Aoyuan'S Acquisition Of Beijing And Wuhan Ends And Real Estate Acquisition And Upgrading

Recently, three months after the announcement of its acquisition of Jinghan shares, Aoyuan, a 100 billion yuan real estate enterprise, quickly reorganized the board of directors of Beijing Han, and five senior executives with Olympic Park background joined in. Jinghan, a Hebei developer, officially became a member enterprise of Guangdong Olympic Park.

Acquisition and merger can enable enterprises to achieve leapfrog growth. Before Vanke's acquisition of Zhejiang Nandu and rongchuang's acquisition of Wanda cultural tourism, they have achieved a leap forward in scale. At the beginning of the year, Aoyuan set a target of 12% sales growth this year. Through this acquisition, we can further enrich the land reserve and achieve the target faster.

It is worth noting that Aoyuan's acquisition of Jinghan is the first company level equity acquisition case in the real estate industry since this year. The wave of mergers and acquisitions sweeping the real estate industry in recent years is upgrading, and has expanded from project acquisition to equity acquisition. It is expected that many such cases will occur in the future. For example, Taihe is looking for strategic shareholders, and Huang Qisen, the founder, is even willing to give up control.

Under the general trend of industry merger and integration, many small and medium-sized real estate enterprises are about to change their owners, and the industry position will change dramatically. Even many well-known real estate brands and famous industry tycoons will gradually disappear in the real estate market.

Efficient acquisition in three months

On July 15, Aoyuan's acquisition of Jinghan ushered in a new node. Jinghan held the third extraordinary general meeting of shareholders in 2020 in Shenzhen, and a new management team of directors, supervisors and senior management was born.

Six of them are from the Olympic Park Department. Ma Jun, the new chairman of Jinghan group, is also the executive director, operation president and President of Aoyuan real estate group. Chen Yong and Guo Shiguo, new directors of Jinghan, are still vice presidents of Aoyuan group. Shen Siyun, the new director and President, Jiang Nan, the new director, and Lin bin, the new CFO, have just left Aoyuan.

It is worth mentioning that Qu Yonghai, a famous real estate general, appeared in the new independent directors of Beijing and Han. He worked for 22 years in the state-owned China Sea real estate group, and then left the company to start a business. He is now the chairman of Shenzhen Dahai Zhidi real estate development and Operation Management Co., Ltd.

From the announcement of the equity acquisition to the takeover of the new management team, Aoyuan only took three months. This is inseparable from Aoyuan's compact and clear acquisition process planning, which greatly shortens the front line.

On April 7, Aoyuan took a key step in the acquisition of Jinghan, signed the "framework agreement on share acquisition" and remitted 50 million yuan of earnest money into the co managed account; on May 19, it formally signed the equity transfer agreement, in which Jinghan transferred 229 million shares and 29.302% equity to Aoyuan, with the transfer price of 1.160 billion yuan.

This is a debt taking acquisition. For the debt of Jinghan, Aoyuan offsets the transfer price of 719 million yuan.

There are two key steps in the delivery and payment process. First of all, Aoyuan acquired the creditor's rights (in the form of share pledge) of Jinghan, handled the equity release pledge, shared 100 million cash + 719 million debt offset, and completed the first phase of share transfer price payment.

On June 24, all the Pledged Shares of Jinghan were released, and 29.302% of the shares were transferred to Aoyuan. Aoyuan officially became the largest shareholder and actual controller of Jinghan.

The second key point is that according to the agreement, the Olympic Park will pay the balance of the remaining transfer funds after deducting the earnest money (roughly 291 million yuan) to the Jinghan account within three working days after July 15, and the earnest money will be paid to the Olympic Park account. According to Jinghan insiders confirmed that all payments were made in accordance with the purchase agreement.

In addition, the Olympic Park will provide 500 million yuan of liquidity support for Beijing and Wuhan. On July 15, the general meeting of Jinghan shareholders deliberated and passed the relevant loan agreement. The Olympic Park will provide Jinghan with loans with an accumulative total amount of no more than 500 million yuan and a term of no more than 12 months. Jinghan will pay the loan interest at the annual interest rate of 8% based on the actual loan amount.

In this way, the actual time is less than two months, the Olympic Park has completed the equity delivery of Jinghan and the re election of the management team.

After the "money and goods have been settled", the first equity merger and acquisition case in the real estate industry in 2020 has been settled, making more waves in the already restless real estate market.

Olympic Garden speeds up

The acquisition of Jinghan is the first big move of Aoyuan after entering the 100 billion club for the first time.

Aoyuan is one of the real estate companies with rapid development in recent years. In 2019, the overall sales of Olympic Park reached 133.06 billion yuan, which was the first time to enter the 100 billion club; from 2016 to 2019, the compound annual growth rate of real estate sales of Olympic Park reached 66%, higher than the industry average level.

The acquisition of Jinghan will provide the Olympic Park with rich land reserves and allow it to enter the relatively weak North China market, and the net land cost is lower than that of bidding, auction and listing.

According to the financial report, the total construction area of the land reserve of Jinghan shares is about 1.237 million square meters, and the value of goods is about 10 billion yuan. Huachuang Securities believes that the acquisition of Jinghan is conducive to the expansion of Aoyuan's reserves, the realization of regional deep ploughing and the increase of market share.

A case that can be referred to is that in 2017, rongchuang acquired 13 cultural and tourism projects of Wanda, increasing the sales value by 650 billion yuan. Since 2017, rongchuang has entered the top four of the industry and has remained so far.

At the end of last year, the Chinese Communist Party of China (CPC) is trying to expand the market share of RMB 200 billion. By the end of last year, there are more and more housing enterprises seeking to expand their market share through the rapid expansion of the market.

For a rising star like Aoyuan, such an acquisition is more significant. CMB International said that the acquisition of Beijing Han Lihao Olympic Park has achieved its sales target; another Shenzhen securities firm believes that the Olympic Park will speed up its layout in the national market, especially in North China, and accelerate its development to 200 billion yuan.

For its enterprises, it will usher in a new stage of development. As a local head developer in Hebei Province, when talking about the "xiong'an gene" of Jinghan shares, the new management said that Jinghan was optimistic about the future development of Beijing Tianjin Hebei metropolitan area, especially xiong'an new area and surrounding Beijing area.

Jing Han president Shen Siyun introduced that real estate development is the company's main business, and will continue to adhere to this direction in the future. "In the second half of the year, Jinghan will focus on revitalizing assets and catching up with performance, and then make a long-term strategic plan for 2-3 years on this basis."

At this point, the Olympic Garden era of Jinghan has started. Tian Han, the founder of Jinghan, withdrew from the management of Jinghan, but still holds 8.28% of the shares, ranking the second largest shareholder.

The tide of equity merger and acquisition is coming

One is a new 100 billion real estate enterprise, and the other is a well-known developer in Hebei Province. Although the target amount is not large, it is the first company level equity acquisition of real estate this year.

In more than 30 years of real estate history, equity acquisition is not a lot, especially among listed companies. More than a decade ago, Vanke acquired Nandu, which was the largest acquisition of real estate equity. In the following years, the real estate market entered a golden period of rapid development, and there were few mergers and acquisitions between big companies.

In recent years, some well-known real estate equity merger and acquisition cases include: CCCC Group acquired 24.29% shares of green city with about HK $6.013 billion, Evergrande acquired the controlling shareholder of Jiakai Chengcheng, and ping an acquired 25.25% shares of Huaxia Xingfu through two acquisitions.

There is also a case that will happen soon is the introduction of strategic investors by Taihe. Although the final bidder has not yet been determined, if it does, it is expected to be the largest real estate equity merger and acquisition this year.

There are likely to be more and more such cases. Since 2020, small and medium-sized real estate enterprises are struggling to survive due to the industry downturn and the impact of the epidemic. The well funded real estate enterprises are all choosing the opportunity to merge and acquire. Rongchuang, Vanke and Zhonghai are all actively involved in it, and the industry feast is opening.

At the performance meeting in March, sun Hongbin, chairman of rongchuang's board of directors, said: "we judge that 2020 will be a shuffle year, and this year's M & A opportunities far exceed any previous year."

Xia Haijun, President of Evergrande, has long been aware of the change in the wind direction of the industry. In 2019, he said that the "big pie" of the sales market has been determined. The future market will be the killing of stocks, and the expansion of large enterprises will be realized through the merger and acquisition of small and medium-sized enterprises.

The vice chairman of Dashi real estate group will enter the era of "fish eating" in the future.

Gu Yunchang, executive chairman of the National Federation of real estate chambers of Commerce, predicts that the top 100 real estate enterprises will become the ideal target for equity acquisition. For small-sized enterprises, the acquisition of equity will focus on the complex equity disputes in the real estate industry. The top 20 and top 50 large-scale real estate enterprises will have higher enthusiasm for purchasing the top 100 real estate enterprises with certain popularity and land reserve. "

Yihan think tank also believes that at present, under the slowdown of industry growth, the competition among scale real estate enterprises is intensifying, and the industry concentration will continue to rise. For the top 50 real estate enterprises, the competitive advantage is no longer obvious.

In this trend, the concentration of the real estate industry will be further enhanced. Last year, sun Hongbin led rongchuang China's equity sales into the top three, while Shimao, which had been left behind for many years, became a dark horse with large-scale mergers and acquisitions, surpassing Longhu and advancing into the top ten.

According to Kerui statistics, the concentration of equity sales amount of top 20 and top 50 real estate enterprises has increased from 20.82% and 39.71% in 2016 to 29.91% and 43.47% in 2019, respectively.

According to Jindi chairman Ling Ke, the top 20 developers in China now account for about 25% - 30% of the national market share; however, compared with the top 20 developers in the United States, the proportion is 65%. This means that China's top 20 real estate enterprises still have 35 percentage points of room for improvement.

A Vanke executive told reporters that from the experience of the U.S. market, the market share of a single developer is up to about 6%, but the Chinese market is likely to break through this figure.

In Xia Haijun's view, in three years' time, China's top 10 real estate enterprises will account for 40% of the total sales. The top 3 giants will monopolize 20% (i.e. 3 trillion yuan), which means that the market share of the top three giants will be close to 7%, and they will probably be generated among Vanke, Evergrande, country garden and rongchuang.

?