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On November 30, Foton Motor announced that it plans to issue additional shares of approximately 426 million new shares at a issuance price of 2.75 yuan per share and a total of approximately 1.172 billion yuan can be raised.
It is worth noting that the object of this additional issuance is, in addition to the actual controller of Foton Motor Beijing Automotive Industry Holding Co., Ltd. (hereinafter referred to as "Beiqi Holding"), as well as the overseas strategic investor Daimler-Chrysler Co., Ltd. ( In the following, "Deck Company"), the two companies will subscribe for 129 million shares and 297 million shares respectively. After the issuance of new shares, the total share capital of Foton Motor will increase from the current 811 million shares to 1.238 billion shares, and BAIC and Dyke will hold 34% and 24%, respectively, and will rank among the first and second largest shareholders.
In 2003, Dyke signed a cooperation agreement with BAIC. However, due to policy restrictions, the joint venture and cooperation agreement between the two parties has been deadlocked since the date of signing. This time, the outside world generally regards the private placement of Foton Motor as the starting point of the actual cooperation between the two parties. Foton Motor will use strategic investment to avoid the industrial policy and achieve a joint venture.
Avoiding policy obstacles
Unlike the issue of whether the pricing of ordinary design issues for the issuance of the issuance issue and the investment projects can be obtained from the shareholders, there is a possible variable in Foton Motor’s directional issuance, which is whether the relevant plan can be approved by the relevant authorities.
The "Automotive Industry Development Policy" stipulates that the same foreign company can establish two (including two) joint ventures in the country to produce the same type of vehicle products (passenger cars, commercial vehicles, and motorcycles) at home, such as a joint venture with China. Partnerships and mergers with other domestic automobile manufacturers are not subject to restrictions. A company that has a legal personality overseas has a controlling stake in another company and is considered to be the same foreign company.
Previously, Dyke had established joint ventures with Fujian Auto Group (hereinafter referred to as "Fuzhou Group") and Jiangsu Yaxing Group (hereinafter referred to as "Yasing Group") in the commercial vehicle sector, which will undoubtedly affect Dyke. The company is looking for further expansion of its partners in China.
Analysts worried that the policy on foreign investment cooperation may make Deck again fail to qualify for the joint venture quota, resulting in Futian Motor's issuance of the program is not approved by the Ministry of Commerce.
"Oriented issuance is not the same as establishing a joint venture company. It is only foreign-invested enterprises," said Zhao Jingguang, deputy secretary of the Foton Motor Party Committee. The restrictions on joint venture quotas do not apply to this additional issuance. Futian Automobile also announced that Deck is an overseas strategic investor. A related person from the Foton Motor and Financial Division stated that Dyke's participation in the private placement can only obtain 24% of the shares. "As long as the equity ratio is less than 25%, we can rely on the strategic investment without touching the joint venture line."
At the end of 2005, five ministries and commissions, including the Ministry of Commerce and the Securities Regulatory Commission jointly issued the Measures for the Strategic Investment Management of Listed Companies by Foreign Investors. Foton Motor hopes to adopt this policy to obtain additional approvals. However, in the face of increasingly stringent approvals for foreign acquisitions, this may still be just an ice ball.
In recent years, in a new round of global mergers and acquisitions, China has become the focus of competition, and the Ministry of Commerce’s examination and approval of foreign equity participation projects has become increasingly stringent. Not long ago, Supor (18.26, 0.31, 1.73%) (002032) was eventually led by the Ministry of Commerce of the People's Republic of China due to the acquisition of the French SEB Group.
Although, this time, Foton Motor’s additional issuance of 24% of Dyke’s shares does not involve the transfer of controlling interests, and the shareholding ratio of major shareholders is still 10% lower. However, the outside world is worried about whether the approval of Futian's issuance of this type of outlet is still "unpredictable."
The ultimate plan to achieve a joint venture
“Fukuda Automobile is currently avoiding the restrictions of industrial policy through participation in shares and technical cooperation, and it is its ultimate goal to establish a joint venture with Dyke.†Analysts believe that Deck entered as a strategic investor and is a joint venture of Foton Motors. The expediency.
According to the announcement of Futian Automobile on September 10, 2003, Dyke and BAIC signed a 20-year cooperation plan with a total amount of 1.21 billion US dollars. Contents include: Futian Automobile and Dyke in the strategic cooperation in the field of commercial vehicles; Dyke acquired part of the legal person shares of Foton Motor, jointly formed a joint venture company of medium and heavy trucks; discuss the possibility of business cooperation between large and medium-sized passenger cars.
"The original plan was that Beiqi Holding transferred some of Futian's shares to Dyke, but it is now that Beiqi Holdings and Dyke have also participated in targeted additional issuances, which has allowed Dyke to acquire shares in the company." According to Foton Motor related sources, according to 2003 In the cooperation plan, Dyke and Foton Motor need to hold the shares of Foton Motor first before starting industrial cooperation, and now it is just a change in the form of obtaining shares.
"Now that Deck Company's equity participation company is entering the company as an overseas strategic investor, it is the early stage of cooperation, and it is still impossible to talk about industrial cooperation." The above sources said. Industrial cooperation is the ultimate goal of Dyke and Foton Motor.
After disclosing the cooperation plan with Dyke, Foton Motor began searching for possible routes for joint ventures in 2004. The acquisition of shares of Yaxing Mercedes-Benz Bus Company (hereinafter referred to as “Yasing Mercedesâ€) from the Yaxing Group replaced the Yaxing Group to achieve cooperation with Dyke. This is the initial thinking of Foton Motor.
Yaxing Group is a leading passenger car manufacturer in the early domestic industry. In March 1997, Yaxing Group set up Yaxing Mercedes with its best assets and Dyke. The two sides invested a total of 95.5 million U.S. dollars, each holding half of the shares. Since then, Yaxing Group has established Yaxing shares (600213) with the remaining assets.
After the joint venture, Yaxing Mercedes-Benz's products overlapped with Yaxing's products and competed internally, making the situation of the joint venture very unsatisfactory. In September 2002, Dyke, Yaxing Group and the Yangzhou City Government signed a new cooperation agreement that stipulated the specific types of the products of Yaxing-Benz and Yaxing to avoid internal competition, but it still failed to see both. The dawn of profit. For this reason, Dyke is eager to withdraw from Yaxing Mercedes, even at the expense of tens of millions of euros.
If Foton Motor successfully acquires Yaxing Group’s shareholding in Yaxing Benz, it can complete the transfer of joint venture partners within the framework of strict policy restrictions and is deemed as a preferred move. In order to realize this plan, Foton Motors had worked hard with Yaxing Group in 2004 and 2005. However, by the end of 2005, the negotiations had been aborted due to price problems. Futian Motor’s efforts had completely failed and it was only waiting to be worn. The company's exit.
Just two months ago, the new general manager of Yaxing Mercedes-Benz, Li Xiao, disclosed to the outside that Dyke had already given up management of Yaxing Mercedes since June and was only responsible for technical support and financial supervision. However, according to sources, Dyke also promised to retain Yaxing’s shares within two years. If it is still not satisfied with its future performance, it chooses to withdraw completely.
"Deck's withdrawal from Yaxing is only a matter of time," said Foton Motors.
Analyst Chen Qiaoning of Tianxiang Investment Co., Ltd. believes that another Dike company's cooperation project in China is not monolithic.
The cooperation project between Dyke and Fuqi Group does not actually have an equity relationship. The so-called Fujian Mercedes-Benz project (Southeast Motor’s MPV by means of a technology licensing contractor Chrysler) is 1:1 by Fuqi Group and a Hong Kong investment company. Shares were formed by joint ventures. Dyke did not directly participate in this project, but the Hong Kong investment company is a joint venture between Taiwan’s “Zhonghua†and Dyke, and they have the same share ratio.
“Dike's Fujian project is also very variable.†Chen Qining believes that because Dyke was the controlling shareholder of Mitsubishi Motors, and the equity relationship between Mitsubishi and Taiwan’s China Motors, the Fujian project is also a joint venture of Foton Motor. . However, Dyke has already transferred its entire shareholding in Mitsubishi Motors at the end of 2005 and has gradually distanced itself from the Fujian project.
Issuance price lower than expected
"The plan should be able to pass." On the December 18 shareholders' meeting, the person concerned of Foton Motor showed confidence. According to its disclosure, the company has actively communicated with shareholders since the announcement of the private placement plan. Despite the majority of individual shareholders, the multi-year holdings have made the individual shareholders with larger shareholdings more connected with the company and the communication is still unobstructed.
However, for this directional issuance price of 2.75 yuan per share, several individual investors said that the pricing was too low, after the market's expectation was a price of 3 yuan to 3.5 yuan per share.
“Although the market has already anticipated the private placement of Foton Motor, the large shareholder’s participation in such private placements still exceeds market expectations.†Shenyin Wanguo analyst Wang Zhihui believes that 355 million yuan of funds is not ideal for cash flow. Beiqi Holdings is not a decimal. Participation in private placements can maintain the control of major shareholders, but this results in lower issuance prices than market expectations.
The above-mentioned persons of Foton Motor stated that the additional issuance price is in compliance with relevant regulations. The lower than expected main pressure comes from the Deck company. "Dyke has paid more than 800 million yuan to obtain 24% of the company's shares. Every dollar he raises, Dick will have to pay more than 40 million yuan."
For Beiqi Holding and Foton Motor, “First is to seek cooperation, not to increase additional fundsâ€, and high-value financing is not the main purpose of this additional issuance. Moreover, within Foton Motor, the issuance and cooperation are also handled by two different departments - the issuance of financial issues by the Financial Services Department and the cooperation of the International Cooperation Department.
Dike’s strategic investment estimate
Foton Motors is China's largest commercial vehicle manufacturer. Its annual sales revenue is nearly 20 billion yuan, but it has not established a leading position in the commercial vehicle segment in the securities market. The market value is less than 3 billion yuan. The top ten shareholders of tradable shares have little institutional investment. By. In 2005, Foton Motors had its first loss after its listing. The joint venture with Dyke was an opportunity to reverse its performance and reshape the stock market. In this regard, most brokerage analysts gave positive affirmation of this, but do not think that Foton Motor can quickly reverse this situation.
“We cannot be sure whether Foton Motor can break through the relevant industrial policies. Even if it breaks, we are not optimistic about the long-term development of the company.†Zhao Xuegui, an Everbright Securities analyst, said in the report.
Zhao Xuegui believes that there are three reasons: First, Foton Motors is a "market share oriented" company, and it has not been able to convert "share lead" into "profit leader"; second, there is a chronic disease in China's current joint venture commercial vehicle companies. The successful case is currently only Jiangling Motors (Ford shares 30%); Third, Sinotruk and Weichai Power shares (possibly holding shares in the future) Shaanxi Heavy Duty Truck, the two shareholders each control the important heavy truck component resources, has become Standard heavy truck industry leader. Although Foton Motors has increased its investment in Auman Heavy Trucks and further cooperation with Dyke in heavy trucks, the outlook is not clear. Everbright Securities maintained a neutral rating on Foton Motor.
Ping An Securities analyst Yao Hongguang said that the important reason why Dike, which has the largest commercial vehicle in the world, has not entered China's booming heavy-duty truck market yet is to establish a direct vehicle manufacturing joint venture that lacks competitiveness. This is mainly due to the lack of competitiveness. The price cannot compete with domestically-produced heavy truck products. An important step in the technical cooperation between the two parties may be the establishment of a heavy-duty engine manufacturing company. The potential benefit of Foton Motor will depend on the development prospects of its high-end products. But so far, "Fukuda Motors, which excels in low-cost competitive strategies, is not in the high-end products. There is much work in the field."
“Fukuda Motors can be said to have entered a new milestone.†Chen Qiaoning upgraded the investment rating of Foton Motor from “overweight†to “buyâ€. He believes that the shares of Dyke have opened up the long-term development space of Foton Motor. Previously, Foton Motor's products were mainly concentrated in the low-end market. After the introduction of the Mercedes-Benz brand, the product structure can be extended upwards to break the short board that restricts profitability. Foton Motors can use the large amount of low-end products to form the tower base of the product pyramid and amortize the cost through the scale effect. The newly introduced high-end products form the spire to make profits. At the same time, the corporate governance issues that have plagued Foton may also change. Of course, Chen Qiaoning's judgment on the growth of Foton Motors cannot be separated from the company's strategic adjustment in improving the self-control capabilities of its core components.
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