Swellfun Transfers 40% Equity Interest in Quanxing, Clearing Obstacles for Foreign Shareholding

The breakup of Shuijingfang and Quanxing Brewery was actually intended to express to the relevant authorities to ease the sensitivity of the policy to foreign-invested holdings, and finally helped the Diageo Holding Shuijingfang for a long period of nine months.

The 4% equity leverage has not been approved by the Ministry of Commerce for a long time. When Diageo Holdings Shuijingfang (600779.SH) is still pending, does an announcement mean that the situation is turning back and forth?

On December 29, 2010, Swellfun announced that it would transfer its 40% stake in Sichuan Quanxing Wines to Shanghai Sugar and Alcoholic Drinks Group for 47.15 million yuan. In addition, in March 2010, Sichuan Quanxing Liquor had been transferred to a 55% stake in Chengdu Jinruitong Industrial Co., Ltd., and thus, both Shuijingfang and Quanxing have completely disassociated themselves.

“This means that Swellfun can also completely get rid of the country's restrictions on 'foreign capital is strictly prohibited from entering the country's famous liquor and spirits'. Foreign investors can absolutely hold full control over Swellfun.” Yuan Ye, CEO of the company's left-wing bird and spirits planning company, told reporters.

At the same time, some people in Chengdu Baiququan analyzed that for the Yingsheng team headed by Yang Shuji, chairman of Quanxing Group, foreign investment control not only means Quanxing's successful cash out management.

Focus on energy and financial resources?

According to the announcement, the implementation of this transaction will help the company to concentrate its energy and financial resources on strengthening the main business of high-end fine liquor, improving the company's financial and asset status, and enhancing the company's ability to maintain a steady and steady operation.

According to the three quarterly reports released on October 28, 2010 by Swellfun, its net profit in the first three quarters was 117 million, down 23%; of which, the third quarter loss was 1.56 million yuan, a year-on-year drop of 103%. Other listed companies in the liquor industry are almost a “floating”. In Shuijingfang, profits have fallen or even lost. However, some analysts pointed out that there are financial problems.

At the same time, an analyst in the securities industry pointed out that at the end of the year, various production materials, labor and logistics costs of white spirits continued to rise, but the sales were dull. As a result, Shuijingfang did not dare to defuse costs by the same as Maotai and other first-tier liquors. crisis.

In addition, the policy on white liquor consumption adjusted since August 1 last year has increased the tax base for famous wineries and cut down the unspoken rules for lowering taxes and fees through connected transactions. This has a great influence on Shuijingfang, which has always taken the high road. “The fact that Swellfun sold Quanxing at the end of last year seems to be in line with the reasons for the 'concentration of energy and financial resources' in the announcement.” The aforementioned analyst pointed out.

In 2002, Swellfun was born in high-profile, peaked around 2006, and sold at a maximum of nearly 10,000 tons, with a profit of 200-300 million yuan.

“Failure to invest in subsequent Shuijingfang wine performance continued to decline in the next few years.” Yuan Ye analysis pointed out. In addition, competition in high-end wines has intensified around 2006, and some rising stars have borrowed from the management ideas of Shuijingfang. They have a great tendency to come from behind. For example, the sales of high-end wine “Guojiao 1573” launched by Luzhou Laojiao has exceeded sales before and after 2007. Shuijingfang.

In recent years, Shuijingfang has also gradually lost momentum, its sales have declined, and its profits have shrunk to tens of millions. From 2008 to 2009, the Shuijingfang annual report shows that its performance mainly depends on the performance of real estate. The old site of Quanxing has now become the “Rong Shang Fang” residential community. The developer is a real estate company registered by Suijingfang. "Rong Shangfang" achieved good results from 2008 to 2009.

However, a senior official close to Shuijingfang disclosed to reporters that the breakup between Shuijingfang and Quanxing was actually aimed at acknowledging the sensitivities of the policy to foreign-funded holdings. It was a long wait of 9 months for Diageo Holdings Shuijingfang. In the final help.

Long-term unapproved As early as March 2010, Quanxing announced that its controlling shareholder, Yingsheng Company, once again transferred 4% equity to 140,000 yuan to Diageo, and thus, the shareholding ratio of Yingsheng Group to Quanxing. Diminishing to 47%, Diageo's shareholding in Quanxing rose to 53%, reaching a controlling position.

Yang Rongji once stated in 2008 that as early as the beginning of the negotiations, Yingsheng reached an agreement with Diageo: The latter will eventually gain control of Quanxing.

Obviously, Swellfun, Quanxing, and Diageo have confidence in this approval. The company has been operating in accordance with the reorganization model. At the same time, the reporter learned from the inside of Swellfun that the Diageo team has been heavily involved in the management of Quanxing.

At the end of June, Diageo also put its global board of directors for the first time in Chengdu, where Quanxing Group's headquarters is located.

The capital market is also cooperating with this good expectation. In addition to the single-day decline of A-share listed Shuijingfang on May 20, 2010, which once reached 9.21%, to close at 18.73 yuan (below Diageo’s offer price), the trend of Shuijingfang has outperformed the trend.

However, Diageo Holdings Shuijingfang still lacks a paper approval from the Ministry of Commerce.

On January 4, a person from the Department of Foreign Investment of the Ministry of Commerce told reporters on the phone: “It is still in the process of hearing. Due to the large number of departments involved, it takes a long time. There is no indication that this case will be rejected.”

An analyst who declined to be named brokerage firm pointed out: “Foreign investment approvals need the united opinion of various local government departments first. Such a major event also involves listed companies, and in-depth research by the NDRC, the Ministry of Commerce, the Securities Regulatory Commission, and other departments. Finally, we will weigh the pros and cons and make decisions."

In addition, one of the obstacles to stopping this acquisition is that although Quanxing has declined, it still ranks among the top 17 famous premium liquor brands. It is protected by state policies and foreign acquisitions are restricted. To circumvent this policy, Yang Junji transferred the controlling stake in Quanxing Daqu Distillery to a local garment company. “Although the controlling stakes no longer belong to Quanxing, but the operation and management remain as usual, this is an agreement reached between us and the transferee,” Yang Rongji once told the media in public, “We have feelings for Quanxing, and we will never Really give it up."

Although the senior executives of the Quanxing Group stated that the explanation for handing over the controlling stakes to foreign investors was to use the hand of the world’s largest foreign wine giant to push Shuijingfang abroad. However, some senior people in the Chengdu Beverage Circle pointed out that the transfer of a controlling stake in Shuijingfang to foreign investors is a “safe landing” for Yang Rongji and the entire Quanxing shareholding management.

The completion of the MBO reform in 2005 after the completion of Quanxing, has not been able to calm down the protests of some workers, as well as public opinion disputes, the dispute focused on the MBO restructuring of the process of non-standard and unreasonable value assessment caused by the loss of state-owned assets.

The restructuring of Quanxing MBO began in 2002. Based on the written explanation materials provided by the Quanxing Group and the Chengdu Municipal Government respectively, the restructuring was roughly as follows: First, the assets of the Quanxing Group were evaluated: Implementation was made on June 30, 2002 as the base day. Assessed, Quanxing Group's total assets were approximately 1.81 billion yuan, liabilities were 522 million yuan, and net assets were approximately 1.28 billion yuan.

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