Press Release
FCIB acted as the independent financial advisor of the M&A transaction
FCIB acted as the leading independent financial advisor of the M&A transaction for Tangshan Jidong Cement Co., Ltd. (“Jidong Cement” or “the Listed Company”, 000401.SZ), which was completed successfully on July 30, 2018.
Jidong Cement,the largest manufacturer of cement in northern China, ranks the third among domestic cement manufacturers, and it’s one of the 12 major cement enterprises making structural adjustment with government’s support. The counterparty BBMG Corporation ("BBMG") is an A+H dual-listed state-owned enterprise under the jurisdiction of Beijing SASAC. BBMG operates its businesses through four segments: cement and ready-mixed concrete, modern building materials and commerce logistics, real estate development, and property investment and management.
Prior to this M&A transaction, FCIB has already acted as the sole FA to assist the equity restructuring between BBMG and Jidong Cement in October 2016, that is, BBMG acquired the controlling right of Jidong Cement through capital increase and acquisition of old shares, and thus became the indirect controlling shareholder of Jidong Cement (000401.SZ) and JIDD (000856.SZ).The deal team has completed the project design of restructuring plan, full-scope due diligence and has obtained all approvals within 6 months, which demonstrates FCIB’s strong project execution ability, outstanding ability in communicating with regulators and excellent transaction matching ability.
In order to solve the problem of competition between BBMG and Jidong Cement, FCIB simultaneously helped Jidong Cement with assets restructuring, acquiring all cement businesses of BBMG through share issuance and raising supporting capital. However, CSRC considered that the proposal involved the acquisition of equity interest by a listed company in another listed company through the injection of existing assets, which is inconsistent with the prevailing regulatory policy. The original proposal was withdrawed. After in-depth study of policy changes and market cases, close attention to regulatory dynamics, maintaining close communication with regulators, and properly taking into account the interests of all parties, the deal team creatively proposed the solution of establishing a joint venture between BBMG and Jidong Cement.
BBMG and Jidong Cement jointly formed BBMG Jidong Cement (Tangshan) Co., Ltd. ( “JV Company”) and Jidong Cement owns the controlling interests of the JV Company. In this transaction, Jidong Cement invested in the assets of 2 branch companies including Tangshan Jidong Cement Co., Ltd. held by Jidong Cement and the equity interests of 20 companies including Jidong Cement Luan County Co., Ltd., while BBMG invested in the equity interests of 10 companies including BBMG Cement Trading Co., Ltd. held by BBMG.Meanwhile, for the remaining cement assets held by BBMG, BBMG trusted it to Jidong Cement and promised to inject them into Jidong Cement or JV Company in the following three years. This transaction effectively avoids the completion between BBMG and Jidong Cement and sweeps away the obstacles for both parties’ business development and capital operations.
In the stage of asset restructuring, up to 32 companies were involved as contributions. The adjusted proposal, which is defined as back-door listing, acquires the approval of Beijing SASAC, the grant of a waiver from strict compliance with paragraph 3(f) of Practice Note 15 of the Listing Rules and passing the anti-monopoly inspection. With as many as 10 intermediary agencies serving the transaction, the workload is overwhelming and the deal structure is sophisticated. In the execution phase, as the leading agency, FCIB efficiently organized and coordinated all parties to complete massive tasks including transaction design, full-scope due diligence, internal and external approval, and assets transfer etc. Since Jidong Cement’s stock suspended trading on November 21, 2017, the deal team completed the whole transaction within only 8 months, a respectively short period of time, and was highly appreciated by the client, the regulators and the market.
The equity and assets restructuring was carried out in the policy context of coordinated development of Beijing, Tianjin and Hebei, supply-side structural reforms, industrial upgrading and air pollution prevention, which has become a model for the reorganization in cement industry and a model case of coordinated development of Beijing, Tianjin and Hebei. It’s also the largest-ever market-oriented strategic M&A in cement industry.
