The Logic Behind Vanke'S "Conservative" Capital Injection Into Taihe

With Vanke's entry into the Bureau, the long-lasting work of "leading the war" of Taihe finally appeared.

In the morning of July 31, Taihe Group announced that the controlling shareholder, Taihe investment, signed an equity transfer framework agreement with Vanke's subsidiaries, and transferred 19.9% of its shares under a number of preconditions. The transfer price was 4.9 yuan per share (the closing price of Taihe on July 29), and the total cost was 2.43 billion yuan, "cash payment".

Prior to this, Taihe had contact with Xiamen international trade, China railway construction, Jinmao, poly and other enterprises. Vanke was the latest entrant to be exposed, and eventually "came from behind".

But Vanke's involvement is not as deep as the outside world thinks. We have reached an agreement with all parties on the due diligence of the company's creditors. 2. We have reached an agreement with all parties on the composition of the company's debt. 2. In addition, Vanke does not assume any responsibility for the operation and debt of Taihe and does not provide additional financial assistance.

In other words, Vanke chose to provide endorsement for Taihe as a shareholder, but neither took over the debt nor set foot in business. Moreover, Vanke did not become the largest shareholder on the premise that Huang Qisen, chairman of Taihe Group, intended to give up the major shareholder.

In this transaction, why is Vanke's "White Knight" rescue just point to the end? What impact will this have on Taihe's subsequent work of "leading the war"?

Vanke's "conservative" choice

Taihe's strategy was announced in May this year. On the evening of May 13, Taihe Group announced that the company's controlling shareholder, Taihe investment, was planning to introduce strategic investors into the company, and the relevant transactions may lead to the change of control right of the company.

According to the 21st century economic report, the contact between Taihe and Vanke began as early as the beginning of May this year. Since then, although other companies have been involved in Taihe's "war" work, the two sides have always maintained communication.

Prior to the signing of the agreement, the management of both sides had held several rounds of consultation in Shenzhen and Beijing, and Vanke had also conducted several rounds of inventory of Taihe project level.

Because of its recognition of the brand and values, Taihe is relatively interested in Vanke in many negotiation partners. For Vanke, the assets of Taihe are also attractive. On the one hand, Vanke's product strategy is mainly based on rigid demand, and Taihe's high-end boutique strategy is a beneficial supplement to Vanke's product line; on the other hand, Taihe's 365 billion saleable value (as of the end of May 2020) is mainly distributed in the core first and second tier cities, which can not only strengthen the layout of Vanke in these regions, but also help Vanke consolidate its scale.

The 21st century economic report learned from people familiar with the matter that although there are differences in some details, the negotiation between Taihe and Vanke is generally smooth. Due to Huang Qisen's intention to give up the position of major shareholder, the outside world generally speculated that Vanke will become the major shareholder of Taihe.

But in the end, Vanke chose the "conservative plan": it became a shareholder, but not a major shareholder, did not intervene in the debt problem, nor did it interfere in the operation.

For the relatively stable Vanke, this choice is not difficult to understand. As of July 7, this year, Taihe has outstanding debts of 27.065 billion yuan. The total debt due in 2020 is RMB 55.5 billion. In addition, some of the projects under Taihe have made slow progress due to various historical problems.

21.9% of the people in the know said that they would consider entering the same trade to control the competition in the end. According to the regulations, if the shareholding ratio reaches or exceeds 20%, Vanke is likely to form a horizontal competition relationship with Taihe, which may involve major adjustments such as asset acquisition or restructuring. Therefore, Vanke made a cautious choice.

Or become the catalyst to solve the crisis

As far as Taihe is concerned, the company's management team has been preserved temporarily because the actual controller has not changed. However, there is still a lot of work to be done before we can really solve the problem.

Vanke's cash of 2.43 billion yuan is just a drop in the bucket compared with the total liabilities of Taihe's 190 billion yuan (as of the end of 2019). But the significance of Vanke lies in that, with the endorsement of Vanke, Taihe will face less difficulties in debt restructuring.

It is reported that due to the large scale of Taihe's debt, in the future debt restructuring, it is likely to transfer Taihe's debt to a third party through debt transfer. According to the Convention, the third party involved in the restructuring is probably financial institutions. This also means that financial institutions are likely to continue to participate after Vanke shares.

According to the 21st century economic report, Taihe once negotiated with a familiar financial institution and tried to introduce it into debt restructuring. Vanke also tried to introduce an AMC in the negotiation. But the final result remains to be seen.

Most analysts believe that the entry of Vanke has not directly solved the problem, but it may become a "catalyst" to solve the debt crisis of Taihe.

According to the agreement, Taihe needs to implement the binding provisions before September 30 this year, including formulating debt restructuring plan and reaching an agreement with Vanke on the solution to the problem. In other words, if the progress is smooth, the long-lasting debt crisis of Taihe is expected to form an initial solution in September this year.

Analysts pointed out that due to the possible existence of third-party shares, it is still possible for the actual controller of Taihe to change ownership.

According to the agreement, after the equity was transferred to Vanke, Taihe investment and its persons acting in concert controlled by Huang Qisen (holding 95% of the shares of Taihe investment) held 41.63% of the shares, and continued to be the largest shareholder of the company, and Huang Qisen was still the actual controller of Taihe group. Vanke is temporarily listed as the second largest shareholder with 19.9% equity.

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