Guowanggaoke Fiber Planning Back Door Listing with Price of Over 12.7Billion RMB

Eastern Market (SZ 000301) announced to issue shares to acquire 100% equity of Guowanggaoke on late Aug 20 after 5-month stock suspension. Thus the business of Eastern Market expanded to civil polyester.

According to the announcement, Eastern Market planned to issue 2.757 billion shares (pricing at 12.762 billion yuan) privately to Shenghong Technology and State Development Fund, acquiring 100% equity of Guowanggaoke. After the trading completed, controlling shareholder of Eastern Market will change to Shenghong Technology from Jiangsu Wujiang China Eastern Silk Market and the controllers will change to Miao Hangen and Zhu Hongmei from Jiangsu Wujiang District State-owned Assets Supervision and Administration Office.

According to the trading plan, revenue of Guowanggaoke in 2014-2016 was 13.297 billion yuan, 13.188 billion yuan and 13.882 billion yuan respectively, with net profits 322 million yuan, 632 million yuan and 1.091 billion yuan. Shenghong Technology will ensure the net profits over 1.119 billion yuan in 2017 and over 2.362 billion yuan totally in 2017-2018. In addition, equity structure of Guowanggaoke is clear with Shenghong Technology 98.4847% and State Development Fund 1.5153%.

What is worth mentioning, State Development Fund established in Aug 2015, Shenghong Technology and Guowang Gaoke signed State Development Fund investment contract on Dec 25 2015 which appointed that State Development Fund invested 90 million yuan into Guowanggaoke with new registered capital 11.1239 million yuan, accounting for 3.03%.

State Development Fund is a wholly-owned subsidiary of State Development Bank. It focuses on non-private equity investment and is controlled by the Ministry of Finance. On Aug 2, State Development Bank issued consent, allowing State Development Fund to participate in the reorganizing with equity of Guowanggaoke.

There are 4 shareholders in Shenghong Technology, in which Miao Hangen and Zhu Hongmei hold 99.51% equity of Shenghong Technology through Shenghong Petrochemical, Best Holding and Wujiang Xintai. In addition, Suzhou Fu’ou Investement Center (limited partnership) holds 0.49%.

Eastern Market reported that the company will expand the research, production and sales of civil PFY with great profits, stable operation and promising prospect on the basis of original electricity, heat, rent, development of real-estate and trade. Meanwhile, Guowang Gaoke will be well connected with A shares market and actively explore on-line sales by e-commerce platform of the listed company.