The closely watched Shanghai Auto (6.54,0.00,0.00%) private placement and overall listing plan has been approved by the China Securities Regulatory Commission. Yesterday, Shanghai Automotive announced that the company will sell 3.72530 billion yuan of ordinary shares of SAIC shares to purchase its related assets at a issuance price of 5.82 yuan per share. After the issuance, SAIC will hold approximately 83.83% of Shanghai Auto's shares. Affected by this news, Shanghai Auto's share price rose sharply yesterday, to close at 6.54 yuan, up 6.17%.
Business to vehicle manufacturing
Through this transaction, Shanghai Automotive's core business will be transformed from parts to vehicle manufacturing. After the transaction, SAIC Automotive's vehicle business mainly includes a 50% stake in Shanghai GM, a 50.098% stake in SAIC-GM-Wuling, a 50% stake in Shanghai Volkswagen, a 100% stake in SAIC Motor and a 50% stake in SAIC Motor. Ssangyong Motor 48.917% equity.
The "adequate" assets adjustment has made a strategic review of the listed company's assets. From the perspective of industry structure, Shanghai Automotive will have a complete series of vehicle models such as passenger cars, commercial vehicles, and mini-vehicles after the overall listing, including investment in the company's own product development, and it will have a strong competitive edge in the automotive industry.
According to the consolidated statement after SAIC’s core assets were injected, Shanghai Automotive’s net assets at the end of June 2006 were RMB 30.281 billion, an increase of approximately 1.65 times; net profit was RMB 1.39 billion, an increase of approximately 1.57 times; earnings per share were RMB 0.212. About 28%; net assets per share of 4.62 yuan, an increase of about 30%. Shanghai Automotive's operating scale and operating performance have been significantly improved.
The time for the overall listing has come
SAIC has chosen to go public now. There are many favorable factors. First of all, in the first half of this year, SAIC Motor Co., Ltd. achieved a total of 682,000 vehicle sales, exceeded its semi-annual plan, and ranked first in the national vehicle sales volume. Passenger car sales reached 449,000 units, an increase of 50.6% year-on-year; commercial vehicle sales reached 233,000 units, an increase of 43.5% year-on-year.
In addition, the overall listing is also the need for SAIC Motor to develop its own brand automotive projects. In the future, SAIC will form the three core vehicle assets and profit centers of Shanghai Volkswagen, Shanghai GM, and SAIC Motor in the country. Hu Maoyuan, president of SAIC, said that by 2010, SAIC plans to produce 2 million cars of various types, of which 600,000 were self-owned brands, accounting for 30% of the total output. Shen Yin Wanguo’s analyst Wang Zhihui analyzed that the research and development of self-owned brands and new energy vehicles all require greater financial support. After SAIC's overall listing, it will solve this problem from financing.
SAIC also made it clear in its announcement yesterday that through this transaction, it will greatly enhance its research and development capabilities in the automotive vehicle and parts sectors, and lay a solid foundation for the launch of its own brand, thereby reducing its dependence on joint venture partners.
Other groups will follow up
In fact, after experiencing the blowout of the automotive industry in 2002 and 2003 and the sharp drop in the market growth rate in 2004, various news about the overall listing of auto companies has appeared in the past two years. The automotive companies that have proposed an overall listing plan include Dongfeng Motor, Changan Automobile (6.28, 0.00, 0.00%), and Beijing Automotive Holdings. Once Shanghai Automotive has successfully completed its overall listing, it will have a significant impact on subsequent companies.
Wang Zhihui said that when several major conglomerates were listed in the 1990s, almost all the assets in the group such as parts and components were put into listed companies. Now that this kind of understanding has undergone a very big change, the overall listing has become an effective method to solve the bottleneck of auto group funds. In addition, in terms of industrial integration and reorganization, the auto group can also achieve more effective expansion through the acquisition of shares.
View related topics: SAIC commercial vehicle expansion
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