"Four Major Problems" Of Zhejiang Newspaper Department And Yongjin Department Quitting The "Four Major Problems" Of IPO Review

"Four problems" of Zhejiang newspaper department and Yongjin Department quitting the "four major problems" of Huakang pharmaceutical industry

On the evening of September 28, the official website of China Securities Regulatory Commission (CSRC) showed that Zhejiang Huakang Pharmaceutical Co., Ltd. (hereinafter referred to as "Huakang pharmaceutical") was approved for the first time. It intends to apply for listing on the main board of Shanghai Stock Exchange. The public offering of shares does not exceed 29.14 million shares, and the sponsor is Credit Suisse Founder Securities.

Huakang Pharmaceutical Co., Ltd. is a "sweet enterprise", mainly engaged in the R & D, production and sales of xylitol, sorbitol, maltitol, fructose syrup and other functional sugar alcohols and starch sugar products. Now, Huakang pharmaceutical has become one of the world's leading manufacturers of xylitol and crystal sorbitol, and its customers include Mars arrow, Yizi, Avanti, Ferrero, etc.

At the meeting, the IEC focused on four major issues: the specific situation and progress of patent disputes between Huakang pharmaceutical and Shandong Lujian; the reasons for the high proportion of overseas revenue of the company; whether the company's dependence on the joint venture Yahua bio chemical constitutes control in essence; and the reason why Huakang pharmaceutical belongs to the food additive industry, but the company name contains "pharmaceutical industry" Rationality.

More than 50% of overseas revenue attracts attention

Huakang Pharmaceutical Co., Ltd. has cooperated with well-known food and beverage enterprises at home and abroad, such as Mars arrow, Yizi, bufandi, Ferrero, Hershey, haoliyou, Coca Cola, Pepsi, Master Kang, nongnong Shanquan, Wahaha, Mengniu and other well-known food and beverage enterprises at home and abroad. The export countries mainly include Poland, the United States, Italy, Russia, Thailand, etc.

From January to June in 2017, 2018, 2019 and 2020, the operating revenue of Huakang pharmaceutical was 925 million yuan, 1.40 billion yuan, 1.51 billion yuan and 707 million yuan respectively; the net profit attributable to the shareholders of the parent company was 55.9402 million yuan, 199 million yuan, 270 million yuan and 186 million yuan respectively.

Huakang pharmaceutical said that based on the company's main financial data, operating conditions and orders in hand from January to June 2020, and assuming that the global new crown epidemic will not continue to have a significant adverse impact on the demand of the main customers of the issuer, it is estimated that the operating revenue in 2020 will be 1.32 billion yuan to 1.53 billion yuan, with a year-on-year change of - 12.61% to 1.04%, and the net profit attributable to the owners of the parent company is expected to be 2.90% 200 million yuan to 317 million yuan, an increase of 7.98% to 17.25%.

From the perspective of income structure, overseas customers account for a large proportion of Huakang pharmaceutical's customers. From January to June in 2017-2020, the proportion of overseas customers' sales amount was 38.75%, 51.41%, 55.03% and 60.89%, respectively, increasing year by year.

In this regard, the IEC also pointed out at the audit meeting that "from January to June in 2019 and 2020, the overseas revenue accounted for more than 50% of the main business income of the issuer. The representative of the issuer is requested to explain: (1) the difference and rationality of the change trend of the gross profit rate of export sales in the reporting period with that of comparable companies in the same industry; (2) the impact of the tariff increase of the United States on the future business performance of the issuer; (3) the reasons and rationality of the further increase of the overseas revenue proportion of the issuer in the first half of 2020 under the influence of the new epidemic situation, and whether the above trend is sustainable. "

In addition, the IEC is also concerned about the patent infringement disputes between Huakang pharmaceutical and Shandong Lujian Biotechnology Co., Ltd.

According to the prospectus, on May 22, 2020, Huakang pharmaceutical received the notice of acceptance of invalidation request sent by the reexamination and invalidation Department of the Patent Office of the State Intellectual Property Office. The patent reexamination Department has accepted the invention of the patent number zl201210549507.3 of the company and Jiaozuo Huakang, entitled "a method of hydrolyzing corncob to obtain xylose hydrolysate" The patent filed a request for invalidation.

As of August 6, 2020, the patent reexamination Department has conducted a remote oral hearing on the above patent invalidation application. As of the signing date of the offering, the remote oral hearing of the patent reexamination Department has ended, and no decision has been made on the request for invalidation of the patent right.

Huakang pharmaceutical said in the prospectus that "the above patent is mainly used by Jiaozuo Huakang, a subsidiary of the company. It is a production process in the process of extracting xylose hydrolysate by Jiaozuo Huakang. Even if it is declared invalid, it will not affect the company to continue to use the production process.".

In addition, Shandong Provincial People's Court of protection issued No. 21 (No. 01, 2020) civil evidence of Shandong Provincial People's Republic of China on July 1, 2020. The applicant filed a patent against Shandong Huakang alcohol Co., Ltd. for the patent of Shandong Huakang alcohol Co., Ltd The relevant evidence of "law of the people's Republic of China" (Patent No.: zl201210478583. X) is preserved by pre litigation evidence.

In addition, the reporter noted that compared with the previous prospectus on June 14, 2019, which was planned to raise 1.091 billion yuan, Huakang Pharmaceutical Co., Ltd. planned to raise 1.394 billion yuan in the prospectus disclosed on August 10, 2020, adding the "comprehensive upgrading and transformation project of energy saving, water saving and emission reduction of the whole plant" (raising 302 million yuan).

In this regard, on September 28, the reporter of the 21st century economic report sent an interview outline to Huakang Pharmaceutical Co., Ltd., but as of the time of publication, no reply was received.

Failed to complete the agreement of Qualified IPO twice

It is worth mentioning that the prospectus disclosed that Huakang Pharmaceutical Co., Ltd. failed to complete the Qualified IPO twice as agreed, resulting in disputes with shareholders Shinkansen and Yongjin investment. Finally, the two institutional investors chose to withdraw.

In addition, on July 17, this year, the initial feedback released by the CSRC also focused on this IPO gambling dispute. "The issuer is requested to make supplementary disclosure of the reasons for previous equity transfer and capital increase, pricing basis, fairness and rationality in combination with net assets per share and evaluation price. Please explain the supplementary agreement signed by the issuer with Yongjin investment, Shinkansen, Fujian Yake and Haiyue energy 》The specific content of the business objectives agreed in, and the reasons why the IPO was not completed in 2013 ".

According to the prospectus, on September 20, 2007, four institutional investors including Yongjin investment, Shinkansen, Fujian Yake and Haiyue energy (600387. SH) increased the capital of Huakang Co., Ltd. with cash of 28 million yuan, 28 million yuan, 17.5 million yuan and 10.5 million yuan respectively. The price of capital increase was 7 yuan per share, and the registered capital of Huakang was increased from 50 million yuan to 62 million yuan.

In addition, On September 24, 2007, all shareholders of Huakang Co., Ltd. and Huakang Co., Ltd. signed the capital increase agreement and supplementary agreement with Yongjin investment, Shinkansen, Fujian Yake and Haiyue energy. Among them, the supplementary agreement stipulates that Huakang Co., Ltd. shall complete the Qualified IPO, performance commitment, performance compensation, performance adjustment and recognition and equity repurchase within 36 months after the completion of the capital increase Special provisions.

However, after the expiration of three years, Huakang Pharmaceutical Co., Ltd. failed to achieve the business objectives agreed in the above agreement. On April 12, 2011, the company and its main shareholders (Chen Deshui, Xu Xiaorong, Yu Jianming, Cheng Xinping and Cao Jianhong) signed a memorandum with four investors, which agreed to pay compensation to Yongjin investment, Shinkansen, Fujian Yake and Haiyue energy in four phases The total amount is 16.2 million yuan.

In addition, Chen Deshui, Xu Xiaorong, Yu Jianming, Cheng Xinping, Cao Jianhong and other major shareholders agreed to transfer 2.10% (total 1.573000 shares) of the company's equity to Yongjin investment, Shinkansen, Fujian Yake and Haiyue energy free of charge, and complete the industrial and commercial change before May 31, 2011. It is agreed by all parties that if the company fails to obtain IPO approval before December 31, 2013, upon the request of the investor, the issuer shall Buy back the shares held by the investor before May 31, 2014 at the price agreed in the original investment agreement (deducting the compensation paid by the original shareholders).

However, Huakang pharmaceutical once again "broke the appointment" and failed to complete the Qualified IPO agreement.

On September 21, 2015, due to the above-mentioned breach, Shinkansen and Yongjin investment filed a lawsuit with Quzhou intermediate people's Court of Zhejiang Province as co plaintiffs.

According to the public information, Zhejiang Shinkansen Media Investment Co., Ltd. is a wholly-owned capital operation and management platform of Zhejiang newspaper media holding group. It is responsible for the investment business of Zhejiang newspaper media and belongs to the private fund manager.

Meanwhile, Yongjin investment, which is also a private fund, is called Lhasa Yongjin Huiquan Investment Center (limited partnership), formerly known as Shanghai Yongjin Huiquan Investment Center (partnership), and later relocated to Lhasa and changed its name. The actual controller is Chen Jinxia, the leader of Yongjin group.

On November 20, 2015, after mediation, the Central People's Court of Quzhou City, Zhejiang Province issued the (2015) zhqzcz No. 10 civil mediation statement, and all parties agreed to terminate the capital increase agreement and supplementary agreement signed on September 24, 2007 and the memorandum signed on April 12, 2011 on November 19, 2015. In addition, Huakang pharmaceutical, Chen Deshui, Xu Xiaorong, Cheng Xinping, Yu Jianming Cao Jianhong and Kaihua Jinyue jointly paid a total of 60.17697 million yuan for the investment of gushing gold and the investment of Shinkansen, respectively, with the principal of 1993.8485 million yuan, the interest of 10 million yuan, and the attorney's agency fee of 150000 yuan respectively.

On June 1, 2017, 30 natural person shareholders including Huakang pharmaceutical and Chen Deshui signed the supplementary agreement on the supplementary agreement with Kaihua Jinyue, stipulating that the repurchase obligation under the supplementary agreement shall be adjusted from the company to Kaihua Jinyue, and the corresponding payment shall be borne by Kaihua Jinyue.

In June 2017, Shinkansen and Yongjin investment respectively confirmed that they had received in full the compensation and shares agreed under the memorandum signed on April 12, 2011, and confirmed that they had received in full the investment principal, interest and lawyer's fees as agreed in the (2015) zhqu SHANGCHU Zi No. 10 civil mediation letter.

On June 26, 2017 and June 28, 2017, Kaihua Jinyue signed a share transfer agreement with Shinkansen and Yongjin investment, respectively, which agreed that Shinkansen and Yongjin investment would transfer 5.324 million shares (7.10% of the total share capital) to Kaihua Jinyue, totaling 60.177 million yuan.

Since then, in September 2017 and April 2018, in order to ensure the stable equity structure of Huakang Pharmaceutical Co., Ltd. and the successful completion of listing, Huakang Pharmaceutical Co., Ltd. acted as Party C and the remaining 31 shareholders as Party A, together with Fujian Yake, Party B and In addition, the supplementary provisions of the "energy agreement" and the "supplementary agreement on the above-mentioned" energy agreement "have been signed.

At present, Fujian Yake, which has not withdrawn from the investment, holds 7.1585 million shares, holding 8.19%, and Haiyue energy holds 1.9965 million shares, holding 2.28%, which are listed as the second and tenth shareholders of Huakang pharmaceutical before this issuance.

In this regard, a primary market investor told the 21st century economic report that "as a private equity fund, it is very common to have a listing and gambling agreement. If the listing plan cannot be completed within the agreed time limit, the investment institution has the right to ask the company to buy back the stock rights."