Another brokerage firm announces a merger plan with supporting fundraising of 8 billion yuan

Another brokerage firm is accelerating its absorption and merger.

On the evening of September 25, Xiangcai announced that at the 16th meeting of the 10th Board of Directors, it reviewed and approved item by item the proposal on the share swap absorption merger of Xiangcai Co., Ltd. and Shanghai DZH Limited and the fundraising plan for supporting funds and related transactions.

According to the draft, this merger will adopt the method of Xiangcai's share swap absorption of DZH, meaning that Xiangcai will issue A-shares to the swap targets as payment for the absorption merger.

Both parties agreed that the A-share swap price for Xiangcai in this absorption merger is RMB 7.51 per share, while the A-share swap price for DZH is RMB 9.53 per share. Each share of DZH can be exchanged for 1.27 newly issued A-shares of Xiangcai.

After the transaction is completed, Zhang Changhong, the controlling shareholder and actual controller of DZH, and his concerted actors will directly hold shares of Xiangcai, accounting for 17.32% of the total share capital. Zhang Changhong has made a commitment not to seek control, thus the control of Xiangcai remains unchanged, with Huang Wei as the actual controller.

Rapid Progress

On March 28, Xiangcai held the 13th meeting of the 10th Board of Directors and the 6th meeting of the 10th Supervisory Board, where it reviewed and approved the proposal on the "Share Swap Absorption Merger of Xiangcai Co., Ltd. and Shanghai DZH Limited and the Fundraising Plan for Supporting Funds and Related Transactions" and other related proposals. Xiangcai plans to absorb and merge Shanghai DZH by issuing A-shares to all shareholders exchanging shares and raise supporting funds through the issuance of A-shares.

On the evening of September 22, Xiangcai announced the progress of the major asset restructuring, stating for the first time that as of the announcement date, the relevant audit, due diligence, and other work related to this transaction had been basically completed. After the company and intermediary institutions further improve the relevant work of this transaction, the board will be convened again to review the relevant proposals and fulfill subsequent procedures and information disclosure obligations in accordance with relevant laws and regulations.

Before the words were finished, on September 25, Xiangcai announced the draft report on the share swap absorption merger of DZH and the fundraising plan for supporting funds and related transactions.

Price Confirmation

According to the draft, this merger will adopt the method of Xiangcai's share swap absorption of DZH, meaning that Xiangcai will issue A-shares to the swap targets as payment for the absorption merger. As of the share swap implementation date, the shares of DZH held by Xiangcai and the shares of DZH held by Xinhuh Group will be directly canceled and will not participate in the share swap, and Xiangcai will not pay any consideration. After this absorption merger, DZH will terminate its listing and cancel its legal status; Xiangcai, as the surviving company, will inherit and assume all assets, liabilities, businesses, personnel, contracts, qualifications, and all rights and obligations of DZH, and will make corresponding changes to the registered capital, business scope, and other contents of the surviving company.

Both parties confirmed that the average stock trading price of Xiangcai for the 120 trading days prior to the pricing benchmark date of this absorption merger is RMB 7.51 per share; the average stock trading price of DZH for the 120 trading days prior to the pricing benchmark date of this absorption merger is RMB 9.53 per share. Accordingly, both parties agreed that the A-share swap price for Xiangcai in this absorption merger is RMB 7.51 per share, while the A-share swap price for DZH is RMB 9.53 per share According to the above-mentioned share exchange price, both parties confirm and agree that the share exchange ratio between DZH and XIANGCAI is 1:1.27 (the share exchange ratio is rounded to two decimal places), meaning that each share of DZH can be exchanged for 1.27 newly issued A-shares of XIANGCAI.

Based on this exchange ratio, the total number of shares that XIANGCAI intends to issue is 2.282 billion shares. After the share exchange is implemented, XIANGCAI's total share capital is expected to increase to 5.141 billion shares.

No Change in Control

According to the draft, after the implementation of this share exchange, the actual controller of XIANGCAI, Huang Wei, will continue to directly and indirectly control 1.154 billion shares of XIANGCAI, accounting for 22.45% of the total share capital; the controlling shareholder and actual controller of DZH, Zhang Changhong, and his concerted actors directly hold 891 million shares of XIANGCAI, accounting for 17.32% of the total share capital.

At the same time, the controlling shareholder and actual controller of DZH, Zhang Changhong, has issued a commitment not to seek control, promising that "I will not become the actual controller of XIANGCAI or seek actual control over XIANGCAI through increasing holdings (including my own increase, through my close relatives, or through any other entity, including any method such as centralized bidding, block trading, agreement transfer, etc.), signing concerted action agreements, making other arrangements, or any other means." Therefore, the control of XIANGCAI has not changed, and the actual controller remains Huang Wei.

Collaboratively Build a New Generation of Securities Digital Platform

The draft shows that after the completion of this transaction, XIANGCAI, as the surviving company, will inherit and assume all assets, liabilities, businesses, personnel, contracts, and all other rights and obligations of DZH. After the completion of this transaction, the surviving company will leverage synergies around financial technology, brokerage business, credit trading business, and wealth management to collaboratively build a new generation of securities digital platform.

After the completion of this transaction, the asset and revenue scale of the surviving company will be enhanced, and its comprehensive competitive strength and risk resistance capability will be further strengthened. The surviving company intends to integrate securities business with financial technology, promote business development to a new level through big data operations, and address the financial service needs of clients throughout their entire lifecycle through intelligent operations. The integration of the surviving company can achieve customer and resource sharing, technological cooperation, market synergy, internal management reshaping, and strengthening competitiveness in advantageous business areas.

After the completion of this transaction, the surviving company intends to empower securities business with financial technology, strengthen the collaborative value of both parties in clients, channels, and financial products, and enhance comprehensive financial service capabilities. The impact of this transaction on the future development prospects of the surviving company mainly reflects in channel synergy, service upgrades, and business innovation.

Supporting Fundraising Not Exceeding 8 Billion Yuan

In this transaction, XIANGCAI plans to raise no more than RMB 8 billion through a private placement of A-shares to no more than 35 qualified specific investors via a bidding method.

The issuance targets are legal entities, natural persons, or other legitimate investors that meet the relevant conditions, including securities investment fund management companies, securities firms, insurance institutional investors, trust companies, financial companies, and qualified foreign institutional investors as stipulated by the China Securities Regulatory Commission (CSRC). The specific issuance targets will be determined in consultation with the lead underwriter of the fundraising based on the subscription bidding situation after obtaining the CSRC's approval for registration of this transaction.

The total amount of funds raised shall not exceed RMB 8 billion. After deducting intermediary fees and transaction taxes and other costs related to this transaction, the funds are intended for projects such as financial large models and securities digital construction, big data engineering and service network construction, integrated wealth management projects, international financial technology projects, replenishing working capital, and repaying debts.

According to the draft, as of the date of signing the report, the procedures that still need to be fulfilled for this transaction include but are not limited to the approval of the shareholders' meeting of XIANGCAI and DZH; obtaining approval from the Shanghai Stock Exchange and registration from the CSRC; and other necessary approvals, authorizations, filings, or permits that may be required by relevant laws and regulations. There is uncertainty regarding whether the transaction can obtain the aforementioned approvals or registrations, as well as the timing of such approvals. The parties involved in the transaction will promptly announce the progress of this restructuring.

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