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China's LED companies overseas mergers and acquisitions boom over-excited overseas supervision to open the "tight-eye" mode
In recent years, the cross-border M&A transactions of Chinese companies have ushered in a blowout, and large-volume transaction cases have emerged. The M&A targets are more high-tech industries such as high-end manufacturing and IT. M&A destinations are mainly concentrated in the US, Australia, Germany and other markets. As a rising star in the manufacturing industry, the LED industry has also contributed a strong force in the cross-border M&A boom. In recent years, the cross-border M&A transactions of Chinese companies have ushered in a blowout, and large-scale transaction cases have emerged in a concentrated manner. Most of them are high-tech industries such as high-end manufacturing and IT. M&A destinations are mainly concentrated in the US, Australia, Germany and other markets. As a rising star in the manufacturing industry, the LED industry has also contributed a strong force in the cross-border M&A boom, and many cases of overseas M&A have emerged, which has drawn the attention of the entire industry. However, following the review of cross-border mergers and acquisitions by Chinese companies in the United States and Australia, Germany, another important destination for cross-border mergers and acquisitions by domestic companies, has also begun to strengthen its review of cross-border mergers and acquisitions by Chinese companies. Moreover, with the increased risk of government review of cross-border mergers and acquisitions, it is becoming more and more common to write reverse break-up clauses in trading agreements. If improperly arranged, there is also a hidden risk. Insiders pointed out that cross-border mergers and acquisitions by Chinese companies have entered the deep water area and must be handled with greater caution. LED companies will not be spared on the road of overseas M&A transactions. China's LED companies go abroad for mergers and acquisitions to face the risk of review China's LED display industry in recent years, the number of mergers and acquisitions is not many, in addition to some large domestic large-scale mergers and acquisitions, overseas mergers and acquisitions have become an important development path for LED display leading enterprises First, with the Chinese LED display companies going abroad and going global, the number of overseas M&A transactions has gradually increased. In November 2014, HC SEMITEK LIMITED, a wholly-owned subsidiary of Huacan Optoelectronics Co., Ltd., subscribed for 420,600 new shares issued by South Korea's Semicon Light, and the company indirectly held 10% of the total shares of Semicon Light. According to previous announcements, Semicon Light focuses on the development, manufacturing and sales of LED chips. Huacan Optoelectronics does not hold its shares until it subscribes for shares in the company. On August 12, 2015, Liard and the United States Pingda Electronics reached a final merger agreement, the Liard US subsidiary acquired all common shares of Pingda Electronics at $6.58 per share. On the basis of complete dilution, the total share price of Pingda Electronics is approximately US$156.8 million (approximately RMB 1 billion). The equity transfer is in line with the delivery conditions passed by the shareholders of both parties, in compliance with the anti-monopoly law and obtained the government's permission. Dongshan Precision announced on the evening of February 22 that the total amount of funds raised was not more than 4.5 billion yuan, which was used to acquire 100% equity of MFLX, a US Nasdaq-listed company, and to supplement liquidity. According to the plan, Dongshan Precision will invest in a wholly-owned subsidiary, Dragon Electronix Holdings Inc., through its wholly-owned subsidiary, Dongshan, Hong Kong. . MFLX will become a merged company and become an indirect wholly-owned subsidiary of Dongshan Precision. On the morning of March 11, Sanan Optoelectronics issued the "Investment Announcement on Foreign Investment". Xiamen Sanan Integrated Circuit Co., Ltd., a wholly-owned subsidiary of the company, plans to merge the total share price of 226 million US dollars with its own monetary funds. The company (referred to as GCS) obtained the full equity of GCS to fully dilute the basis. Sanan Optoelectronics said that compared with silicon-based semiconductors, China's compound semiconductor technology is far from the overseas, and overseas mergers and acquisitions have become an effective means to bridge the gap. In summary, the enthusiasm of overseas LED mergers and acquisitions of LED display companies has increased year by year. Under this form, overseas mergers and acquisitions have been going smoothly, but this form has changed in the second half of this year. Many companies have been involved in overseas mergers and acquisitions. It has been strengthened by the strengthening of the overseas censorship system. On the evening of October 27th, the German Federal Ministry of Economic Affairs confirmed that it will further investigate the acquisition of LEDVANCE, a lighting business brand of German lighting company OSRAM. Three months ago, the Chinese consortium, led by strategic investor IDG Capital, including general partners such as listed company Mulinsen and Yiwu State-owned Capital Operation Center, announced that it would acquire Landevance for 400 million euros. On October 24th, German chip equipment manufacturer Aixtron announced that the German Federal Ministry of Economic Affairs had withdrawn on October 21 this year the approval order issued by China Fujian Hongxin Fund (FGC) to acquire the company on September 8 this year. , the evaluation will be restarted for this transaction. On May 23, FGC launched an offer for Ai Siqiang, which is planned to acquire Ai Siqiang at 6 euros per share. The total amount of the acquisition is about 670 million euros, which is 50.7% higher than the weighted average share price of the past three months. On October 6, German media reported that China's local company Sanan Optoelectronics intends to acquire Osram for a total of 70 euros per share, a total amount of about 7.2 billion euros (about 8.1 billion US dollars). Subsequently, the German economy minister said that if the news is true, the German government will oppose the acquisition. A number of relevant experts said that the acquisition is unlikely to be successful, or may face policy obstruction. Insiders pointed out that the three upcoming M&A transactions were suddenly intervened by the German Federal Ministry of Economics, which means that Germany began to strengthen cross-border M&A examinations of Chinese companies. In addition, Australia, another major cross-border M&A destination for Chinese companies, has begun to strengthen government censorship of Chinese companies' cross-border mergers and acquisitions. Government review has been a major obstacle for Chinese companies in cross-border mergers and acquisitions. Among them, cross-border mergers and acquisitions in the US market, the US Foreign Investment Committee (CFIUS) review usually plays a key role. Since the acquisition of IBM by IBM in 2004 by CFIUS, CFIUS has entered the public view of China more and more frequently. Cross-border mergers and acquisitions of companies such as PetroChina, Huawei, and Sany Heavy Industry in the United States have been terminated because they have not passed the CFIUS review. Since this year, CFIUS has become a roadblock for cross-border mergers and acquisitions of domestic enterprises, and many cross-border M&A transactions have died. According to statistics released by London investment bank Grisons Peak recently, as the United States, Australia and other places tightened the review of foreign investment, since July last year, Chinese buyers have given up 11 large-scale acquisitions, the total value of blocked transactions is 38.9 billion US dollars. This is equivalent to 14% of all transactions announced in the past 16 months. Cross-border mergers and acquisitions of domestic companies in the United States have been accustomed to censorship from CFIUS. What is really worrying is that cross-border mergers and acquisitions in Australia and Germany have also begun to be reviewed by the government, which is rare in the past. It is not ruled out that a domino effect may be formed in the future, which will lead to more overseas government review. The head of the investment banking department of a large brokerage in Beijing said. Overseas M&A boom has been over-excited and overseas supervision has started to be closely targeted. With the deepening of economic transformation and the intensification of consumption, this year's cross-border mergers and acquisitions reached a historical peak. The strength and willingness of domestic enterprises to participate in global industrial integration are strengthening, and large-scale, snake-like cross-border mergers and acquisitions cases continue to emerge. This has caused, to a certain extent, the concerns of the people in the location of the acquisition. The above investment bank said. Since the beginning of this year, cross-border mergers and acquisitions by domestic companies have ushered in a blowout. According to statistics from Dealogic, an international financial data provider, in the first three quarters of 2016, Chinese companies acquired a large number of cross-border mergers and acquisitions. The announced M&A amount reached US$173.9 billion, an increase of 68% compared with US$103.2 billion in the same period last year. . At the same time, cross-border M&A transactions in the LED display industry have emerged. In the trend of overseas mergers and acquisitions, many leading LED display companies are keeping an eye on the huge potential of overseas mergers and acquisitions. According to the relevant data last year, in 2015, the LED industry integrated M&A frequently, and began to choose a deep industrial chain to produce and sell high value-added products. According to the "2016-2021 China LED industry market prospects and investment strategic planning analysis report" incomplete statistics, in 2015 the whole industry chain mergers and acquisitions case has more than 40 cases, the total amount of mergers and acquisitions has exceeded 30 billion yuan, including many Chinese LED display Cases of the acquisition of foreign brand companies by Ping Capital. Perhaps it is precisely because of the violent enthusiasm for overseas mergers and acquisitions, and the overseas censorship system has also intensified. On February 16 this year, Fairchild Semiconductor rejected a high-priced acquisition of two Chinese buyers, China Resources Microelectronics and Huachuang Investment, on the grounds that the US regulatory authorities would block the transaction for security reasons. Jinshajiang Venture Capital acquired the lighting business of Philips, the Chinese consortium's acquisition of Round Vans, and the Fujian Hongxin Fund's acquisition of Ai Siqiang were hindered by overseas government review, all because the M&A targets involved high-tech industries. According to industry insiders, cross-border M&A destinations are too concentrated and are easily targeted by overseas regulators. At present, cross-border M&A destinations of domestic companies are increasingly leaning towards the European market, especially Germany. According to the statistics of the Ministry of Commerce, in the second quarter of 2016, 70% of the total overseas mergers and acquisitions of Chinese companies were invested in manufacturing. Germany was the second largest destination after the United States, accounting for 11% of the total amount of Chinese overseas mergers and acquisitions. Jonathan Schoo, representative of the German Federal Foreign Trade and Investment Agency in China, said in an interview with the media that in the first half of 2016, the number of Chinese investors' acquisitions of German companies reached 37, compared with 39 last year. In 2015, the number of M&A investments known to Chinese companies in Germany was 526 million euros. In the first half of this year, the figure has exceeded 10.7 billion euros, more than the total investment of Chinese companies in Germany in the past 10 years. The risk of trading has increased dramatically. M&A in the face of multiple crisis As the risk of cross-border M&A increases, the use of reverse break-up clauses in the transaction process is becoming more and more common. Insiders pointed out that once major mergers and acquisitions involving multiple jurisdictions are involved, antitrust and national security reviews may become important factors influencing the success of the transaction. In order to seek the relative reliability of the transaction, the parties to the M&A transaction usually agree on a series of protection clauses, such as the break-up fee and the reverse break-up fee arrangement, such as the government review is not approved, the buyer’s shareholder meeting is not passed, and the buyer fails to obtain The risk of trading abortion caused by financing and other circumstances. It is precisely because of government restrictions and other restrictions, LED display companies have also been greatly affected by overseas mergers and acquisitions, and even led to the suspension and failure of mergers and acquisitions. For example, on May 9, Abeson signed an Investment Memorandum with Artixium, and the company plans to invest $4.5 million to acquire a 51% stake in the original shareholder of Artixium. However, Abbison announced on the evening of July 18 that, considering the complexity of the transaction and the uncertainty of the advancement, the company decided to terminate the acquisition of 51% equity of Artixium Display Ltd. and notified the counterparty of the decision. In addition, it is worth noting that as the risk of overseas government review in the cross-border M&A process of domestic enterprises is increasing, in the course of the transaction, the target companies are increasingly requesting reverse break-up fees and foreign investment approvals. National security approval is linked. Zhang Weihua, a cross-border M&A legal expert, pointed out that Chinese companies are not consistent in their approach to whether foreign investment approval/national security approval and reverse break-up fees are linked. It should be pointed out that it is not an industry practice to link foreign investment approval/national security approval with reverse break-up payment. Chinese companies should be cautious in facing such arrangements. The strengthening of the government censorship system exerts unlimited pressure on overseas M&A enterprises, which creates great uncertainty. Due to government obstacles, some cross-border M&As are about to face the risk of failure, which will be a huge loss for both parties. With the strengthening of the overseas M&A review system, LED enterprises are about to enter the deep water area of ​​overseas mergers and acquisitions. Therefore, LED companies should be cautious when considering overseas mergers and acquisitions.