Lukang Culture (601599):4 Billion Price To Sell Shares Of Subsidiaries To Conceal Risks

Data show that Tianyi film, the first three quarters of a substantial loss, in 2019 its performance commitments probably failed to complete the case, the Lukang culture transaction exempt from the counterpart's 2019 performance compensation commitment. At the same time, the total amount of loan principal and interest paid by the listed companies to Tianyi film and its subsidiaries is 1 billion 58 million yuan. This huge amount has also become another focus of the inquiry letter.

A few years ago, a subsidiary bought now is now sold to the original holder. But between this purchase and sale, it is difficult to conceal the risk of continuous accumulation. This is the situation that Jiangsu Lukang culture Limited by Share Ltd (601599.SH, Lukang) has to face.

In December 13th, the Lukang cultural disclosure announcement said that the company signed a share transfer agreement with Xinyu superior water resources management Co., Ltd. (hereinafter referred to as Xinyu's upper good water) and Wu Yi, and intends to sell Xinyu's good fortune to sell 47% stake in Tianyi film and Television Company Limited (hereinafter referred to as Tianyi TV), with a transaction price of 408 million 900 thousand yuan.

However, the stock of Tianyi film and television held by Lukang culture is purchased by two companies in 2015 and 2017. He did not cover it for several years, but he sold it back to Xinyu. Moreover, in the film and television industry, there is a lot of appreciation of the stake in Tianyi TV.

In response, the Shanghai stock exchange sent an inquiry letter to the company, asking for an explanation of the reasonableness and fairness of the pricing of the transaction. At the same time, it required Lukang's culture to explain whether the trading partner, Xinyu superior or not, had signed any other agreements or other arrangements for the sale of Tianyi film and television items between Wu Yi.

The investment times researcher noted that the background of Lukang culture's transaction is complicated.

Data show that Tianyi film, the first three quarters of a substantial loss, in 2019 its performance commitments probably failed to complete the case, the Lukang culture transaction exempt from the counterpart's 2019 performance compensation commitment. At the same time, the total amount of loan principal and interest paid by the listed companies to Tianyi film and its subsidiaries is 1 billion 58 million yuan. This huge amount has also become another focus of the inquiry letter.

In addition, some analysts believe that in the case of Tianyi film and television's approximate performance loss, Lukang culture is eager to reduce the shareholding of Tianyi movie and television to below 50%, perhaps in order to avoid the performance drag caused by it.

Textile cross-border film and television diversification is encountered in the winter industry.

Since the establishment of Lukang culture for more than 20 years, it has been engaged in the textile industry. But in 2014, the company suddenly adopted the strategy of diversified development through merger and reorganization for the purpose of "enhancing overall competitiveness and reducing operational risks".

Aiming at the film and television industry, the Lukang culture, which aims to create a double main business in the textile industry and film and television business, has begun its own acquisition.

In 2015, in the form of cash acquisition and capital increase, Lukang culture obtained 51% stake in Tianyi TV from Wu Yi's superior Xinyu, and the transfer price was 217 million yuan. In 2017, Lukang culture continued to purchase in cash. The target is Xinyu Tianya Shui's holdings of Tianyi film and television company. The transfer price of the 45% shares is 395 million yuan.

After the two acquisition, Lukang culture held 96% stake in Tianyi film and television company, which paid a total of 612 million yuan.

However, in 2018, the entire film and television industry changed suddenly. Lukang Culture said in its announcement that since 2018, the film and television industry has experienced multiple pressures, such as capital outflow, project reduction or delay, intensified inventory and uncertain factors of broadcasting, facing "unprecedented difficulties and challenges".

In this overall environment and situation, Lukang culture expresses its own video business has also been significantly affected. Since 2018, banks and other financial institutions have been shrinking their loans, resulting in the completion of their planned works.

Lukang culture indicates that although the company has financial support for textile sector, the overall sales and shooting progress of some TV programs is still lower than expected.

Moreover, the shortage of funds in the entire film and television industry has led to the fact that the receivables of Lukang's cultural film and television business can not be recovered in time, accounts receivable growth is obvious, the rate of repayment is declining as a whole, the provision for bad debts has been rising, profitability has declined, and the funds for the textile sector have also been hamper.

Lukang culture says that in this case, the 47% stake of Tianyi TV will be sold for 409 million yuan.

However, it is noteworthy that, in the well-known movie and TV winter, why is Xinyu good at Shui Shui and Wu Yi willing to take the stake in Tianyi TV at such a price? In this regard, the Shanghai stock exchange requires that the rationality and fairness of the transaction pricing be explained in the light of the development trend of the industry and the comparable transaction situation of the same industry.

At the same time, the inquiry asked the Lukang culture to explain whether the company and the counterpart Xinyu, Wu Yi, whether to sign other agreements or other arrangements for the sale of Tianyi film and television, and to sell the film of heaven and earth to Xinyu's good wishes.

Exemption from performance compensation?

In addition to counterparties and pricing, the transaction's exemption from 2019 performance commitments is equally noteworthy.

In the early days of Lukang's cultural acquisition of Tianyi film and television, Xinyu's superior and Wu Yi made performance commitments. The agreement shows that between 2017 and 2019, the transferee promised that the net profit of Tianyi film and television should not be less than 100 million yuan, 120 million yuan, and 150 million yuan. In the profit compensation period, the audited net profit of any year up to the end of the current year should not be less than the cumulative profit promise, otherwise it will perform the cash compensation obligation.

In 2017 and 2018, Tianyi film and television completed its performance pledge. But by 2019, the performance of Tianyi film was not satisfactory. The losses in the first three quarters were 41 million 800 thousand and 600 yuan, far lower than the 2019 annual performance pledge of Xinyu, Wu Yi.

However, in this transaction, Lukang culture claims that all obligations of the performance commitments of the agreement are no longer fulfilled. After the completion of the transfer of shares, Xinyu's superior performance is not as good as water, and Wu Yi no longer assumes the responsibility of compensation for performance commitments in 2019.

For the exemption content in the transaction, the Shanghai stock exchange requires Lukang culture to combine the actual performance of the Tianyi film and television, showing the probable amount of the performance compensation amount in 2019, and whether the above performance compensation is considered in the transaction valuation.

At the same time, the Shanghai Stock Exchange asked the company to explain whether the exemption was in violation of the relevant requirements for the exemption from the listed companies' supervision guidelines. In the event that the listed company is about to receive a performance compensation, the letter of inquiry is also required for the reasonableness of the Lukang cultural transfer and the exemption from the performance compensation obligation of the counterparty.

Under the chilling wind of the film and television industry, there are still a lot of risks in the sale of Tianyi TV by Lukang culture.

According to the announcement, the total amount of loan principal and interest of Lukang culture to the Tianyi film and television company and its subsidiaries totaled 1 billion 58 million yuan. According to the investment agreement between the two sides, these loans will be repaid in five years, and the accounts receivable which are invested by Providence will be mortgaged.

However, in the case of sluggish industries, there will probably be a time when the receivables can not be recovered in time, accounts receivable will increase significantly and the provision for bad debts will continue to rise. However, Lukang culture still accepts the conditions of pledge receivable. In this regard, the Shanghai stock exchange requires listed companies to disclose the loan situation and the accounts receivable of Providence and film, and explain whether the five year repayment plan of Tianyi film is feasible, and whether the guarantee measures can protect the interests of listed companies.

In addition, the transaction price will be paid in four years, and the first payment before December 31, 2019 will only account for 21% of the total consideration. According to the agreement, Tianyi film and television will complete the industrial and commercial alteration within five days after the shareholders' meeting is passed.

In response, the inquiry asked the Lukang culture to explain whether the transfer of the transaction was harmful to the interests of the listed company if only 21% of the total transaction consideration was paid.

Industry analysts said that although the sale of Lukang culture can no longer be a natural film and television tables, but in the overall sales, shooting progress is lower than expected, the 10 billions of loans and risk accumulated accounts receivable, is undoubtedly the head of the listed company hard to erase the clouds.