Changyuan Donggu discloses details of major asset restructuring transaction; stock resumes trading today.

【Briefing】Changyuan Donggu discloses details of a major asset restructuring deal, planning to resume trading starting from April 8

On the evening of April 7, Changyuan Donggu released a transaction prospectus stating that the company plans to acquire 100% of the equity of Xiangyang Kanghao Mechanical and Electrical Engineering Co., Ltd. (hereinafter referred to as Kanghao Mechanical and Electrical) and raise supporting funds, which is expected to constitute a major asset restructuring.

For the above transaction, Changyuan Donggu has been suspended from trading since March 24. It plans to resume trading starting from April 8. As of the close on March 23, Changyuan Donggu’s stock price was 37.09 yuan per share, and its total market value was 12.02 billion yuan.

**　　Convert the acquisition method to issuing shares**

**　　Expected to constitute a related-party transaction**

Changyuan Donggu previously announced that it is in the process of planning to acquire 100% of the equity of Kanghao Mechanical and Electrical by issuing shares and paying cash.

The transaction prospectus shows that Changyuan Donggu plans to acquire 100% of the equity of Kanghao Mechanical and Electrical by issuing shares. The share issuance price is 29.87 yuan per share, which is not lower than 80% of the average stock trading price over the 120 trading days prior to the pricing benchmark date.

As can be seen from the comparison, the price at which Changyuan Donggu plans to issue shares to acquire assets, compared with its closing price of 37.09 yuan per share on March 23, results in a discount rate of 19.47%.

At the same time, Changyuan Donggu expects this transaction to constitute a related-party transaction.

First, the transaction counterparty for Changyuan Donggu to acquire assets by issuing shares is Hubei Xinyuan Power Technology Group Co., Ltd., which is an entity controlled by Li Zuoyuan and Xu Nengzhen, the共同 actual controllers of Changyuan Donggu.

Second, based on preliminary estimates, after the completion of this transaction, the shareholding proportion of the transaction counterparty in Changyuan Donggu will exceed 5%.

**　　Borrowing the transaction to form synergy effects and improve operating quality**

The transaction prospectus shows that this transaction is conducive to leveraging the synergy between Changyuan Donggu and Kanghao Mechanical and Electrical to enhance Changyuan Donggu’s overall competitive strength.

Changyuan Donggu mainly engages in the R&D, production, and sales of core components for diesel, natural gas, and gasoline engines (cylinder blocks, cylinder heads, connecting rods), and is a supplier of the “core castings” for power units.

Kanghao Mechanical and Electrical is a domestic supplier of engine heat exchange systems. It also engages in the integration business of diesel power units, serving as the “core functional supporting part” and “core unit” for power units.

Changyuan Donggu states in its announcement that through this transaction, the company can extend downstream into building a product matrix of “core components of engines + core supporting parts such as heat exchange systems + power unit integration,” closely coordinating with downstream customers’ needs.

At the same time, through this transaction, Changyuan Donggu will enhance its level of operating revenue and its ability to sustain operations, which will help improve overall operating quality.

In 2024 and 2025, Kanghao Mechanical and Electrical’s operating revenue will be 8B yuan and 1.45B yuan, respectively, and its net profit attributable to the parent will be 237 million yuan and 278 million yuan, respectively.

In 2024 and 2025, Changyuan Donggu’s total operating revenue will be 1.64B yuan and 8B yuan, respectively, and its net profit attributable to the parent will be 230 million yuan and 389 million yuan, respectively.

（Source: China Fund News）