On the evening of October 16, Songfa Shares announced that the company plans to acquire 100% of the equity of Hengli Heavy Industry Group Co., Ltd. (hereinafter referred to as Hengli Heavy Industry) through significant asset replacement and the issuance of shares to purchase assets. At the same time, the company plans to resume trading starting from the opening of the market on October 17th.

If the aforementioned transaction is completed, it will become a new case of "snake swallowing elephant" style M&A in the A-share market.

The controlling parties behind Hengli Heavy Industry and Songfa Shares can both be traced back to the Fortune Global 500 company Hengli Group and its actual controller. However, the current total market value of Songfa Shares is less than 2 billion yuan, while Hengli Heavy Industry increased its capital by 2.5 billion yuan in September.

Industry insiders have pointed out that the current regulatory authorities encourage mergers and acquisitions, focusing on creating a batch of benchmark cases. If the mergers and acquisitions of companies such as Songfa Shares and Guangzhi Technology can be completed, it will enhance the enthusiasm for mergers and acquisitions in the capital market.

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Songfa Shares increases the intensity of mergers and acquisitions

In comparison, Songfa Shares currently plans to acquire 100% of the equity of Hengli Heavy Industry, while on the evening of September 30, it announced its intention to obtain a certain number of equity interests in Hengli Heavy Industry or its subsidiaries.

At the same time, Songfa Shares' transaction plan is divided into three parts. First, Songfa Shares plans to replace the equivalent part of the 50% equity of Hengli Heavy Industry held by Suzhou Zhongkun Investment Co., Ltd. with all its assets and operational liabilities.

Second, Songfa Shares plans to purchase the difference part of the aforementioned significant asset replacement from Suzhou Zhongkun Investment Co., Ltd. through the issuance of shares, and to purchase the remaining 50% equity of Hengli Heavy Industry held by Suzhou Heng Neng Supply Chain Management Co., Ltd., Heng Neng Investment (Dalian) Co., Ltd., and Chen Jianhua.

Third, Songfa Shares plans to issue shares to no more than 35 specific investors to raise supporting funds.

If Songfa Shares completes the aforementioned transactions, it will exit the daily ceramic products manufacturing industry and fully transform into "China's most dynamic shipyard".Songfa Shares mainly operates in the fields of home ceramics, customized ceramics, hotel ceramics, ceramic wine bottles, and other ceramic products, but the net profit attributable to the parent company for the years 2021, 2022, and 2023 were all negative.

Songfa Shares announced that through the aforementioned transactions, the company will expand its effective transformation investment in high-end, intelligent, and green ship products, forming a virtuous cycle between existing assets and new investments.

Hengli Heavy Industry's "Family Assets" are made public.

The Hengli Heavy Industry that Songfa Shares plans to acquire this time is the main vehicle for Hengli Group's cross-industry entry into the shipbuilding industry in July 2022, focusing on the development of shipbuilding, ocean engineering, engines, precision casting, and other sectors.

The transaction plan shows that in 2022 and 2023, Hengli Heavy Industry's unaudited operating income was 27.9176 million yuan and 768 million yuan, respectively; the net profit was -24.6428 million yuan and 4.049 million yuan, respectively.

It is reported that Hengli Heavy Industry was still in the initial start-up stage in 2022, and the scale effect of the shipbuilding business had not yet been reflected, resulting in relatively low profitability and relatively small operating income.

Hengli Heavy Industry estimates that as the shipbuilding business gradually gets on track in 2024, with an increase in orders, the company's profitability in 2024 will be greatly improved.

At present, Hengli Heavy Industry has determined the production plan for 140 new ships, with a cargo value of about 10.8 billion US dollars, including bulk carriers, VLCCs, VLOCs, and container ships.