Less Than A Week From "Engagement" To "Break Up": Why Did The Merger Of Weining Health And Venture Huikang End?

On July 23, Chuangye Huikang announced that the company and Weining health had disclosed the announcement on termination of planning for major asset restructuring and resumption of trading of securities of the company on July 23, terminating the promotion of the merger intention agreement and resuming trading on July 26, because "both parties of the transaction can not reach an agreement on the core terms". After the termination of the planning of stock exchange merger, on July 26, both venture Huikang and Weining health resumed trading, falling more than 6%.

Prior to this, on July 18, Weining health and venture Huikang signed the "merger intention agreement" to confirm the cooperation intention. On July 19, Weining health and venture Huikang released the announcement of suspension of trading on planning major asset restructuring. But the excitement of the market has not begun to ripple, with the termination announcement of both sides suddenly stopped.

Both sides said that the merger failure was caused by the failure to reach an agreement on the core terms. It took less than a week from the confirmation to the cancellation of the merger between the two sides. Such a drastic change has aroused widespread doubts. On July 25, Weining health and Chuangye Huikang received letters of concern from Shenzhen Stock Exchange.

On July 26, a reporter from 21st century economic report called Weining health, which said that the exchange had sent an inquiry letter and was preparing to reply. It would make an announcement at that time. The 21st century economic reporter also called Chuangye Huikang on July 27, saying that the reasons for the decision to cooperate and hastily cancel had been announced in the previous announcement. Chuangye Huikang also said that they would reply to the inquiry letter of Shenzhen Stock Exchange before July 29, and further answer the relevant questions in the reply.

On July 27, Ma Shiyong, deputy general manager of Dongfang Ruichen fund and member of the investment decision Committee, told the reporter of the 21st century economic report that the core terms in general business combination have not been agreed, which actually means that "enterprise consideration" or "market valuation" have not been discussed.

"Could have dominated the market"

Weining health and venture Huikang are two leading enterprises in domestic medical it track. According to the data of Guoyuan securities, Weining health's business is driven by traditional medical it and innovation business. In 2020, the company achieved revenue of 2.267 billion yuan / year (year-on-year) of 18.79%, net profit of 491 million yuan / YYY of 23.26%. From 2017 to 2020, the company's revenue CAGR (compound annual growth rate) reached 23.48%. The company's business includes medical and health information business group, medical and health Internet business group, medical and health Internet business group and medical insurance business department. In 2020, the company's revenue will reach 1.633 billion yuan / yy10.34%, and the net profit attributable to the parent company will be 332 million yuan / yy5.82%. From 2017 to 2020, the company's revenue CAGR will reach 12.30%.

Weining health and venture Huikang held talks on July 18 and signed the "merger intention agreement" to confirm the cooperation intention. Weining health plans to issue a shares to all shareholders of venture Huikang for share exchange to merge venture Huikang. On July 19, Weining health and venture Huikang successively issued temporary suspension notices, indicating that they intend to disclose major issues and suspend trading since the opening of the market. At 10:30 a.m. on July 19, Weining health and venture Huikang planned to merge.

On July 19, Weining health and Chuangye Huikang issued the "suspension notice on planning major asset restructuring", which said that Weining health and venture Huikang were planning to merge in the form of share exchange. This merger will not lead to the change of actual controller of Weining health, but will lead to the change of actual controller of venture Huikang. The merger is expected to constitute a major asset restructuring.

Weining health and venture Huikang merger news, the market in an uproar. At present, the domestic medical information market is relatively scattered, and at that time, the market value of the two companies after the merger was nearly 50 billion yuan, which can be called "large".

Some analysis divides the medical information industry into several scale gradients: the first echelon's enterprise income scale is more than one billion yuan, and the market share of the industry's leading companies is expected to be about 10%; The enterprises in the second echelon maintained at about 500 million yuan, with a market share of 1% - 4%; In addition, there are many small and medium-sized medical IT companies distributed in the country, mainly do some regional markets, do not have the ability of remote replication.

Therefore, Guoyuan Securities believes that the merger of the two sides is expected to accelerate the concentration of medical IT industry, and the competitiveness is expected to increase under the synergy effect. In terms of customer resources, by the end of 2020, the number of Weining health customers has reached more than 6000, including more than 400 tertiary hospitals; The number of clients of venture Huikang has reached more than 6700, and public health projects cover more than 370 districts and counties in China. After the merger, the two sides are expected to share customer resources and improve the ability to serve customers.

In terms of market share, according to IDC data, in 2017, Neusoft group, Weining health and venture Huikang accounted for 13.9%, 9.3% and 5.7% respectively. After the merger, the share of the two cities is expected to jump to the first place, and gain a stronger competitive advantage under the synergy effect.

There is no agreement on the core terms

When the market is booming, a dramatic turn has taken place. On the evening of July 23, the two companies announced that "after careful study, the company decided to terminate the planning of this major asset restructuring" because "both parties of the transaction could not reach an agreement on the core terms".

Wei Ning Health said that during the suspension period of the self planned major asset restructuring, the company and relevant parties actively promoted the relevant work of this major asset restructuring, and actively discussed, communicated and negotiated with the relevant parties of this major asset restructuring. After communicating with the relevant parties on the original core trading scheme, the two parties could not reach an agreement on the core terms.

Chuangye Huikang said in the official micro blog that the original intention of this cooperation is to form a community of 1 + 1 > 2 by means of merger between Chuangye Huikang and Weining health, so as to strengthen cooperation and seek common development. However, with the in-depth discussion of the cooperation plan, the enterprise brand, customer service, employee interests and other aspects that are concerned by all parties can not be guaranteed to be substantially affected after the merger; Due to the objective constraints beyond expectation, the detailed cooperation plan is difficult to achieve. Therefore, the company finally decided to terminate the cooperation plan.

From the signing of the "agreement of intent to merge" on July 18 and the cancellation of the merger on July 23, the merger of the two sides failed in less than a week. In the stock bar, investors on both sides of the "farce", "family" and other questions continue.

On July 25, Weining health and Chuangye Huikang received a letter of concern from the Shenzhen Stock Exchange to investigate whether the two companies had abused the restructuring suspension. The Shenzhen stock exchange requires the two companies to verify and make supplementary disclosure: whether the reasons for the company's application for suspension of trading of shares are true and accurate, whether the suspension operation is in compliance with and necessary for, whether the two sides have fully communicated about the relevant arrangements of the reorganization plan before the suspension, the specific reasons and rationality of failing to reach an agreement after the suspension, and whether there is any abuse of restructuring suspension, etc, Whether there is the situation that the application for suspension of trading replaces the information confidentiality obligation of the company and relevant parties; Whether the decision-making process and decision-makers of planning and terminating this major asset restructuring are prudent, and whether the directors, supervisors and senior managers of the company are diligent and responsible in the process of the transaction planning; Whether there are other reasons leading to the termination of planning for this major asset restructuring, and whether the reasons disclosed above are complete.

What are the difficulties in the merger of private enterprises?

In fact, the merger of the two companies is not a trivial matter, which will lead to the change of the actual controller of venture Huikang, and at the same time, it will lead to the delisting of venture Huikang and the suspension of trading into Weining health. The structure and personnel adjustment of related companies are also faced with many challenges, and the integration is difficult.

Ma Shiyong told the 21st century economic reporter that the challenges of merger among private enterprises mainly include four aspects: first, the difference of transaction consideration between enterprises; Second, the transfer of control right; Third, the integration of management and shareholders; Fourth, the synergy effect of private enterprises after M & A“ After the merger, the management has changed from two to one. It is an unavoidable question who should be in charge. The original intention of cooperation between enterprises is to form a community of 1 + 1 > 2 through merger, so as to achieve strong cooperation. However, from the practical effect of mergers and acquisitions of many listed companies, due to various reasons, 1 + 1 may not be greater than 2. "

Ma Shiyong pointed out that business combination is generally divided into horizontal merger and vertical merger. Horizontal merger generally refers to the merger of two or more enterprises with the same or similar production processes, products and services in the same industry. After the merger, it is possible to expand the market share and make "rivals become teammates"; Vertical merger is the combination of the upstream and downstream of the industrial chain, which extends the industrial chain, and can obtain core resources, technological advantages, R & D advantages, and reduce transaction negotiation costs.

21st century economic reporter learned that in fact, the merger between Weining health and venture Huikang is more similar to vertical merger.

It is understood that as the leading enterprise of medical informatization, although the main advantageous areas of both sides are concentrated in East China, the market share of Weining health is 48.25%, and that of venture Huikang is 47.27%. However, there are differences in business development between the two sides.

In terms of business, Weining health has stronger customer resources in the hospital, focusing on providing integrated platform solutions for medical informatization. At the same time, it has more advantages in internet medical innovation business, with a compound growth rate of 25.51% in the past three years.

However, venture Huikang software products are mainly concentrated in the hospital side and part of the medical insurance informatization. It regards cloud technology and Internet of things technology as the core business, and gradually increases the proportion of medical industry business income. In recent three years, the compound growth rate of medical and health industry revenue has been close to 30%.

"Because under the existing laws and regulations, the only merger mode of the two listed companies is to adopt the stock exchange merger, that is, the acquirer purchases the acquired Party's assets and shares by issuing additional shares instead of using cash. After acquiring the shares of the acquired party, the shareholders of the acquired party also have the opportunity to enjoy the growth dividend of the new company after the merger. But the disadvantage is that if the acquiree is not optimistic about the stock, the merger will be difficult. " An industry person who did not want to be named explained to the 21st century economic reporter.

The merging party is Weining health and the merged party is venture Huikang. Generally, the merging party has strong discourse power and dominant power, and retains the main brand. This will lead to the change of the actual controller of venture Huikang, and at the same time, it will lead to the delisting of venture Huikang and the suspension of trading into Weining health.

"There has never been a precedent of" a "in the gem before. For the purpose of industrial co construction, the two sides signed an agreement. After entering into the main topic, they found that the merger must require one of the two companies to delist, which means that venture Huikang will be cancelled, and customers and employees can not ensure that they will not be affected in substance." Venture Huikang said in public information.

Whether it is beneficial to both sides is the most important point of the merger“ A few years ago, when listed companies expressed their intention of M & A, the stock prices of both the acquirer and the acquired party would soar. But now the market is more rational, for the merger of enterprises to see its specific implementation The industry said.

Deng Yong, an associate professor of medicine and health law in the law department of Beijing University of traditional Chinese medicine, once said that A-share merger is feasible, but due diligence and valuation evaluation should be done well to protect the rights and interests of the merged shareholders. If the interests of shareholders are damaged, they may be resisted by shareholders.

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