform, the proportion of management entity ownership of Gree Electric will be greatly increased, from the original local state-owned enterprises to the diversified ownership structure of SASAC secondary market investors in the management channel of strategic investors, and that the management interests that have basically mastered the actual business decision-making power can better bind listed companies, and the agency entrustment problem of the company will no longer disappear at the governance level. The environment for management to implement strategic changes has gradually matured.

Tianfeng securities household appliances team pointed out that after the transfer, Gree appliances will have no actual controller. According to the current 9-person distribution of Gree's board of directors, except for 3 independent directors, the remaining 6 board seat nomination rights are allocated to 3 Mingjun, Zhuhai (including 1 Director's nomination rights from the management entity), 2 Jinghai guarantee and 1 Gree Group. From this perspective More understanding of the actual influence of the long-term management and dealer representatives on the board of directors.

Tianfeng Securities pointed out that in the transfer, Hillhouse capital guaranteed the incentive and influence of the management in multiple forms in the transaction structure and agreement, which is expected to strengthen the long-term business objectives of the company in the future.

However, Liu buchen, an analyst of home appliance industry, pointed out to Zhongxin Jingwei reporter that Hillhouse capital invested more than 40 billion yuan into Gree Electric, which is not only a pure financial investment, but also for Hillhouse capital, it will definitely exercise the rights of its major shareholders in the future, reflecting its will in strategic adjustment, corporate governance and other aspects.

In Liu buchen's view, the introduction of Hillhouse capital to Gree Electric will help Gree Electric optimize its corporate governance structure, fade Dong Mingzhu's color and let the company say goodbye to the era of rule of man. "Hillhouse capital will also contribute to the development of Gree Electric in the international market, and internationalization is just one of the short boards of Gree Electric at present." (Zhongxin Jingwei APP)

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